Menu
TwitterRssFacebook
More Links

Are you looking for an experienced agent to help you buy or sell a home? Contact Jim the Realtor!

Carlsbad
(760) 434-5000

Carmel Valley
(858) 560-7700
jim@jimklinge.com


Category Archive: ‘Mortgage News’

Mortgages 2016

Those in the business who know the mortgage underwriting guidelines might enjoy this video – here are my takeaways from today’s Caliber Home Loans talk:

  1. ‘Investors’ are banks, mutual funds, insurance cos., hedge funds, etc. who invest in steady streams of income. But they get more than the note rate – discount points and admin fees will bump up the annual returns to 5% – 8%.  They are motivated to find ways to fund mortgages!
  2. Income-qualifying the self-employed buyers according to their 24 months of bank statements is an idea that should have been implemented by now – it is a fantastic way to qualify the actual income.
  3.  Trended credit is a smart and gives benefit to those who pay off credit cards every month.
  4.  Alternative credit is here to stay, and anyone who can verify they are paying on 3 lines of credit on time every month – one being rent – can get a mortgage.
  5.  We accept that the government will want to subsidize the mortgage industry.  The FHA allows for sub-580 FICO scores on FHA loans (which already accept gift money for down payments and multiple co-borrowers).

Posted by on Jun 9, 2016 in Bubbleinfo TV, Jim's Take on the Market, Mortgage News, Mortgage Qualifying | 2 comments

Mayor Gets Forgiven

mayor

Hat tip to daytrip for sending in this article on mortgage forgiveness:

http://www.clarionledger.com/story/news/local/2016/05/21/jackson-mayors-mortgage-vanishes-after-election/83615172/

A few weeks after being elected Jackson mayor in 2014, Tony Yarber stood in his pulpit at Relevant Empowerment Church and spoke of his blessings — the bank “washing away” his nearly $100,000 mortgage.

“Election is over. We trusted God. Y’all talked all that noise,” Yarber said in his sermon. “And while they was running their mouth, a letter came in the mail from Wells Fargo. The letter said, ‘Dear Mr. Yarber, concerning loan number whatever it was, at 1605 whatever street you stay on, we have no more interest in that property. Consider the $92,000 that you owe us washed away.’”

The audience cheered.

Two years later, and about a year out from the next mayoral election, that revelation is fodder for Yarber detractors, who believe his house was paid off.

Yet evidence suggests Wells Fargo forgave his mortgage.

Sure enough, records in Hinds Chancery Court show the release of his mortgage, which typically indicates the remaining lien has been satisfied. But at the time Yarber was in financial straits, having not paid his house note in several months.

Bank records show that Wells Fargo authorized the release of the remaining lien, $91,621.94, on April 22, 2014, the day of his election. Essentially, they wrote it off, Yarber said.

“Wells Fargo said don’t worry about sending no more money,” he told The Clarion-Ledger.

Read More

Posted by on Jun 1, 2016 in Bailout, Jim's Take on the Market, Mortgage News | 4 comments

Skimpy-Doc Gets Higher Rate

appr

Hat tip to eddieironmaiden89 for sending this in:

http://www.ocregister.com/articles/percent-714878-credit-mortgage.html

There was no such animal as a credit score for mortgages backed by Fannie Mae or Freddie Mac until about 1995. Well, it’s back to the future. Good going Fannie Mae.

On June 25, Fannie Mae will be rolling out the automation of a manual process for mortgage applicants without credit scores, according to Mindy Armstrong, senior product manager at Fannie Mae.

Here’s how it will work: A loan officer takes your application and runs your credit, but the credit bureaus Equifax, Transunion and Experian have no credit scores for you. This usually happens because you don’t have any or don’t have enough traditional credit (credit cards or auto financing, for example).

In the past, that meant that we loan officers were unable to qualify you for a loan backed by Fannie Mae. But in seven weeks, you will qualify, opening up a vast new array of borrowing options.

You are eligible for purchase as well for a no cash-out refinance loan if the lender can gather at least two pieces of credit information that covers the last 12 months. One must be a verification of rent. The other can be anything from a utility bill to on-time payments to your local gym.

You must put a minimum of 10 percent down (or have 10 percent equity when refinancing), all of which can be a gift. It has to be a single unit primary residence and, for Orange County, your loan amount cannot exceed $417,000.

