tag:blogger.com,1999:blog-12487471855119735382023-11-15T09:34:05.081-08:00Mortgage Minute NewsHaving discussions about what matters most to youMortgage Minute Newshttp://www.blogger.com/profile/02391786233028318204noreply@blogger.comBlogger39125tag:blogger.com,1999:blog-1248747185511973538.post-33098088213172322472010-10-02T09:24:00.000-07:002010-10-02T09:24:37.124-07:00Bank of America delays foreclosures in 23 statesBy ALAN ZIBEL<br />
The Associated Press<br />
Saturday, October 2, 2010; 1:51 AM <br />
WASHINGTON -- Bank of America is delaying foreclosures in 23 states as it examines whether it rushed the foreclosure process for thousands of homeowners without reading the documents. <br />
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The move adds the nation's largest bank to a growing list of mortgage companies whose employees signed documents in foreclosure cases without verifying the information in them. <br />
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Bank of America isn't able to estimate how many homeowners' cases will be affected, Dan Frahm, a spokesman for the Charlotte, N.C.-based bank, said Friday. He said the bank plans to resubmit corrected documents within several weeks. <br />
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Two other companies, Ally Financial Inc.'s GMAC Mortgage unit and JPMorgan Chase, have halted tens of thousands of foreclosure cases after similar problems became public. <br />
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The document problems could cause thousands of homeowners to contest foreclosures that are in the works or have been completed. If the problems turn up at other lenders, a foreclosure crisis that's already likely to drag on for several more years could persist even longer. Analysts caution that most homeowners facing foreclosure are still likely to lose their homes. <br />
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State attorneys general, who enforce foreclosure laws, are stepping up pressure on the industry. <br />
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On Friday, Connecticut Attorney General Richard Blumenthal asked a state court to freeze all home foreclosures for 60 days. Doing so "should stop a foreclosure steamroller based on defective documents," he said. <br />
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And California Attorney General Jerry Brown called on JPMorgan to suspend foreclosures unless it could show it complied with a state consumer protection law. The law requires lenders to contact borrowers at risk of foreclosure to determine whether they qualify for mortgage assistance. <br />
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In Florida, the state attorney general is investigating four law firms, two with ties to GMAC, for allegedly providing fraudulent documents in foreclosure cases. The Ohio attorney general asked judges this week to review GMAC foreclosure cases. <br />
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In New York, State Attorney General Andrew Cuomo is reviewing the matter "to prevent homeowners from being improperly removed from their homes," according to a spokesman, Richard Bamberger, who said Friday that Cuomo's office has been in contact with several of the financial institutions. <br />
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Mark Paustenbach, a Treasury Department spokesman, said the Treasury has asked federal regulators "to look into these troubling developments." And the Office of the Comptroller of the Currency, which regulates national banks, has asked seven big banks to examine their foreclosure processes. <br />
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"We both want to see that they fix the processing problems, but also to look to see whether there is specific harm" to homeowners, John Walsh, the agency's acting director told lawmakers Thursday. <br />
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A document obtained Friday by the Associated Press showed a Bank of America official acknowledging in a legal proceeding that she signed up to 8,000 foreclosure documents a month and typically didn't read them. <br />
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The official, Renee Hertzler, said in a February deposition that she signed 7,000 to 8,000 foreclosure documents a month. <br />
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"I typically don't read them because of the volume that we sign," Hertzler said. <br />
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She also acknowledged identifying herself as a representative of a different bank, Bank of New York Mellon, that she didn't work for. Bank of New York Mellon served as a trustee for the investors holding the homeowner's loan. <br />
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Hertzler could not be reached for comment. <br />
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A lawyer for the homeowner in the case, James O'Connor of Fitchburg, Mass., said such problems are rampant throughout the industry. <br />
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"We have had thousands, maybe hundreds of thousands of foreclosures around the country by entities that did not have the right to foreclose," O'Connor said. <br />
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The disclosure comes two days after JPMorgan said it would temporarily stop foreclosing on more than 50,000 homes so it could review documents that might contain errors. Last week, GMAC halted certain evictions and sales of foreclosed homes in 23 states to review those cases after finding procedural errors in some foreclosure affidavits. <br />
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Consumer advocates say the problems are widespread across the lending industry. <br />
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"The general level of sloppiness is pervasive around the industry," said Diane Thompson, counsel at the National Consumer Law Center. <br />
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Vickee Adams, a spokeswoman for Wells Fargo & Co., said Wells' "policies, procedures and practices satisfy us that the affidavits we sign are accurate." <br />
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Mark Rodgers, a spokesman for Citigroup Inc., said the bank "reviews document handling processes in our foreclosure group on an ongoing basis, and we have strong training to ensure that appropriate employees are fully aware of the proper procedures." <br />
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Mortgage finance companies Fannie Mae and Freddie Mac said Friday they're directing companies they work with that collect loan payments to follow proper procedures. <br />
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In some states, lenders can foreclose quickly on delinquent mortgage borrowers. By contrast, the 23 states in which Bank of America is delaying foreclosures use a lengthy court process. They require documents to verify information on the mortgage, including who owns it. <br />
Those states are: <br />
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Connecticut, Delaware, Florida, Hawaii, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Nebraska, New Jersey, New Mexico, New York, North Dakota, Ohio, Oklahoma, Pennsylvania, South Carolina, South Dakota, Vermont and Wisconsin.True facts Newshttp://www.blogger.com/profile/07906940005857716594noreply@blogger.com0tag:blogger.com,1999:blog-1248747185511973538.post-89485251505990195022010-07-01T07:04:00.000-07:002010-07-01T07:04:14.044-07:00FHA Commissioner Discusses RESPA Reform and SAFE Act ImplementationFHA Commissioner David Stevens wrote to the industry today. He discussed RESPA Reform and provided and update on the implementation of the SAFE ACT. Below are his comments....<br />
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The Office of Housing’s latest efforts have a common thread: the continued need to strengthen protections for consumers in the home buying process. We are working to make the housing market stronger, sustainable, and safer.<br />
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Two examples of our efforts to accomplish this goal are the recent reform of HUD’s Real Estate Settlement Procedures Act (RESPA) regulations which make mortgages more transparent and understandable, and the development of Safe Mortgage Licensing Act (SAFE) regulations which better protects consumers.<br />
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Transparency is important for consumer protection. Fair dealings require open, clear information. The SAFE Act helps increase the integrity of the mortgage process and prevent fraud. In combination with RESPA reform, consumers have greater protection from possible bad actors in the marketplace. These two measures highlight our commitment to regulatory reform and consumer protection in order to bring trust and stability back to the housing market.<br />
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RESPA IMPLEMENTATION<br />
In a previous edition, I briefly discussed some aspects of the Real Estate Settlement Procedures Act (RESPA) Rule. I now want to update you on the great efforts the Department has made providing clarity to the industry during the implementation phase, primarily involving the use of the standardized Good Faith Estimate (GFE) and the revised and expanded Settlement Statement (HUD-1).<br />
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The Office of Housing has delivered a live webcast and hosted an Industry Roundtable, and has also met with and trained many lenders and others in an effort to resolve industry implementation inconsistencies. The RESPA staff has participated in more than 150 formal speaking engagements to educate industry professionals and state and federal regulators on the new RESPA rule and plan more in the future. The response has been overwhelming. Since the start of the year, we’ve received and answered more than 7,000 emails. Finally, the Office is currently developing multi-media guidance and education for consumers.<br />
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Most recently we have posted additional Frequently Asked Questions (FAQs) on our website aimed to give detailed guidance on topics about which we have had the most inquiries. Two of the hottest topics are pre-approvals and the use of worksheets. For full information and guidance, please refer to the FAQ’s.<br />
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Pre-approvals<br />
A pre-approval is a document issued by a lender stating that a consumer qualifies for a specific loan amount prior to the consumer choosing a specific property.<br />
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If the loan originator is missing one of the elements it requires for a loan application (e.g., the property address) and is not required to provide a GFE, the originator is not prevented from verifying information for which the customer voluntarily provides documentation. <br />
Also, a loan originator IS PERMITTED to determine that a property address is not one of the required pieces of information that the loan originator needs in order to issue a GFE. It is important to note that a loan originator must consistently apply its policy on the information it deems necessary to issue a GFE, and the RESPA rule requires a loan originator to issue a GFE whenever it receives information sufficient to complete an application for a GFE.<br />
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Worksheets<br />
A worksheet is a document issued by a loan originator that may include generic information regarding interest rates and loan fees, or a document that may provide additional information to the consumer regarding the cost of the overall transaction outside of loan fees that are disclosed on the GFE.<br />
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A worksheet may be provided to a customer for a rate quote if the consumer does not want to provide the information necessary to generate a GFE. However, loan originators should ensure the following: (1) to eliminate consumer confusion, a worksheet should not look like a GFE and should not lead the customer to believe that it is a GFE and (2) a loan originator should NEVER use a worksheet in lieu of a GFE. <br />
A loan originator may also use a worksheet to provide the consumer with additional information about his or her loan transaction, such as the amount of cash needed to close, seller credits, and other non-loan transaction fees that would be helpful to the consumer. <br />
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HOMEOWNER WARRANTIES AND RELATED COMPENSATION<br />
Another recent development in RESPA is that HUD’s Office of General Counsel has issued additional guidance on “Home Warranty Companies’ Payments to Real Estate Brokers and Agents.” This new rule interprets section 8 of RESPA and HUD’s regulations as they apply to the compensation provided by home warranty companies (HWCs) to real estate brokers and agents.<br />
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Specifically, the rule provides: <br />
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A payment by an HWC for marketing services performed by real estate brokers or agents on behalf of the HWC that are directed to particular homebuyers or sellers is an illegal kickback for a referral under section 8; <br />
Depending upon the facts of a particular case, an HWC may compensate a real estate broker or agent for services when those services are actual, necessary and distinct from the primary services provided by the real estate broker or agent, and when those additional services are not nominal and are not services for which there is a duplicative charge; and <br />
