Goldman Sachs Group Inc., the only firm among Wall Street's five biggest to remain profitable through the credit crisis, will shed about 3,200 workers, or 10 percent of its staff, as the revenue outlook worsens, according to a person briefed on the plans who declined to be identified.
The cuts add to more than 130,000 jobs eliminated in the financial industry since mid-2007, eclipsing the cuts after the Internet bubble burst in 2001. Paul Kafka, a Goldman spokesman in London, wouldn't comment. Goldman had 32,569 employees at the end of August, up 3 percent from May and 9 percent for the year.
Banks worldwide are shelving deals and cutting jobs as the unprecedented turmoil in credit markets spreads and spurs concern the global economy may fall into a recession. Goldman, which converted to a bank holding company last month and is receiving $10 billion from the U.S. Treasury, has dropped by almost 50 percent in New York trading this year.
``When a lean and mean firm starts trimming, they're cutting into muscle,'' said Shaun Springer, chief executive officer of Napier Scott Executive Search Ltd. in London. ``The fact that they are cutting 10 percent is quite indicative of the fact that there are still a lot of problems ahead.''
The new job cuts signal a reversal in strategy at Goldman since Sept. 16, when Chief Financial Officer David Viniar told analysts he expected the number of Goldman employees to increase by a percentage ``in the low single digits'' this year, excluding the purchase of a mortgage servicing company.
Nine-Month Revenue
The firm's revenue for nine months this year slid 32 percent from a year earlier, as investment banking fell 26 percent and trading and principal investment plunged 45 percent. Revenue may drop 38 percent in the quarter that ends in November, according to the average estimate of 12 analysts surveyed by Bloomberg.
Mergers and acquisitions, in which Goldman is the top-ranked adviser for the eighth consecutive year, have declined by almost one third this year, and global equity offerings have tumbled 39 percent, Bloomberg data show.
The company has booked $4.9 billion of losses on devalued assets such as mortgage securities and leveraged loans, a fraction of the writedowns taken by rivals such as Citigroup Inc., Merrill Lynch & Co. and Morgan Stanley.
Citigroup has cut 24,000 jobs in the past 18 months, more than any other bank in the world, according to data compiled by Bloomberg. Lehman Brothers Holdings Inc., which filed for bankruptcy last month, eliminated almost 14,000 jobs, the data show.
Further Reductions
Other financial firms are planning further reductions. Merrill Lynch may cut more than 10,000 jobs after Bank of America Corp. completes its $50 billion acquisition of the firm, Ladenburg Thalmann Inc. analyst Richard Bove said this week. The Wall Street Journal reported Goldman Sachs's plan to cut jobs earlier today.
Banks may cut 62,000 jobs in London by the end of next year, reducing employment in the industry to the lowest level in more than a decade as the credit crisis worsens, the Centre for Economics and Business Research estimated this month.
In New York, state budget planners expect a loss of 40,000 financial jobs this year.
(Bloomberg)
Custom Search
Showing posts with label Home mortgages. Show all posts
Showing posts with label Home mortgages. Show all posts
Thursday, October 23, 2008
Tuesday, September 30, 2008
Fannie Mae Eases Credit To Aid Mortgage Lending Sept 30, 1999
By STEVEN A. HOLMES
Published: September 30, 1999
In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders.
The action, which will begin as a pilot program involving 24 banks in 15 markets -- including the New York metropolitan region -- will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans. Fannie Mae officials say they hope to make it a nationwide program by next spring.
Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.
In addition, banks, thrift institutions and mortgage companies have been pressing Fannie Mae to help them make more loans to so-called subprime borrowers. These borrowers whose incomes, credit ratings and savings are not good enough to qualify for conventional loans, can only get loans from finance companies that charge much higher interest rates -- anywhere from three to four percentage points higher than conventional loans.
''Fannie Mae has expanded home ownership for millions of families in the 1990's by reducing down payment requirements,'' said Franklin D. Raines, Fannie Mae's chairman and chief executive officer. ''Yet there remain too many borrowers whose credit is just a notch below what our underwriting has required who have been relegated to paying significantly higher mortgage rates in the so-called subprime market.''
Demographic information on these borrowers is sketchy. But at least one study indicates that 18 percent of the loans in the subprime market went to black borrowers, compared to 5 per cent of loans in the conventional loan market.
In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980's.
''From the perspective of many people, including me, this is another thrift industry growing up around us,'' said Peter Wallison a resident fellow at the American Enterprise Institute. ''If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.''
Under Fannie Mae's pilot program, consumers who qualify can secure a mortgage with an interest rate one percentage point above that of a conventional, 30-year fixed rate mortgage of less than $240,000 -- a rate that currently averages about 7.76 per cent. If the borrower makes his or her monthly payments on time for two years, the one percentage point premium is dropped.
Fannie Mae, the nation's biggest underwriter of home mortgages, does not lend money directly to consumers. Instead, it purchases loans that banks make on what is called the secondary market. By expanding the type of loans that it will buy, Fannie Mae is hoping to spur banks to make more loans to people with less-than-stellar credit ratings.
Fannie Mae officials stress that the new mortgages will be extended to all potential borrowers who can qualify for a mortgage. But they add that the move is intended in part to increase the number of minority and low income home owners who tend to have worse credit ratings than non-Hispanic whites.
Home ownership has, in fact, exploded among minorities during the economic boom of the 1990's. The number of mortgages extended to Hispanic applicants jumped by 87.2 per cent from 1993 to 1998, according to Harvard University's Joint Center for Housing Studies. During that same period the number of African Americans who got mortgages to buy a home increased by 71.9 per cent and the number of Asian Americans by 46.3 per cent.
In contrast, the number of non-Hispanic whites who received loans for homes increased by 31.2 per cent.
Despite these gains, home ownership rates for minorities continue to lag behind non-Hispanic whites, in part because blacks and Hispanics in particular tend to have on average worse credit ratings.
In July, the Department of Housing and Urban Development proposed that by the year 2001, 50 percent of Fannie Mae's and Freddie Mac's portfolio be made up of loans to low and moderate-income borrowers. Last year, 44 percent of the loans Fannie Mae purchased were from these groups.
The change in policy also comes at the same time that HUD is investigating allegations of racial discrimination in the automated underwriting systems used by Fannie Mae and Freddie Mac to determine the credit-worthiness of credit applicants.
Published: September 30, 1999
In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders.
The action, which will begin as a pilot program involving 24 banks in 15 markets -- including the New York metropolitan region -- will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans. Fannie Mae officials say they hope to make it a nationwide program by next spring.
Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.
In addition, banks, thrift institutions and mortgage companies have been pressing Fannie Mae to help them make more loans to so-called subprime borrowers. These borrowers whose incomes, credit ratings and savings are not good enough to qualify for conventional loans, can only get loans from finance companies that charge much higher interest rates -- anywhere from three to four percentage points higher than conventional loans.
''Fannie Mae has expanded home ownership for millions of families in the 1990's by reducing down payment requirements,'' said Franklin D. Raines, Fannie Mae's chairman and chief executive officer. ''Yet there remain too many borrowers whose credit is just a notch below what our underwriting has required who have been relegated to paying significantly higher mortgage rates in the so-called subprime market.''
Demographic information on these borrowers is sketchy. But at least one study indicates that 18 percent of the loans in the subprime market went to black borrowers, compared to 5 per cent of loans in the conventional loan market.
In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980's.
''From the perspective of many people, including me, this is another thrift industry growing up around us,'' said Peter Wallison a resident fellow at the American Enterprise Institute. ''If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.''
Under Fannie Mae's pilot program, consumers who qualify can secure a mortgage with an interest rate one percentage point above that of a conventional, 30-year fixed rate mortgage of less than $240,000 -- a rate that currently averages about 7.76 per cent. If the borrower makes his or her monthly payments on time for two years, the one percentage point premium is dropped.
Fannie Mae, the nation's biggest underwriter of home mortgages, does not lend money directly to consumers. Instead, it purchases loans that banks make on what is called the secondary market. By expanding the type of loans that it will buy, Fannie Mae is hoping to spur banks to make more loans to people with less-than-stellar credit ratings.
Fannie Mae officials stress that the new mortgages will be extended to all potential borrowers who can qualify for a mortgage. But they add that the move is intended in part to increase the number of minority and low income home owners who tend to have worse credit ratings than non-Hispanic whites.
Home ownership has, in fact, exploded among minorities during the economic boom of the 1990's. The number of mortgages extended to Hispanic applicants jumped by 87.2 per cent from 1993 to 1998, according to Harvard University's Joint Center for Housing Studies. During that same period the number of African Americans who got mortgages to buy a home increased by 71.9 per cent and the number of Asian Americans by 46.3 per cent.
In contrast, the number of non-Hispanic whites who received loans for homes increased by 31.2 per cent.
Despite these gains, home ownership rates for minorities continue to lag behind non-Hispanic whites, in part because blacks and Hispanics in particular tend to have on average worse credit ratings.
In July, the Department of Housing and Urban Development proposed that by the year 2001, 50 percent of Fannie Mae's and Freddie Mac's portfolio be made up of loans to low and moderate-income borrowers. Last year, 44 percent of the loans Fannie Mae purchased were from these groups.
The change in policy also comes at the same time that HUD is investigating allegations of racial discrimination in the automated underwriting systems used by Fannie Mae and Freddie Mac to determine the credit-worthiness of credit applicants.
Thursday, July 17, 2008
Little foreclosure relief seen from housing bill
ANALYSIS
By John W. Schoen
Senior Producer
MSNBC
After a year of debate, Congress appears close to passing a bill intended to stem the rising tide of home foreclosures and stabilize the shaky housing market.
But even if the bill wins final passage — far from a certainty — the most optimistic forecasts suggest it would help only about 400,000 of the estimated 3 million homeowners who will likely lose their homes in the next year.
Prospects for the bill have been complicated by the mortgage meltdown's latest chapter — the severe turmoil surrounding Fannie Mae and Freddie Mac, the government-sponsored companies that provide much of the capital to the mortgage market. A Bush administration plan to help prop up the two faltering enterprises has been tacked on to the housing bill, generating some backlash from congressional Republicans.
Federal Reserve Chairman Ben Bernanke warned this week that the ongoing housing crisis is having a serious ripple effect.
