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A few more of these stories and people are going to take it to the streets. From Reuters:

Remember Jackie Ramos? She caused a huge stir by going public, on YouTube, with her story of working for Bank of America, which fired her for allowing customers to pay off their debts with installment loans.

Now Ramos is back, and her latest story of Bank of America is even worse. The short version: BofA started charging her extra money, on her mortgage bill, for mortgage insurance she’d never asked for. Eventually, when she found out what the charges were for, she agreed to keep on making those insurance premiums, since they would allow her to stay in her home if anything ever happened to the other person on the mortgage, her son’s father Tim.

Then, in April 2011, Tim died — and the mortgage insurance didn’t pay out. Instead, BofA foreclosed on Ramos, and she lost her house. When she tried to ask why the insurance didn’t pay out, they wouldn’t answer her questions, on the grounds that she and Tim weren’t married.

Over email, Ramos told me that the insurance in question was absolutely mortgage life insurance, over and above the standard mortgage insurance which they already were paying for from another provider. That’s what BofA explained when they agreed to keep on paying the premiums. And Ramos also passed on a tax form 1098 from Bank of America to Tim, which clearly shows that Tim had paid mortgage insurance premiums in 2011 — even as the bank is now telling Ramos that there was no mortgage insurance at all.

At the very least, this is a case of Bank of America communicating in an absolutely atrocious manner with one of its homeowners. And at worst it’s a case of BofA foreclosing on and evicting someone who should instead have had her home paid off. One can’t expect that anybody at BofA realized that the person they were talking to was that Jackie Ramos. But it’s unfortunate for them that they didn’t. Because I suspect that this video might prove just as popular as the last one — which received more than 440,000 views, at last count.

This guy’s opinions are usually suspect, but he’s got it right here – though he stops short of fingering the Tan Man specifically - from the WaPo:

It wasn’t that Fannie and Freddie made a prescient strategic decision to stay clear of the housing frenzy. They couldn’t have participated even if they had wanted to. The two agencies had committed various accounting irregularities earlier in the decade, and their regulator forced them to rein in their growth.

Moreover, Fannie and Freddie couldn’t compete with rapaciously expanding private lenders. Securitization was in full swing, enabling private lenders to offer low rates and increasingly aggressive terms to borrowers. In 2006, almost half the loans made by private lenders required no down payment and no documentation. Fannie and Freddie simply couldn’t play in that league, even though Congress had given them aggressive lending targets to help boost homeownership among lower-income and minority households.

Fannie and Freddie did play a significant part in the financial panic. As financial conditions began to weaken in 2007 and the private mortgage industry pulled back, the agencies partially filled the void. This was their chance to get back in the game. The memory of their accounting scandals had faded, and policymakers hoped the agencies could keep the housing market from unraveling. Fannie’s and Freddie’s originations of sketchy loans actually peaked near $160 billion in 2008, the year regulators placed them into conservatorship. The two agencies had jumped back into the housing market at precisely the wrong time.

The government’s takeover of Fannie and Freddie arguably ignited the global financial panic. The Treasury Department’s decision to wipe out shareholders of Lehman Brothers and Bear Stearns, two of the largest financial institutions on the planet, sent a shock wave through markets as it became apparent that no institution was safe any longer. Investors ran for the door, sending Lehman Brothers into bankruptcy one week later; a string of failures at other venerable institutions followed.

Despite Fannie and Freddie’s role in the panic, it is wrong to blame them for creating it; that distinction belongs rightly to the private mortgage market. Understanding this is critical to creating a stable, efficient mortgage finance system for the future. While Fannie and Freddie themselves deserve to pass from the scene, given their numerous past missteps, it is equally clear that the government needs to remain an important player in housing finance, providing consistent regulatory oversight and a backstop in case the private market collapses again.

Mark Zandi is chief economist at Moody’s Analytics, a subsidiary of Moody’s Corp. He is the author of “Financial Shock,” an book about the financial crisis. His column will appear regularly.

http://www.washingtonpost.com/realestate/fannie-and-freddie-dont-deserve-blame-for-bubble/2012/01/23/gIQAn3LZMQ_story_1.html

From HW:

A panel on the future of mortgage financing in the United States predicts a government-led initiative to sell distressed properties in bulk. Also, they say Fannie Mae and Freddie Mac will be around for quite some time despite congressional efforts to wind down the government-sponsored enterprises.

“When the conservatorship was established, we thought it would be a timeout for six months,” said Federal Housing Finance Agency Chief Economist Patrick Lawler. “It’s been three years and five months with no end in sight.”

Lawler said the FHFA is working to move Fannie and Freddie into the future, and good progress is being made. A big challenge is anticipating the market direction of the mortgage industry, Lawler added.