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The amount of compensation from the HWC that is permitted under section 8 for such additional services must be reasonably related to the value of those services and not include compensation for referrals of business.” <br />
This rule was published on June 25. You may view this interpretive rule here.<br />
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SAFE ACT<br />
Passed by Congress as part of the Housing and Economic Recovery Act of 2008 (HERA), the SAFE Act mandates that all individual Mortgage Loan Originators (MLOs) either be licensed by the state where they do business or, if they are employed by a federally-regulated depository institution, be registered. Both licensing and registration must be done through the Nationwide Mortgage Licensing System and Registry (NMLSR), which also provides MLO’s with unique identifiers. The SAFE Act sets forth minimum standards for state licensing.<br />
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HUD is responsible for ensuring that state regulators implement and maintain SAFE Act-compliant licensing systems, as well as ensuring the overall effectiveness of the NMLSR.<br />
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HUD’s SAFE Act Office has worked closely with the Conference of State Bank Supervisors (CSBS), the American Association of Residential Mortgage Regulators (AARMR) and the states to ensure that all U.S. jurisdictions enact SAFE Act-compliant licensing systems through legislation or regulations.<br />
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Final Rule Status<br />
HUD published a proposed rule in the Federal Register on December 15, 2009, setting forth the minimum requirements that a state would have to meet in order to be compliant with the SAFE Act. As of this date, the proposed rule has not been finalized. In the absence of a final rule, HUD cannot provide definitive guidance regarding certain compliance issues.<br />
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HUD received over 5,300 comments from the public during the comment period on the proposed rule. Most of the comments were from organizations and individuals concerned that they would need to license their employees.<br />
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Those who commented included: non-profit agencies, housing counseling organizations, loan modification and servicing specialists, housing finance agencies, those involved in owner/seller financing, mortgage industry groups and other interested persons. In developing its final rule, HUD is working to address concerns raised by comments.<br />
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In closing, I hope you find these overviews helpful. I am confident that updating the RESPA Rule and implementing the SAFE Act will lead to clear regulations for the housing industry, stronger protections for consumers, and a more stable housing market.True facts Newshttp://www.blogger.com/profile/07906940005857716594noreply@blogger.com0tag:blogger.com,1999:blog-1248747185511973538.post-64357465768862324532010-06-29T07:05:00.000-07:002010-07-01T07:07:29.977-07:00Extension of Homebuyer Tax Credit Closing Deadline Has New LifeThe House just backed a measure to extend the closing deadline to Sept. 30 for buyers who met the April 30 deadline to have a signed contract. The current deadline requires those buyers to close the transaction by June 30 to receive the $8,000 tax credit for first-time homebuyers.<br />
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Today, the House of Representatives passed an extension of the $8,000 homebuyer tax credit for first time homebuyers. The extension was set to expire at the end of June. The extension, sponsored by Rep. Frank Kratovil and his colleagues Rep. Travis Childers (D-MS) and Kathy Dahlkemper (D-PA), will extend the credit until October 1, 2010.<br />
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“The first time home buyer tax credit is working to revitalize the housing industry, a major indicator of the overall strength of the economy,” said Rep. Frank Kratovil. “However, more than 2,000 Marylanders who have already signed a contract to purchase a new home are having their closings delayed through no fault of their own. This common sense legislation will ensure that these individuals receive the tax credit that they rightfully deserve. Extending this tax credit will not only boost our economic recovery and support our housing market, but it is also the right thing to do.”<br />
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The bill extends the credit for all homebuyers with a binding contract as of April 30, 2010 so that they are afforded more time to close the sale and still benefit from the credit.<br />
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In late September Reps. Frank Kratovil (D-MD) and Travis Childers (D-MS) introduced a bill, The Tax Credit Extension for Homebuyers with a Loss Deduction Incentive Act (H.R. 3640), to extend the first time home buyer tax credit. A similar home buyer tax credit extension was eventually signed into law on November 6, 2009.True facts Newshttp://www.blogger.com/profile/07906940005857716594noreply@blogger.com0tag:blogger.com,1999:blog-1248747185511973538.post-32719951825980586432010-06-22T07:09:00.000-07:002010-07-01T07:14:26.049-07:00OBAMA ADMINISTRATION UNVEILS PLAN TO PREVENT AND END HOMELESSNESS"As the most far-reaching and ambitious plan to end homelessness in our history, this plan will both strengthen existing programs and forge new partnerships," said USICH Chair and HUD Secretary Shaun Donovan. "Working together with Congress, state and local officials, faith-based and community organizations, and business and philanthropic leaders across our country, we will harness public and private resources to build on the innovations that have been demonstrated at the local level nationwide. No one should be without a safe, stable place to call home and today we unveil a plan that will put our nation on the path toward ending all types of homelessness."<br />
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By combining permanent housing with support services, federal, state, and local efforts have reduced the number of people who are chronically homeless by one-third in the last five years. <br />
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"Communities across the country have stressed the need for federal leadership to prevent and end homelessness," said USICH Executive Director Poppe. "For the first time, the nation will have goals, strategies, and measureable outcomes that will guide us toward a fiscally prudent government response. Local, state, and federal governments cannot afford to invest in anything but the most evidence-based, cost-effective strategies."<br />
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In recent years, over 300 communities have developed plans to end homelessness. "We know that the Federal government alone cannot address this challenge," said USICH Vice Chair and Labor Secretary Hilda Solis. "Achieving the goals in Opening Doors will require strong partnerships with Congress, states, localities, philanthropy, and faith based and community organizations across the country. After all, the people of our nation are best served when we work as a team.<br />
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Opening Doors serves as a roadmap for joint action by the 19 USICH member agencies along with local and state partners in the public and private sectors. The plan puts us on a path to end veterans and chronic homelessness by 2015; and to ending homelessness among children, family, and youth by 2020. The Plan presents strategies building upon the lesson that mainstream housing, health, education, and human service programs must be fully engaged and coordinated to prevent and end homelessness, including:<br />
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Increasing leadership, collaboration, and civic engagement, by a focus on providing and promoting collaborative leadership at all levels of government and across all sectors and strengthening the capacity of public and private organizations by increasing knowledge about collaboration and successful interventions to prevent and end homelessness.<br />
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<ul><li>Increase access to stable and affordable housing, by providing affordable housing and permanent supportive housing.</li>
<li>Increase economic security, expand meaningful and sustainable employment and improve access to mainstream programs and services to reduce financial vulnerability to homelessness.</li>
<li>Improve health and stability, by linking health care with homeless assistance programs and housing, advancing stability for youth aging out of systems such as foster care and juvenile justice, and improving discharge planning for people who have frequent contact with hospitals and criminal justice systems.</li>
<li>Retool the homeless response system, by transforming homeless services to crisis response systems that prevent homelessness and rapidly return people who experience homelessness to stable housing.</li>
</ul>True facts Newshttp://www.blogger.com/profile/07906940005857716594noreply@blogger.com0tag:blogger.com,1999:blog-1248747185511973538.post-5429828719686040382009-09-04T15:16:00.000-07:002009-09-04T15:18:25.485-07:00Who will Replace Fannie and FreddieNEW YORK -- The U.S. Mortgage Bankers Association said on Wednesday it will ask Congress to transform mortgage lenders Fannie Mae, Freddie Mac into several smaller, privately held companies that would issue mortgage securities with a government guarantee. <br />The proposed framework from the industry group would give successor entities to Fannie Mae and Freddie Mac the authority to create securities backed by certain types of mortgage. <br />The new companies would guarantee the securities against defaults on underlying mortgages and pay fees into a federal insurance fund that would make good on interest and principal payments to bondholders if the companies were unable to make them. <br />"The government has an important, limited role to play to ensure a stable flow of funds for mortgages." said Michael Berman, MBA's vice chairman and chairman of the Council on Ensuring Mortgage Liquidity. <br />The MBA plan calls for government agencies, rather than the new companies, to assume the "mission" of promoting affordable housing that Congress has long assigned to Fannie and Freddie. <br />The number of new companies would be initially limited to two or three, the MBA said. <br /><br /><br />Fannie Mae and Freddie Mac were not immediately available for comment. <br /><br /><br /><br /><br /><br />© 2009 Reuters. All rights reserved. Republication or redistribution of Reuters content, including by caching, framing or similar means, is expressly prohibited without the prior written consent of Reuters.True facts Newshttp://www.blogger.com/profile/07906940005857716594noreply@blogger.com0tag:blogger.com,1999:blog-1248747185511973538.post-44292065363406580992009-07-15T15:40:00.000-07:002009-07-15T15:41:42.038-07:00Pressures on Mortgage RatesMortgage backed securities had another losing day yesterday moving lower in price by .375 in discount. Many lenders did reprice for the worse as the losses held through close. The stock market is one of the driving forces behind bond market losses at the moment as bond traders are taking some of their cues about the long term economic outlook from current stock performance. Sparking the stock market rally was the much better than expected earnings from Goldman Sachs and Johnson and Johnson. If stocks gain, it puts a damper on the safety-oriented mentality that can spur demand for bonds like treasuries and MBS. Although MBS have lost a fair amount of ground recently, bond and stock traders alike are waiting for additional data before a firm trend is likely to develop. This includes several of the more anticipated earnings announcements as well as the scheduled economic data. Of particular importance, according to many market participants, are earnings from JP Morgan, Bank of America and Citi. Once those chips are down and this reasonably busy week of data is over, there is a higher potential for a trend to develop in MBS for better or worse.<br /><br />On the surface, the economic data yesterday favored the stock market over the fixed income market, but as the markets had time to digest the less superficial aspects of the reports, mitigating factors helped ease bond losses and keep a stock rally in check. Today we get several important data sets that will set the trend for today.<br /><br />First out this morning is the weekly Mortgage Bankers’ Association applications index which tracks the weekly change in mortgage applications at major lenders. An increasing trend in purchase activity would be seen as a positive indicator for equities as home purchases lead to many other purchases including furniture, flooring, appliances, etc… Also, one would have to feel very confident in their own financial position and job security to purchase a new home, so economic factors relating to consumer confidence are also in play. The report has shown a large decline in purchase activity from last week moving lower by 9.4% and pointing to continued troubles in the housing market. Many economists and talking heads have stated that housing is a critical component of our potential recovery and although reports on housing and mortgages can vary greatly from week to week, this one is certainly not indicating an imminent recovery. On a positive note the refinance activity improved again last week moving higher by 18%. The increase in refinance activity can be attributed to the recent decline of mortgage rates back to the 5% mark.