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Category Archive: ‘Bailout’

National Housing Policy

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I saw these questions from Ed DeMarco on Twitter. My answers:

1. Have the M.I.D. apply towards primary residence only (not second homes), and lower from $1,000,000 to $500,000.  Those buying in hopes of a bigger write off will still buy a house, and take the partial benefit – and be in it for the appreciation and to raise a family (make wifey happy).

2.  Have the mortgage interest deduction be in effect for the first ten years of ownership only.  It would encourage borrowers to pay off mortgages in the ten years, and not refinance every year.

3.  Require that only the buyers can pay for mortgage insurance (sellers can pay in full now).

4.  Redirect the disadvantaged folks to subsidized rentals until they aren’t disadvantaged. Only stable, secure, affluent people should buy a house – it’s too late for the rest, unless they drive to the suburbs/outer edge of town.

5.  There are several loan programs available to help the disadvantaged already.  NACA is still around, helping buyers purchase with no down payment and no closing costs (H/T daytrip):

6.  Lower the capital-gains tax for 1-2 years to incentivize those reluctant-but-motivated possible sellers to unload a rental property or two.  Cut federal rate to 10% for the first year (currently 20%), and then back to 15% in the second year.  The crotchety old guys still won’t sell, so there won’t be a flood.  But more inventory = more sales while stabilizing prices.

7.  Keep Fannie/Freddie the way they are for now. If they can keep operating in the black, let’s allow the mortgage industry to enjoy the fluidity. I attended a seminar today on the new loan disclosures coming on October 3rd, and it is clear that Fannie/Freddie will be extremely strict on compliance. It doesn’t mean tougher credit, it means the mortgage industry needs to submit the cleanest loan packages ever – which is good for the taxpayers.

8.  The new compliance crunch will virtually eliminate mortgage brokers – wholesale lenders won’t want to take a chance on them. Yes, we still have room for you over here to be a realtor – there’s only 11,000 of us chasing 3,500 sales each month.

9.  Encourage a private jumbo-MBS market without subsidizing it.  Eventually, a private MBS marketplace could help shift the burden from Fannie/Freddie.

10. Run a tight ship.  We can handle it.

The powers-that-be have made some great moves to get us this far, now bow out gracefully and let free enterprise take care of the rest.

Posted by on Aug 20, 2015 in Bailout, Housing Tax Credit, Interest Rates/Loan Limits, Loan Mods, Local Government, Mortgage News, Mortgage Qualifying | 0 comments


From the SD Union-Tribune:

An excerpt:

When Chad Sanfillipo got the keys to his house in Ramona last year, he had come full circle in the real estate market.

After losing his home to a short sale during the crash of the housing market, Sanfillipo was once again an owner.

“It felt so exciting to be able to buy again, to have something I own,” said Sanfillipo, 45, who rented for a couple of years before a bank would lend him money again. “There’s no landlord or rent check. I get to say what I get to do with my house.”

Sanfillipo, a systems engineer, is one of roughly 116,000 San Diego County residents who had either a short sale or foreclosure between 2006 and 2014, before and after the Great Recession, according to CoreLogic, a real estate data company.

The good news for Sanfillipo and others who lost their homes during the downturn is that there’s ultimately forgiveness in the lending market. Each month, thousands of San Diegans who went through short sales or foreclosures are completing waiting periods that render them eligible to once again apply for government-backed loans. In the worst case, some must wait seven years, but others can get new loans in just one, depending on whether they go through the Department of Veterans Affairs, Federal Housing Administration, Fannie Mae or Freddie Mac.

People who lost their homes during the recession but own again are called boomerang buyers, and they’re becoming a larger part of the market.