Call me cynical, but I think credit scoring is just a “gotcha” way for creditors in general to upcharge borrowers that don’t have the very best credit scores.

“Thirty percent of bureau data is inaccurate,” said Stan Baldwin, chief operating officer at Garden Grove-based credit report seller Informative Research.

Where Fannie’s no-score gets ugly is the pricing. Fannie Mae is going to assume that your credit score is in its lowest allowable FICO score bucket of 620. That adds 0.625 percent to your mortgage rate for well-qualified borrowers.

“We price for the risk,” said Andrew Wilson, Fannie Mae spokesman.

Out of all seven mortgage insurance companies, so far only Radian and Arch told me they are willing to insure these loans.

Radian’s pricing looks very competitive compared to other standard mortgage insurance rates, adding 1.10 percent to your base interest rate. They also assume a 620 middle FICO score. Arch pricing was not available.

Assume you buy a $450,000 home and get a $405,000, zero-point 30-year fixed-rate mortgage at 4 percent, with a homeowner’s association fee of $350 a month. Your total payment with impounds would be about $3,159.

None of my piggy-back lenders (avoiding mortgage insurance by providing a 10 percent second behind an 80 percent first mortgage) will go behind a no-score loan. At a minimum, a 680 middle score is required.

Fannie needs to rethink their one size fits all pricing. They assume all no-score borrowers are high risk, just like the “before score” olden days.

They should consider job stability, cash reserves, and payment shock (industry jargon for how much your house payment will go up from your current rent).

Better risk borrowers deserve better pricing, score or not.

Posted by on Jun 1, 2016 in Jim's Take on the Market, Mortgage News, Mortgage Qualifying | 3 comments

Fraud or Mistake?

moz

The U.S. Court of Appeals threw out the $1.3 billion judgement against BofA – here is the story behind it:

http://www.latimes.com/business/hiltzik/la-fi-hiltzik-bofa-mortgage-billions-20160524-snap-story.html

If I’m ever dragged into court for a financial fraud, I want to throw myself on the mercy of Judge Richard C. Wesley.

Wesley is the U.S. appeals court judge in New York who, with his colleagues Reena Raggi and Christopher F. Droney, found a loophole in federal fraud law big enough for the nation’s second-largest bank to fit through without even scratching a fender.

In a ruling written by Wesley and issued Monday, the three judges tossed out a $1.3-billion judgment against Bank of America for stuffing thousands of lousy mortgages into the portfolios of Fannie Mae and Freddie Mac in 2007 and 2008 by pretending they were high-quality loans. Their ruling turned on the curious question: “When is a fraud not a fraud, but just, sort of, a lie?”

Anyone concerned about white-collar crime should find the appellate court’s logic appalling. One who does is Dennis Kelleher, a former corporate lawyer who is now CEO of the financial watchdog group Better Markets.

“You wonder why the American people are so cynical,” he told me after the decision came down. “It’s because there’s an endless reservoir of ways to figure out how to hold no one accountable for illegal conduct.”

Read the full article here:

http://www.latimes.com/business/hiltzik/la-fi-hiltzik-bofa-mortgage-billions-20160524-snap-story.html

Posted by on May 26, 2016 in Jim's Take on the Market, Mortgage Lawsuits, Mortgage News | 6 comments

Mortgage Interest Deduction Isn’t Much

MID

We’re coming off tax season – how was your mortgage-interest deduction?  It only benefits those in high-cost areas.  Should we initiate a real tax-reform package, and start with eliminating the MID when it’s impact is low?

http://www.realestateeconomywatch.com/2016/04/the-mortgage-interest-deduction-is-the-sacred-cow-worthless/

Chronically low interest rates may have accomplished something that the housing lobby has spent millions of campaign contributions and decades of political pressure to prevent.

Did the mortgage interest deduction, long the holy grail of homeownership, become worthless eight years ago when low rates and falling prices so reduced the value of the interest that owners can deduct that the MID has minimal impact?

Even when the MID is combined with the dedication owners receive for property taxes, would many middle class homeowners do just as well tax-wise by renting?

“We believe we have found one of the primary reasons why entry-level home buying has not recovered—and why homeownership has been plunging,” wrote real estate consultant John Burns in an eye-opening blog post circulated April 13, two days before income tax deadline day.