<br /><br />In other data, the US Department of Labor released the monthly Consumer Price Index(CPI) which measures the price change of a fixed basket of goods and services at the consumer level. One of the biggest enemies of mortgage rates and indeed of bonds in general, is higher inflation. To explain why this is with broad strokes, if inflation decreases the value of today’s money, and fixed income investments pay a guaranteed return of today’s money, then the greater the inflation, the less and less a fixed income investment would return. Of course it’s going to return the amount of money it promises (one hopes), but if you’re planning on getting $1000 back in a year on a fixed income investment and inflation is so bad that, in a year from now $1000 only buys two cheeseburgers, the VALUE of your investment is obviously not as high as it is today when that same $1000 could buy a new TV and a week’s worth of cheeseburgers. Sounds like mortgage blogger paradise to me…<br />Back to the point, today’s data indicates a slightly higher than expected rate of inflation but most of the increase can be attributed to higher gasoline prices as was the case with yesterday’s PPI report. The headline CPI came in right on expectations at a month over month increase of .7% but year over year CPI posted a -1.4% decline which is the biggest decline since 1950! The core rate, which strips out volatile food and energy prices posted a slightly higher read of 0.2%. The market had anticipated only a 0.1% increase to the core rate. Year over year the core rate has risen by 1.7% which is well within the Fed’s comfort zone for inflation and better than last month’s 1.8% reading. Our economy needs inflation to grow and the Fed would like to see core inflation between 1% and 2%. With the recent decline in oil prices, this trend of higher consumer prices is not likely to continue. Following the release of this report, MBS have continued to move lower which will result in higher consumer borrowing costs.<br /><br />The New York Fed has released the monthly Empire State Manufacturing survey which gives market participants a read on the strength of the manufacturing sector around the New York area. Readings below 0 indicate a contracting sector while readings above 0 indicate expansion. The release has indicated a much better than expected reading of -0.55 versus expectations of -4.5. This is a sizable improvement over last month’s -9.4 and contributes to the case for recovery which. As you know, most of data that are good for the recovery are bad for bonds, so this certainly did not help this AM’s situation. <br /><br />The final data set this morning is the release of Industrial Production down -0.4% versus a consensus of -0.7%. This report shows how much factories, mines and utilities are producing and better than expected readings are generally good for stocks and bad for bonds. In May, this data set posted a drop of -1.1%. But remember, this is still a decline and “less bad” doesn’t necessarily equal “good.”<br /><br />If you are keeping stats, the economic data, except for purchase applications, is all negative for fixed income. The downward pressure on MBS prices is continuing and so far this morning has posted another .25 in discount drop. This trend may be short-lived as we still have the FOMC minutes later today, jobless claims tomorrow and earnings reports to digest. Like yesterday, for MBS to manage any type of rebound they will need the stock market to move lower. That looks to be a difficult challenge this morning as stock market futures are pointing to a significantly higher open. If the stock market does change course, it will allow for money to flow back into treasuries first than into MBS. Currently, the benchmark 10 year note is continuing to move higher in yield and is trading at 3.54. Just last week, it was trading under 3.30! One reason we feel the current market has not set a firm trend is that the trading volume is extremely low. If market participants really feel the economy has turned, the rally in the stock market would see much higher level of trades. This is a key indicator of the market waiting for guidance but unfortunately the rally in the stock market is at the expense of the fixed income sector.<br /><br />At 2pm eastern, the Federal Reserve will release the minutes from their last Federal Open Market Committee. Most of the information in the minutes will already be known, but market participants will review it thoroughly for any hints of future monetary policy and outlook on the economy. Matt and AQ will post any relevant details after the release on the <a href="http://www.mortgagenewsdaily.com/mortgage_rates/blog/">MBS Commentary</a> blog. <br /><br />Early reports from fellow mortgage professionals are indicating the mortgage rates continue to move higher. The par 30 year fixed rate conventional mortgage is in the 5.00% to 5.25% range for the best qualified consumers. In order to qualify you must have a FICO credit score of 740 or higher, a loan to value at 80% or less and pay all closing costs including 1 point loan origination/discount/broker fee. If you are accessing home equity, you should expect to pay higher costs or take a higher interest rate. For consumers seeking FHA or VA loans, expect the rate to be about .25% higher than conventional loans.True facts Newshttp://www.blogger.com/profile/07906940005857716594noreply@blogger.com0tag:blogger.com,1999:blog-1248747185511973538.post-45742881108691757042009-07-15T15:38:00.000-07:002009-07-15T15:39:30.257-07:00Changes in Home Appraisal GuidelinesThe National Association of Home Builders (NAHB) is pleased with one underwriting guideline adjustment made last week by government sponsored enterprise, Freddie Mac.<br />Freddie Mac's Bulletin 2009-18 announced several changes to the GSE's underwriting guidelines. The changes deal mainly with the documentation required for income and asset verification, make "condominium hotel" loans ineligible for purchase, and eliminated Form 70A, Energy Addendum as a required attachment to appraisals.<br />More notably, Freddie Mac made several "Best Practices" recommendations for selecting appraisers and reviewing their products. One of these contained the statement that Freddie does not require appraisers to use Real Estate Owned, foreclosures or short sales in selecting comparable sales but rather that appraisers must "certify that comparable sales chosen are those most similar to the subject property." These should include distressed sales if they are representative, something many industry professionals have been requesting since the Home Valuation Code of Conduct was enacted on May 1, 2009.<br />In a press release on Monday, NAHB Chairman Joe Robson said that this was "a step in the right direction," but that this modification needed to go further. He called for additional changes that would allow appraisers the option of expanding both the geographic area and the time frame for comps in cases where local and recent contracts are heavily skewed toward distressed sales.<br />He cited a recent survey by NAHB that found that 26 percent of builders have seen signed contracts fall apart because of appraisals that do not reflect the contract sales price. Of these, 54 percent said that the questionable appraisals were actually coming in at less than the cost of building the home.<br />In addition, 60 percent of those responding to the survey knew of problems in their market areas caused by inadequate appraisal values. The biggest problem reported resulted from the use of foreclosures and distressed sales as comparables.<br />The NAHB's position is that such sales should not be used without appropriate adjustments to reflect the cost of improving them to a point where they are a valid comp and a reasonable alternative for the home buyer.<br />"Home builders are increasingly concerned that inappropriate appraisal practices are needlessly driving down home values," Robson said. "This, in turn, is slowing new home sales, causing more workers to lose their jobs and putting a drag on the economic recovery.<br /> The NAHB further stated that current appraisal practices are causing other problems for builders by depressing the availability of acquisition, development, and construction funds. The low values being assigned to land and subdivisions have caused banks and investors to cut lending to builders, require additional collateral, or even call performing loans. <br />"If the spigot for housing production loans is cut off, there can be no housing recovery, and this has major implications for the economy as a whole," said Robson.True facts Newshttp://www.blogger.com/profile/07906940005857716594noreply@blogger.com0tag:blogger.com,1999:blog-1248747185511973538.post-61471233280007706462009-07-07T18:10:00.000-07:002009-07-07T18:11:21.748-07:00Bad Implications for Housing RecoveryThe American Bankers Association's (ABA) today released Consumer Credit Delinquency data. The ABA report said that the composite ratio, which tracks delinquencies in eight closed-end installment loan categories, rose 0.1 percent to a new record high of 3.23 percent of all accounts being delinquent.<br />Closed-end installment loans are extensions of credit to a borrower in which all funds are dispersed at the time of the loan closing. These loans have scheduled periodic repayment plans based on the amount of principal that was lent and the interest rate that was charged by the lender. Most real estate and auto loans are forms closed-end installment loans, also known as closed-end credit. The ABA's overall delinquency rate includes direct auto, indirect auto, closed-end home equity, home improvement, marine, mobile home, personal, and recreational vehicle loans.<br />The delinquent balances on those accounts rose from 3.16 percent to 3.35 percent of total balances due. The ABA defines a delinquency as payment that is 30 days or more overdue.<br />The weak labor market has been blamed for the record rate of delinquencies on credit card debt and home equity loans as job losses topped 2 million in the first quarter of 2009 leaving over 14.5 million Americans unemployed. ABA Chief Economist James Chessen said:<br />"When people lose their jobs or work fewer hours, it makes it that much harder to meet their obligations. Unfortunately, we're going to see higher job losses in the next year, and I expect elevated delinquencies."<br />Chessen added that the unemployed may be using bank cards to bridge a temporary income gap, especially with less home equity to fall back on as housing prices continue to fall. Bank card delinquencies rose 23 basis points to 4.75 percent of all accounts, compared to 4.52 percent in the previous quarter. The balances on those delinquent accounts rose dramatically, up 108 basis points to 6.60 percent of the value of all outstanding bank card debt, marking a new record.<br /><br />Illustrating the detrimental loss of consumer credit and its affect on housing was the home equity category of the report. Home Equity loan delinquencies rose 0.49 basis points to 3.52 percent of all accounts, a record high. The Home Equity Line of Credit category rose 43 bps to 1.89 percent of all accounts.<br />With continued job losses and longer periods of unemployment expected, further credit delinquencies are anticipated, especially if consumers are becoming increasingly reliant on credit cards to "make the ends meet". Credit issuers are thus likely to freeze or close accounts in anticipation of this event. With a loss of credit, consumers will be forced to make a decision on whether to make their housing payment or buy groceries to feed their family. Clearly this would lead to further housing delinquencies and eventually more foreclosures.<br />This draws attention to yet another roadblock to the Obama Administration's efforts to increase consumer spending via lower monthly housing costs. Because loans sold to the government sponsored enterprises, Fannie Mae and Freddie Mac, are subject to risk based loan level price adjustments, borrowers whose FICO scores are under 680 have a higher cost of borrowing than a consumer whose FICO score is over 680. The rising rate of delinquencies means more consumers will see their FICO score drop below 680 which implies more homeowners be subjected to higher housing finance costs. Not a positive omen for the prospects of a housing recovery.<br />Here is a look at the rest of the categories.....<br />Delinquencies rose for the following categories:<br />Direct Auto Loans from 2.03 to 3.01%<br />Mobile Home Loans from 2.96 to 3.70%<br />Personal Loans from 2.88 to 3.47%<br />Recreational Vehicle Loans from 1.38 to 1.52%<br />Delinquencies dropped for the following:<br />Auto Loans Made through Dealers from 3.53 to 3.42%<br />Marine Loans from 2.35 to 2.04%<br />Property Improvement Loans from 1.75 to 1.46%True facts Newshttp://www.blogger.com/profile/07906940005857716594noreply@blogger.com0tag:blogger.com,1999:blog-1248747185511973538.post-12821113922553084142009-06-30T16:48:00.000-07:002009-06-30T16:50:04.914-07:00delinquencies are still on the rise with FannieFannie Mae, the mortgage goliath taken under government control last September, yesterday announced that its portfolio expanded by an annual rate of 35.1% in May, marking a stark contrast to the 19.2% decline in April.<br /><br />In its summary of monthly highlights, the agency said it provided nearly $72 billion of liquidity to the market, mostly in the form of Mortgage-Backed Securities ($67.7 billion). Fannie also securitized more than $61 billion of whole loans within their investment portfolio.<br /><br />Fannie, the largest funder of U.S. home mortgages, began accepting refinance mortgage originations in April, as part of its ‘Making Home Affordable’ Program. This helped their refinance volume increase to $57 billion in May.