Jerry Diamond, a managing director at Annaly Capital Management and director of its related real estate investment trust Chimera Investment, said the recent hike in guarantee fees at the GSEs essentially keep the firms around for another 10 years. He did not feel bills in Congress to reduce the footprint of the GSEs would offer meaningful reform.

“This time next year will probably look like it does this year,” Diamond said.

The panel, which convened at the annual American Securitization Forum in Las Vegas, did offer a forward-looking perspective. Laurie Goodman, senior managing director-RMBS of Amherst Securities, said there is a big expectation the government will sell distressed properties in bulk to investors.

“This is a likely solution,” she said.

Currently, she said, investor capital is being raised to absorb the supply. Furthermore, she said buyers should look to buy up to 100 to 200 properties at a time in localized markets. This will help create a cottage industry around managing the properties.

Saul Sanders, co-CEO of mortgage investor Shellpoint Partners, said that market fundamentals remain challenging, but is confident that it is time to move forward.

“Originations are pristine,” he said, “and no one expects a further 30% decline in house prices.”

Hat tip to DOB for sending this in, from the Charlotte Observer:

As Bank of America Corp. finalized plans to buy the ailing Countrywide Financial Corp., government officials traded emails about the mortgage lender’s troubles, rumors that regulators had a hand in the deal, and the housing market’s role in the looming recession. 

The newly released messages between U.S. Treasury Department officials span the turbulent months between August 2007, when Bank of America first invested in Countrywide, and January 2008, when the Charlotte bank announced plans to buy the nation’s biggest mortgage lender.

Bank stakeholders still lament the acquisition, which led to losses and legal troubles that have continued to pummel the company.

The nearly 40 pages of emails, obtained by the Observer after a public-records request, provide a real-time look at the crisis unfolding a year before the financial meltdown. Subject lines warn of Countrywide bankruptcy rumors. Analysts discuss an imminent mortgage-market collapse. And the Treasury’s communications staffers scramble to deflect questions on whether government officials pressured the bank into the deal – questions that linger today among some Bank of America shareholders and analysts.

California-based Countrywide had seen its earnings soar during the housing boom. But by August 2007, the company was sagging under the weight of its subprime mortgages. Borrowers couldn’t pay their bills, and faltering confidence in the mortgage industry made it hard for lenders to borrow the money they needed to keep making loans.

In an early-morning email Aug. 16, 2007, Treasury official Robert Steel – who would later become chief executive of Charlotte’s Wachovia Corp. – told a colleague that then-Federal Reserve Bank of New York President Tim Geithner had just given him a dismal report about Countrywide’s future as an independent company.

“There was a Countrywide commercial paper issue last night which was solved, but days as indep. Inc. are numbered,” Steel wrote.  The same day, the deepening credit mess forced Countrywide to borrow $11.5 billion from a group of banks, and its stock tumbled.

Later that month, Bank of America invested $2 billion in the company, calling the stake a potentially lucrative vote of confidence, though bank officials reiterated that they had no interest in buying Countrywide outright.

“When we’re able to go and look at their books and see value, I think the market should take that as a sign that things are not as bad as people believe,” a bank spokesman said at the time.

Read the rest of this entry »

From the latimes.com:

Could gloomy popular assumptions about how tough it is to get approved for a mortgage be scaring away large numbers of qualified people?

You bet. Lenders and economists will tell you flat out: The lack of accurate information about the availability of loan programs designed to address special needs is discouraging far too many consumers from even considering an application, much less shopping around.

For example, what’s needed for an acceptable down payment? Is it 20%, 10%, less?

Yes, it’s less - and potentially a lot less if you qualify for the right program. The widespread erroneous assumption that banks require a minimum 20% for conventional loans may have arisen from heavy media coverage of a controversial proposal by federal agencies calling for borrowers to put down that much if they want to get the best interest rates and lowest fees.

If you have little or no cash to put down, there are multiple options: The Federal Housing Administration requires just 3.5% down on its insured mortgages. Other programs let you go to zero — even finance more than the price on the house when fees are rolled into the mortgage — provided you fit into an eligibility niche. If you qualify as a veteran or active member of the military, you can get a zero-down Veterans Affairs-guaranteed mortgage. Plus the VA allows your seller to pay your loan fees and closing costs provided that they don’t exceed 6% of the house price.

What about credit? Haven’t lenders been pushing up minimum FICO scores into the mid-700s and rejecting applications with lower scores outright? Not everywhere. Though most lenders doing FHA loans require 620 to 640 scores to get you in the door, a few of the biggest FHA originators, such as Quicken Loans, will accept scores down to 580. Bob Walters, Quicken’s chief economist, says underwriters scrutinize low FICO applications extra carefully but are seeing good to excellent performance from them: Not one has gone seriously delinquent this year.