The standard marital deduction has risen from $1,300 in 1972 to $12,600 today, meaning that the first $12,600 of itemized deductions has no benefit to consumers.  Today, a typical first-time home buyer financing 95% or less of a median-priced US home pays less than $12,000 in mortgage interest and property taxes, which is not enough to warrant itemizing. Even with other deductions that bring the taxpayer over the $12,600 limit, the tax savings are minimal, argues Burns.

“In the graph, we show the change over time for a typical homeowner couple with an 80% loan-to-value mortgage and a 1.5% property tax rate on the median-priced US home. That owner paid mortgage interest and property taxes in excess of the standard deduction every year from 1972 to 2008. Today, that homeowner’s deductions fall nearly $2,500 short of the standard deduction,” Burns wrote.

Posted by on Apr 20, 2016 in Jim's Take on the Market, Mortgage News | 6 comments

FHA to the Rescue

herewegoagain

Do you buy anything that’s cheap(er), figuring that the demand will become unglued and prices continue racing towards the sky – or sit this one out? P.S. Three offers are in on Cherokee, and more expected.

https://www.washingtonpost.com/business/economy/obama-administration-pushes-banks-to-make-home-loans-to-people-with-weaker-credit/2013/04/02/a8b4370c-9aef-11e2-a941-a19bce7af755_story.html

The Obama administration is engaged in a broad push to make more home loans available to people with weaker credit, an effort that officials say will help power the economic recovery but that skeptics say could open the door to the risky lending that caused the housing crash in the first place.

President Obama’s economic advisers and outside experts say the nation’s much-celebrated housing rebound is leaving too many people behind, including young people looking to buy their first homes and individuals with credit records weakened by the recession.

In response, administration officials say they are working to get banks to lend to a wider range of borrowers by taking advantage of taxpayer-backed programs — including those offered by the Federal Housing Administration — that insure home loans against default.

Housing officials are urging the Justice Department to provide assurances to banks, which have become increasingly cautious, that they will not face legal or financial recriminations if they make loans to riskier borrowers who meet government standards but later default.

Officials are also encouraging lenders to use more subjective judgment in determining whether to offer a loan and are seeking to make it easier for people who owe more than their properties are worth to refinance at today’s low interest rates, among other steps.

Obama pledged in his State of the Union address to do more to make sure more Americans can enjoy the benefits of the housing recovery, but critics say encouraging banks to lend as broadly as the administration hopes will sow the seeds of another housing disaster and endanger taxpayer dollars.

“If that were to come to pass, that would open the floodgates to highly excessive risk and would send us right back on the same path we were just trying to recover from,” said Ed Pinto, a resident fellow at the American Enterprise Institute and former top executive at mortgage giant Fannie Mae.

Posted by on Apr 4, 2016 in Frenzy, Jim's Take on the Market, Mortgage News, Mortgage Qualifying | 3 comments

Wrongful Foreclosure Lawsuits in CA

freecheese

Those who were wrongly foreclosed won’t get their house back, but the courts might make the banks throw around some more free money.

http://www.latimes.com/business/la-fi-foreclosure-ruling-20160302-story.html

Excerpts:

During the bust that followed last decade’s housing boom, hundreds of thousands of Californians lost their homes to foreclosure. It was a process later found to be rife with problems, such as overwhelmed bank employees who sometimes didn’t even read the foreclosure documents in front of them.

But challenging foreclosures on the basis of paperwork problems proved to be mostly futile, given California courts had ruled that borrowers who weren’t paying their mortgages didn’t suffer financial harm.

Now, a recent decision by the California Supreme Court will allow some of those former homeowners to pursue lawsuits and possibly win damages for wrongful foreclosure even if they were in default.

“They opened the courthouse doors,” said Katherine Porter, a law professor at UC Irvine and a former monitor for a national settlement over foreclosure abuses.

A statute of limitations of four years might mean that the decision won’t help most of the nearly 1 million California homeowners who were foreclosed upon from 2007 to 2012, according to real estate data provider CoreLogic.

Still, Porter estimated there may be tens of thousands of Californians who could conceivably argue for damages given inconsistencies in documents that transferred their loans.

Others are more skeptical.

George Lefcoe, a professor at the USC Gould School of Law, said it will be very difficult for borrowers to prove that the ownership of their loans was so muddled that the foreclosure process was fatally flawed.

And even if borrowers do win the argument, it’s unclear what damages they may receive, if any.