<br /><br />“We expect that our refinance volumes will remain above historical norms in the near term, but may fluctuate from month-to-month based on a number of market factors,” the press release stated. Looking ahead, Fannie said the MHA Program “will bolster refinance volumes over time as major lenders adopt necessary system changes and consumer awareness continues to build.”<br /><br />Fannie’s total portfolio of mortgage holdings grew from $770.1 billion to $789.6 billion in the month, and they are expected to expand it to $900 billion later this year, before reducing activity early next year.<br /><br />Meanwhile, delinquencies are on the rise: Fannie said the pace of serious delinquent payments ― 90 days or more delinquent ― on single-family Fannie-sponsored mortgages soared 27 basis points to 3.42% in April. Just one year prior, the rate was 1.22%. <br /><br />For multi-units, the serious delinquency rate was up two-tenths to 0.36%, quadrupling the rate from last year.<br /><br />Delinquencies are expected to continue as the unemployment rate approaches double-digits.True facts Newshttp://www.blogger.com/profile/07906940005857716594noreply@blogger.com0tag:blogger.com,1999:blog-1248747185511973538.post-47110268367619407452009-03-17T13:02:00.000-07:002009-03-17T13:04:42.272-07:00Card Issuers Choke Firms With Rate Hikes, Limit CutsMarch 17 (Bloomberg) -- Susan Woodward isn’t renewing the lease on her music boutique and internet cafe in Jackson Hole, Wyoming, after nine years. The reason: doubling interest rates on her credit cards. <br /><br />“My business is seasonal, so we count on credit to stock the store at the end of the slow season and prepare for the busy season,” said Woodward, who canceled her Citibank and Capital One credit cards in February after learning that rates would climb to 19 percent from 10 percent. She said she always made timely payments and kept low balances. <br /><br />Almost three-quarters of U.S. companies with fewer than 500 employees are experiencing a deterioration in credit or credit- card terms at a time when half of them depend on credit cards as a primary source of financing, according to a December survey of 250 firms by the National Small Business Association, a trade group with more than 150,000 members. <br /><br />The increase in credit-card costs has forced some business owners to stop using their cards, and at the same time declining credit limits are cutting their access to cash, said Todd McCracken, president of the Washington-based NSBA. Twenty-eight percent of small businesses in NSBA’s December survey said they had their card limits or lines of credit lowered in the second half of 2008. <br /><br />There were about 27 million companies with fewer than 500 employees in 2007, according to estimates by the Small Business Administration’s Office of Advocacy. <br /><br />Loans Drying Up <br /><br />Bank loans are drying up as an estimated 70 percent of U.S. banks have tightened standards for small-business loans, based on a Federal Reserve January survey of senior loan officers. <br /><br />Financial institutions may slash $2.7 trillion in credit- card lines by the end of 2010, according to a report published last week by Meredith Whitney, chief executive officer of Meredith Whitney Advisory Group LLC in New York. Small-business owners often use business and personal credit cards, with 41 percent relying on a combination of both, based on data compiled by the NSBA. <br /><br />“Small businesses in particular are getting squeezed on multiple credit fronts,” said Alan Blinder, an economics professor at Princeton University and former vice chairman of the Federal Reserve. “Some businesses are forced to turn to very expensive forms of credit or not get credit at all.” <br /><br />Independent businesses with fewer than 500 employees created 60 to 80 percent of new jobs annually in the U.S. during the last decade, according to the Washington-based Small Business Administration’s Web site. <br /><br />Credit Plan <br /><br />President Barack Obama and Treasury Secretary Timothy Geithner said yesterday the U.S. will free up credit for small businesses by raising federal loan guarantees on Small Business Administration lending and increasing bank liquidity. <br /><br />“Small businesses are the heart of the American economy,” Obama told a gathering of small-business owners, community banking executives and lawmakers at the White House. He said the measures announced yesterday are a “first step” of a continuing effort to help small business. <br /><br />The Fed plans to start disbursing funds on March 25 from its Term Asset-Backed Securities Loan Facility program, or TALF, to prop up the market for consumer and small-business loans. <br /><br />“If it succeeds, the TALF can be an important step in both preserving what’s left of consumer and small business lending and restoring those markets,” Blinder said. <br /><br />Decrease Balances <br /><br />If card limits are slashed or interest rates are increased, small-business owners should try to decrease the balances on all of their cards, not just one, so the ratio of debt to available credit is lower, a key in determining credit scores, said Jeff Van Winkle, an attorney in Grand Rapids, Michigan who represents small-businesses owners. <br /><br />Borrowers should also ask vendors if they will extend credit so they can defer payment to the vendor, without penalty, instead of to the credit-card company, Van Winkle said. <br /><br />Vendor financing may not be an option for Ralph Soto, who owns a construction company in Lutz, Florida. Twenty percent of the suppliers he uses won’t extend credit or are reducing credit lines, which has prevented him from bidding on certain projects that require up-front funding. Soto, 41, said the rate on his card issued by Capital One Financial Corp. has tripled, forcing him to cancel the card. <br /><br />“If lenders don’t manage risk, they won’t have the funds to lend to anyone else,” said Ken Clayton, senior vice president of card policy at the Washington-based American Bankers Association. One significant way to manage risk in these economic circumstances is to reduce credit lines, Clayton said. <br /><br />Risk Environment <br /><br />Charge-offs, which are loans the banks don’t expect to be repaid, were 7.1 percent on average in January compared with 4.6 percent a year earlier, according to data compiled by Bloomberg. Consumers are falling behind on credit-card payments as U.S. unemployment reached 8.1 percent in February, the highest level in more than a quarter century. <br /><br />American Express Co., the largest credit-card company by purchases, said yesterday net charge-offs rose to 8.7 percent of loans in February from 8.3 percent the previous month. <br /><br />New York-based Citigroup Inc. may cut credit lines by $600 billion and Charlotte, North Carolina-based Bank of America Corp. by $500 billion, according to Whitney. She estimated New York-based JPMorgan Chase & Co. and American Express would decrease lines by $300 billion and $100 billion, respectively. <br /><br />Rate Increase <br /><br />Some customers will have their interest rates increased to reflect the current risk environment, said Pam Girardo, a spokeswoman for McLean, Virginia-based Capital One. Customers were notified in writing with a minimum 45-day notice and can opt to decline the changes and close the account, she said. A Citigroup spokesman, Samuel Wang, declined to comment on the specifics of Woodward’s case. <br /><br />Woodward, 41, said three other stores along the main square in Jackson Hole are already empty, an unprecedented sight in her more than 20 years living there. <br /><br />Since American Express reduced Jim MacRae’s credit limit from $25,000 to $1,500 and San Francisco-based Wells Fargo & Co. almost halved his business line of credit, he has been forced to require more than a 50 percent deposit from customers who buy office furniture from him. He can no longer afford to keep inventory in stock and sales have dropped by about 80 percent, he said. <br /><br />“The stimulus package isn’t giving the companies I sell to the feeling that everything is going to be okay,” said MacRae, 59, who lives in Newport Beach, California. “Instead of buying office furniture, they’re laying people off.”Mortgage Minute Newshttp://www.blogger.com/profile/02391786233028318204noreply@blogger.com0tag:blogger.com,1999:blog-1248747185511973538.post-90710786218825440962009-02-26T13:14:00.000-08:002009-02-26T13:15:23.590-08:00Tax Credit Forms and Rules Now in PlaceThe Treasury Department has moved at record speed to implement one piece of the new American Recovery and Reinvestment Act of 2009 Act aka the stimulus act.<br /><br />The Department and the Internal Revenue Service which will manage it announced on Wednesday that forms and regulations are already in place for homebuyers who wish to claim the first-time credit enabled under the act.<br /><br />The credit is available to homebuyers who purchase a home before December 1 of this year. In an effort to make the effects of the credit felt quickly in the economy, homebuyers can claim the credit either on their 2009 tax return or immediately on the 2008 return due in April.<br /><br />The tax credit represents 10 percent of the purchase price of a home up to a maximum of $8,000 or $4,000 for married taxpayers filing separate returns. The $7,500 credit that was authorized under earlier legislation last year was actually a 15 year loan; the new tax credit does not have to be repaid by the homeowner under ordinary circumstances. <br /><br />The credit does have to be repaid if the homeowner sells the home in less than 36 months or if the home ceases to be his principal residence during that time.<br /><br /><br /><br /><br />For the purpose of this credit, a first time homeowner is defined as one who has not owned a home for the 36 months ending on the date of purchase.<br /><br />The credit is available to taxpayers with adjusted gross incomes up to $75,000 or $150,000 for married taxpayers filing jointly. Above those income levels the credit is phased out gradually.<br /><br />Homeowners who purchased a house between April 8 and December 31, 2008 are not eligible for the new credit. They are covered by the earlier legislation and can claim the $7,500 repayable credit.<br /><br />Treasury Secretary Tim Geithner said in a press release from his department, "The expansion of the first-time home buyer tax break as part of the President's recovery agenda gives money to taxpayers when they need it most, while also targeting an important group of buyers. We view our economic recovery plan, our financial stability plan, and now this homeowner affordability plan as three legs of the same stool - an integrated whole that represents our immediate response to the current crisis."<br /><br />Forms and instructions for claiming the credit on 2008 tax returns are available at www.irs.gov. The form number is 5405.Mortgage Minute Newshttp://www.blogger.com/profile/02391786233028318204noreply@blogger.com0tag:blogger.com,1999:blog-1248747185511973538.post-47602346558354535042009-01-24T05:23:00.000-08:002009-01-23T17:26:05.504-08:00Freddie Mac says it will ask for about $30B to $35BMcLEAN, Va. (AP) — Mortgage finance company Freddie Mac said Friday it will need an additional $30 billion to $35 billion in government aid as it copes with losses on loans the company backed during the U.S. housing bubble.<br /><br />The company disclosed in a Securities and Exchange Commission filing late Friday that it expects its government regulator, the Federal Housing Finance Agency, to make the request from the Treasury Department.<br /><br />It comes on top of the $13.8 billion the company received last year after it was seized by the government. Sibling company Fannie Mae has yet to request any such aid but has warned it may need to do so.<br /><br />Federal regulators seized control of both companies in September after they faced mounting losses from the housing market's bust. An agreement with the Treasury Department allows the government to invest up to $100 billion in each company.<br /><br /><br /><br />The actual amount of the request will reflect the amount of losses the company sustained in the fourth quarter, Freddie Mac said in the filing.<br /><br />The request suggests that losses are continuing for Freddie Mac, which posted a loss of $25.3 billion for the third quarter. In that report, Freddie Mac said that rising unemployment rates, tightening credit and deteriorating economic conditions caused the number of delinquent loans to rise, including prime loans made to borrowers with strong credit.<br /><br />Meanwhile, Freddie Mac also disclosed that it settled a dispute with JP Morgan Chase & Co., which will now collect payments on mortgages previously handled by failed thrift Washington Mutual. The agreement settles a dispute with JPMorgan, which purchased Washington Mutual in late September for $1.9 billion.Mortgage Minute Newshttp://www.blogger.com/profile/02391786233028318204noreply@blogger.com0tag:blogger.com,1999:blog-1248747185511973538.post-8366136310771377382009-01-23T12:05:00.000-08:002009-01-23T12:08:25.036-08:00Keep Your Home. Know Your Loan.” campaign promotes free housing counselingHUD KICKS OFF SIX-CITY FINANCIAL LITERACY CAMPAIGN TO HELP TROUBLED HOMEOWNERS AVOID FORECLOSURE AND RESCUE SCAMS<br /><br />NEW YORK - U.S. Housing and Urban Development Secretary today announced HUD's latest effort to prevent foreclosure by launching an aggressive consumer education campaign in six cities. HUD's "Keep Your Home. Know Your Loan." campaign will kick off in Chicago, Detroit, Los Angeles, Miami, New York and Phoenix. Preston launched the public awareness initiative at Neighborhood Housing Services, a New York City agency that offers clients free mortgage delinquency and default resolution counseling. <br /><br /> <br />HUD's financial literacy campaign builds on the Department's continuing commitment to support its 2,600 housing counseling agencies across the country. In 2008, demand for HUD-approved counseling increased significantly. Meanwhile, the number of foreclosure rescue scams has also increased in response to the nation's housing crisis. <br /><br />"This campaign is a call to action for families at risk of losing their homes," said Preston. "We want people to pick up the phone and call a HUD-approved housing counseling agency before they reach a point of no return. <br />Keeping your home may be as easy as dialing <br />(877) HUD-1515."