Boomerang buying is becoming a nationwide movement. The National Association of Realtors says that 9.3 million homeowners underwent foreclosures between 2006 and 2014. Already, 1 million of them purchased homes again, and an additional 1.5 million will become eligible over the next five years.

boomerang buyers

Posted by on Jun 20, 2015 in Bailout, Foreclosures/REOs, Jim's Take on the Market, Market Conditions | 7 comments

Kitchen-Sink Foreclosure Avoidance

Hat tip to daytrip for sending this along:

Eric Mains is fulfilling a dream many Americans have had since the onset of the financial crisis seven years ago: He’s attacking fraud in the banking industry as aggressively as he can, using every possible tool under the law to achieve justice —and win some money back for himself.

Mains, a former team leader with the Federal Deposit Insurance Corporation (FDIC), has become so bitterly embroiled in a six-year dispute with his mortgage lender that he left the regulatory agency, fearing that he might have to eventually name it as a defendant in a federal lawsuit. He’s one of a small yet determined band of people still fighting foreclosure (the seizure of property) cases with obscure and sometimes arcane arguments, built on a simple yet mind-blowing premise: The true ownership of millions of mortgages issued during the housing bubble was fatally corrupted, and now it’s impossible to prove who actually legally controls those mortgages.

Recent Supreme Court precedent suggests that by rescinding his mortgage—canceling it, basically—Mains and people like him can put the onus on banks to prove they have the right to assets like his house in the first place. If Mains or his allies succeed, they would rip open a wound that virtually everyone in power has tried to stitch up and forget. But such a long-awaited victory wouldn’t make up for the years of stress and personal hardship Mains has suffered, including a failed marriage and now the end of his career in public service.

“I had to ask myself a question: Will I do this no matter if it hurts?” Mains told me. “I said yes. If I can afford to fight these suckers and bring this illegality to light, that’s why I went to law school.”

Mains has gotten divorced, lost custody of his kid, and wound up in the hospital – read the full article here:

Posted by on May 18, 2015 in Bailout, Foreclosures, Foreclosures/REOs | 4 comments

More Free Cheese

max cheese

More foreclosure-avoidance incentives were announced this week:

An excerpt:

“While the housing sector has strengthened in recent years, there are still many homeowners struggling to make their mortgage payments,” said Secretary of the Treasury Jacob J. Lew. “The changes we are announcing today offer meaningful incentives for borrowers to stay current in their modifications, increase their opportunity to build equity in their homes, and provide vital safety nets for those facing greater financial strains.”

The Home Affordable Modification Program (HAMP), established in 2009, offers homeowners loan modifications with lower monthly payments achieved through lowered interest rates and modified loan terms.  Many homeowners with HAMP modifications have been eligible to earn up to $5,000 if they adhere to modification terms for five years.  The amount is applied to their outstanding principal balance.

Under the revisions an additional $5,000 will be available to homeowners after a sixth year of on-time payments and they will then have the opportunity to re-amortize the reduced mortgage balance, thus further lowering their monthly payment.   HUD/Treasury estimate some one million borrowers with HAMP modifications may be eligible for the new incentive.

HAMP Tier 2 was developed as an alternative for homeowners who can’t qualify or are unable to sustain a HAMP Tier 1 modifications.  It provides modifications with a low fixed rate for the life of the loan.  The revision announced this week will include reducing the interest rate for these modified loans by 50 basis points which will also make more borrowers eligible for the program.  It also extends the sixth year $5,000 pay-for-performance incentive to Tier Two borrowers.

Posted by on Dec 6, 2014 in Bailout, Loan Mods, Mortgage News | 8 comments

QE3 To Facilitate Next Bubble?

From David D. at FDL:

Analysts have tried to parcel out whether QE3 will really help the economy.

The way almost everyone looks at this is about the impact on housing, specifically mortgage prices. But mortgage rates haven’t changed at all since the announcement of QE3, and if the Fed was trying to influence the expectations channel, the impact really should have been that immediate.

Then again, rates didn’t rise, either. It could be that QE3 arrested a trend toward increasing mortgage financing costs. But more likely, banks are taking the profits out of the eased cost of mortgage financing for themselves:

The banks are choosing not to reduce mortgage rates further. One reason: By keeping the rates elevated, they are able to earn much larger profits when they sell the mortgages into the bond market. If the level of profits on those sales stayed at recent average levels, borrowers might, for instance, pay $30,000 less in interest payments on a $300,000 mortgage, according to a recent New York Times analysis.

