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Category Archive: ‘Loan Mods’

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):

https://www.naca.com/naca/purchase/purchase.aspx

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

More Free Cheese

max cheese

More foreclosure-avoidance incentives were announced this week:

http://www.mortgagenewsdaily.com/12052014_hamp_mfa_programs.asp

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

Automatic Loan Mod

Occasionally, the ivory-tower set comes up with these wacky ideas to have banks share risk with borrowers.  Fannie and Freddie may not be interested just due to the complexity, but if a private bank gave it a run with a good marketing push, they might find an audience. Hat tip to Scott S. who sent this in from Bloomberg BusinessWeek:

http://www.businessweek.com/articles/2014-05-22/redesign-30-year-mortgage-prevent-next-financial-crisis

Entertaining as it is, playing the financial crisis blame game gets us nowhere. A more useful contribution from Mian and Sufi is the shared-responsibility mortgage, their prescription to make economies less vulnerable to debt-fueled bubbles. In such a mortgage, lenders take some of the hit if housing prices fall and reap some of the reward if they rise. “Had such mortgages been in place when house prices collapsed, the Great Recession in the United States would not have been ‘Great’ at all,” they argue. “It would have been a garden variety downturn with many fewer jobs lost.”

Their claim is bold, perhaps too bold, but the strategy for making debt less dangerous by putting a twist into the 30-year fixed-rate mortgage is sound.

If an index of home prices in a home’s ZIP code fell, say, 30 percent, then the borrower’s monthly payment of principal and interest would also fall 30 percent. That’s not achieved by stretching out the length of the loan, which lenders sometimes will do: Despite the smaller payment, the mortgage would still get paid off over 30 years. Financially speaking, it would be equivalent to getting a reduction in principal.

If prices recover, payments go back up, but never above the original amount. Lenders would ordinarily charge a higher rate for that protection, but Mian and Sufi calculate that they would be willing to forgo a bump on the rate if they were given some upside potential: 5 percent of any capital gain the homeowner gets upon selling or refinancing the house.

Read full article here:

http://www.businessweek.com/articles/2014-05-22/redesign-30-year-mortgage-prevent-next-financial-crisis

Posted by on May 29, 2014 in Loan Mods, Mortgage News | 4 comments

Debt-Relief Tax Exemption Expiring Again

Hat tip to daytrip for sending in this article from the latimes.com alerting us to the expiring The Mortgage Debt Relief Act of 2007, wrapped around the free cheese in the recent JP Morgan settlement:

http://www.latimes.com/business/hiltzik/la-fi-mh-homeowners-20131029,0,6953798.story#axzz2jD09ygWq

David Dayen spots a new blow for underwater homeowners that thus far has flown under the radar: the coming expiration of the Mortgage Forgiveness Debt Relief Act of 2007, scheduled for Dec. 31.

taxing refi proceedsThe act is a mouthful, but it’s been a crucial factor in helping countless families get out from under bad mortgages. Simply put, the act relieves homeowners from having to pay taxes on any loan forgiveness they receive in a mortgage restructuring. (The maximum exemption is $2 million for a couple.) The measure was originally set to expire last Dec. 31, but it was extended another year by the fiscal cliff deal.

The foreclosure crisis is ebbing, but the relief is still needed. Millions of families are still underwater and facing delinquency, default, and foreclosure. As Dayan notes, those who succeed in obtaining principal reductions will be getting a bill that’s almost certain to be unaffordable.

As an additional irony, the act’s expiration comes just as JPMorgan, one of the banks that contributed massively to the housing crisis, reaches a deal that gives it a tax break on its multibillion-dollar settlement of federal charges related to the disaster.

He suggests folding an extension of the homeowner relief act into the JPMorgan settlement, but the extension looks like something that would have to clear Congress all by its lonesome. What are the chances of that? Congress has a lot to do as the end of the year looms. Somehow the things that aren’t on its agenda are all needed to help the less advantaged of society — food stamp extensions and now mortgage relief. Come New Year’s Day, we’ll be asking once again: Who do the people on Capitol Hill work for?

Posted by on Oct 30, 2013 in Foreclosures/REOs, Loan Mods, Mortgage News, Principal Reductions, Short Selling | 6 comments

Eminent Domain – Mortgages

Hat tip to daytrip for sending this in from nytimes.coman excerpt:

Robert and Patricia Castillo paid $420,000 for a three-bedroom, one-bathroom home in Richmond, Calif., in 2005. It is now worth $125,000.

The power of eminent domain has traditionally worked against homeowners, who can be forced to sell their property to make way for a new highway or shopping mall. But now the working-class city of Richmond, Calif., hopes to use the same legal tool to help people stay right where they are.

Scarcely touched by the nation’s housing recovery and tired of waiting for federal help, Richmond is about to become the first city in the nation to try eminent domain as a way to stop foreclosures.

The results will be closely watched by both Wall Street banks, which have vigorously opposed the use of eminent domain to buy mortgages and reduce homeowner debt, and a host of cities across the country that are considering emulating Richmond.

The banks have warned that such a move will bring down a hail of lawsuits and all but halt mortgage lending in any city with the temerity to try it.

But local officials, frustrated at the lack of large-scale relief from the Obama administration, relatively free of the influence that Wall Street wields in Washington, and faced with fraying neighborhoods and a depleted middle class, are beginning to shrug off those threats.

“We’re not willing to back down on this,” said Gayle McLaughlin, the former schoolteacher who is serving her second term as Richmond’s mayor. “They can put forward as much pressure as they would like but I’m very committed to this program and I’m very committed to the well-being of our neighborhoods.”

