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Category Archive: ‘Mortgage News’

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

$10 Million Loans

bstoneBlackstone Group LP, the private-equity firm that has spent $5 billion on more than 30,000 distressed houses, is preparing to expand its bet on the housing recovery by lending to other landlords.

The firm, which already owns more rental homes than any other investor, has set up B2R Finance LP to offer loans starting at $10 million, according to four people who reviewed the terms. B2R is reaching out to landlords with portfolios of properties seeking to grow in the burgeoning industry for single-family homes to rent, said the people, who asked not to be identified because the discussions are private.

The world’s largest private-equity firm said last month that it was entering the later stages of its buying spree after leading a group of institutional investors who’ve spent at least $17 billion on more than 100,000 homes over two years, helping fuel the fastest price gains since 2006. By increasing its stake in the rebound through lending, New York-based Blackstone could benefit from smaller landlords already investing in what Goldman Sachs Group Inc. estimates to be a $2.8 trillion market.

Read the full article here:

http://www.bloomberg.com/news/2013-07-08/blackstone-raises-5-billion-rental-bet-with-lending-arm.html

Posted by on Jul 8, 2013 in Mortgage News | 0 comments

Cutting Appraisal Costs

From bloomberg.com:

http://www.bloomberg.com/news/2013-06-27/bank-of-america-said-to-send-property-reviews-to-india.html

bofa1Bank of America Corp. opened a unit in India to review home-valuation reports as it seeks to rebuild share in U.S. mortgages at a lower cost, said four people with knowledge of the move.

“One of the biggest problems in the mortgage business is all the paperwork involved, and how do you engineer it to reduce the bottlenecks,” said Bert Ely, an independent banking consultant in Alexandria, Virginia. “With offshoring, the potential for problems is always there, but it’s hard to be critical for trying to minimize costs.”

Read More

Posted by on Jun 27, 2013 in Mortgage News | 3 comments