Read the full article here:

http://www.latimes.com/business/la-fi-foreclosure-ruling-20160302-story.html

Posted by on Mar 3, 2016 in Foreclosures, Jim's Take on the Market, Mortgage Lawsuits, Mortgage News | 0 comments

Australia Real Estate

aussie auctions

Our cruise around the world looking for similar real estate markets has to include a stop Down Under, where the auction format to sell homes and the lack of capital-gains tax on seller proceeds from the sale of their primary residence has to add extra juice.  Add in some mortgage funny business….and well, these guys think there’s a bubble:

LINK to article.

An excerpt:

Bronte Capital’s chief investment officer John Hempton and economist Jonathan Tepper (founder of research house Variant Perception) toured suburbs across north-west and south-west Sydney to view housing developments and met with 20 mortgage brokers three weeks ago.

They discovered that mortgage brokers were advising them to lie on loan application documents about the deposit for a house and about income, the Australian Financial Review (AFR) reported.

Mr Tepper has also used charts to support his housing bubble theory.

When the pair asked banks to call their employer, ‘both reputable and disreputable brokers said banks rarely verified payslips,’ Mr Tepper wrote in a report.

They also encountered developers lying about units and houses being sold in the west, the ‘epicentre’ of the housing bubble.

To Mr Tepper’s surprise, some of Sydney’s poorest suburbs, such as Blacktown, Rooty Hill and Mount Druitt in Sydney’s west had properties selling from $500,000 to $700,000 – prices at least eight times the income of local workers.

‘The further west I went, the more irrational it felt. Lots and lots of supply and prices that bore no resemblance to construction cost and income of people around there,’ Mr Hempton told AFR.

There were more advertisements for deposit guarantees, where rather than putting a deposit down on a house you can take out an insurance contract that will pay the deposit if you default.

Another shocking revelation was that the verification of documents was sometimes done by Indian call centres, according to Mr Hempton.

On loan applications low-income earners were often offered discounts on the advertised mortgage rate of up to a one percentage point, increasing the vulnerability of the banks if there were a correction.

Mr Hempton claims they were ‘coached on how to get things through banks’ as opposed to banks having high quality underwritings.

In Mr Tepper’s report, he warns of sharp fall in Australian bank stocks and predicts falls in the Australian housing market of up to 50 per cent in Sydney and Melbourne and of about 80 per cent in mining towns.

 

Posted by on Feb 26, 2016 in Jim's Take on the Market, Market Conditions, Mortgage News, Mortgage Qualifying | 1 comment

Non-Profit 3% Mortgages

bofa

We saw how crowdfunding could be a new (and bubblicious) way to finance home purchases.  Here’s one of the old ways – non-profits getting involved that are well-funded today, but…..Hat tip to Susie for sending in this story:

http://www.nasdaq.com/article/bank-of-americas-newest-mortgage-low-down-payment-no-fha-20160222-00020

An excerpt:

Bank of America Corp. is rolling out a new-mortgage product that would allow borrowers to make down payments of as little as 3%, in a move that would represent an end run around a government agency that punished the bank for making errors on similar loans.

The new mortgage program, which the Charlotte, N.C.-based lender plans to unveil on Monday, will let borrowers avoid private mortgage insurance, a product to protect mortgage lenders and investors that is usually required for low- down-payment loans.

Bank of America’s new mortgage cuts the FHA out of the process. Instead, the new loans are backed in a partnership with mortgage-finance giant Freddie Mac and the Self-Help Ventures Fund, a Durham, N.C.-based nonprofit.

Bank of America agreed to pay $800 million to settle claims of making errors on FHA-backed loans in 2014. This month, Wells Fargo & Co. said it would pay $1.2 billion to settle similar claims, joining J.P. Morgan Chase & Co., which settled in 2014, and other big lenders which have settled over the past few years. Nonbank lender Quicken Loans Inc. is currently fighting such claims.

Many big banks have pulled back sharply from FHA-insured lending in the past few years, citing the risk of being hit with penalties for minor errors. A raft of nonbank lenders have rushed in, but the banks’ retreat from the program has made it more difficult for low-income borrowers to get home loans.

“We need an alternative in the marketplace that helps creditworthy borrowers with a track record of paying debts on time,” said Bank of America managing director D. Steve Boland, who noted that “We think there are still a lot of uncertainties out there in working with FHA.”