“The declines in home prices have contributed to the rising tide of foreclosures,” Bernanke told a congressional panel. “By adding to the stock of vacant homes for sale, these foreclosures have in turn intensified the downward pressure on home prices in some areas.”
One major hurdle to passage of the bill is a proposed $4 billion in community development grants to help agencies in hard hit areas to buy and refurbish foreclosed homes, renting them out or reselling them.
The debate over the provision has become something of a showdown. President Bush has threatened to veto the bill if it includes the community grants, while House supporters have vowed to keep it in the final bill, which is expected to come to a vote early next week.
Opponents say using tax dollars to buy foreclosed homes amounts to a bailout for lenders; proponents argue that the funds would create new jobs and help stem the slide in home price where foreclosure rates are highest.
“The real losers in this awful crisis are the residents who live next to the foreclosed property who have continued to pay their mortgages on time yet see their property values rapidly decreasing,” Ali Solis, vice president of public policy for Enterprise Community Partners, a non-profit group that helps finance affordable housing.
The centerpiece of the proposed foreclosure relief effort is $300 billion in federal loan guarantees to help homeowners refinance into mortgages with better terms. But attorneys, housing counselors and others working with strapped homeowners say the proposal falls short because it leaves the decision to modify a loan up to the lender or loan servicing company.
That means the housing bill will have “little or no impact on the number of foreclosures,” according to O. Max Gardner III, a Shelby, N.C. bankruptcy attorney who works with homeowners who are trying to modify their mortgages.
“I just don’t think the bill addresses the core problem,” he said. “You have so many servicers representing so many different interests with each (mortgage pool) to some extent having different guidelines on loan modifications.”
Despite government efforts to prod lenders to speed up the process of reworking bad loans, progress has been slow.
A survey by Moody's Investors Service released Monday found that as of March loan servicers had modified less than 10 percent of the subprime loans with interest rate resets — up from 3.5 percent in December. Some homeowners report that their modified loan came with higher monthly payments, offering little long-term relief.
The survey found that about 40 percent of the loans modified in the first half of 2007 were 90 or more days delinquent as of the end of March.
A weakening economy, along with rising prices for food, energy and other household expenses, has expanded the pool of homeowners at risk of default. Some who might otherwise be able to keep up with their payments are falling behind as job loss or major health expense depletes their savings or retirement funds.
“The crisis is not getting better, the crisis is getting more severe,” said Susan Keating, the president of the National Foundation for Credit Counseling, which works with local agencies helping cash-strapped families. “And the tentacles of the problems are much more far-reaching than any of us would have considered 18 months ago.”
While the initial rounds of mortgage defaults and foreclosures were concentrated on the lower end of the economic ladder, the problem is now hitting families with higher incomes. Gardner says he’s seeing a big increase in bankruptcy filings from wealthier clients.
“From predominantly hourly employees all the way up to doctors, lawyers, insurance agents, people that were involved in the banking mortgage and real estate business,” he said. “It’s just been a massive upward movement on the income scale.”
For some homeowners, no amount of government help will head off a foreclosure. That includes many in states with the highest concentrations of mortgage defaults, such as California, Florida, Arizona and Nevada. In those states up to 40 percent of buyers in recent years were buying the homes as investments, according to Wachovia economist Mark Vitner.
“These investors never thought they’d have to make any mortgage payments. They thought they’d flip it,” he said. “These investors have no money. They have nothing. They used credit cards to make the down payment.”
Other homeowners facing default simply bought more house than they could afford, sometimes based on the advice of a real estate agent or mortgage broker.
With so many different factors behind the rise in foreclosures, the extended debate over the housing bill has brought wide disagreement about appropriate solutions.
Opponents of government relief maintain that borrowers willingly took on debts they knew — or should have known — they couldn’t afford. But as state and federal investigators have brought thousands of cases of mortgage fraud in the past year, the role of mortgage brokers and lenders has gotten more attention.
Bernanke, in announcing new mortgage rules this week, said many borrowers had been victimized by "unfair or deceptive acts and practices by lenders."
Among other provisions, the new Fed regulations require mortgage brokers and lenders to verify that a borrower can afford the mortgage and fully understands the terms. The rules also bar lenders from locking home buyers into bad loans by applying unaffordable pre-payment penalties.
While much of the early debate on the housing bill centered on whether the government should “bail out” borrowers and lenders who got in trouble, the debate has shifted with the collapse of Bear Stearns in March and the problems faced by Fannie Mae and Freddie Mac
Critics of the two companies have long voiced concerns that, with a combined $5 trillion in mortgages and mortgage-backed bonds, Fannie Mae and Freddie Mac had grown too fast and hold too little capital to weather a severe downturn.
The White House's proposed reforms could help maintain a ready supply of affordable mortgage financing for future home buyers. But they won’t help those with existing loans who face default. Or their neighbors who are seeing their home’s value decline.
“It’s not going to speed up or lessen the impact of the correction of the housing market,” said Vitner. “It’s too late for that. There's nothing that can be done.”
By John W. Schoen
Senior Producer
MSNBC
After a year of debate, Congress appears close to passing a bill intended to stem the rising tide of home foreclosures and stabilize the shaky housing market.
But even if the bill wins final passage — far from a certainty — the most optimistic forecasts suggest it would help only about 400,000 of the estimated 3 million homeowners who will likely lose their homes in the next year.
Prospects for the bill have been complicated by the mortgage meltdown's latest chapter — the severe turmoil surrounding Fannie Mae and Freddie Mac, the government-sponsored companies that provide much of the capital to the mortgage market. A Bush administration plan to help prop up the two faltering enterprises has been tacked on to the housing bill, generating some backlash from congressional Republicans.
Federal Reserve Chairman Ben Bernanke warned this week that the ongoing housing crisis is having a serious ripple effect.
“The declines in home prices have contributed to the rising tide of foreclosures,” Bernanke told a congressional panel. “By adding to the stock of vacant homes for sale, these foreclosures have in turn intensified the downward pressure on home prices in some areas.”
One major hurdle to passage of the bill is a proposed $4 billion in community development grants to help agencies in hard hit areas to buy and refurbish foreclosed homes, renting them out or reselling them.
The debate over the provision has become something of a showdown. President Bush has threatened to veto the bill if it includes the community grants, while House supporters have vowed to keep it in the final bill, which is expected to come to a vote early next week.
Opponents say using tax dollars to buy foreclosed homes amounts to a bailout for lenders; proponents argue that the funds would create new jobs and help stem the slide in home price where foreclosure rates are highest.
“The real losers in this awful crisis are the residents who live next to the foreclosed property who have continued to pay their mortgages on time yet see their property values rapidly decreasing,” Ali Solis, vice president of public policy for Enterprise Community Partners, a non-profit group that helps finance affordable housing.
The centerpiece of the proposed foreclosure relief effort is $300 billion in federal loan guarantees to help homeowners refinance into mortgages with better terms. But attorneys, housing counselors and others working with strapped homeowners say the proposal falls short because it leaves the decision to modify a loan up to the lender or loan servicing company.
That means the housing bill will have “little or no impact on the number of foreclosures,” according to O. Max Gardner III, a Shelby, N.C. bankruptcy attorney who works with homeowners who are trying to modify their mortgages.
“I just don’t think the bill addresses the core problem,” he said. “You have so many servicers representing so many different interests with each (mortgage pool) to some extent having different guidelines on loan modifications.”
Despite government efforts to prod lenders to speed up the process of reworking bad loans, progress has been slow.
A survey by Moody's Investors Service released Monday found that as of March loan servicers had modified less than 10 percent of the subprime loans with interest rate resets — up from 3.5 percent in December. Some homeowners report that their modified loan came with higher monthly payments, offering little long-term relief.
The survey found that about 40 percent of the loans modified in the first half of 2007 were 90 or more days delinquent as of the end of March.
A weakening economy, along with rising prices for food, energy and other household expenses, has expanded the pool of homeowners at risk of default. Some who might otherwise be able to keep up with their payments are falling behind as job loss or major health expense depletes their savings or retirement funds.
“The crisis is not getting better, the crisis is getting more severe,” said Susan Keating, the president of the National Foundation for Credit Counseling, which works with local agencies helping cash-strapped families. “And the tentacles of the problems are much more far-reaching than any of us would have considered 18 months ago.”
While the initial rounds of mortgage defaults and foreclosures were concentrated on the lower end of the economic ladder, the problem is now hitting families with higher incomes. Gardner says he’s seeing a big increase in bankruptcy filings from wealthier clients.
“From predominantly hourly employees all the way up to doctors, lawyers, insurance agents, people that were involved in the banking mortgage and real estate business,” he said. “It’s just been a massive upward movement on the income scale.”
For some homeowners, no amount of government help will head off a foreclosure. That includes many in states with the highest concentrations of mortgage defaults, such as California, Florida, Arizona and Nevada. In those states up to 40 percent of buyers in recent years were buying the homes as investments, according to Wachovia economist Mark Vitner.
“These investors never thought they’d have to make any mortgage payments. They thought they’d flip it,” he said. “These investors have no money. They have nothing. They used credit cards to make the down payment.”
Other homeowners facing default simply bought more house than they could afford, sometimes based on the advice of a real estate agent or mortgage broker.
With so many different factors behind the rise in foreclosures, the extended debate over the housing bill has brought wide disagreement about appropriate solutions.
Opponents of government relief maintain that borrowers willingly took on debts they knew — or should have known — they couldn’t afford. But as state and federal investigators have brought thousands of cases of mortgage fraud in the past year, the role of mortgage brokers and lenders has gotten more attention.
Bernanke, in announcing new mortgage rules this week, said many borrowers had been victimized by "unfair or deceptive acts and practices by lenders."
Among other provisions, the new Fed regulations require mortgage brokers and lenders to verify that a borrower can afford the mortgage and fully understands the terms. The rules also bar lenders from locking home buyers into bad loans by applying unaffordable pre-payment penalties.
While much of the early debate on the housing bill centered on whether the government should “bail out” borrowers and lenders who got in trouble, the debate has shifted with the collapse of Bear Stearns in March and the problems faced by Fannie Mae and Freddie Mac
Critics of the two companies have long voiced concerns that, with a combined $5 trillion in mortgages and mortgage-backed bonds, Fannie Mae and Freddie Mac had grown too fast and hold too little capital to weather a severe downturn.
The White House's proposed reforms could help maintain a ready supply of affordable mortgage financing for future home buyers. But they won’t help those with existing loans who face default. Or their neighbors who are seeing their home’s value decline.