The fact that banks haven’t prepped for a backlog of mortgage applications, meaning that the benefits of QE3 cannot possibly get to customers in a reasonable amount of time, leads us more toward this conclusion. Banks have no problem securing cheap backstopping of mortgages, but they don’t have to channel those savings into the mortgages they sell. It’s a form of collusion, because nobody else has dropped their rates to gather the lion’s share of the business. And nobody can actually get a loan to move, either, because that would require hiring staff. This way, banks can benefit from lower rates for themselves on one side and higher rates for customers on the other. The arbitrage between those two prices equals massive profits.

Let me add another postulate to all this. When you have this delay in financing, the beneficiaries are those who have the working capital to purchase in cash. Furthermore, the cheap market for foreclosures invites groups who can accumulate capital to come in and scoop up the housing stock. This is what we’re seeing all over the country – institutional investors buying up foreclosed properties to rent out in the short term and sell at a profit in the longer term. They are securing very large amounts of capital to pull this off.

This is the next bubble, happening right here, and QE3 facilitates it.

Investment firms can scoop up cheap housing stock and flip it into rentals. There’s also talk of securitizing the rental income streams, which really reinflates the bubble machine. Meanwhile the character of neighborhoods completely changes, homeowners get nudged out for properties by the investors, the phenomenon of absentee slumlord-ism takes hold, and power relationships change when one company owns a substantial amount of the housing stock in a city.

What’s happening in housing right now should absolutely terrify people. The forces that are being coordinated to show positive statistics at the macro level are also creating a dangerous environment for the future.

Posted by on Sep 17, 2012 in Bailout, Real Estate Investing | 8 comments

BofA Not Foreclosing

Hat tip to HW for publishing this story, but I’m not sure that they or Barclays grasp the full meaning – that banks are deliberately letting defaulters live for free…..for years.

Loans serviced by Bank of America tend to remain in the 90-plus-delinquency state for significantly longer than loans serviced by other big banks, analysts at Barclays Capital find. The length of time that a loan is in the 90-plus delinquency bucket, they say, is driven by the credit quality of the borrower, its geographic location, and especially, by the servicer processing the loan.

A disproportionate share of BofA mortgages in the 90+ days delinquent bucket — 62% — are there for more than three years. That’s biggest among Too Big to Fails.

“We believe that this is partly driven by the more intense media scrutiny and government pressure being applied to BofA with respect to its foreclosure practices, given its history of servicing lapses,” Barclays says.

Over the past few years, BofA has likely exhausted all other avenues of resolution (loan modifications, short sales, deeds-in-lieu of foreclosure, etc.) before proceeding with moving a borrower into foreclosure. The bank implemented a temporary foreclosure moratorium across the country in late 2010.

Posted by on Sep 17, 2012 in Bailout, Mortgage News | 8 comments

QE3 Impact on Housing?

In January, 2009 the Fed didn’t hold any mortgage-backed securities.

Today they have $843 billion, and yesterday they “agreed to increase policy accommodation by purchasing additional agency  mortgage-backed securities at a pace of $40 billion per month. The Committee also will continue through the end of the year its program to  extend the average maturity of its holdings of securities as announced in June,  and it is maintaining its existing policy of reinvesting principal payments from  its holdings of agency debt and agency mortgage-backed securities in agency  mortgage-backed securities.”

 “These actions, which together will increase the  Committee’s holdings of longer-term securities by about $85 billion each month through the end of the year, should put downward pressure on longer-term  interest rates, support mortgage markets, and help to make broader financial conditions more accommodative.”

(seen at CR, HT josap)

Will the Fed’s buying more MBS make a difference in housing?

