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Category Archive: ‘Mortgage News’

Subprime Again?

HT to daytrip for sending this in:

http://www.nytimes.com/2014/09/14/magazine/are-subprime-mortgages-coming-back.html?ref=magazine&_r=1

An excerpt:

This lending freeze is not just preventing people like the Sleimans, who have struggled to document their income, from chasing their dreams. It’s bad for the overall economy too.

Laurie S. Goodman, an expert in housing finance at the Urban Institute, a think tank in Washington, D.C., recently calculated that lenders would have made an additional 1.2 million loans in 2012 had they merely loosened standards to the prevailing level in 2001, well before the industry completely lost its sense of caution.

As a result, fewer young people are now buying first homes, fewer older people are moving up and less money is changing hands. Instead of driving the economic recovery, the housing business is dragging behind. “An overly tight credit box means fewer individuals will become homeowners at exactly the point in the housing cycle when it is advantageous to do so,” Goodman and her co-authors wrote in their study, published in The Journal of Structured Finance. “Ultimately, it hinders the economy through fewer new-home sales and less spending on furnishings, landscaping, renovations and other consumer spending.”

“We’ve locked down mortgage lending to the point where it’s like we’re trying to avoid all defaults,” said William D. Dallas, the chairman of Skyline Home Loans, who has three decades of experience in the industry. “We’re back to using rules that were written for Ozzie and Harriet. And we’ve got to find a way to help normal people start buying homes again.”

Navy Fed is doing their part, and these aren’t VA loans.  Rate is around 5.50%:

Nvfd

Posted by on Sep 13, 2014 in Mortgage News | 6 comments

FHA Selling Loans in Default

From the latimes.com – thanks daytrip:

http://www.latimes.com/business/realestate/la-fi-distressed-loan-sales-20140911-story.html

An excerpt:

The protests over the FHA Distressed Asset Stabilization Program are the latest ripple in the wake of the foreclosure crisis, which has seen growing concern about the “Wall Street-ization” of the housing market.

A handful of large real estate trusts and investment firms have scooped up an estimated 200,000 bargain-rate houses in the last two years — in some cases elbowing first-time home buyers out of the way — and turned them into rental properties.

Some of these firms are now buying the loans, getting potential rental properties even before they are in foreclosure. Other buyers aim to profit by collecting mortgage payments or by selling the homes after they foreclose.

From the FHA’s perspective, the program is working, said Carol Galante, the agency’s commissioner.

“We really do consider the DASP to be quite successful in accomplishing what it set out to do,” she said. “That was to achieve significant cost savings for [the FHA] and at the same time offer borrowers a final opportunity to avoid foreclosure.”

Many of the loans that are being sold haven’t had payments on them in two or three years, Galante notes, and they’ve run out of options for being reworked by the FHA. But a new owner may be able to restructure them or reduce principle payments to help borrowers, she said.

Of the 38,000 loans that had been sold before July 2013, about half are still being worked out, according to data released last week by HUD. In about 5% of cases, borrowers are back on schedule making payments. Most of the rest ended either in a foreclosure or short sale or were flipped to another investor and are no longer being tracked.

The program has some successes, said Sarah Edelman, a policy analyst at the Center for American Progress.

About one-fifth of the loans are in “neighborhood stabilization” loan pools, which are geographically concentrated and carry higher workout requirements. Nearly 24% of them are being paid on time. And among the relatively small slice that were sold to nonprofit lenders that partner with community housing groups, the success rate tops 35%.

“This program shows a lot of potential,” Edelman said. “FHA really has an opportunity to build on its strengths.”

http://www.latimes.com/business/realestate/la-fi-distressed-loan-sales-20140911-story.html

Posted by on Sep 10, 2014 in Mortgage News | 0 comments

What’s Holding Back Buyers

This guy says there are 5-6 million people who were or could be homeowners but are on the sidelines – the buy vs. rent equation isn’t compelling enough.

She says these potential buyers don’t have the down payment and don’t know about FHA, but she might be guessing.  Though FHA is very expensive and caps out at $546,250, it’s definitely a viable option in San Diego County.  Of the 14,129 house sales this year, 1,459 of them (10%) have been financed via FHA.

Remember when we said that the market would be seasoned when we see more FHA and VA purchases…..the bidding wars would have died down, and buyers with more horsepower have passed on those deals?  Here are the percentages of FHA+VA loans used to purchase SD houses:

2011 = 35%

2012 = 31%

2013 = 25% (FHA got tougher in June, 2013)

2014 = 25%

There are more VA loans than FHA this year (59% vs 41%).

Posted by on Aug 25, 2014 in Interest Rates/Loan Limits, Jim's Take on the Market, Market Conditions, Mortgage News | 3 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

Mortgage Fraud

FBI-logoLast summer I met with an FBI agent to discuss a local realtor. I submitted 32 pages of conclusive evidence that implicated the realtor in committing 19 cases of short-sale fraud.

Though the agent said he would pursue it, I never heard from the FBI again.