<br /><br />Many troubled homeowners seek help late in their financial crisis thereby limiting their loan modification options. HUD's campaign will target homeowners who are three-to-six months from defaulting on their mortgage, facing a reset on their adjustable-rate mortgage, or are experiencing a family crisis such as unemployment or skyrocketing health care costs in 2009. <br /><br />The "Keep Your Home. Know Your Loan." campaign will include print, radio and television public service announcements, as well as a tool kit for non-profit counseling agencies that will support the effort. In each PSA, consumers are directed to call HUD's toll-free counseling hotline (877-HUD-1515) to arrange free face-to-face meetings with a counselor near them. Since most HUD-approved counseling agencies lack the resources for marketing and outreach, the Department is launching this campaign to help consumers earlier in their financial crisis and to fight the explosion of "pay-to-play" loan modification scams. <br /><br />HUD's support for housing counseling agencies has grown significantly, from $20 million in 2001 to $50 million in 2008. In addition, federal support has now grown exponentially with $360 million in additional funds in 2008 specifically for foreclosure prevention counseling. HUD has requested another $65 million to support local housing counseling agencies in FY 2009. <br /><br />Research finds HUD-approved housing counseling is effective to prevent foreclosure. A recent HUD study noted a 55 percent increase in the number of clients receiving foreclosure prevention counseling between 2006 and 2007. Of the approximately 136,000 families that completed this counseling during 2007, 45 percent were able to remain in their homes while 14 percent ultimately lost their home through foreclosure. This report also found that in the years leading up to the current crisis, more than 55 percent of low-income families seeking to buy their first home did not seek out pre-purchase counseling. This lack of counseling likely left them unprepared to make one of the biggest financial commitments of their lives and may have contributed to some of today's high rates of default and foreclosure.<br /><br />Challenge: In light of the economic conditions, including declining home values and the increase of resetting mortgage rates, many Americans are facing significant challenges that are contributing to the alarming rate of foreclosures. HUD-approved Housing Counseling Agencies can help homeowners navigate their financial challenges. However, counselors have more options to assist clients when homeowners call early in the process before they are in crisis.<br /><br />Response: Over the next 6 months, the U.S. Department of Housing and Urban Development is launching a national consumer education campaign urging homeowners to seek free, HUD-approved housing counseling advice. The campaign is a call to action for homeowners and target communities and demographic groups that are most at-risk.<br /><br />Campaign goal: Provide marketing and outreach materials and technical support to assist housing counseling and non-profit agencies that provide services to homeowners. The hope is to target current homeowners to assist them in keeping their homes by:<br /><br />Informing them of their loan terms and associated financial options; <br />Encouraging them to seek assistance early – call to action; and <br />Educating consumers on how to improve general financial literacy. <br />Components: The campaign provides a 'tool kit' which includes print, radio and TV PSAs, to support community, non-profit agencies that provide housing counseling services.<br /><br />Partners: HUD is urging community, cultural, faith-based and political advocates to become involved in the campaign. In addition, HUD is seeking homeowner associations, real estate brokers and other members of industry to take an active role.<br /><br />Target cities: Six cities were chosen for the launching of the campaign which are New York, Miami, Chicago, Detroit, Los Angeles, and Phoenix.<br /><br />Campaign brand and hotline: Keep Your Home. Know Your Loan.<br /><br />Call 1 (877) HUD-1515 for one of HUD's 2300 approved Housing Counseling Agencies in your local area. Visit http://www.hud.gov/keepyourhome.Mortgage Minute Newshttp://www.blogger.com/profile/02391786233028318204noreply@blogger.com0tag:blogger.com,1999:blog-1248747185511973538.post-63727423076774162822009-01-23T12:02:00.000-08:002009-01-23T12:04:19.902-08:00Fannie Mae Announces National REO Rental PolicyRenters in Fannie Mae-Owned Foreclosed Properties<br />Eligible to Stay in Their Homes <br /><br />WASHINGTON, DC -- Fannie Mae (FNM/NYSE) today announced the establishment of a new National Real Estate Owned (REO) Rental Policy that will allow qualified renters in Fannie Mae-owned foreclosed properties to stay in their homes. The company currently has an eviction suspension in place through the end of January which will allow for the new policy to be fully operationalized prior to the suspension concluding. <br /><br />"Renters in foreclosed properties have often been a casualty of the foreclosure crisis the country is facing," said Michael Williams, chief operating officer of Fannie Mae. "This policy will allow qualified renters to remain in Fannie Mae-owned properties should they choose to do so, mitigate the disruption of personal lives that foreclosures can cause, and help bring a measure of stability to communities impacted by high foreclosure rates." <br /><br />The new policy applies to renters occupying foreclosed properties at the time Fannie Mae acquires the property. Renters occupying any type of single-family property will be eligible including residents of two- to four-unit properties, condos, co-ops, single-family detached homes and manufactured housing. Eligible renters will be offered a new month-to-month lease with Fannie Mae or financial assistance for their transition to new housing should they choose to vacate the property. The properties must meet state laws and local code requirements for a rental property. <br /><br />While the company markets the properties for sale, Fannie Mae will manage the properties through a real estate broker or a property management company. The company will not require security deposits to be posted in connection with this program. <br /><br /><br />Renters in the foreclosed properties will be asked to pay market rate rent under the new leases. Rates may be determined by reviewing local comparable rents, conducting a neighborhood survey, or through other relevant indicators. Rates will also be subject to any legal rent control restrictions. The company will review each instance where the market rate may require a tenant to pay additional rent and will work to reach an equitable resolution. <br /><br />On behalf of the company, property managers are contacting renters in Fannie Mae-owned foreclosed properties to notify them of their options.Mortgage Minute Newshttp://www.blogger.com/profile/02391786233028318204noreply@blogger.com0tag:blogger.com,1999:blog-1248747185511973538.post-62608913891268070962008-12-23T16:33:00.000-08:002008-12-23T16:51:46.934-08:00Rates are low, but that doesn't help consumers when banks aren't given loansThe Federal Reserve may have cut its key short-term interest rate to the lowest level on record, but that doesn't mean credit will be any easier to get. <br /><br />The move to lower the fed funds target rate to a range between 0% and 0.25%marked the tenth time the Fed has cut rates in the past 15 months in an attempt to jumpstart the economy. <br /><br />Generally, the Fed lowers rates when it is concerned about the economy slowing because consumers tend to spend more when the cost of borrowing is cheap. But economists say the problem for consumers and businesses right now is not the cost of borrowing, but the availability of credit. <br /><br />"Consumers might see lower rates but it's still hard to get a loan "Banks are taking big hits, and they're still trying to preserve capital. So they'll only make loans if you're a good credit risk."<br /><br />How it works<br />The federal funds rate is an overnight lending rate that is used as a benchmark to determine the price of a variety of loans, including credit cards, home equity loans, lines of credit and car loans. <br /><br />Most types of consumer loans are pegged to the prime rate, which is directly influenced by the federal funds rate. Typically, the prime rate is 3 percentage points higher than the federal funds rate. It was 4% before Tuesday's rate cut; just after the decision, several banks announced they were lowering their prime rate to 3.25%.<br /><br />In turn, all credit cards with variable interest rates will automatically reset to reflect the lower rate. That is good news for card holders, but expect issuers to counter it by setting rate floors in order to preserve their margins, as well as scaling back consumer credit lines and closing old accounts. <br /><br />Banks are trying to mitigate losses, "New credit is going to be a problem, "If you have shaky credit you're going to be very challenged to find money...even people with good credit are going to find it's not as easy to get credit.<br /><br />Those in the market for a new car will certainly find deals, but that's mostly thanks to slashed sticker prices, not lower interest rates. That's because auto loans are not overly rate sensitive. For example, despite the Fed rate cuts, the average five-year note for a new car loan is at 7.05%, down from 7.60% a year ago But remember the rates are based on your credit score and lenders like GMAC or Ford want to see scores over 800 to get there tier 1 financing. <br /><br />Plus, even if borrowers can get financing, the difference of a percentage point doesn't seriously impact affordability. "Nobody is upgrading to a Hummer based on lower interest rates,".<br /><br />For many mortgage holders, the cumulative Fed rate cuts will result in lower payments when their variable-rate loans reset in 2009. But there is also a diluted effect: While this is a good time to refinance your existing mortgage, those in the market for a new home will need excellent credit to get a low rate. <br /><br />"To obtain today's low interest rates, you need to have a down payment - or equity position in your home in the case of a refi - of at least 10% and fully document your income and your assets," If you don't have good credit, you're going to have trouble getting financing. But as long as your loan is within FHA limits for your state and county you still can finance up to 97% of your loan. Just remember FHA loans are more expensive then your normally conventional loan and the PMI is more expensive as well.Mortgage Minute Newshttp://www.blogger.com/profile/02391786233028318204noreply@blogger.com0tag:blogger.com,1999:blog-1248747185511973538.post-47054417199749276992008-11-14T07:20:00.000-08:002008-11-14T07:21:04.755-08:00FDIC's Bair pushes aggressive mortgage plan<a href="http://anthonylandaeta.blogspot.com/2008/11/fdics-bair-pushes-aggressive-mortgage.html">True Facts News: FDIC's Bair pushes aggressive mortgage plan</a>Mortgage Minute Newshttp://www.blogger.com/profile/02391786233028318204noreply@blogger.com0tag:blogger.com,1999:blog-1248747185511973538.post-81626210715699177322008-11-12T07:04:00.000-08:002008-11-12T07:05:45.877-08:00Foreclosure Consumer Concerns for Older Americans<strong>Steps That Advocates Can Take To Help Prevent Foreclosure</strong><br /><br />Foreclosure or the threat of foreclosure can be devastating for seniors. Older homeowners fall behind on their mortgages for many reasons: sudden decreases in income due to the loss of a spouse; poor financial management which contributes to nonpayment of utility bills, service shutoffs and liens against the property; failure to perform necessary repairs and maintenance which makes the property uninhabitable; second mortgage or scams which make impossible demands on the homeowner’s limited resources. All of these contributing factors can be addressed by skilled advocates--if homeowners turn to them in time. This issue of Consumer Concerns for Older Americans examines some of the measures that legal and non-legal advocates for the elderly can take to defend homeowners at risk of foreclosure.<br /><br />How Foreclosures Work<br /><br />Foreclosure procedures vary from state to state. The procedures are established by state statutes, by case law, and by local practice. In about half of the states, foreclosures are court proceedings. First the creditor files a suit in a court located near the property. Unless the homeowner files an answer successfully contesting the foreclosure, a judgment is entered for the creditor. The home is then sold under court supervision.<br /><br />Other states have “non-judicial” foreclosures. Creditors foreclose by simply advertising the home for sale, using a legal notice in a newspaper. If homeowners want to contest this type of foreclosure, they must file a lawsuit and ask the court to stop the sale. Sometimes if the homeowner wants the court to stop the foreclosure, the homeowner must file a bond to protect the creditor. Unless the homeowner initiates a court proceeding, there is no judicial involvement in such a foreclosure.