The city is offering to buy the loans at what it considers the fair market value. In a hypothetical example, a home mortgaged for $400,000 is now worth $200,000. The city plans to buy the loan for $160,000, or about 80 percent of the value of the home, a discount that factors in the risk of default.

Then, the city would write down the debt to $190,000 and allow the homeowner to refinance at the new amount, probably through a government program. The $30,000 difference goes to the city, the investors who put up the money to buy the loan, closing costs and M.R.P. The homeowner would go from owing twice what the home is worth to having $10,000 in equity.

Read full article here:

http://www.nytimes.com/2013/07/30/business/in-a-shift-eminent-domain-saves-homes.html?pagewanted=1&_r=1&ref=business&

Posted by on Jul 30, 2013 in Loan Mods, Local Government, Mortgage News | 4 comments

No-Pay Preferred?

Another hat tip to daytrip for sending this in from cnnmoney:

Nearly 1.2 million mortgage modifications have been completed since the Home Affordable Modification Program (HAMP) was first launched four years ago.

Yet more than 306,000 borrowers have re-defaulted on their loans and more than 88,000 are at risk of following suit, the Special Inspector General for the Troubled Asset Relief Program (SIGTARP) found in its quarterly report to Congress.

In addition, the watchdog found that the longer a homeowner stays in the HAMP modification program, the more likely they are to default. Those who have been in the program since 2009, are re-defaulting at a rate of 46%, the inspector general found.

Read full article here:

http://money.cnn.com/2013/07/24/real_estate/hamp-default/index.html

Posted by on Jul 24, 2013 in Loan Mods | 2 comments

No-Doc Loan Mod

fhfaIn late March, HousingWire reported the Federal Housing Finance Agency would expand its suite of mortgage modification tools for Fannie Mae and Freddie Mac servicers.

As of July 1st, the Streamlined Modification Initiative is in effect, in order to encourage servicers to handle delinquencies earlier, minimizing losses to the GSEs and taxpayers, while cutting back some of the red tape that slows down the traditional approval process.

Borrowers who are 90-days late on their Fannie/Freddie first mortgage will receive a 4% fixed-rate payment (as long as it is lower than the current payment and the LTV is above 80%).

All eligible borrowers must make three on-time trial payments, the FHFA said. Once those payments are made, the loan modification takes permanent effect.

No documentation is required. The program expires Aug. 1, 2015.

Posted by on Jul 2, 2013 in Loan Mods | 1 comment

Not-Foreclosing As A Strategy

Bank of America Corp. has amassed $64 billion of mortgages that are at least six months delinquent and have yet to enter foreclosure, more than twice the amount held by its four largest competitors combined.

The loans are monitored as part of February’s $25 billion settlement between the top five U.S. lenders and state attorneys general over allegations of abusive foreclosure practices. Bank of America’s stockpile of deteriorating debt is mostly from its 2008 acquisition of Countrywide Financial Corp., once the nation’s largest mortgage provider. Wells Fargo & Co., the biggest U.S. servicer, has $15.3 billion of such unpaid loans.

The data, published last month by the monitor of the settlement, highlight Bank of America’s vast backlog of delinquencies, and the years it will take to work through them as borrowers fall further behind and losses mount for investors in mortgage-backed securities. While the Charlotte, North Carolina-based bank has begun modifications for many of its 275,000 homeowners at least 180 days behind as of Sept. 30, some will join the already clogged U.S. foreclosure pipeline.

“There’s just a long tail to work out all of these loans, which are severely delinquent at this point,” said Marty Mosby, an analyst with Guggenheim Securities LLC in Memphis, Tennessee.“It just shows the amount of work that’s still left to do.”

Delays in processing the loans add to the expenses borne by investors because maintenance, property taxes and other costs add up. While rising prices may make the mortgage-backed securities more valuable, servicers can be forced to come up with cash to cover interest payments from the delinquent loans and modifications become more difficult to accomplish as the borrower’s unpaid debt grows.

Bank of America’s portfolio of loans that are at least six months old and not in foreclosure accounts for 3.3 percent of all of the mortgages it services. Citigroup Inc. has 1.1 percent of its loans in that category and Ally Financial Inc., Wells Fargo and JPMorgan Chase & Co. each have less than 1 percent.

Bank of America has about 930,000 loans that are at least 60 days delinquent, down from 1.5 million from the peak in January 2010, Chief Executive Officer Brian Moynihan, 53, said during a Dec. 14 event at the Brookings Institution in Washington.

Read More

Posted by on Dec 20, 2012 in Foreclosures/REOs, Loan Mods, Market Conditions, Mortgage News, Principal Reductions | 2 comments

Principal Reduction & Re-default

From HW:

Borrowers will likely stay current on their mortgage after a principal write-down whether they share future equity returns with the bank or not, according to new shared appreciation program data.

Select borrowers can receive a principal reduction from Ocwen Financial Corp., but those back above water over three years but must agree to share 25% of the appreciated value after that time through a program the subprime servicer launched last summer.

Roughly 12.6% of the roughly 20,000 borrowers who took advantage of the program redefaulted within 12 months according to a report Morningstar Credit Ratings released this week.

That is above the 10% redefault rate for Home Affordable Modification Program workouts, but below the nearly 16% rate on private modifications.

A report this summer from Laurie Goodman at Amherst Securities showed borrowers who received a principal reduction in 2011 redefaulted at a 12% rate within in the first 12 months.

That’s right on par with Ocwen’s program, and the bank or investor gets some of the equity back.

Ocwen has faced much criticism from community groups and borrowers after the foreclosure crisis struck. Just 853 of its more than 5,000 employees live in the U.S. with the rest in India and Uruguay, and many borrowers complain of paperwork labyrinths and call center runarounds.

Posted by on Sep 19, 2012 in Loan Mods, Principal Reductions |