Hat tip to daytrip for sending in this article from the nytimes.com:

http://www.nytimes.com/2014/03/16/business/a-loan-fraud-war-thats-short-on-combat.html?ref=business&_r=0

Two excerpts:

“The I.G. report confirmed what’s been clear for quite a while — that the D.O.J. has never taken mortgage fraud seriously,” Professor Levitin said. “There is going to be no comeuppance for crimes committed during the financial crisis. This sets a really bad precedent for future crises because we’re seeing that there is going to be no deterrent effect of criminal law.”

“The report fits a pattern that is scary for a democracy, that there really are two levels of justice in this country, one for the people with power and money and one for everyone else. And that eats at the heart of what I think makes this country great.”

Posted by on Mar 17, 2014 in Fraud, Market Conditions, Mortgage News, Scams | 7 comments

New Mortgage Rules/Pricing

Fannie Mae and Freddie Mac are too big, and changes are coming.

moneypitBeginning on January 10th, the new QM rules take effect – limiting the debt-to-income ratios to 43%, and capping points and fees charged by lenders to 3% of the loan amount.

Because lenders will be subject to repurchasing any mortgages that don’t comply, some lenders are talking about limiting the DTI to 39% to provide a margin of error.

In the past, borrowers with compensating factors have been able to stretch their D-T-I ratio as high as 50%.  Now they won’t.

Is it a big deal?

It is for lenders, but to home buyers and sellers all it means is that there will be fewer people in the buyer pool for each house for sale.  Buyers may need to lower their sights, which will make the cheaper homes in each market more competitive.

The other change is how Fannie/Freddie will add more fees depending on your down payment and credit score.  It is rather arbitrary too, where borrowers with 680-740 FICO scores get hit the worst.  They can look forward to a nasty choice; to pay 1/4% to 3/4% higher in rate, use a 30% down payment, or manipulate your credit score downward to pay less fees.

The gritty details can be found Here.

For home buyers who are looking for more to reasons to stay on the fence, this is a truckload of fun.  But for the highly motivated buyers (the ones making the market), all it means is being more determined to fight for the best deal you can find, and hope that home prices will reflect the new era.

For anyone selling a great house on a great street, these changes won’t mean a thing.  For those trying to sell an inferior home for retail-plus, don’t be surprised if 2014 brings a more-measured response.


Posted by on Dec 20, 2013 in Interest Rates/Loan Limits, Mortgage News, Mortgage Qualifying | 10 comments

FHA Going Down

fha bandaid
Thanks to daytrip for sending in this story on FHA reducing loan limits:

http://www.latimes.com/business/money/la-fi-mo-fha-insurance-limits-20131207,0,3321748.story#axzz2moSfa0DJ

As of Jan. 1, the limits for FHA-insured loans in the nation’s most expensive areas will be $625,500 for a single-unit dwelling, down from $729,500.  The upper limits are for areas with the highest housing costs, including Los Angeles, Orange and Santa Barbara counties, the San Francisco Bay Area and Silicon Valley.

The limit varies for other areas. For example,  Riverside and San Bernardino counties will top out at $355,350, San Diego County at $546,250 and Ventura County at $598,000.

The FHA historically provided insurance on smaller loans so first-time  borrowers and people with modest incomes could get mortgages. Its role changed and Congress increased the limits in 2008 during the financial crisis, when home  loans not backed by the government dried up.

More recently, banks have been eager to write jumbo mortgages for well-heeled  borrowers without government support.

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The reduction from $697,500 to $546,250 is a welcome relief for San Diego buyers.  The FHA mortgage insurance is outrageous, and buyers are much better served getting a conventional or jumbo loan, even if it takes saving a while longer for a bigger down payment.

But what’s the current impact of FHA financing?

Here are the totals of FHA financed purchases of detached NSDCC homes in the 2nd and 3rd quarters, compared to the overall sales:

Year
FHA-financed Sales
Total Sales
%%
2011
64
1,427
4%
2012
75
1,745
4%
2013
38
1,879
2%

What has become the nation’s subprime loan was only used in 2% of the NSDCC purchases this year. With prices going in the opposite direction of their loan-limit, FHA loans should become extinct around here.

Posted by on Dec 8, 2013 in Mortgage News | 5 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

Happy Anniversary

We’ve heard all the hubbub about higher mortgage rates having a negative effect on the real estate market.  But the non-taper has caused rates to come back a bit – we are now down around 4.375% for 30-year conforming rates.

For those who had their heart set on having payments lower than what you get with a 4.375%, 30-year mortgage rate, then there are options available:

  • Buyers can pay more points to lower their rate.
  • Buyers can have the sellers buy down their rate.
  • They can take an interest-only loan, instead of fixed-rate.
  • Buy a cheaper house.

Or, in this cash-happy environment, they can borrow less:

Microsoft PowerPoint - 2013 Florida Saltmarsh Conference [Compat

The stir-up from higher rates might cause some changes in the buyer psychology, but the baseline problem hasn’t changed – there aren’t any great buys available, and even the decent buys are loaded with compromise.

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We’ve wrapped up eight years of www.bubbleinfo.com!  Thanks for participating, and most of all, thank you to those have become clients. 

I do this to demonstrate my abilities, and want to help more people buy and sell homes.  If you, or someone you know, is thinking of moving, I’d love to hear from you!

Posted by on Sep 25, 2013 in About the author, Ideas/Solutions, Interest Rates/Loan Limits, Mortgage News | 7 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