<br /><br />Some states allow both types of foreclosure, judicial and non-judicial. Practicality and local custom usually dictate a creditor’s choice of one type over the other.<br /><br />Consumer Strategies When Foreclosure Is Threatened <br />When a homeowner first becomes worried about meeting mortgage payments, advocates can recommend that a series of steps be taken to reduce the risk of foreclosure:<br /><br />Get Legal Advice. Because foreclosure is a harsh legal process, homeowners threatened with foreclosure should immediately obtain legal help. Possible sources of legal help are the neighborhood legal services office, a bar association panel of pro bono attorneys, or a program providing legal assistance for the elderly. A competent attorney can determine whether there are legal defenses to a foreclosure.<br />Too often, homeowners either postpone consulting a lawyer until after the time to assert their legal rights has passed, or walk away from their homes in frustration, leaving themselves without any equity and vulnerable to deficiency claims. For each foreclosure situation, a counselor or lawyer must carefully evaluate the homeowners’ objectives and interests.<br />Homeowners should, however, avoid “quick fix” attorneys who may advertise or solicit through the mail from published foreclosure lists. Many times these practitioners will push the homeowner to file a bankruptcy prematurely. A bankruptcy may be necessary at some point. But, as with many things, proper timing may be critical. <br />Keep Current on Home Payments. The homeowner should not pay credit card debts, doctor bills or other low priority debts ahead of home mortgage payments. Skipping payments on low priority debts for several months may have few bad consequences. Skipping one or two home mortgage payments may subject the homeowner to loss of the home. <br />Apply for Income Maintenance, Tax Abatement and Public Assistance Programs. Benefits provided by government and non-profit agencies are a key source of assistance for individuals in financial distress. These resources can help older homeowners free their income for home payments. Benefit programs to apply for may include fuel assistance and weatherization assistance, food stamps and emergency home repair programs. Most municipalities also offer property tax abatements for reasons of age or hardship. For very low-income homeowners, particularly those who are recently widowed, advocates should also determine the homeowner’s eligibility for Supplemental Security Income.<br />The process of obtaining these benefits is often slow and difficult. When necessary, shepherd individuals through the bureaucratic maze, ensuring that application procedures are understood and that all documentation is properly assembled and delivered. <br />Negotiate with the Mortgage Company or Servicer. It may be useful to ask the mortgage company to agree to a temporary or permanent change in the mortgage terms, commonly called a “workout.” More and more creditors are realizing that foreclosure is a losing proposition for the lender, and that they are better off keeping the consumer in the home making whatever payments the household can afford. It is important to contact the lender early, as soon as the homeowner begins experiencing financial difficulties. Although consumers may attempt to arrange a workout on their own, it is best if they are assisted by an experienced attorney or mortgage counselor. If the loan is guaranteed by a federal or state funded agency, the lender may be required to provide certain assistance and options to the homeowner to try to avoid foreclosure.<br /><br />Some workouts that lenders may accept include: <br />Payment arrangements including “forbearance,” “reinstatement,” or “deferral” agreements. These involve curing a default by making regular payments as they are due and making partial payments on the arrears. <br />Temporary interest rate reduction. Generally this will also require a reasonable plan to increase income to make future payments. <br />Recasting missed payments. This usually involves deferring the missed payments to the end of the loan. <br />Permanent interest rate reduction. <br />Extension of the loan period. <br />Reamortization/capitalization of arrears. <br />Reduction of the principal balance. <br />Refinance the Home Debt. If the homeowner has equity in the home, refinancing may allow the homeowner to avoid foreclosure. A refinance called a “reverse mortgage” may be especially useful for seniors. Such a reverse mortgage may reduce or eliminate the need for a senior to make a monthly mortgage payment. Advocates should keep in mind, however, that many refinancing schemes are frauds. Even legitimate refinancing options that look like an improvement on closer inspection are far more costly than the existing mortgage. The major disadvantages to refinancing residential debts are the increased finance charges that result from extending the repayment period, the possibility of having to pay points, the additional closing costs, and prepayment penalties on old mortgages. The feasibility of refinancing depends on whether the homeowner can obtain a loan at a reasonable rate, usually from a savings bank, a commercial bank, a credit union, or a legitimate mortgage company. Most finance companies and certain mortgage companies do not make residential loans at reasonable rates and terms. <br />Consider Selling the House Before Foreclosure. When foreclosure is threatened, a homeowner may wish to contact a local realtor to obtain an appraisal or a broker’s price opinion of the home’s value. Doing so provides the owner with information about the home’s marketability and its likely sale price, without necessarily obligating the owner to sell.<br /><br />Most homeowners do not want to give up their homes, but sometimes no other solution exists. Selling the house may be painful, but it is always a better solution than letting a bank sell the house. If they find a buyer, homeowners may sell their home privately before a foreclosure sale takes place. If more is owed on the mortgage than the house can be sold for, it may be possible to get the mortgage company’s consent to sell the home at a price that is less than the amount owed. <br />Consider Filing Bankruptcy. Homeowners who are about to lose their homes should carefully consider filing a petition in bankruptcy. This can stop the foreclosure process and allow them time to regroup and try to work out a plan to keep the home. Bankruptcy may also help them cure past defaults and make future payments. However, the bankruptcy option is complicated and it is a good idea to seek professional assistance from an attorney specializing in bankruptcy. Bankruptcy law requires almost all debtors to receive budget and credit counseling within 180 days before the bankruptcy case is filed. Homeowners who are considering bankruptcy should obtain credit counseling from an approved agency well before they need to file the bankruptcy case. <br />Deed in Lieu of Foreclosure. Homeowners often will be tempted to turn over their deed to the creditor instead of fighting the foreclosure. This is generally a good idea only if the borrower will receive something from the creditor in return for saving it the trouble of foreclosing. Fore example, if the home’s value exceeds the amount of the indebtedness, the homeowner may want to ask the creditor to agree not to seek further collection remedies. Some lenders will even agree to pay a small amount of cash for a deed in lieu in order to help the homeowner move. However, by turning over the deed to the mortgage holder, the consumer may forfeit any right to equity in the home. Similarly, the consumer may have valid claims or defenses against the creditor that would be lost by turning over the deed. If the consumer does offer the creditor a deed in lieu of foreclosure, make sure that there is a written agreement giving them sufficient time to vacate the premises in order to find alternative housing and move in an orderly fashion.Mortgage Minute Newshttp://www.blogger.com/profile/02391786233028318204noreply@blogger.com0tag:blogger.com,1999:blog-1248747185511973538.post-63223817159753363722008-11-12T06:57:00.000-08:002008-11-12T07:01:09.691-08:00Beware of Foreclosure Rescue ScamsForeclosure rescue scams are real. The people behind these scams prey on struggling homeowners who don't know where to turn for help. Scam artists often target defendants named in a foreclosure proceedings. Don't let them take advantage of you, your situation, your house, or your money.<br /><br />The best way to avoid becoming a victim is to get informed and ask a lot of questions. If you receive an offer, information, or advice that sounds too good to be true, then it probably is. Here are some tips:<br /><br />Know the person you do business with. The U.S. Department of Housing and Urban Development (HUD) sponsors many housing counseling agencies that can help you with questions relating to foreclosure and credit issues. Before responding to any person or organization offering to "save" you from foreclosure, check that the organization is HUD-approved at www.hud.gov/counseling. <br /><br />Beware of anyone who says that you don't need a real estate professional or title company when selling your home. You should always have a real estate professional, attorney, or a title company to help you with any transaction involving your home and protect your interests.<br /><br /><br />Don't be pressured to sign papers immediately or to transfer the deed of your house. Do not sign over the deed to your property to any organization or individual if you are not working directly with your mortgage lender to forgive your debt. <br /><br />Additionally, don't sign papers in exchange for a promise that someone else will pay off your mortgage. ALWAYS be sure to read and understand all paperwork before signing to ensure that you are not unknowingly giving someone else ownership of your home.<br /><br /><br />Beware of anyone who tells you that a buyer will purchase your home for the balance owed on your loan, plus an additional cash payment to you. Never make mortgage payments to anyone other than your lender, unless you have spoken personally to your lender about this. Scammers might ask you to make your payments to them; however, they pocket your payments instead of sending them to the lender.<br /><br />Cantact me with any questions regarding your Mortgage Anthony Landaeta tlandaeta@aol.comMortgage Minute Newshttp://www.blogger.com/profile/02391786233028318204noreply@blogger.com0tag:blogger.com,1999:blog-1248747185511973538.post-56565283248104005022008-11-12T06:54:00.000-08:002008-11-12T07:01:42.794-08:00Act Now to Avoid ForeclosureIf you have fallen behind on your mortgage payments, or if your loan has been referred to an attorney, you may still have time to save your home. You should act quickly to avoid losing your home. The most important step you can take is to get help early from your mortgage lender, servicer, or housing counselor. <br /><br /><br />If you delay and fall further behind in your payments, you are likely to have fewer options. Finding a solution that avoids foreclosure is better for you and better for your mortgage lender. Foreclosure damages your credit rating and your ability to borrow money or buy a home in the future.<br /><br />It is important to be open and honest about your financial situation with your servicer or counselor. Here are important steps to take immediately:<br /><br />Cantact me with any questions regarding your Mortgage Anthony Landaeta tlandaeta@aol.com<br /><br /><br /><br />Call your lender or loan servicer to talk about your situation. You can find the contact information on your monthly mortgage statement or coupon book. <br /><br /><br />If you can't reach your lender or servicer or you do not receive help, contact the Homeownership Preservation Foundation at 1-888-995-HOPE. Experienced counselors can help you develop the best plan for your personal financial situation. This counseling is free.<br /><br /><br />Gather the information you will need. You will be asked to provide: <br />letters or communications from your lender, <br /><br />foreclosure notices, <br /><br />recent mortgage statements showing your loan number, <br /><br />homeowner's insurance policy, <br /><br />last two pay stubs and most recent tax return for all borrowers named on the mortgage, <br /><br />proof of other income, such as child support, alimony, Social Security, or pension, <br /><br />bank account statements, and<br /><br />list of major monthly bills, including child care, utilities, credit cards, and cell phone. <br /><br /><br />Understand your options. Depending on your situation, you may have several options to discuss with your servicer or counselor. They could include:<br /><br />Repayment Plan--You may be able to catch up on missed payments by creating a schedule for repaying the past-due amount. <br /><br />Modification--In some cases, mortgage loan terms can be changed on a temporary or permanent basis to make the payment more affordable.