“It’s not going to speed up or lessen the impact of the correction of the housing market,” said Vitner. “It’s too late for that. There's nothing that can be done.”
Monday, July 14, 2008
Federal Reserve Board amends Reg Z new rules take effect on October 1, 2009
Release Date: July 14, 2008
Anthony Landaeta
Posted 07/14/2008
The Federal Reserve Board on Monday approved a final rule for home mortgage loans to better protect consumers and facilitate responsible lending. The rule prohibits unfair, abusive or deceptive home mortgage lending practices and restricts certain other mortgage practices. The final rule also establishes advertising standards and requires certain mortgage disclosures to be given to consumers earlier in the transaction.
The final rule, which amends Regulation Z (Truth in Lending) and was adopted under the Home Ownership and Equity Protection Act (HOEPA), largely follows a proposal released by the Board in December 2007, with enhancements that address ensuing public comments, consumer testing, and further analysis.
"The proposed final rules are intended to protect consumers from unfair or deceptive acts and practices in mortgage lending, while keeping credit available to qualified borrowers and supporting sustainable homeownership," said Federal Reserve Chairman Ben S. Bernanke. "Importantly, the new rules will apply to all mortgage lenders, not just those supervised and examined by the Federal Reserve. Besides offering broader protection for consumers, a uniform set of rules will level the playing field for lenders and increase competition in the mortgage market, to the ultimate benefit of borrowers," the Chairman said.
The final rule adds four key protections for a newly defined category of "higher-priced mortgage loans" secured by a consumer's principal dwelling. For loans in this category, these protections will:
Prohibit a lender from making a loan without regard to borrowers' ability to repay the loan from income and assets other than the home's value. A lender complies, in part, by assessing repayment ability based on the highest scheduled payment in the first seven years of the loan. To show that a lender violated this prohibition, a borrower does not need to demonstrate that it is part of a "pattern or practice."
Require creditors to verify the income and assets they rely upon to determine repayment ability.
Ban any prepayment penalty if the payment can change in the initial four years. For other higher-priced loans, a prepayment penalty period cannot last for more than two years. This rule is substantially more restrictive than originally proposed.
Require creditors to establish escrow accounts for property taxes and homeowner's insurance for all first-lien mortgage loans.
"These changes have made for better rules that will go far in protecting consumers from unfair practices and restoring confidence in our mortgage system," said Governor Randall S. Kroszner.
In addition to the rules governing higher-priced loans, the rules adopt the following protections for loans secured by a consumer's principal dwelling, regardless of whether the loan is higher-priced:
Creditors and mortgage brokers are prohibited from coercing a real estate appraiser to misstate a home's value.
Companies that service mortgage loans are prohibited from engaging in certain practices, such as pyramiding late fees. In addition, servicers are required to credit consumers' loan payments as of the date of receipt and provide a payoff statement within a reasonable time of request.
Creditors must provide a good faith estimate of the loan costs, including a schedule of payments, within three days after a consumer applies for any mortgage loan secured by a consumer's principal dwelling, such as a home improvement loan or a loan to refinance an existing loan. Currently, early cost estimates are only required for home-purchase loans. Consumers cannot be charged any fee until after they receive the early disclosures, except a reasonable fee for obtaining the consumer's credit history.
For all mortgages, the rule also sets additional advertising standards. Advertising rules now require additional information about rates, monthly payments, and other loan features. The final rule bans seven deceptive or misleading advertising practices, including representing that a rate or payment is "fixed" when it can change.
The rule's definition of "higher-priced mortgage loans" will capture virtually all loans in the subprime market, but generally exclude loans in the prime market. To provide an index, the Federal Reserve Board will publish the "average prime offer rate," based on a survey currently published by Freddie Mac. A loan is higher-priced if it is a first-lien mortgage and has an annual percentage rate that is 1.5 percentage points or more above this index, or 3.5 percentage points if it is a subordinate-lien mortgage. This definition overcomes certain technical problems with the original proposal, but the expected market coverage is similar.
One element of the original proposal has been withdrawn. The Federal Reserve Board had proposed for public comment certain requirements pertaining to so-called "yield-spread premiums." During the intervening period, the Board engaged in consumer testing that cast significant doubt on the effectiveness of the proposed rule. As part of its ongoing review of closed-end loan rules under Regulation Z, however, the Board will consider alternative approaches.
In finalizing the rule, the Board carefully considered information obtained from testimony, public hearings, consumer testing, and over 4,500 comment letters submitted during the comment period. "Listening carefully to the commenters, collecting and analyzing data, and undertaking consumer testing, has led to more effective and improved final rules," Governor Kroszner said.
The new rules take effect on October 1, 2009. The single exception is the escrow requirement, which will be phased in during 2010 to allow lenders to establish new systems as needed.
In a related move, the Board is publishing for public comment a proposal to revise the definition of "higher-priced mortgage loan" under Regulation C (Home Mortgage Disclosure), which requires lenders to report price information for such loans, to conform to the definition the Board is adopting under Regulation Z.
Anthony Landaeta
Posted 07/14/2008
The Federal Reserve Board on Monday approved a final rule for home mortgage loans to better protect consumers and facilitate responsible lending. The rule prohibits unfair, abusive or deceptive home mortgage lending practices and restricts certain other mortgage practices. The final rule also establishes advertising standards and requires certain mortgage disclosures to be given to consumers earlier in the transaction.
The final rule, which amends Regulation Z (Truth in Lending) and was adopted under the Home Ownership and Equity Protection Act (HOEPA), largely follows a proposal released by the Board in December 2007, with enhancements that address ensuing public comments, consumer testing, and further analysis.
"The proposed final rules are intended to protect consumers from unfair or deceptive acts and practices in mortgage lending, while keeping credit available to qualified borrowers and supporting sustainable homeownership," said Federal Reserve Chairman Ben S. Bernanke. "Importantly, the new rules will apply to all mortgage lenders, not just those supervised and examined by the Federal Reserve. Besides offering broader protection for consumers, a uniform set of rules will level the playing field for lenders and increase competition in the mortgage market, to the ultimate benefit of borrowers," the Chairman said.
The final rule adds four key protections for a newly defined category of "higher-priced mortgage loans" secured by a consumer's principal dwelling. For loans in this category, these protections will:
Prohibit a lender from making a loan without regard to borrowers' ability to repay the loan from income and assets other than the home's value. A lender complies, in part, by assessing repayment ability based on the highest scheduled payment in the first seven years of the loan. To show that a lender violated this prohibition, a borrower does not need to demonstrate that it is part of a "pattern or practice."
Require creditors to verify the income and assets they rely upon to determine repayment ability.
Ban any prepayment penalty if the payment can change in the initial four years. For other higher-priced loans, a prepayment penalty period cannot last for more than two years. This rule is substantially more restrictive than originally proposed.
Require creditors to establish escrow accounts for property taxes and homeowner's insurance for all first-lien mortgage loans.
"These changes have made for better rules that will go far in protecting consumers from unfair practices and restoring confidence in our mortgage system," said Governor Randall S. Kroszner.
In addition to the rules governing higher-priced loans, the rules adopt the following protections for loans secured by a consumer's principal dwelling, regardless of whether the loan is higher-priced:
Creditors and mortgage brokers are prohibited from coercing a real estate appraiser to misstate a home's value.
Companies that service mortgage loans are prohibited from engaging in certain practices, such as pyramiding late fees. In addition, servicers are required to credit consumers' loan payments as of the date of receipt and provide a payoff statement within a reasonable time of request.
Creditors must provide a good faith estimate of the loan costs, including a schedule of payments, within three days after a consumer applies for any mortgage loan secured by a consumer's principal dwelling, such as a home improvement loan or a loan to refinance an existing loan. Currently, early cost estimates are only required for home-purchase loans. Consumers cannot be charged any fee until after they receive the early disclosures, except a reasonable fee for obtaining the consumer's credit history.
For all mortgages, the rule also sets additional advertising standards. Advertising rules now require additional information about rates, monthly payments, and other loan features. The final rule bans seven deceptive or misleading advertising practices, including representing that a rate or payment is "fixed" when it can change.
The rule's definition of "higher-priced mortgage loans" will capture virtually all loans in the subprime market, but generally exclude loans in the prime market. To provide an index, the Federal Reserve Board will publish the "average prime offer rate," based on a survey currently published by Freddie Mac. A loan is higher-priced if it is a first-lien mortgage and has an annual percentage rate that is 1.5 percentage points or more above this index, or 3.5 percentage points if it is a subordinate-lien mortgage. This definition overcomes certain technical problems with the original proposal, but the expected market coverage is similar.
One element of the original proposal has been withdrawn. The Federal Reserve Board had proposed for public comment certain requirements pertaining to so-called "yield-spread premiums." During the intervening period, the Board engaged in consumer testing that cast significant doubt on the effectiveness of the proposed rule. As part of its ongoing review of closed-end loan rules under Regulation Z, however, the Board will consider alternative approaches.
In finalizing the rule, the Board carefully considered information obtained from testimony, public hearings, consumer testing, and over 4,500 comment letters submitted during the comment period. "Listening carefully to the commenters, collecting and analyzing data, and undertaking consumer testing, has led to more effective and improved final rules," Governor Kroszner said.
The new rules take effect on October 1, 2009. The single exception is the escrow requirement, which will be phased in during 2010 to allow lenders to establish new systems as needed.
In a related move, the Board is publishing for public comment a proposal to revise the definition of "higher-priced mortgage loan" under Regulation C (Home Mortgage Disclosure), which requires lenders to report price information for such loans, to conform to the definition the Board is adopting under Regulation Z.
Friday, July 11, 2008
REMARKS BY HUD SECRETARY STEVE PRESTON DURING MEDIA TELECONFERENCE CALL TO DISCUSS FHASECURE EXPANSION AND PENDING CONGRESSIONAL LEGISLATION
Good morning. Thank you for phoning in. I wanted to join FHA Commissioner Brian Montgomery to talk about the next phase of FHASecure and discuss housing legislation pending before Congress.
As you know, in response to the housing crisis, FHA has expanded its mission to help more Americans facing foreclosure refinance into safer, more affordable mortgages. In late August 2007, President Bush introduced a new product called FHASecure for homeowners who were unable to make their mortgage payments after their interest rate reset. Since then, more than 260,000 families have refinanced with FHA. Hundreds of thousands more will refinance with FHA by the end of the year.
