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Category Archive: ‘Mortgage News’

EZ-Doc

From the wsj.com:

A new mortgage lender is loosening documentation requirements, allowing applicants to provide less paperwork on income and assets than is typical to get a home loan.

Social Finance, a peer-to-peer lender often referred to as SoFi, rolled out mortgage lending in five states—New Jersey, North Carolina, Pennsylvania, Texas and Washington—and the District of Columbia on Tuesday. The San Francisco-based lender began offering mortgages in California in August.

The firm has specialized in student loans since it launched in 2011. The move into mortgages comes as SoFi prepares to file to raise $200 million to $250 million in an initial public offering early next year, according to its chief executive Mike Cagney.

SoFi’s mortgages will be geared toward borrowers with high credit scores, though other criteria will be less onerous than what most other lenders require. The firm isn’t requiring tax returns to verify applicants’ income or proof of funds to verify the source of borrowers’ down payments—requirements that most lenders have had in place since the housing downturn. Instead, SoFi is accepting applicants’ most recent paystub or W2 as proof of income. It will also take all applicants at their word that their down-payment funds aren’t coming from a loan they have taken out elsewhere, says Mr. Cagney. Borrowers will have to make a minimum 10% down payment.

Read the full article here:

http://blogs.wsj.com/totalreturn/2014/10/07/new-mortgage-lender-demands-less-documentation/

mortgage rates Oct 10 2014

Posted by on Oct 10, 2014 in Mortgage News, Mortgage Qualifying | 8 comments

Helicopter Ben’s Refi

benb

For a guy who has thrown around trillions of dollars, Ben Bernanke was probably more surprised than anyone who has been turned down for a refinance in recent years – hat tip to Mark, Joe, and daytrip who sent this in:

http://www.bloomberg.com/news/2014-10-02/you-know-it-s-a-tough-market-when-ben-bernanke-can-t-refinance.html

Here’s a full explanation:

http://www.mortgagenewsdaily.com/10032014_lending_standards.asp

Business media are having a lot of fun today over a throw-away remark Ben Bernanke made yesterday.  In a question and answer session with Moody Analytics economist Mark Zandi, the former Federal Reserve chair said he was having a little personal trouble in the financial markets.  “I recently tried to refinance my mortgage,” he said, “and I was unsuccessful in doing so.”

According to multiple reports, when the audience laughed Bernanke insisted he was not making it up.

“Overregulation and the fear of buybacks makes it difficult to make a common sense loan, ” notes Geoff Allison, a Senior Loan Officer at Blue Skye Lending.

“While there may have been a rhetorical goal underlying the comment, it’s not hard to believe based on the current state of lending guidelines.  A recent change to what is essentially a commission-based job with no recent history of working on commission would prevent anyone from getting a conforming loan,” says Mortgage News Daily’s Matt Graham.  “Even though there are products that he could qualify for, they don’t carry the same low rates as the more stringent programs.”

Bernanke made the remark in an appearance before a conference hosted by the National Investment Center for Senior Housing and Care.  Zandi confirmed the remark to CNNMoney and said, “It highlights how tight credit is for residential mortgage loans.  This is the key constraint on the housing recovery.”

Lending standards were tightened by banks and regulators in response to the rapid deflation of the housing bubble and, according to Bloomberg, Bernanke said, “I think it’s entirely possible” that lenders “may have gone a little bit too far on mortgage credit conditions.”  He acknowledged that the first-time homebuyer market is not where is should be as the economy in general strengthens.  “The housing area is one area where regulation has not yet got it right.”

This is old news for market participants.

Frank Hanna, an Originator at Gateway Funding sums it up “In order to truly help the housing market and ultimately the economy we  will need to see lending regulations strike a better balance between the current defensive underwriting posture and common sense.”

Bloomberg headlined its report, “You want proof that it’s tough to get a mortgage? While CNN went so far as to underwrite Bernanke’s loan.  They found that he bought his Washington, DC home in 2004, paying $839,000 and it is assessed today at $880,700 although Zillow puts its market value about $80,000 higher.  His $200K salary as Fed Chair is history but he commands as much as $250,000 per speech, consults at the Brookings Institution, and his last financial disclosure put his assets in the $1 million to $2 million range (putting him way down the list of wealthy Fed Board members.)

What we don’t know is whether Bernanke or Zandi made any real news yesterday.

Nick at the WSJ confirmed Ben’s approximate loan amount on twitter:

 

Posted by on Oct 3, 2014 in Mortgage News | 0 comments

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