<br /><br />Your financial situation may have changed significantly since you qualified for your home due to unemployment, divorce, job change/relocation, or medical issues. You may want or need to sell your home as a result of this change. There are options for borrowers who are worried about possible foreclosure:<br /><br /><br />Pre-foreclosure or Short-Sale--Servicers work with borrowers to sell their home and use the proceeds to pay off the loan even if the proceeds are not enough to settle the entire balance. <br /><br />Deed-in-lieu--Borrowers sign over title to the property to Fannie Mae without the expense of foreclosure. <br /><br />You have more options if you act quickly. Now is the time to ask for help!Mortgage Minute Newshttp://www.blogger.com/profile/02391786233028318204noreply@blogger.com0tag:blogger.com,1999:blog-1248747185511973538.post-26233840552023107652008-11-04T13:25:00.000-08:002008-11-04T13:26:42.994-08:00J.P. Morgan Chase Unveils Mortgage Foreclosure ProgramJ. P. Morgan Chase & Company has announced that it will make its own contribution to stemming the tide of foreclosures sweeping the country by modifying around $70 billion of its owned mortgages that are in or nearing default.<br /><br />The bank's efforts will focus on restructuring loans for borrowers who are at risk of foreclosure and it has placed a 90 day moratorium on all foreclosures in order to put guidelines for its program in place. The company will hire and train an estimate 300 additional loan counselors (it currently employs about 2,500) and open two dozen new regional counseling centers.<br /><br />The company has targeted 400,000 families for the rescue program. This is in addition to what it claims are 250,000 families which have already been helped in the earlier restructure of some $40 billion in loans.<br /><br />The bank is also a major servicer of loans owned by others. Its own mortgages account for only 20 percent of the total portfolio it controls. (The Wall Street Journal pegs the number at only 4.7 percent.) The restructuring program will not, at least at present, apply to those serviced mortgages however it hopes that eventually the initiative can be expanded to include some of the investor owned loans.<br /><br />The Chase program joins one previously announced by the Federal Deposit Insurance Corporation (FDIC) for the assets it has taken from the failed IndyMac Bank which was a major player in the mortgage industry. Bank of American has also started a modification program as did Wachovia Bank shortly before it was taken over by Wells Fargo Bank.<br /><br /><br /><br /><br />The FDIC decided, after its experience in the banking and savings and loan crises of the late 1980's and early 1990's that there was a far greater recovery possible from working with borrowers to modify loans than in foreclosing on the underlying collateral. It has been trying to convey the wisdom of shoring up homeowners to the Federal Reserve and the Treasury Department which appeared to be focused on the recovery of financial institutions and the credit market. FDIC Chairman Sheila Bair has submitted a plan for White House consideration which would help three million homeowners facing mortgage defaults. <br /><br />According to an article in The WSJ about the Chase program 7.3 million American homeowners are expected to default on their mortgages between 2008 and 2010 and approximately 4.3 million of them will actually lose their homes.<br /><br />While Chase plans to work with holders of all types of mortgage loans, a particular emphasis of the new program will be on pay-option adjustable rate mortgages. These now widely discredited instruments allowed borrowers to make a monthly payment that might not even be sufficient to cover the mortgage interest, the balance of which was added to the principle in a variation on negative amortization loans. While the borrower could certainly make a payment that covered the interest or a regular interest and principal payment most opted for the lowest required amount. Chase inherited a large number of these pay-option loans when it acquired the failing Washington Mutual Bank and EMC.<br /><br />According to CNNMoney.com, the bank will offer borrowers affordable 30-year fixed-rate loans or 10-year interest only loans where principal payments are deferred and may be forgiven over a period of years or until the house is sold.<br /><br />One particularly unusual feature of the Chase plan is their intention to go to the borrower. Caseworkers will review the entire bank-owned portfolio to determine loans that can benefit from the program and will then contact the borrowers. Hopefully this will eliminate the frustration experienced by many troubled homeowners who have been unable to reach appropriate help or get any response to their requests for assistance.<br /><br />According to CNN Charley Scharf, CEO of Retail Financial Services at Chase said of the program, "While Chase has helped many families already, we feel it is our responsibility to provide additional help to homeowners during these challenging times. We will work with families who want to save their homes but are struggling to make their payments."Mortgage Minute Newshttp://www.blogger.com/profile/02391786233028318204noreply@blogger.com0tag:blogger.com,1999:blog-1248747185511973538.post-53018585264024124322008-10-30T13:14:00.001-07:002008-10-30T13:14:27.259-07:00Treasury, FDIC Said to Consider Guarantees to Stem ForeclosuresOct. 30 (Bloomberg) -- The U.S. Treasury and the Federal Deposit Insurance Corp. are considering a program that may offer about $500 billion in guarantees for troubled mortgages to stem record foreclosures, people familiar with the matter said. <br /><br />The plan, which might put as many as 3 million homeowners into affordable loans, would require lenders to restructure mortgages based on a borrower's ability to repay. Under one option, the industry would keep lower monthly payments for five years before raising interest rates, the people said. <br /><br />FDIC Chairman Sheila Bair mentioned the program at an international deposit insurers conference in Arlington, Virginia, yesterday without offering details. ``A framework is needed to modify loans on a scale large enough to have a major impact,'' Bair said. <br /><br />A program of guarantees backed by the $700 billion bank rescue would be the Bush administration's most aggressive step on behalf of homeowners since the subprime crisis began more than a year ago. The government until now has relied mainly on a voluntary, industry-led alliance to spur loan modifications and avert foreclosures. <br /><br />``It will take a massive and quick infusion of funds for refinancings and other foreclosure prevention to turn the tide,'' said David Abromowitz, a senior fellow at the Center for American Progress, a Washington-based public policy research organization. <br /><br />Multiple options to stem foreclosures are being considered by the agencies and a final decision on a ``particular approach'' hasn't been made, said Jennifer Zuccarelli, a Treasury spokeswoman. ``The administration is looking at ways to reduce foreclosures, and that process is ongoing.'' <br /><br />Rising Foreclosures <br /><br />Bair, whose Washington-based agency insures deposits at U.S. banks, is pressing the mortgage industry to modify more loans to curb foreclosures, which rose to the highest on record in the third quarter led by California, Florida, Arizona, Ohio, Michigan and Nevada, according to California-based RealtyTrac. <br /><br />``The FDIC has had better ideas about how to solve this mortgage crisis than anyone else in the Bush administration,'' said Senator Charles Schumer, a New York Democrat. ``We hope that the White House will listen very carefully to the FDIC's proposals.'' <br /><br />The FDIC and Treasury program would provide incentives to mortgage lenders and loan-servicing companies to change their loans, ``along with a framework for modifying them systematically into long-term and sustainable, affordable mortgages,'' Bair said. <br /><br />Banks, Hedge Funds <br /><br />The plan would apply to banks, savings and loans, hedge funds and other mortgage holders, the people said. While it would provide guarantees for about $500 billion in mortgages, it would cost about $50 billion that would be covered by the bailout package. <br /><br />The government also is considering guaranteeing a second home loan, such as a home-equity line of credit, to assure mortgage holders they wouldn't lose money when they change loan terms, the people said. A guarantee in effect would put taxpayers on the hook for the loan if borrowers default. <br /><br />Treasury's plan ``was very necessary legislation to keep the fundamental financial institutions and the financial markets from collapsing,'' Ara Hovnanian, chief executive officer of homebuilder Hovnanian Enterprises Inc., said last week. ``We think in isolation it will fail if it's not combined with something that stabilizes the housing market right now.'' <br /><br />The FDIC would manage the program, the people said, adding that details are still being worked out and might change. <br /><br />`Productive Conversations' <br /><br />While the FDIC has had ``productive conversations'' with Treasury on using loan guarantees, ``it would be premature to speculate about any final framework or parameters of a potential program,'' FDIC spokesman Andrew Gray said in an e-mailed statement. <br /><br />Bair last week said the rescue plan lets the government set standards for mortgage modifications and offer loan guarantees for mortgages that meet the standards. <br /><br />``Loan guarantees could be used as an incentive for servicers to modify loans,'' Bair said in her Oct. 23 testimony before the Senate Banking Committee. ``The FDIC is working closely and creatively with Treasury to realize the potential benefits of this authority.''Mortgage Minute Newshttp://www.blogger.com/profile/02391786233028318204noreply@blogger.com0tag:blogger.com,1999:blog-1248747185511973538.post-47349433435490950392008-10-23T14:22:00.000-07:002008-10-23T14:24:25.444-07:00FDIC Chair Promotes Increased Incentives for Mortgage ModificationsWhile the media today focused mostly on the testimony of former Federal Reserve Chairman Alan Greenspan before the Senate Banking Committee, there was other news coming out of the hearing.<br /><br />Federal Deposit Insurance Corporation Chairperson Sheila Bair told lawmakers about her plans to use methods pioneered by several existing programs to encourage mortgage servicers to increase the pace of loan modifications for homeowners facing foreclosure.<br /><br />The proposed initiative in which the FDIC is working closely with the Department of the Treasury, will involve the government setting standards for loan modifications and then guaranteeing the resulting modified loans.<br /><br />Ms. Barr said in her testimony that the bulk of the banking industry is healthy and well capitalized but there is a liquidity problem caused by uncertainty about the value of mortgage assets. This is making banks reluctant to lend to each other or lend to consumers and businesses.<br /><br />She recounted recent actions by her agency to increase confidence in the banking system including increasing deposit insurance coverage and providing senior unsecured debt guarantees through the recently announced Temporary Liquidity Guarantee Program.<br /><br /><br /><br /><br />Ms. Bair said that since the program was unveiled at the beginning of last week, "we have seen steady progress in reducing risk premiums in money and credit markets. Yields on short-term Treasury instruments, which had approached zero in mid-September, have now risen back in line with longer-maturity instruments. Quotes for Libor, the London Interbank Offer Rate, also have declined in relation to Treasury yields - indicating a slow thaw in the interbank lending market. Interest rates on short-term commercial paper have fallen back to their lowest levels since mid-September, indicating that liquidity is also starting to return to that market.... We are making steady progress in returning money and credit markets to a more normal state."<br /><br />She turned to the current unprecedented wave of foreclosures which she described as "often a very lengthy, costly and destructive process that puts downward pressure on the price of nearby homes. While some level of home price decline is necessary to restore U.S. housing markets to equilibrium, unnecessary foreclosures perpetuate the cycle of financial distress and risk aversion, thus raising the possibility that home prices could overcorrect on the downside. <br /><br />"The continuing trend of unnecessary foreclosures imposes costs not only on borrowers and lenders, but also on entire communities. Foreclosures may result in vacant homes that may invite crime and create an appearance of market distress, diminishing the market value of other nearby properties. In addition, the direct costs of foreclosure include legal fees, brokers' fees, property management fees, and other holding costs that are avoided in workout scenarios. These costs can total between 20 and 40 percent of the market value of the property. The FDIC has strongly encouraged loan holders and servicers to adopt systematic approaches to loan modifications that result in affordable loans that are sustainable over the long term." <br /><br />Specifically she suggested that loan guarantees could be used as an incentive for servicers to modify loans with the government establishing standards for loan modifications and providing guarantees for loans meeting those standards. <br /><br />The Chairperson cited the steps taken by the FDIC following the failure of IndyMac Bancorp as an example of what the government can do to stem the foreclosure tide. She said that already more than 3,500 borrowers have agreed to loan modifications with the FDIC and these modifications have resulted in lowering monthly payments by over $350 on average.