Starting on July 14th, FHASecure will begin to provide additional assistance to subprime borrowers with adjustable rate mortgages, and help to restore liquidity and stability to the markets. It will assist families who have missed up to three
monthly mortgage payments over the previous 12 months or have experienced temporary economic hardship, such as loss of overtime or medical needs, as well as those who were affected by payment shock. The expansion will also encourage lenders to voluntarily write down outstanding subprime mortgage principal.
We estimate this plan will help an additional 100,000 families refinance into more affordable FHA-insured loans by the end of the year.
The combination of all efforts under FHASecure will help a total of 500,000 families by year's end. Our monthly refinancings this fiscal year are already more than five times the level of 2006. It is clear people are coming to us as their solution for the future.
As part of this expansion, we are instituting a fairer, more flexible premium pricing structure at FHA. Like any other insurance company, FHA will begin pricing the insurance premiums for these borrowers according to their credit risk. This will eliminate a pricing inequity that treats applicants with a low risk of default the same as those with a high risk of default.
Risk-based pricing will benefit many borrowers, especially lower-income American families. In FHA's portfolio, families with the lower incomes actually have higher FICO scores. These are hard-working American families who live within their means and pay their bills on time. Pricing mechanisms should reflect that fact.
The bill currently moving through the Senate would place a moratorium on risk-based pricing. That would be a big mistake. FHA will have to increase premiums across the board on all borrowers or, alternatively, seek taxpayer funds in October to cover potential losses, or cut back on the program at the very time we are an island of hope for hundreds of thousands of Americans.
In addition to a possible moratorium on risk-based pricing, Congress may require FHA to accept mortgage insurance loans with seller-funded down payment assistance. The option for FHA not to insure such mortgages would be removed. This would not only be costly for FHA but could be expensive for taxpayers, too. Even if FHA raised premiums to a max of 2.25 percent upfront for all borrowers across the board, it would still need to seek an appropriation to cover the losses caused this practice.
We have issued a regulation to address seller-funded down payments. We are in a comment period right now, and I intend to look hard at those comments. Therefore, I do not want to discuss this matter in great detail. The comments are important to us and we will look at them carefully. But the reason for our efforts to regulate in this area is that FHA-backed mortgages with seller-funded down payments go into foreclosure at three times the rate of FHA's remaining portfolio. Because of a lack of equity, losses on these seller-funded down payment mortgages are significantly greater. We remain solvent and in good shape today. But no insurance company can continue to absorb losses of this magnitude.
At the end of the day, I hope reason will prevail. FHA is more important to the mortgage market now than it has been for many years. FHA's volume and market share continue to grow every month. I hope final legislation from Congress would put forward actions that can keep FHA solvent, self-financing, and responsibly able to help homeowners. Taxpayers should not have to absorb preventable, foreseeable losses.
We are looking for the Congress to pass responsible legislation that will help FHA continue to provide stability for the housing market and provide government-backed mortgages for low-and-moderate income families.
Thank you.
Posted Anthony Landaeta
http//anthonylandaeta.blogspot .com/
As you know, in response to the housing crisis, FHA has expanded its mission to help more Americans facing foreclosure refinance into safer, more affordable mortgages. In late August 2007, President Bush introduced a new product called FHASecure for homeowners who were unable to make their mortgage payments after their interest rate reset. Since then, more than 260,000 families have refinanced with FHA. Hundreds of thousands more will refinance with FHA by the end of the year.
Starting on July 14th, FHASecure will begin to provide additional assistance to subprime borrowers with adjustable rate mortgages, and help to restore liquidity and stability to the markets. It will assist families who have missed up to three
monthly mortgage payments over the previous 12 months or have experienced temporary economic hardship, such as loss of overtime or medical needs, as well as those who were affected by payment shock. The expansion will also encourage lenders to voluntarily write down outstanding subprime mortgage principal.
We estimate this plan will help an additional 100,000 families refinance into more affordable FHA-insured loans by the end of the year.
The combination of all efforts under FHASecure will help a total of 500,000 families by year's end. Our monthly refinancings this fiscal year are already more than five times the level of 2006. It is clear people are coming to us as their solution for the future.
As part of this expansion, we are instituting a fairer, more flexible premium pricing structure at FHA. Like any other insurance company, FHA will begin pricing the insurance premiums for these borrowers according to their credit risk. This will eliminate a pricing inequity that treats applicants with a low risk of default the same as those with a high risk of default.
Risk-based pricing will benefit many borrowers, especially lower-income American families. In FHA's portfolio, families with the lower incomes actually have higher FICO scores. These are hard-working American families who live within their means and pay their bills on time. Pricing mechanisms should reflect that fact.
The bill currently moving through the Senate would place a moratorium on risk-based pricing. That would be a big mistake. FHA will have to increase premiums across the board on all borrowers or, alternatively, seek taxpayer funds in October to cover potential losses, or cut back on the program at the very time we are an island of hope for hundreds of thousands of Americans.
In addition to a possible moratorium on risk-based pricing, Congress may require FHA to accept mortgage insurance loans with seller-funded down payment assistance. The option for FHA not to insure such mortgages would be removed. This would not only be costly for FHA but could be expensive for taxpayers, too. Even if FHA raised premiums to a max of 2.25 percent upfront for all borrowers across the board, it would still need to seek an appropriation to cover the losses caused this practice.
We have issued a regulation to address seller-funded down payments. We are in a comment period right now, and I intend to look hard at those comments. Therefore, I do not want to discuss this matter in great detail. The comments are important to us and we will look at them carefully. But the reason for our efforts to regulate in this area is that FHA-backed mortgages with seller-funded down payments go into foreclosure at three times the rate of FHA's remaining portfolio. Because of a lack of equity, losses on these seller-funded down payment mortgages are significantly greater. We remain solvent and in good shape today. But no insurance company can continue to absorb losses of this magnitude.
At the end of the day, I hope reason will prevail. FHA is more important to the mortgage market now than it has been for many years. FHA's volume and market share continue to grow every month. I hope final legislation from Congress would put forward actions that can keep FHA solvent, self-financing, and responsibly able to help homeowners. Taxpayers should not have to absorb preventable, foreseeable losses.
We are looking for the Congress to pass responsible legislation that will help FHA continue to provide stability for the housing market and provide government-backed mortgages for low-and-moderate income families.
Thank you.
Posted Anthony Landaeta
http//anthonylandaeta.blogspot .com/
Senate poised to pass housing bill
Foreclosure rescue bill takes big step forward. But all of measure's provisions aren't settled since the House wants to have another crack at it.
By Jeanne Sahadi, CNNMoney.com senior writer
Last Updated: July 10, 2008: 4:03 PM EDT
NEW YORK (CNNMoney.com) -- The saga still isn't over, but after months of debate on Capitol Hill, the Senate seemed poised Thursday to finally pass a comprehensive housing and foreclosure prevention bill this week.
The measure, which would create a new government-backed foreclosure prevention program and strengthen oversight of Fannie Mae and Freddie Mac, still faces a likely final debate in the House.
The House passed a version of the bill in May and is expected to try to amend some Senate provisions to bring them closer in line with its bill. Any changes will need to be considered by the Senate.
That likely back-and-forth makes it uncertain when lawmakers will be able to send final legislation to President Bush for his consideration. Final passage of a package has been delayed for close to two months due to substantive disagreements as well as countless procedural delays.
On the Senate floor Thursday, one of the lead authors of the bill, Senate Banking Committee Chairman Christopher Dodd, D-Conn., lamented how long it has taken to move the bill through. "Candidly, we can't wait any longer."
Dodd cited the latest foreclosure data, released Thursday, showing 250,000 new foreclosure filings in June, up 53% from a year earlier.
"A lot of us hoped the market would take care of all of this and there would be light at the end of the tunnel," Dodd said. "[But now] the only light at the end of the tunnel is a train coming."
The omnibus housing package attempts to address the housing crisis in several ways. Among them is providing more relief for some borrowers facing foreclosure; increasing access to mortgages in higher-cost areas; modernizing the loan guidelines for the Federal Housing Administration (FHA); and more stringently regulating Fannie and Freddie, the government-sponsored enterprises that have taken a beating this week amidst concern over how well funded they are.
FHA role expansion. Under the Senate bill, the FHA could insure up to $300 billion in new 30-year fixed rate mortgages for at-risk borrowers if their lenders agree to write down their loan balances to 90% of the current appraised value of their homes.
Lenders would also agree to pay upfront fees to the FHA equal to 3% of a home's appraised value. Borrowers must agree to pay an annual premium to the FHA equal to 1.5% of their new loan balance and they must also agree to share with the government any profit they realize from selling or refinancing their home.
The cost of the new FHA program - which will only be in place for a few years - would be funded by fees from Fannie and Freddie. Thereafter those fees would finance an affordable housing trust fund also created by the bill. The House version of the bill calls for those fees to be used solely for affordable housing.
Create a new regulator for Fannie and Freddie. The GSEs, which grease the wheels of the housing market by guaranteeing the purchase and trade of mortgages, will get a new regulator under the bill. That regulator, among other things, will have a greater say over how well funded the agencies are - a major concern in the markets that has sent stocks in both companies plunging.
"We know they play a central role in our housing. We also know that together they owe over $5 trillion in debt, and they're thinly capitalized. The way to keep them [from getting into worse shape] is to create a strong regulator to make sure they're adequately capitalized," Sen. Richard Shelby, R-Ala., another key architect of the bill, said Thursday on the Senate floor.
While the Senate bill calls for the appointment of a new regulator to be made immediately, House Democrats want the appointment to be made 6 months from the date of enactment.
Raise conforming loan limits. The bill would permanently increase the cap on the size of mortgages guaranteed by Fannie and Freddie to $625,000 from $417,000. The FHA maximum loan limits for high-cost areas would also increase to $625,000. The House bill raises the limit at all three agencies to nearly $730,000.
Higher loan limits will make it easier for borrowers to get mortgages, because they're more likely to be traded if they are considered conforming.
Update FHA rules. The bill would update a number of rules for FHA loans. Among them, it would increase to 3.5% from 3% the down payment requirement for borrowers in FHA loans. And it would eliminate a program that has allowed sellers to provide down payment assistance.
The House bill had contained a modified form of the down payment assistance program.