And how about debt-to-income ratios? Aren’t they tighter than ever? Not really. Lenders say that when loan applications go through the “automated underwriting” systems used by Fannie, Freddie and FHA, borrowers with high total monthly debt levels of 45% to 55% of household income — well beyond the posted limits — frequently get approved if they have positive compensating information elsewhere in the application.

Bottom line: Don’t assume you can’t qualify for a mortgage in 2012. Talk to lenders and seek out loan products that offer flexibility where you need it. You just might be surprised.

From Bloombergbusinessweek.com:

Dec. 23 (Bloomberg) — The 30-year fixed-rate mortgage, the most common way U.S. buyers finance a home purchase, isn’t the ideal instrument its supporters claim it to be.

First, its dominance requires permanent government subsidies. Second, it amortizes slowly, exposing homebuyers to years of unnecessary default risk. Third, it was responsible for two taxpayer bailouts in the last 20 years.

Most important, these mortgages may be behind a new bubble.

Read the rest of this entry »

Hat tip to daytrip for sending this along, from betabeat.com:

A new wave of startups is working on algorithms gathering data for banks from the web of associations on the internet known as “the social graph,” in which people are “nodes” connected to each other by “edges.” Banks are already using social media to befriend their customers, and increasingly, their customers’ friends. The specifics are still shaking out, but the gist is that eventually, social media will account for at least the tippy-top of the mountain of data banks keep on their customers.

“There is this concept of ‘birds of a feather flock together,’” said Ken Lin, CEO of the San Francisco-based credit scoring startup Credit Karma. “If you are a profitable customer for a bank, it suggests that a lot of your friends are going to be the same credit profile. So they’ll look through the social network and see if they can identify your friends online and then maybe they send more marketing to them. That definitely exists today.”

And in the last year or so, financial institutions have started exploring ways to use data from Facebook, Twitter and other networks to round out an individual borrower’s risk profile—although most entrepreneurs working on the problem say the technology is three to five years away from mainstream adoption.

“Credit score is a lagging indicator,” said Brett King, a tall, puffy Australian with white blond hair who is the founder of the online-only bank Movenbank and author of BANK 2.0: How Customer Behavior and Technology Will Change the Future of Financial Services. “At best, your credit score is about 60 days behind. What we’re trying to do is look for things that reflect the likelihood of a future default, rather than what’s happened in the past.”

Movenbank is an online bank in private alpha release that replaces plastic credit and debit cards with a mobile device such as an iPad or smartphone. Mr. King is a major proponent of the questionable young science of using social media to evaluate creditworthiness.

When it comes to online privacy, Mr. King subscribes to the Mark Zuckerberg school of thought: standards are evolving, and the world will be better for it. (As long as you’re connecting and sharing, only good things can happen to you!) “Our view of what ‘private’ is, is changing,” Mr. King said. “We make friends with people we barely know!”

He predicts that banks will soon start asking customers to verify their social media profiles. Not everyone has a social media presence, of course, so submitting your Twitter handle will first be pitched as a way to provide customer support or account alerts, which will later open the door for “more complex products,” Mr. King said.

Thanks to the few readers who sent in the links about the Fannie/Freddie executives who had civil lawsuits filed against them today – but it doesn’t look like they will be facing jail time.  Excerpted from the AP:

In a lawsuit filed in New York, the Securities and Exchange Commission brought civil fraud charges against six former executives at the two firms, including former Fannie CEO Daniel Mudd and former Freddie CEO Richard Syron.

The executives were accused of understating the level of high-risk subprime mortgages that Fannie and Freddie held just before the housing bubble burst.

“Fannie Mae and Freddie Mac executives told the world that their subprime exposure was substantially smaller than it really was,” said Robert Khuzami, SEC’s enforcement director.

Many legal experts say they don’t expect the six executives to face criminal charges.

“If the U.S. attorney’s office was going to be bringing charges, they would have brought it simultaneously with the civil case,” said Christopher Morvillo, a former federal prosecutor now in private practice in Manhattan.

Robert Mintz, a white-collar defense lawyer, says he doubts any top Wall Street executives will face criminal charges for actions that hastened the financial crisis, given how much time has passed.

The SEC has brought other cases related to the financial crisis since it began a broad investigation into the actions of Wall Street banks and other financial firms about three years ago.

Most cases, however, didn’t involve charges against prominent top executives.

An exception was Angelo Mozilo, the co-founder and CEO of failed mortgage lender Countrywide Financial Corp. He agreed to a $67.5 million settlement with the SEC in October 2010 to avoid trial on civil fraud and insider trading charges that he profited from doling out risky mortgages while misleading investors about the risks.

(These perpetrators will probably settle for something less than the Tan Man?)

From the latimes.com:

After a year characterized by grumpy partisan gridlock, Congress came up with a Thanksgiving compromise that could change the mortgage choices of buyers and refinancers in more than 660 markets across the country: It raised maximum loan limits for the Federal Housing Administration while leaving loan ceilings untouched for Fannie Mae and Freddie Mac.