After making a mortgage under the new program, Bank of America will sell it to Self-Help, which then sells it to Freddie Mac. If a mortgage defaults, and Self-Help isn’t able to recover the full amount owed, Self-Help takes a big chunk of the losses before Freddie Mac starts to take a loss, which lets borrowers avoid paying mortgage insurance.

Self-Help also gives counseling to borrowers who struggle to pay, which it believes will help more people avoid foreclosure.

“We believe the mortgage-lending sector is underserving families of modest means,” said Self-Help CEO Martin Eakes. Mr. Eakes said that his fund also is in talks with other large and small lenders to roll out similar programs.

Mr. Eakes said Self-Help didn’t need new funding for the Bank of America program, but in the past the organization has received funding for other loan programs from foundations, the government and companies.

Mr. Eakes is also CEO of the Center for Responsible Lending, a nonprofit advocacy group for borrowers that in the past has also asked the FHA to limit lenders’ damages for some errors.

To get the loans under Bank of America’s new program, borrowers must have a credit score of at least 660, which is higher than FHA’s requirement, and an income that is less than the area’s median.

Bank of America said that for now it is capping loan production at $500 million annually under the program and that it expects that three out of four mortgages in the new program would have otherwise been backed by the FHA.

Last year, Bank of America made $1.36 billion in FHA-backed loans, according to trade publication Inside Mortgage Finance, making it the 22nd biggest FHA lender. The bank used to be in the top 10.

Freddie and competitor Fannie Mae in 2014 said they would roll out mortgages with down payments of as low as 3% to improve mortgage availability for low-income borrowers. But because the mortgages often cost more than FHA-backed loans, the programs had little volume last year.

As lenders become more wary of the FHA program, lenders and Fannie and Freddie executives said that their programs’ volume could rise.

Read full article here:

http://www.nasdaq.com/article/bank-of-americas-newest-mortgage-low-down-payment-no-fha-20160222-00020

Posted by on Feb 22, 2016 in Jim's Take on the Market, Mortgage News, Mortgage Qualifying | 0 comments

Communal House Flipping

flippers

The building of the next bubble won’t look the same as the last one, but a common thread will be lenders who are hands-off. Hat tip to daytrip for sending in this story about crowdfunding for flippers:

http://www.latimes.com/business/la-fi-crowdfunding-house-flippers-20160214-story.html

An excerpt:

Although data providers don’t track the number or dollar-volume of loans going to house flippers as opposed to developers of larger projects, more than a dozen real-estate-focused platforms offer loans to them. And a handful of Southern California start-ups specialize in the market.

Patch of Land in West Los Angeles made about $61 million in loans last year, mostly to house flippers, and PeerStreet in Manhattan Beach made $40 million, almost entirely to them.

“There’s a crowdfunder popping up once a month now, and the low-hanging fruit is the fix and flips,” said Jonathan Lee, a principal at George Smith Partners, a Century City real-estate-financing firm.

Like hard-money lenders, crowdfunding platforms guard against risk by securing the loans to the property and lending for less than its full value.

If a borrower goes bust, the lender takes title to the property, which, in theory, can be sold for more than the loan principal. PeerStreet, for instance, typically will lend only about 75% of a home’s value.

“They don’t look at income or tax returns. They’re looking at the property and the project. Is there profit to be made?” said Christian Fuentes, a Pomona real estate agent and house flipper.

Patch of Land can issue a check in just a couple of weeks, assuming that a loan meets its underwriting standards. The loan is then offered up to the 17,000 investors signed up on its site.

Golden Bee in November bought a two-bedroom house on Greenfield Avenue in West L.A., not far from the Westside Pavilion. The company paid about $1.2 million, with $1 million coming from Patch of Land at an annual interest rate of 12%.

Berneman is planning a $750,000 renovation that will add more than 1,500 square feet of space, along with new plumbing and wiring. He estimates that the house, built in the 1930s, hasn’t been renovated in 50 years.

“We’ll be knocking some of it down to the studs,” he said.

Berneman hopes to sell the house for as much as $2.5 million once it’s back on the market this fall. Golden Bee would stand to make $575,000, not including the cost of financing.

Posted by on Feb 13, 2016 in Jim's Take on the Market, Mortgage News, Real Estate Investing, Remodel Projects | 1 comment