The seller-funded program is largely the reason why the agency's reserve has fallen by $4.6 billion, according to congressional testimony of FHA Commissioner Brian Montgomery. Currently, that reserve is roughly $16.4 billion.
Provide housing-related tax credits. The Senate bill includes more than $14 billion in tax credits. One is an $8,000 tax refund for first-time home buyers. The refund, however, serves more as an interest-free loan, since it would have to be paid back over 15 years by the buyer.
Help states buy foreclosed properties. Despite a White House veto threat, the Senate bill still contains a provision that would provide states with $4 billion to buy and fix up foreclosed properties.
The House is expected to debate whether or not the provision should stay and also whether it should be paid for by raising an equal amount of revenue elsewhere. If not, it could be considered emergency spending, in which case lawmakers would not have to compensate for the cost of the provision.
By Jeanne Sahadi, CNNMoney.com senior writer
Last Updated: July 10, 2008: 4:03 PM EDT
NEW YORK (CNNMoney.com) -- The saga still isn't over, but after months of debate on Capitol Hill, the Senate seemed poised Thursday to finally pass a comprehensive housing and foreclosure prevention bill this week.
The measure, which would create a new government-backed foreclosure prevention program and strengthen oversight of Fannie Mae and Freddie Mac, still faces a likely final debate in the House.
The House passed a version of the bill in May and is expected to try to amend some Senate provisions to bring them closer in line with its bill. Any changes will need to be considered by the Senate.
That likely back-and-forth makes it uncertain when lawmakers will be able to send final legislation to President Bush for his consideration. Final passage of a package has been delayed for close to two months due to substantive disagreements as well as countless procedural delays.
On the Senate floor Thursday, one of the lead authors of the bill, Senate Banking Committee Chairman Christopher Dodd, D-Conn., lamented how long it has taken to move the bill through. "Candidly, we can't wait any longer."
Dodd cited the latest foreclosure data, released Thursday, showing 250,000 new foreclosure filings in June, up 53% from a year earlier.
"A lot of us hoped the market would take care of all of this and there would be light at the end of the tunnel," Dodd said. "[But now] the only light at the end of the tunnel is a train coming."
The omnibus housing package attempts to address the housing crisis in several ways. Among them is providing more relief for some borrowers facing foreclosure; increasing access to mortgages in higher-cost areas; modernizing the loan guidelines for the Federal Housing Administration (FHA); and more stringently regulating Fannie and Freddie, the government-sponsored enterprises that have taken a beating this week amidst concern over how well funded they are.
FHA role expansion. Under the Senate bill, the FHA could insure up to $300 billion in new 30-year fixed rate mortgages for at-risk borrowers if their lenders agree to write down their loan balances to 90% of the current appraised value of their homes.
Lenders would also agree to pay upfront fees to the FHA equal to 3% of a home's appraised value. Borrowers must agree to pay an annual premium to the FHA equal to 1.5% of their new loan balance and they must also agree to share with the government any profit they realize from selling or refinancing their home.
The cost of the new FHA program - which will only be in place for a few years - would be funded by fees from Fannie and Freddie. Thereafter those fees would finance an affordable housing trust fund also created by the bill. The House version of the bill calls for those fees to be used solely for affordable housing.
Create a new regulator for Fannie and Freddie. The GSEs, which grease the wheels of the housing market by guaranteeing the purchase and trade of mortgages, will get a new regulator under the bill. That regulator, among other things, will have a greater say over how well funded the agencies are - a major concern in the markets that has sent stocks in both companies plunging.
"We know they play a central role in our housing. We also know that together they owe over $5 trillion in debt, and they're thinly capitalized. The way to keep them [from getting into worse shape] is to create a strong regulator to make sure they're adequately capitalized," Sen. Richard Shelby, R-Ala., another key architect of the bill, said Thursday on the Senate floor.
While the Senate bill calls for the appointment of a new regulator to be made immediately, House Democrats want the appointment to be made 6 months from the date of enactment.
Raise conforming loan limits. The bill would permanently increase the cap on the size of mortgages guaranteed by Fannie and Freddie to $625,000 from $417,000. The FHA maximum loan limits for high-cost areas would also increase to $625,000. The House bill raises the limit at all three agencies to nearly $730,000.
Higher loan limits will make it easier for borrowers to get mortgages, because they're more likely to be traded if they are considered conforming.
Update FHA rules. The bill would update a number of rules for FHA loans. Among them, it would increase to 3.5% from 3% the down payment requirement for borrowers in FHA loans. And it would eliminate a program that has allowed sellers to provide down payment assistance.
The House bill had contained a modified form of the down payment assistance program.
The seller-funded program is largely the reason why the agency's reserve has fallen by $4.6 billion, according to congressional testimony of FHA Commissioner Brian Montgomery. Currently, that reserve is roughly $16.4 billion.
Provide housing-related tax credits. The Senate bill includes more than $14 billion in tax credits. One is an $8,000 tax refund for first-time home buyers. The refund, however, serves more as an interest-free loan, since it would have to be paid back over 15 years by the buyer.
Help states buy foreclosed properties. Despite a White House veto threat, the Senate bill still contains a provision that would provide states with $4 billion to buy and fix up foreclosed properties.
The House is expected to debate whether or not the provision should stay and also whether it should be paid for by raising an equal amount of revenue elsewhere. If not, it could be considered emergency spending, in which case lawmakers would not have to compensate for the cost of the provision.
Thursday, July 10, 2008
Six months, 343,000 lost homes
Through the first half of 2008, the foreclosure rate shows little sign of letting up.
By Les Christie, CNNMoney.com staff writer
Last Updated: July 10, 2008: 8:27 AM EDT
NEW YORK (CNNMoney.com) -- The number of Americans losing their homes to foreclosure continued to soar in June, according to a report released Thursday.
RealtyTrac, an online marketer of foreclosed properties, reported that lenders repossessed 71,563 homes in June. A year ago, just 26,369 homes were taken back.
During the first six months of 2008, 343,159 Americans lost their homes, up 136% from 145,696 recorded during the same period in 2007.
The report revealed that foreclosure filings of all types, including notices of default, notices of auction sales and bank repossessions, rose 53% from June 2007, to 252,363. For the first six months, total filings rose 56% to 1.4 million.
"June was the second straight month with more than a quarter-million properties nationwide receiving foreclosure filings," said James Saccacio, chief executive officer of RealtyTrac.
There was a shred of good news: When compared with May, filings declined 3%.
Part of that decline may be traced to the actions of states, including Maryland and Massachusetts, that have put moratoriums on foreclosures, according to Rick Sharga, a spokesman for RealtyTrac.
"Massachusetts put a 90-day hold on new foreclosures," he said, "and filings dropped 3% there over last year."
But big increases were more common. In 13 states, filings more than doubled from a year earlier, including in Arizona, Nebraska and Oregon.
"The year-over-year increase of more than 50% indicates we have not yet reached the top of this foreclosure cycle," said Saccacio.
Adding to foreclosure woes is that home prices have been falling all year, down more than 14% in the first quarter, according to the latest figures from the S&P Case-Shiller Home Price Index.
Price declines strip homeowners of equity, making many mortgage borrowers owe more than their homes are worth. When they're underwater, they can't borrow against home equity to help out during a rough financial stretch.
Underwater properties are hard to sell because any deal would be for a sum below the mortgage balance - the bank would have to agree to take a loss. Many of these "short sales" get turned down and wind up as bank-owned properties.
"The real explosion has been in bank repossessions," said Sharga. "There's really no place else for these places to go except back to the lenders when they're underwater."
Two things work against short sales, according to Duane LeGate, president of HouseBuyerNetwork.com, a short-sale specialist. One is there is often a question of who has authority over the loan. Mortgage servicers are loath to make decisions that will result in losses of mortgage principal of loans in investor pools, even if it means smaller losses than foreclosures produce.
The second is manpower. Servicers simply don't have the personnel to handle the volume of short-sale and other loss-mitigation requests they've been receiving. Delays in processing short sales can mean approvals come too late.
"We hear about all these streamlined mortgage lending programs," said LeGate. "Where are the streamlined processes to undo the mortgages they originated?"
Sun Belt still hard hit
Nevada led all states in the rate of foreclosure activity for the 17th consecutive month, with one filing for every 122 households, a total of 8,713. California had the most filings with 68,666, one for every 192 households.
Other states with very high foreclosure rates included Arizona, one for every 201 households, Florida (one for every 211), Michigan (one in 375) and Ohio (one in 382).
California had seven of the 10 metropolitan areas worst hit by foreclosure. Stockton had one for every 72 households - more than six times the national average of one for every 501 households. Merced, was second with one for every 77 households, and Modesto - one in 86 - was third.
Cape Coral-Fort Myers, Fla., where one in every 91 households received a foreclosure filing, had the fourth highest rate. In Las Vegas, the only city outside of California and Florida with a foreclosure rate ranking among the top 10, one in 99 households received a foreclosure filing in June.
First Published
By Les Christie, CNNMoney.com staff writer
Last Updated: July 10, 2008: 8:27 AM EDT
NEW YORK (CNNMoney.com) -- The number of Americans losing their homes to foreclosure continued to soar in June, according to a report released Thursday.
RealtyTrac, an online marketer of foreclosed properties, reported that lenders repossessed 71,563 homes in June. A year ago, just 26,369 homes were taken back.
During the first six months of 2008, 343,159 Americans lost their homes, up 136% from 145,696 recorded during the same period in 2007.
The report revealed that foreclosure filings of all types, including notices of default, notices of auction sales and bank repossessions, rose 53% from June 2007, to 252,363. For the first six months, total filings rose 56% to 1.4 million.
"June was the second straight month with more than a quarter-million properties nationwide receiving foreclosure filings," said James Saccacio, chief executive officer of RealtyTrac.
There was a shred of good news: When compared with May, filings declined 3%.
Part of that decline may be traced to the actions of states, including Maryland and Massachusetts, that have put moratoriums on foreclosures, according to Rick Sharga, a spokesman for RealtyTrac.
"Massachusetts put a 90-day hold on new foreclosures," he said, "and filings dropped 3% there over last year."
But big increases were more common. In 13 states, filings more than doubled from a year earlier, including in Arizona, Nebraska and Oregon.
"The year-over-year increase of more than 50% indicates we have not yet reached the top of this foreclosure cycle," said Saccacio.