In effect, this may make FHA the go-to financing option for borrowers needing loans up to $729,750 with down payments as low as 3.5% in high-cost areas of California, the District of Columbia, New York, New Jersey and scattered counties in other states including Massachusetts, Florida and North Carolina. Fannie Mae- and Freddie Mac-eligible loans in those areas, meanwhile, stay capped at $625,500.

Equally important, the new plan raises the FHA ceilings for purchasers in hundreds of more moderate-priced markets. Seattle-area buyers’ maximum FHA loan amount jumped to $567,500, while the Fannie Mae-Freddie Mac ceiling remains at $506,000. In Hartford, Conn., the limit for FHA is now $440,000, up from $320,850; Fannie and Freddie remain capped at $417,000.

The new loan ceilings in hundreds of markets are at the core of the compromise: They raise the maximum FHA loan amount in all areas of the country to 125% of the local median home-sale price, while leaving Fannie Mae’s and Freddie Mac’s limit at 115% of the median.

What will this mean for buyers from now through the end of 2013, when the compromise expires?

“There’s no doubt this will drive more business to FHA,” said David H. Stevens, former FHA commissioner and current president and chief executive of the Mortgage Bankers Assn.  “FHA is going to become the darling of the industry again,” said Annie Austin, a loan officer with Cobalt Mortgage in Bellevue, Wash.

Bob Walters, chief economist of national lender Quicken Loans, said he thinks the increased loan limits will benefit many consumers, “especially those looking to borrow larger amounts,” he said, but who “are in a credit situation where Fannie Mae and Freddie Mac loans are not available or optimal.”

The switch to the FHA could entail some pain, however. Tim Kepler, a loan officer with Land Home Financial in Danville, Calif., noted that the agency raised its upfront mortgage insurance premiums from 0.5% of the loan amount to 1.15% earlier this year. This will increase applicants’ closing costs over a Fannie or Freddie loan, he said.

The premium can be financed, but can add substantially to the costs of high-balance mortgages. Bruce Calabrese, president of Equitable Mortgage in Columbus, Ohio, said the hefty new premiums make “FHA too restrictive and unattractive” for most refinancers in his area, even with slightly higher loan ceilings.

Bottom line for house shoppers: Take a hard, close look at FHA with a local loan officer, in light of the rule changes. Pencil out the costs, down-payment requirements and more generous standards on credit. FHA may be your best option. But then again, the higher fees just might change your mind.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Other benefits of FHA financing:

1. FHA accepts credit scores under 620.

2. FHA takes higher back-end qualifying ratios – up to 58%.   Fannie/Freddie caps at 45%.

3. FHA allows non-occupant co-borrowers, and you can add as many as needed.

4. Lower down payments, as low as 3.5%.

A reader sent this in:

An article in today’s Wall Street Journal sounds like the HARP program should be named CRAP, because Fannie/Freddie are holding the line by not allowing HARP refi’s on loans over 6% to appease their bond holders, and the Bond rates increased yesterday on this news.

All while our guviment is out there saying they are trying to ‘help’ homeowners that are stuck with high loan rates and high LTV’s that do not allow them to refi, as long as they are current.  Other recent news showed Fannie/Freddie Execs are getting massive payouts, while homeowners bend over and take it. 

I am in this group over 6% trying a ‘streamlined’ Wells refi but Fannie will not approve it under HARP and I am being forced to paydown approximately $22,000 to keep the new 1st plus 2nd HELOC that is being subordinated under a combined 95% LTV.

Here’s an excerpt of the WSJ article:

NEW YORK—Mortgage-backed securities issued by Fannie Mae and Freddie Mac jumped Wednesday, as investors grew more confident that new incentives to boost refinancing for borrowers stuck with high-interest-rate loans would have a limited impact.

Fannie Mae 6% mortgage-backed securities—backed by 6.5% home loans—rose 8/32 to 109 14/32, outpacing gains in Treasurys by about 7/32 after accounting for the change in interest rates, according to Credit Suisse’s Locus analytics. Prices fell late in the day, after Fitch Ratings warned about the European debt exposures of large U.S. banks, which are some of the biggest buyers of mortgage-back securities.

“There was a big fear that you’d see a big rise in prepayments, and, based on what [Fannie Mae and Freddie Mac] said, that has receded,” said Todd Abraham, co-head of the government- and mortgage-bond group at Federated Investors in Pittsburgh. “It doesn’t look like they’ve done anything big here.”

The changes to HARP came after more than a year of speculation that the administration would enact major overhauls of mortgage programs to help lift home buying out of its five-year slump. The talk persisted even as banking groups and some investors warned that rewriting rules could discourage buyers of the securities and result in higher interest rates.