Archive for January, 2009

Fannie’s Modifying Loans

by Justin Miller on January 31, 2009 in Bailout, Foreclosure, Loan Modification with No comments

I keep reading more and more articles about how lenders are modifying more loans, the Hope for Homeowners loans, Fannie/Freddie streamlining modifications, etc. but it sure doesn’t seem they are doing it as much as they talk about it.

Fannie Mae has reached an agreement to work with one of its former critics, Neighborhood Assistance Corp. of America, to prevent foreclosures by reworking home mortgages to make them easier to afford.

http://online.wsj.com/article/SB123328152873231973.html?mod=todays_us_page_one

Fannie/Freddie Slow On Evicting Tenants

by Justin Miller on January 31, 2009 in Foreclosure with No comments

This is a very interesting article.  Although Fannie/Freddie are in the mortgage business are they doing the right thing by being landlords?  You can make that call.

Fannie Mae and Freddie Mac, currently the largest holders of U.S. home mortgages, are fast becoming big landlords. But some real estate agents say the firms’ unwillingness to evict tenants from properties they inherit could slow the housing market’s recovery.

Freddie Mac, bowing to pressure from affordable-housing advocates, said Friday it would let renters remain in homes lost to foreclosure. The mortgage-finance company will begin next month offering monthly leases to tenants, following the lead of Fannie Mae, which rolled out a similar policy earlier this month. Both companies said Friday they would halt tenant evictions in February.

The policies are an about-face from the two companies’ previous practice when, like most lenders and mortgage companies, they routinely evicted tenants in homes that fell into foreclosure, even when residents were current on their rent.

Tenant advocates have called on private lenders to follow Fannie and Freddies’ lead, noting that tenants have been swept up in the foreclosure crisis. Lenders should “not be kicking a tenant out in the middle of a recession who has upheld all the terms of their rental agreement,” said Jim Carr, operating chief of the National Community Reinvestment Coalition. “It represents a really important and good-faith effort not to compound the misery of these families.”

http://online.wsj.com/article/SB123336843063635637.html?mod=todays_us_page_one

Is Foreclosure Is a Good Choice?

by Justin Miller on January 31, 2009 in Bailout, Foreclosure, Loan Modification with No comments

This is an incredible article.  I am not saying for anyone and everyone to foreclose on their property but the article makes some great points. 

“If the intent is to help homeowners, then foreclosure is undoubtedly the best solution. Household balance sheets have been destroyed by taking on too much debt via the purchase of inflated assets. With so little savings, a household with negative equity almost implies negative net worth. Walking away from the mortgage immediately repairs the balance sheet.

Credit may be damaged, but homeowners can rebuild it. And by renting something they can afford, instead of the McMansion they cannot, homeowners are most likely to have some money left over each month that they can save toward a down payment on a house they can eventually afford.”

http://online.wsj.com/article/SB123336541474235541.html?mod=todays_us_opinion

Loan Modifications Can Stop Foreclosures

by Justin Miller on January 31, 2009 in Bailout, Foreclosure, Loan Modification with 2 Comments

Below is a great opinion article from The Wall Street Journal.  As I will continue to say, we need to stop foreclosures in order to stabilize the housing market. 

The article states that the evidence shows that such modifications don’t work. For one thing, many of the servicers who control the mortgage loans claim they are not legally permitted to agree to voluntary modifications. And even when they are legally permitted to agree, their financial incentives are stacked in the direction of foreclosure.

As a result, the much-vaunted federal “Hope for Homeowners” program launched in October has been only a limited success. The program is supposed to facilitate new mortgages for homeowners if lenders agree to reduce the amount of money owed on a home to 90% of its assessed value. The program went into effect with the goal of helping hundreds of thousands of homeowners. To date, it has processed less than 400 applications.

My thoughts are that it is not in a banks best interest to foreclose.  Why not put a portion of the balance into forbearance if you don’t want to do the Hope for Homeowners loan which reduces the principle balance.  I understand why banks don’t want to do this program because the government shares in the equity but if you put a large portion of the balance into forbearance they can make out.  For example, say the borrower who fell behind has a $300,000 mortgage but the property is only worth $150,000.  Put $150,000 into forbearance that doesn’t have to be repaid until you sell your home or recover the value to refinance.  They could give you an interest rate of 0%-3% on the balance in forbearance as long as you prove you can afford the home at that amount.  If a bank let’s the property go into foreclosure they will get less than $150,000 for their offers, have to pay a realtor 4-6% to sell it, keep up the property, pay back taxes, etc, etc.  Isn’t this a win, win? 
http://online.wsj.com/article/SB123327754670931503.html?mod=todays_us_opinion

More Bank Say No To TARP Funds

by Justin Miller on January 31, 2009 in Bailout with No comments

Why would a bank not want money from the TARP fund?  According to the article below from The Wall Street Journal, A growing number of healthy banks are rejecting funds from the Treasury Department’s $700 billion bailout partly over concerns that the U.S. may impose tougher restrictions on institutions that take government cash.

At least 50 banks that qualified for aid have rejected the Treasury’s funds, say government officials, bank executives and the Government Accountability Office, who cite the prospect of new strings as a factor.