Everybody I know was happy at the thought of getting a 3.875% rate.  Freddie Mac’s 30-year rate was 3.55% this week.  If the Fed’s actions push them lower, what is the effect on monthly payments?

They are only buying agency paper, so let’s look at the conforming $417,000 loan amount:

$417,000 @ 3.55% = $1,884.17

$417,000 @ 3.00% = $1,758.09

If 30-year conforming rates got all the way down to 3.00%, buyers would either save $126/mo., or be able to afford a $30,000 higher mortgage and pay the same $1,884.

But JimG nailed it – this MBS buying spree will allow banks to offload stinky paper to the Fed, rather than foreclosing.  Banks can predict when a mortgage is going bad – because borrowers people typically slow-pay before defaulting.  Servicers would be able to dump any suspected about-to-default mortgages, and keep the short-sale desk open for the borrowers who want to cooperate over the next few years.

The Fed would probably be more accomodating of the folks who don’t pay, so defaulters would enjoy an extended free-rent period.  Foreclosures will dry up further (causing banks to appear solvent), the real-estate market will have fewer distressed sales giving people the idea that prices will improve soon, and the Fed will look like a hero.

In the meantime, we’ll have tight inventory and more OPTs.

Posted by on Sep 14, 2012 in Bailout | 6 comments

House Passes FHA Bill


House lawmakers overcame election-year gridlock on Tuesday to punt their version of a bill that would shore up the Federal Housing Administration, whose embattled Mutual Mortgage Insurance Fund falls short of the capital required by law.

The lower chamber passed the Federal Housing Administration Fiscal Solvency Act by a sweeping vote of 402 -7.

If it becomes law, the bill would strengthen HUD’s ability to do away with lenders that fail important lending criteria and allow the federal agency to avoid losses on defaulted loans underwritten by non-compliant lenders.

The law would allow HUD to charge up to 2.05 percent in annual insurance premiums, establish an annual fee for lenders at 0.55 percent, and deepen repayment requirements for lenders that commit fraud or violate other FHA criteria.

Read More

Posted by on Sep 12, 2012 in Bailout | 5 comments

No Cheese For You


Financial help is moving to embattled homeowners under the $25 billion national mortgage settlement that resulted from abusive foreclosure practices by some of the nation’s largest banks.

Mortgage servicers spent $10.6 billion on principal reductions, short-sales, refinancing and other borrower relief efforts from March 1 to June 30, according to a  report Wednesday by settlement monitor Joseph Smith. The help was directed at 137,846 U.S. homeowners, who received an average benefit of $76,616 each.

The spending includes $6.7 million in settlement-related relief for 260 Iowa homeowners, which averaged $25,781 each, according to the office of Iowa Attorney General Thomas Miller. The disparity is partly due to the state’s lower home prices. Iowa residents are eligible for $18 million in direct relief in all.

Wells Fargo, Bank of America, JPMorgan Chase, Citigroup and Ally Financial reached the deal in March, while admitting no wrongdoing. Their alleged misdeeds included the falsification of documents via so-called “robo-signing” operations. They have three years to fulfill their mortgage-relief obligations.

“It’s good news that here in Iowa and across the country we’re starting to see the banks moving generally in the right direction,” said Miller, who was the lead state attorney general in the joint state-federal investigation which resulted in the landmark civil settlement. The probe began in October of 2010 amid widespread reports of servicer misconduct.

The servicers spent $8.67 billion on short sales, which occur when an underwater borrower sells their home for less than they owe on it, according to the monitor. Idled workers saddled with an underwater mortgage generally are more likely to restrict their job searches to the area around their home. Short sales are important because they make it easier for the unemployed to pursue jobs that require relocation.

Bank of America has the largest financial obligation under the settlement, at $11.8 billion and has committed to writing down the principal owed on 200,000 homes whose owners are now underwater on their mortgages.

The five mortgage servicers also committed to new rules under the deal, which include making foreclosure a last resort.

Posted by on Aug 30, 2012 in Bailout, Mortgage News | 1 comment