Adding to foreclosure woes is that home prices have been falling all year, down more than 14% in the first quarter, according to the latest figures from the S&P Case-Shiller Home Price Index.
Price declines strip homeowners of equity, making many mortgage borrowers owe more than their homes are worth. When they're underwater, they can't borrow against home equity to help out during a rough financial stretch.
Underwater properties are hard to sell because any deal would be for a sum below the mortgage balance - the bank would have to agree to take a loss. Many of these "short sales" get turned down and wind up as bank-owned properties.
"The real explosion has been in bank repossessions," said Sharga. "There's really no place else for these places to go except back to the lenders when they're underwater."
Two things work against short sales, according to Duane LeGate, president of HouseBuyerNetwork.com, a short-sale specialist. One is there is often a question of who has authority over the loan. Mortgage servicers are loath to make decisions that will result in losses of mortgage principal of loans in investor pools, even if it means smaller losses than foreclosures produce.
The second is manpower. Servicers simply don't have the personnel to handle the volume of short-sale and other loss-mitigation requests they've been receiving. Delays in processing short sales can mean approvals come too late.
"We hear about all these streamlined mortgage lending programs," said LeGate. "Where are the streamlined processes to undo the mortgages they originated?"
Sun Belt still hard hit
Nevada led all states in the rate of foreclosure activity for the 17th consecutive month, with one filing for every 122 households, a total of 8,713. California had the most filings with 68,666, one for every 192 households.
Other states with very high foreclosure rates included Arizona, one for every 201 households, Florida (one for every 211), Michigan (one in 375) and Ohio (one in 382).
California had seven of the 10 metropolitan areas worst hit by foreclosure. Stockton had one for every 72 households - more than six times the national average of one for every 501 households. Merced, was second with one for every 77 households, and Modesto - one in 86 - was third.
Cape Coral-Fort Myers, Fla., where one in every 91 households received a foreclosure filing, had the fourth highest rate. In Las Vegas, the only city outside of California and Florida with a foreclosure rate ranking among the top 10, one in 99 households received a foreclosure filing in June.
First Published
Tuesday, July 08, 2008
IndyMac Joins Roster of Banks to Fold its Mortgage "Tent."
IndyMac has announced that, effective yesterday, it is closing both its wholesale and retail production channel and will no longer accept any new mortgage loan submission or rate locks. It will also reduce its workforce to around 3,200 from the current level of 7,400. The bank will also, apparently, continue its other retail banking operations.
IndyMac Bankcorp, Inc is the holding company for IndyMac Bank, the 7th largest savings and loan and the 2nd largest independent mortgage lender in the nation. It claims to have financed the construction of over 70,000 new homes over the last five years but has consistently been listed among those financial institutions in serious trouble over the mortgage crises.
The stock had reached $.71 cents Monday after trading as high as 31.32 in the last year and was delisted from NASDAQ. There were no announcementS or news items on the Yahoo IndyMac website on Monday, but the company's own website made the following statement:
"Given the continued downward trend in home prices and a resulting increase in our forecasted credit losses and the related downward trend in the pricing of all mortgage related assets in the capital markets, especially mortgage-backed securities where we have experienced significant rating agency downgrades this quarter, we expect our loss for the second quarter to be larger than Q108, but it is difficult at this time to be more precise given the significant uncertainty surrounding accounting estimates, fair value accounting and other accounting matters.
"� We have been working closely with our federal banking regulators with respect to the actions that they and we must take to meet our mutual goal of keeping Indymac safe and sound through this crisis period. In that respect, based on information we have provided to our regulators, they have advised us that we are no longer "well capitalized", which we stated on May 12 was a possible scenario. Our regulators have also asked us to submit to them a new business plan for their review and approval, something on which we have been working with them for some time. We have agreed on the basic elements of the plan, and the regulators have directed us to begin executing on it. An important element of our plan is to improve our capital ratios. Without an external capital raise, the traditional way to improve safety and soundness is to sell assets and shrink the balance sheet, which in normal times generally has the effect of improving capital ratios and bolstering liquidity. Yet in this environment, where either there are no bids for most of IMB's mortgage loans and securities or the bid/ask spreads are abnormally wide, "fire-selling" assets would actually deplete capital further. As a result, the most realistic and cost-effective way to shrink both our balance sheet and our servicing rights asset (which, as discussed in previous communications, is up against the regulatory cap limit), is to curtail most new activity.
"As a result of the above, we have made the difficult decision, effective July 7, 2008, that we will no longer accept any new loan submissions or rate locks in our retail and wholesale forward mortgage lending channels, except for our servicing retention channel. We plan to honor all of our existing rate-locked loans and will continue to fund these loans in the coming weeks. While the managers and employees in these units have worked incredibly hard, these units are not currently profitable due to the continuing erosion of the housing and mortgage markets. At the same time, these operations take up significant balance sheet capacity and "feed" growth in the servicing asset, an asset we need to shrink given its size relative to our existing capital."
Unfortunately, the above actions will necessitate the reduction in our present workforce from approximately 7,200 to roughly 3,400 or so over the next couple of months, which should reduce our operating expenses by roughly 60%. We will retain about 1,100 employees in loan servicing in Kalamazoo and Austin; 350 in our servicing retention group in Irvine and Kansas City; 800 at Financial Freedom, primarily in Irvine, Sacramento, and Atlanta; 400 in our Southern California retail and web bank; 500 in portfolio management and administration, largely in Pasadena; and 250 in discontinued businesses. In building Indymac up from 4 employees in 1993 to its present size, we have had to retrench and then rebuild several times over the past 15 years, but clearly these are the largest and most difficult staff reductions we have ever had to make. If we had another alternative, we clearly would have chosen it, as we understand how painful these workforce reductions can be for the affected employees and their families. Given Indymac's current financial position and these significant layoffs, I strongly believe it is appropriate that I further materially reduce my own compensation. As a result, I have requested of Indymac's Board of Directors that they reduce my base salary by 50%.
The memo was signed by Michael W. Perry, CEO."
IndyMac Bankcorp, Inc is the holding company for IndyMac Bank, the 7th largest savings and loan and the 2nd largest independent mortgage lender in the nation. It claims to have financed the construction of over 70,000 new homes over the last five years but has consistently been listed among those financial institutions in serious trouble over the mortgage crises.
The stock had reached $.71 cents Monday after trading as high as 31.32 in the last year and was delisted from NASDAQ. There were no announcementS or news items on the Yahoo IndyMac website on Monday, but the company's own website made the following statement:
"Given the continued downward trend in home prices and a resulting increase in our forecasted credit losses and the related downward trend in the pricing of all mortgage related assets in the capital markets, especially mortgage-backed securities where we have experienced significant rating agency downgrades this quarter, we expect our loss for the second quarter to be larger than Q108, but it is difficult at this time to be more precise given the significant uncertainty surrounding accounting estimates, fair value accounting and other accounting matters.
"� We have been working closely with our federal banking regulators with respect to the actions that they and we must take to meet our mutual goal of keeping Indymac safe and sound through this crisis period. In that respect, based on information we have provided to our regulators, they have advised us that we are no longer "well capitalized", which we stated on May 12 was a possible scenario. Our regulators have also asked us to submit to them a new business plan for their review and approval, something on which we have been working with them for some time. We have agreed on the basic elements of the plan, and the regulators have directed us to begin executing on it. An important element of our plan is to improve our capital ratios. Without an external capital raise, the traditional way to improve safety and soundness is to sell assets and shrink the balance sheet, which in normal times generally has the effect of improving capital ratios and bolstering liquidity. Yet in this environment, where either there are no bids for most of IMB's mortgage loans and securities or the bid/ask spreads are abnormally wide, "fire-selling" assets would actually deplete capital further. As a result, the most realistic and cost-effective way to shrink both our balance sheet and our servicing rights asset (which, as discussed in previous communications, is up against the regulatory cap limit), is to curtail most new activity.
"As a result of the above, we have made the difficult decision, effective July 7, 2008, that we will no longer accept any new loan submissions or rate locks in our retail and wholesale forward mortgage lending channels, except for our servicing retention channel. We plan to honor all of our existing rate-locked loans and will continue to fund these loans in the coming weeks. While the managers and employees in these units have worked incredibly hard, these units are not currently profitable due to the continuing erosion of the housing and mortgage markets. At the same time, these operations take up significant balance sheet capacity and "feed" growth in the servicing asset, an asset we need to shrink given its size relative to our existing capital."
Unfortunately, the above actions will necessitate the reduction in our present workforce from approximately 7,200 to roughly 3,400 or so over the next couple of months, which should reduce our operating expenses by roughly 60%. We will retain about 1,100 employees in loan servicing in Kalamazoo and Austin; 350 in our servicing retention group in Irvine and Kansas City; 800 at Financial Freedom, primarily in Irvine, Sacramento, and Atlanta; 400 in our Southern California retail and web bank; 500 in portfolio management and administration, largely in Pasadena; and 250 in discontinued businesses. In building Indymac up from 4 employees in 1993 to its present size, we have had to retrench and then rebuild several times over the past 15 years, but clearly these are the largest and most difficult staff reductions we have ever had to make. If we had another alternative, we clearly would have chosen it, as we understand how painful these workforce reductions can be for the affected employees and their families. Given Indymac's current financial position and these significant layoffs, I strongly believe it is appropriate that I further materially reduce my own compensation. As a result, I have requested of Indymac's Board of Directors that they reduce my base salary by 50%.
The memo was signed by Michael W. Perry, CEO."
Wednesday, July 02, 2008
Bank Of America Completes Countrywide Financial Purchase
Bank of America Corp. has completed its purchase of Countrywide Financial Corp. The company says it will focus on responsible home lending. Bank of America also will assist new and existing customers with selecting the right products to meet their needs."Mortgages are one of the three main cornerstone consumer financial products, along with deposits and credit cards," says Kenneth D. Lewis, Bank of America chairman and chief executive officer. "This purchase significantly increases Bank of America's market share in consumer real estate, and as our companies combine, we believe Bank of America will benefit from excellent systems and a broad distribution network that will offer more ways to meet our customers' credit needs."Bank of America plans to offer the following types of first-lien mortgages: conforming loans underwritten to standard guidelines of government-sponsored enterprises and the government, including FHA and VA loans and other loans designed for low- and moderate- income borrowers; nonconforming loans with terms expected to produce no greater risk of default than conforming loans; interest-only fixed-rate and adjustable-rate mortgages (ARMs) that are subject to a 10-year minimum interest-only period, which lessens the possibility of short-term payment shock; and fixed-period ARMs that provide borrowers low initial rates with the security of fixed payments, subject to protections against steep increases in payment amounts.The company will continue its long-established policy of not originating subprime mortgages. As announced previously, Bank of America will discontinue certain nontraditional mortgages - including option-ARM loans. It also will significantly curtail some other nontraditional mortgages, such as certain low-documentation loans, and will implement enhanced borrower protections over time as part of the transition process.