<br /><br />"By achieving mortgage payments for borrowers that will be both affordable and sustainable, these distressed mortgages will be rehabilitated into performing loans and avoid unnecessary and costly foreclosures. We expect that by taking this approach, future defaults will be reduced, the value of the mortgages will improve, and servicing costs will be cut. The streamlined modification program will achieve the greatest recovery possible on loans in default or danger of default, in keeping with our statutory mandate to minimize impact on the insurance fund and improve the return to uninsured depositors and creditors of the failed institution. At the same time, we can help many troubled borrowers remain in their homes. Under the program, modifications are only being offered where doing so will result in an improved value for IndyMac Federal or for investors in securitized or whole loans, and where consistent with relevant servicing agreements.<br /><br />She said she hoped that the program will be a catalyst for promoting more loan modifications for borrowers from other banks. <br /><br />The FDIC has also been playing a role in the implementation of the HOPE for Homeowners Act Ms. Bair said. The FDIC has joined the Departments of Housing and Urban Development (HUD) and Treasury and the Federal Reserve in establishing requirements and standards for the Program outside those specified in the authorizing legislation, and prescribing necessary regulations and guidance to implement those requirements and standards.<br /><br />"The HOPE Program incorporates many of the principles the FDIC considers necessary to be effective. It converts current problematic mortgages into loans that should be sustainable over the long-term and subsequently convertible into securities. It also requires that lenders and investors accept significant discounts and prevents borrowers from being unjustly enriched if home prices appreciate. "<br /><br />She said that the Emergency Economic Stabilization Act (EESE - popularly known as "the bailout,) recently passed by Congress, includes a number of provisions to encourage loan modifications. In particular, EESA addresses the issue of foreclosure mitigation and provides authority that could hold significant promise for future loan modifications. Under EESE, the Secretary of the Treasury is empowered to use loan guarantees and credit enhancements to facilitate loan modifications to prevent avoidable foreclosures.<br /><br />Chairperson Bair said that "Applying workout procedures for troubled loans in a failed bank scenario is something the FDIC has been doing since the 1980s. Our experience has been that performing loans yield greater returns than non-performing loans. In recent years, we have seen troubled loan portfolios yield about 32 percent of book value compared to our sales of performing loans, which have yielded over 87 percent."<br /><br />In conclusion Ms. Bair said, "In recent weeks, the FDIC has engaged in unprecedented actions to maintain confidence and stability in the banking system. Although some of these steps have been quite broad, we believe that they were necessary to avoid consequences that could have resulted in sustained and significant harm to the economy. The FDIC remains committed to achieving what has been our core mission for the past 75 years - protecting depositors and maintaining public confidence in the financial system."Mortgage Minute Newshttp://www.blogger.com/profile/02391786233028318204noreply@blogger.com0tag:blogger.com,1999:blog-1248747185511973538.post-62430882071931585472008-10-23T06:55:00.000-07:002008-10-23T07:00:02.673-07:00Foreclosure Filings Rose 71% in Third Quarter as Prices FellOct. 23 -- U.S. foreclosure filings increased 71 percent in the third quarter from a year earlier to the highest on record as home prices fell and stricter mortgage standards made it harder for homeowners to sell or refinance, RealtyTrac said. <br />A total of 765,558 U.S. properties got a default notice, were warned of a pending auction or were foreclosed on in the quarter, the most since records began in January 2005, the Irvine, California-based seller of default data said in a statement today. Filings rose 3 percent from the second quarter and fell 12 percent in September from August as state laws created to keep people in homes slowed the pace of defaults. <br />``I wouldn't be surprised to see foreclosures increase as the economy slows down,'' Rick Sharga, executive vice president for marketing at RealtyTrac, said in an interview. ``The people living paycheck to paycheck are at risk if they lose their jobs. It will cause more people to lose their homes.'' <br />The worst U.S. housing slump since the 1930s is being compounded by a recession that began in the third quarter and may last a year or more, according to Jay Brinkmann, chief economist for the Mortgage Bankers Association. Home prices in 20 U.S. metropolitan areas fell in July at the fastest pace on record, and sales of previously owned homes in August were 32 percent below the peak reached in September 2005. <br />Government Rescue <br />The government may buy home loans and related securities to help property owners struggling with monthly payments, even as ``people are walking away from their mortgages,'' Treasury Secretary Henry Paulson said in an interview with PBS television's Charlie Rose on Oct. 21. Congress passed a $700 billion financial-rescue fund that may be used to modify loans and inject capital to banks and unfreeze credit markets. <br />A new law in California, which accounted for 27 percent of the foreclosure filings in the third quarter, helped slow the process in September as notices of default dropped 51 percent compared with the previous month, RealtyTrac said. In North Carolina, default notices fell 66 percent last month after lawmakers required lenders to give homeowners an additional 45- day notice. <br />In Massachusetts, filings rose 465 percent in September from August after a law was passed requiring a 90-day notice before foreclosures could proceed, RealtyTrac said. <br />After a summer lull, defaults ``jumped back up close to the level we were seeing earlier in the year,'' James Saccacio, chief executive officer of RealtyTrac, said in the statement. <br />Spillover Effect <br />Homeowners may be buffeted by a deepening recession as consumer spending contracts and job losses mount, especially in states such as Michigan and Ohio where manufacturing has declined, said Brinkmann of the mortgage bankers group. <br />``The length of the recession will depend on how this bleeds over to employment,'' he said. The housing bust is the main reason more than 98,000 jobs in Florida and 77,700 in California were lost in the year through August, Brinkmann said. <br />Six states accounted for more than 60 percent of defaults in the third quarter, led by California with 210,845 foreclosure filings, more than double the amount from a year earlier, according to RealtyTrac. Florida more than doubled its total to 127,306 from the same period a year ago and Arizona almost tripled to 40,419. Ohio, Michigan and Nevada reported third- quarter filings of more than 30,000 each. <br />New York had 14,477 filings, up 19 percent from a year earlier, and New Jersey had 17,893 filings, up 95 percent. <br />California Leads <br />California had six of the 10 metropolitan areas with the highest foreclosure rates in the quarter, led by Stockton, where 3.69 of the housing units received a default filing in the quarter. Riverside-San Bernardino ranked third, Bakersfield was fourth, Sacramento was seventh and Fresno and Oakland ranked ninth and 10th, respectively, RealtyTrac said. <br />Las Vegas had the second-highest metro foreclosure rate with 3.48 of its housing units receiving a filing in the third quarter, more than double the amount from a year earlier. Fort Lauderdale and Orlando in Florida ranked fifth and eighth, respectively, said RealtyTrac, which has a database of more than 1.5 million properties. <br />Nationwide in September, one in every 475 U.S. housing units received a foreclosure filing. <br />The state of the U.S. economy is emerging as a key issue in the presidential race between Democrat Barack Obama of Illinois and Arizona Senator John McCain, a Republican. <br />Obama supports an economic stimulus plan to boost the economy, while McCain wants the government to purchase troubled mortgages. <br />By Dan Levy (Bloomberg)Mortgage Minute Newshttp://www.blogger.com/profile/02391786233028318204noreply@blogger.com0tag:blogger.com,1999:blog-1248747185511973538.post-40422978183853868982008-10-22T14:13:00.000-07:002008-10-22T14:16:22.702-07:00NAR Presents Four-Point Stimulus ProposalThe National Association of Realtors® (NAR) stayed right on message as it proposed a four-point plan for Congress to enact to resuscitate the housing market and including yet another plea to keep banks out of the real estate business. <br /><br />The plan, revealed in a statement made late last week and in the NAR President's Podcast released on October 21, calls for a special "lame-duck" session of Congress and asks that it consider the following, what it calls "consumer-driven" provisions to boost the economy and soothe the nerves of jittery homebuyers.<br /><br />1. Eliminate the provision contained in last summer's housing rescue bill that requires first-time homebuyers to repay the $7,500 tax credit they receive under the plan and expand that credit to apply to all buyers of a primary residence.<br /><br /><br /><br /><br />2. Urge the government to use a portion of the allotted $700 billion that was provided to purchase mortgage-backed securities from banks to provide price stabilization for housing. The Treasury department should be required to:<br /><br />3. Extend credit down to Main Street, making credit more available to consumers and small businesses;<br /><br />Extend credit down to Main Street, making credit more available to consumers and small businesses; <br />Expedite the process for short sales; <br />Expedite the resolution of banks' real estate owned (REOs) properties. <br />4. Make permanent the prohibition against banks entering real estate brokerage and management, further protecting consumers and the economy.<br /><br />In the podcast NAR President Richard F. Gaylord called the proposal "a boldstep on the policy front," and urged NAR members to talk with members of Congress while they are home in their districts over the election hiatus about the proposal and how important its provisions are to consumers.<br /><br />In the earlier statement Gaylor said, "Housing has always lifted the economy out of downturns, and it is imperative to get the housing market moving forward as quickly as possible." It is vital to the economy that Congress take specific actions to boost the confidence of potential homebuyers in the housing market and make it easier for qualified buyers to get safe and affordable mortgage loans. We are asking Congress to act right away."<br /><br />Gaylord said NAR, as the leading advocate for homeownership and private property rights, believes it is important for Congress to address the concerns and fears of America's families, much in the way it has addressed Wall Street turbulence. "Housing is and has always been a good, long-term investment and a family's primary step towards accumulating wealth." <br /><br />Gaylord said that NAR will strongly pursue those proposals and is calling on Congress to return to enact housing stimulus legislation in a lame-duck session after the national elections in November.Mortgage Minute Newshttp://www.blogger.com/profile/02391786233028318204noreply@blogger.com0tag:blogger.com,1999:blog-1248747185511973538.post-62484171235025508542008-09-26T12:31:00.000-07:002008-09-26T12:34:00.937-07:00MGIC Investment Corporation stop accepting new businessMGIC Investment Corporation, one of the nation's largest issuers of private mortgage insurance, announced on Friday that it plans to stop accepting new business under one type of contract that it now considers to present an unacceptable risk.<br /><br />Starting the first of the year MGIC will no longer take new business from "captive insurance companies." These are entities that are established to finance risk. This is the latest of a series of actions the company has taken to protect itself in the midst of a meltdown that has seen its portfolio hit by mortgage foreclosures and a downgrade of its senior debt rating by Moody's from A2 to A1 in March of this year.<br /><br />In a press release MGIC said that coverage for loans that have been reinsured through December 31 will be allowed to run out but that the company's quota-share reinsurance will be unaffected.<br /><br />In an attempt to shore up its financial situation MGIC has in recent months raised $840 million through sale of its securities, changed its underwriting guidelines, raised insurance premiums, sold its stake in Sherman Financial and entered into a reinsurance agreement that covers business written by the company starting last April.<br /><br />Private mortgage insurance is required by banks when they write a mortgage where the borrower makes less than a 20 percent down payment or has particularly questionable credit. The borrower pays the insurance premium but the insurance covers a portion of the bank's loss in the event the mortgage defaults. Obviously that section of the mortgage market requiring private mortgage insurance has been particularly hard-hit by foreclosures and short sales since those homeowners, by definition, had little or no equity in the home at origination and then watched their home's value erode from there.<br /><br />MGIC has reported negative income in each of the last three quarters. In the second quarter of 2008 which ended on June 30, it reported net income of -$97,899,000. <br /><br />MGIC stock was trading at $7.20 after Friday's announcement, down $0.75 from its close on Thursday. The stock has traded as high as $31.81 and as low as $3.51 in the last year.Mortgage Minute Newshttp://www.blogger.com/profile/02391786233028318204noreply@blogger.com0