“There is a provision that allows the government to unilaterally change the rules and that is of great concern to us,” said Rick Adams, executive vice president at United Bankshares Inc. of Charleston, W.Va. “There’s a big fear of the unknown.”

http://online.wsj.com/article/SB123336063516635301.html?mod=todays_us_money_and_investing

Loan Fraud Is Hot

by Justin Miller on January 28, 2009 in Commercial Real Estate, Conventional Loans, FHA Loans, Interest Rates with 2 Comments

There was a great article in “Origination News” all about fraud increasing in 2008.  That is why it is more important than ever to do with someone that can be trusted.  Many people go onto websites and read in the newspaper about rates.  You have to be so careful with companies publishing rates that do not currently exist.  You also need to make sure to read the fine print.  Here is what 2 individuals said in the article:

 

“I think the losses are going to get a lot worse. I think we’re closing a chapter on the rampant mortgage fraud that was out there. We’re going to at least require people to falsify a W-2 and a pay stub, we’re not going to let them just slide it through. We’re not going to do it as foolishly as we did in the last five years. If you’re going to commit fraud now, you’re going to have to get creative on your Photoshop.

There will continue to be a high percentage of reported fraud as the market continues to constrict because we haven’t seen the losses come in from the 2005, 2006 and 2007 books and I think those are going to be fairly substantial. My only concern about the new market is that I don’t think that tightening underwriting policies doesn’t necessarily stop fraud. It stops a lot of the marginal deals, but there are fraudsters out there that have to do it for necessity, as opposed to opportunity.

The fraud rates we are seeing on applications for 2008 originations are increasing. They are going back up again and it is, as Merle said, because of desperation. You have borrowers who can’t sell, you have…”

The Good And Bad News On Interest Rates

by Justin Miller on January 28, 2009 in Interest Rates with No comments

Here is a great script from www.mortgagemarketguide.com.  They state to copy and paste it but I never want to lead someone to believe that I wrote something that I didn’t. 

I have good news and bad news…which do you want first?

OK – here’s the good news. Interest rates are at historic lows, making it possible for many homeowners to refinance and improve their financial position – and combined with homes listed currently at bargain prices, those who are in the market to buy are able to purchase the home of their dreams and get a great deal.

Here’s the bad news. All lenders and investors in the US have been completely slammed by with the recent increase in loan applications – right at the time that many have laid off staff to save money in a challenging economy. This means that timeframes they need for underwriting, approvals and closings have become longer than normal. It also means that some companies actually have chosen to raise rates, just to slow down the volume to a manageable level.

But wait – there’s an answer. I know how to plan ahead and be smart, so that we can keep your rate protected. We may want to consider a longer lock in period than we might normally utilize, just to ensure that your loan will be processed, underwritten, approved and closed in this extremely volatile climate. I will also ask that you respond quickly when I request information or documentation, as the faster we can get your file submitted and approved, the better off we are to keep your rate protected.

The best news is that we are working together – and as always, I encourage you to get in touch with me with any questions you may have at this time!

Central Bank’s Modifications

by Justin Miller on January 28, 2009 in Bailout, Loan Modification with No comments

There seems to be plenty of talk about modifying loans but very little action.  I guess we will have to wait and see.  According to the article below from The Wall Street Journal, The Federal Reserve has developed a new policy to modify mortgages tied to assets it acquired via recent federal bailouts, the latest step in the government’s attempt to alleviate the mortgage crisis.

The goal of the policy, which lawmakers have sought for months, is to “avoid preventable foreclosures” on residential mortgage assets that are held, owned or controlled by the central bank, Fed Chairman Ben Bernanke wrote to top lawmakers Tuesday.

http://online.wsj.com/article/SB123311240039823003.html?mod=todays_us_page_one

Jumbo Mortgage Troubles

by Justin Miller on January 28, 2009 in Bailout, Jumbo Mortgages, Loan Modification with No comments

You have to love this article on how defaults are increasing on Jumbos.  The 3 banks that did the most jumbos were Chase, Wells Fargo, and Bank of America.  Chase’s CEO James Dimon states “We were wrong.  We obviously wish we hadn’t done it.”

 

A jumbo mortgage is a loan amount greater than the conforming loan limits for Fannie Mae and Freddie Mac of $417,000.

 

http://online.wsj.com/article/SB123310421416822271.html?mod=todays_us_money_and_investing

The Fed Leaves Fed Funds Rate Unchanged

by Justin Miller on January 28, 2009 in Conventional Loans, FHA Loans, Interest Rates with No comments

The Federal Reserve said they are going to buy mortgage-backed securities in a big way which will keep interest rates low and maybe move them even lower.  According to The Wall Street Journal today, the Federal Reserve, unable to lower rates further, said it is prepared to purchase long-term Treasurys in order to keep rates low. “The economy has weakened further,” the Federal Open Market Committee said, adding that conditions “are likely to warrant exceptionally low levels” on fed funds “for some time.”

 

The Fed kept its target on the federal-funds rate at a record-low range of 0% to 0.25%. Central bankers said they are committed to keeping rates at low levels for some time in order to combat a worsening recession and a deflationary spiral of falling employment and spending.

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