Monday, June 30, 2008
WA Fines Countrywide, Seeks To Revoke Company's License
Gov. Chris Gregoire, D-Wash., says that the state of Washington plans to fine Countrywide Home Loans $1 million for discriminatory lending. In addition, the company will be required to pay more than $5 million in back assessments the company failed to pay. The state is seeking to revoke Countrywide's license to do business in Washington for its alleged illegal activity."The allegation that Countrywide preyed on minority borrowers is extremely troubling to me," Gregoire says. "And I hope to learn eventually just how much this may have contributed to foreclosures in our state. The allegation offers evidence that Countrywide engaged in a pattern to target minority groups and engage in predatory practices."The state's Department of Financial Institutions (DFI) is required to examine every home lender licensed in the state of Washington, the governor's office explains. The agency conducted its fair lending examination of Countrywide last year.At that time, DFI looked at roughly 600 individual loan files and uncovered evidence that Countrywide engaged in discriminatory lending that targeted Washington's minority communities. The agency also found significant underreporting of loans during its investigation.DFI sent Countrywide a statement of charges on June 23, notifying the company of the fine and the back assessments the state plans to pursue. The investigation continues.Source: Office Of Gov. Chris Gregoire
CA AG Sues Countrywide For Mortgage Deception
California Attorney General Edmund G. Brown Jr. has sued Countrywide Financial, its chief executive, Angelo Mozilo, and its president, David Sambol, for allegedly engaging in deceptive advertising and unfair competition by pushing homeowners into mass-produced, risky loans for the sole purpose of reselling the mortgages on the secondary market."Countrywide exploited the American Dream of homeownership and then sold its mortgages for huge profits on the secondary market," Brown states. "The company sold ever-increasing numbers of complex and risky home loans, as quickly as possible. Countrywide was, in essence, a mass-production loan factory, producing ever-increasing streams of debt without regard for borrowers. Today’s lawsuit seeks relief for Californians who were ripped off by Countrywide’s deceptive scheme.”Brown alleges that Countrywide Financial used deceptive tactics to push homeowners into complicated, risky, and expensive loans so that the company could sell as many loans as possible to third-party investors. According to the lawsuit, the company marketed complex and difficult-to-understand loans with very low initial or “teaser” interest rates or payments.Despite receiving numerous complaints from borrowers claiming that they did not understand their loan terms, Countrywide ignored loan officers' deceptive practices and loose underwriting standards, according to Brown’s office. Countrywide also pushed its borrowers to serially refinance, repeatedly urging borrowers to obtain home loans to pay off their current debt.The case is People v. Countrywide, Los Angeles Superior Court case number LC081846.Source: Office Of California Attorney General Edmund G. Brown Jr.
Wednesday, June 25, 2008
Iran Warns West May Face 'Done Deal' on Nukes if Country Is Provoked
Wednesday, June 25, 2008
Associated Press
posted by http//anthonylandaeta.blogspot.com/
TEHRAN, Iran — Iran's powerful parliament speaker on Wednesday warned that the West could face a "done deal" if it provokes Iran, in a rare hint by an Iranian official that Tehran could build nuclear weapons if attacked.
Iran's leaders have long been adamant that the country's nuclear program is and will always be aimed only at generating electricity. Ali Larijani did not directly contradict that stance, but his veiled warning comes amid increased Iranian fears that the U.S. or its ally Israel could strike its nuclear facilities.
Earlier this month, Israel sent warplanes and other aircraft on a major exercise in the eastern Mediterranean that U.S. officials said was a message to Iran — a show of force as well as practice in the operations needed for a long-range strike mission.
Larijani, who was once Iran's top nuclear negotiator with the West, made the comments in a speech to parliament aired on state TV and radio.
He pointed to recent comments by Mohamed ElBaradei, the U.N. nuclear watchdog chief, who said in an interview last week that a military strike on Iran could turn the Mideast into a "ball of fire" and "prompt Iran, even if it didn't produce a nuclear weapon today, to resort to an emergency plan to produce a nuclear weapon."
Iran's leaders have long been adamant that the country's nuclear program is and will always be aimed only at generating electricity. Ali Larijani did not directly contradict that stance, but his veiled warning comes amid increased Iranian fears that the U.S. or its ally Israel could strike its nuclear facilities.
Earlier this month, Israel sent warplanes and other aircraft on a major exercise in the eastern Mediterranean that U.S. officials said was a message to Iran — a show of force as well as practice in the operations needed for a long-range strike mission.
Larijani, who was once Iran's top nuclear negotiator with the West, made the comments in a speech to parliament aired on state TV and radio.
He pointed to recent comments by Mohamed ElBaradei, the U.N. nuclear watchdog chief, who said in an interview last week that a military strike on Iran could turn the Mideast into a "ball of fire" and "prompt Iran, even if it didn't produce a nuclear weapon today, to resort to an emergency plan to produce a nuclear weapon."
"Take Mr. ElBaradei's warnings seriously," Larijani said, addressing the West.
"Don't provoke Iran otherwise you will face a done deal that will block the path of your return to a compromise with Iran," Larijani told an open session of the parliament broadcast live on state radio Wednesday.
The phrase he used in Farsi, "amal-e anjam shodeh," means literally "an accomplished act" or "fait accompli."
Larijani also warned that a "short opportunity is left" for a deal with Iran over its nuclear program.
The West is taking a carrot and stick approach with Iran, trying to push it to suspend uranium enrichment, a process that can produce either fuel for a nuclear reactor or the material for a warhead. Top Western powers have put forward a package of economic incentives for Iran to halt enrichment, while threatening an increase in sanctions.
Iran has yet to reply to the package, insisting it will never suspend enrichment but also mentioning some common ground with its own proposals for a resolution to the standoff.
The U.S. and some of its allies accuse Iran of seeking to build a nuclear bomb. Iran has always said it will never do so — and Iran's supreme leader Ayatollah Ali Khamenei has ruled it out, calling nuclear weapons un-Islamic.
Larijani is a member of the powerful Supreme National Security Council and is close is close to Khamenei. He was careful not to directly state that the country could change its intentions. His vague hint now that Iran could do so appeared aimed at signalling the possible consequences of military action and pressing the West to reach a negotiated solution.
One hard-line newspaper was more overt about the possibility, though it too stopped short of directly threatening a move to build a weapon.
The daily Kayhan said in an editorial that even if Iran's nuclear facilities are destroyed in a strike, they could be rebuilt "within a short period of time, but with the difference that it (a military strike) may prompt a fundamental reconsideration in intentions."
Meanwhile, a top commander of the elite Revolutionary Guards on Wednesday warned that an attack on Iran would draw the U.S. into "a new tragedy."
"If you want to move towards Iran, make sure you will bring artificial legs and walking sticks because you will not have any legs to return on should you come," the television quoted Mohammad Hejazi, a top Guards figure, as saying.
Iran has spread its nuclear facilities over various parts of the large country and has built key portions underground to protect if from possible Israeli or American airstrikes.
In 1981, Israeli jets bombed Iraq's Osirak nuclear facility in an attempt to end then-Iraqi leader Saddam Hussein's nuclear program. Last September, Israel bombed a facility in Syria that U.S. officials have said was a nuclear reactor being constructed with North Korean assistance, a claim denied by Damascus and Pyongyang.
"Don't provoke Iran otherwise you will face a done deal that will block the path of your return to a compromise with Iran," Larijani told an open session of the parliament broadcast live on state radio Wednesday.
The phrase he used in Farsi, "amal-e anjam shodeh," means literally "an accomplished act" or "fait accompli."
Larijani also warned that a "short opportunity is left" for a deal with Iran over its nuclear program.
The West is taking a carrot and stick approach with Iran, trying to push it to suspend uranium enrichment, a process that can produce either fuel for a nuclear reactor or the material for a warhead. Top Western powers have put forward a package of economic incentives for Iran to halt enrichment, while threatening an increase in sanctions.
Iran has yet to reply to the package, insisting it will never suspend enrichment but also mentioning some common ground with its own proposals for a resolution to the standoff.
The U.S. and some of its allies accuse Iran of seeking to build a nuclear bomb. Iran has always said it will never do so — and Iran's supreme leader Ayatollah Ali Khamenei has ruled it out, calling nuclear weapons un-Islamic.
Larijani is a member of the powerful Supreme National Security Council and is close is close to Khamenei. He was careful not to directly state that the country could change its intentions. His vague hint now that Iran could do so appeared aimed at signalling the possible consequences of military action and pressing the West to reach a negotiated solution.
One hard-line newspaper was more overt about the possibility, though it too stopped short of directly threatening a move to build a weapon.
The daily Kayhan said in an editorial that even if Iran's nuclear facilities are destroyed in a strike, they could be rebuilt "within a short period of time, but with the difference that it (a military strike) may prompt a fundamental reconsideration in intentions."
Meanwhile, a top commander of the elite Revolutionary Guards on Wednesday warned that an attack on Iran would draw the U.S. into "a new tragedy."
"If you want to move towards Iran, make sure you will bring artificial legs and walking sticks because you will not have any legs to return on should you come," the television quoted Mohammad Hejazi, a top Guards figure, as saying.
Iran has spread its nuclear facilities over various parts of the large country and has built key portions underground to protect if from possible Israeli or American airstrikes.
In 1981, Israeli jets bombed Iraq's Osirak nuclear facility in an attempt to end then-Iraqi leader Saddam Hussein's nuclear program. Last September, Israel bombed a facility in Syria that U.S. officials have said was a nuclear reactor being constructed with North Korean assistance, a claim denied by Damascus and Pyongyang.
Down payment assistance to risky borrowers $300B Housing Rescue Plan Passes
Commentary By Anthony Landaeta Jr
Posted 06/24/07 http://anthonylandaeta.blogspot.com/
Why would the Government offer loans and down payment assistance to risky borrowers after the collapse of the banking industry, isn't that what got us into too this mess in the first place with 100% financing and adjustable rates. The Government not only what's us to bail out the Bank's that created this mess but they also want to provide $14.5 Billion in a array of Tax Breaks, including a credit of up to $8,000 for first-time homebuyers who buy in the next year. $8,000 Dollars is a lot of money, so if a borrower wants to purchase a home at $265,000 through the Federal Housing Administration (FHA/HUD) there are purchasing that home with no money down which would be 100% financing, FHA requires as much as 3% in down payment so we as tax payers get to help those folks purchase there Dream Home's without any savings. "This is the government at there best" leading the charge Christopher J. Dodd, D-Conn, Rep Pelosi, Nancy D-CA with a set of weak Republicans that have no backbone with low approval ratings.
At the Capitol statement by Sen. Christopher J. Dodd, D-Conn., the Banking Committee chairman, said the lending measure "would allow us to begin to put a tourniquet on the hemorrhaging of foreclosures in this country."
Dictionary meaning:
Tourniquet: Bandied Quick fix
Hemorrhaging: To lose (assets): a company that was hemorrhaging money.
Members of the Congressional Black Caucus call it unacceptable, arguing it doesn't do enough to address the needs of black Americans. (My be we should just give everyone homes for free)
"Owning a home is not a right, it has to be earned"
There estimated 400,000 distressed borrowers who otherwise would be considered too financially risky to qualify for government-insured, fixed-rate loans. The Government will aid these borrowers by allowing them to refinance there home into a FHA loan where the Government will share in the portion of any profits they make from selling or refinancing their properties in the future. " Your Tax dollars work "
This is why we need checks and balances on our government having a equal Balance of independent - Democrat - Republican senators will help to ensure bills like this won't go anywhere lets hope President Bush Veto's this bill we all know a President Obama would sign this Bill, and we all know this election belongs to Obama he will be the next President, with that said a Democratic House and Senate with a Democratic President only means a large creation of Government Programs with High Taxes for the next 4 to 8 years, so hold on to your wallets because there is a lot of needy people with there hands out that the democrats have to Feed.
Anthony Landaeta Jr
Posted 06/24/07 http://anthonylandaeta.blogspot.com/
Why would the Government offer loans and down payment assistance to risky borrowers after the collapse of the banking industry, isn't that what got us into too this mess in the first place with 100% financing and adjustable rates. The Government not only what's us to bail out the Bank's that created this mess but they also want to provide $14.5 Billion in a array of Tax Breaks, including a credit of up to $8,000 for first-time homebuyers who buy in the next year. $8,000 Dollars is a lot of money, so if a borrower wants to purchase a home at $265,000 through the Federal Housing Administration (FHA/HUD) there are purchasing that home with no money down which would be 100% financing, FHA requires as much as 3% in down payment so we as tax payers get to help those folks purchase there Dream Home's without any savings. "This is the government at there best" leading the charge Christopher J. Dodd, D-Conn, Rep Pelosi, Nancy D-CA with a set of weak Republicans that have no backbone with low approval ratings.
At the Capitol statement by Sen. Christopher J. Dodd, D-Conn., the Banking Committee chairman, said the lending measure "would allow us to begin to put a tourniquet on the hemorrhaging of foreclosures in this country."
Dictionary meaning:
Tourniquet: Bandied Quick fix
Hemorrhaging: To lose (assets): a company that was hemorrhaging money.
Members of the Congressional Black Caucus call it unacceptable, arguing it doesn't do enough to address the needs of black Americans. (My be we should just give everyone homes for free)
"Owning a home is not a right, it has to be earned"
There estimated 400,000 distressed borrowers who otherwise would be considered too financially risky to qualify for government-insured, fixed-rate loans. The Government will aid these borrowers by allowing them to refinance there home into a FHA loan where the Government will share in the portion of any profits they make from selling or refinancing their properties in the future. " Your Tax dollars work "
This is why we need checks and balances on our government having a equal Balance of independent - Democrat - Republican senators will help to ensure bills like this won't go anywhere lets hope President Bush Veto's this bill we all know a President Obama would sign this Bill, and we all know this election belongs to Obama he will be the next President, with that said a Democratic House and Senate with a Democratic President only means a large creation of Government Programs with High Taxes for the next 4 to 8 years, so hold on to your wallets because there is a lot of needy people with there hands out that the democrats have to Feed.
Anthony Landaeta Jr
Tuesday, June 24, 2008
Fannie, Freddie Fail to Relieve Housing by Shunning Jumbo Loans
June 24 (Bloomberg) -- Three months after Fannie Mae and Freddie Mac won the freedom to step up home-loan purchases, the government-chartered mortgage-finance companies are doing what critics in the Federal Reserve and Congress had predicted.
Instead of using powers granted by Congress to buy jumbo loans for the first time, Freddie Mac and Fannie Mae are purchasing their own mortgage-backed securities, helping reduce losses, company filings show. The large loans, above $417,000, made up almost a third of the U.S. market last year, according to the Mortgage Bankers Association.
Since the rule change took effect in March, Fannie Mae has packaged $24 million of jumbo loans into securities, while Freddie Mac added $220 million, according to the Inside Mortgage Finance newsletter. In April, the companies spent more than $32.4 billion to buy their own instruments, regulatory filings show.
``They were granted expanded opportunity to help recovery in a troubled housing market and yet have appeared to focus on their own recovery,'' said former U.S. Representative Richard Baker, a critic of the companies who left office earlier this year to run the Managed Funds Association in Washington.
Congress had kept Fannie Mae and Freddie Mac out of the jumbo market to force them to concentrate on low- and moderate- income borrowers.
The change places taxpayers at greater risk ``without facilitating the policy goals I believe the Congress had in mind when they eased these portfolio limits,'' said Baker, 60, a Louisiana Republican.
Worse Slump
The slowness of Fannie Mae and Freddie Mac in injecting cash for new jumbo loans may have exacerbated the housing slump in markets including California and Florida, where prices have already fallen more than the national average, said Jerry Howard, 53, president of the National Association of Home Builders.
``Had they been quicker into the marketplace, they could have helped slow the downward spiral in housing prices,'' Howard said.
Congress created Washington-based Fannie Mae and Freddie Mac of McLean, Virginia, to promote home ownership by increasing financing and providing market stability. The companies own or guarantee almost half of the $12 trillion in U.S. residential mortgage debt. They profit by holding assets that yield more than their debt costs and from fees charged to guarantee bonds they create.
Fannie Mae and Freddie Mac posted record losses of $11.8 billion in the past three quarters as defaults on mortgages soared to the highest in 30 years.
Less Impact
The National Association of Realtors estimated last year that Fannie Mae and Freddie Mac would buy $150 billion of jumbo loans in 2008. UBS AG analysts now say the amount may be $74 billion; the companies' own projections indicate that they may not even reach that figure.
Freddie Mac said it would purchase $10 billion to $15 billion in jumbo loans and securities in 2008. Fannie Mae hasn't made any public commitments to buy a set amount of the assets this year.
``So far, we haven't seen as much impact as we anticipated,'' said Paul Bishop, managing director of research for the Realtors.
Fannie Mae added $4.05 billion in net purchases of its mortgage-backed securities in April, taking its portfolio to $728.4 billion, according to company filings. Freddie Mac net purchases were $28.4 billion, bringing holdings to $737.5 billion, filings show. Buying existing debt may help prop up prices for the companies' instruments.
The $168 billion fiscal-stimulus bill signed by President George W. Bush on Feb. 13 temporarily allowed Fannie Mae and Freddie Mac to buy jumbo loans in 91 of the most expensive U.S. housing markets.
Increased Limits
The increased lending power, combined with an agreement to reduce the companies' capital requirements, are part of congressional efforts to revive housing starts and the economy following restrictions placed on the companies two years ago.
Both ousted their chief executives after more than $11 billion in accounting errors were revealed. Fannie Mae restated earnings for 2002 through 2004. Freddie Mac did the same for 2000 through 2002.
Fannie Mae shares have fallen 29 percent and Freddie Mac has lost 31 percent in New York trading since Bush signed the bill.
House Financial Services Committee Chairman Barney Frank, a Massachusetts Democrat, said in February that Fannie Mae and Freddie Mac should buy bigger mortgages ``because we're in an economic crisis and need a short-term response.'' Frank has since said that the companies are moving too slowly and should get ``more bang for the buck'' from their spending power. Making the higher limits permanent may encourage purchases, he said.
`Some Liquidity'
Fannie Mae has moved to ``help provide some liquidity and impact on rates in this market segment,'' spokesman Brian Faith said in an e-mail. ``We're eligible to buy these loans and we want that business.''
The companies' entry into the jumbo market has increased financing and lowered rates where they are allowed to compete, Freddie Mac spokesman Brad German said. Fannie Mae and Freddie Mac can't buy multimillion mortgages so some data from high-cost markets such as Los Angeles may be skewed, he said.
``In the products where we are competing, the rates are a lot lower than for the products we can't buy,'' German said. ``We're doing what Congress intended us to do.''
Freddie Mac may do more jumbo business than it estimated this year, he said.
While jumbo loans accounted for about 29 percent of the $2.42 trillion of mortgages issued last year, they represented a fifth of applications in May, according to Inside Mortgage Finance and the Mortgage Bankers Association. About half of the market should be available for purchase by Fannie Mae and Freddie Mac. Stricter criteria set by the companies mean that less than 16 percent of loans eligible for the program actually can qualify, according to UBS and Mortgage Bankers Association data.
10 Percent
For a loan of more than $417,000, Fannie Mae and Freddie Mac require a minimum down payment of 10 percent and a credit score of 660. That compares with 3 percent and 580 for loans under $417,000 at Fannie Mae; and 5 percent, with no minimum score, at Freddie Mac. The rankings, which range from 300 to 850, are used by lenders to predict whether a borrower will repay.
``Fannie and Freddie are catering to low-risk homeowners with high credit scores and a lot of equity in their homes,'' said Dan Green, a loan broker at Mobium Mortgage Group Inc. in Cincinnati and Chicago. ``I'm sure there will be some high-cost areas in the country that will benefit. They just don't happen to be Florida, Michigan, California, Nevada.''
Jumbo loans bought by Fannie Mae and Freddie Mac carry an interest rate of 6.59 percent, more than a percentage point below regular jumbo rates of 7.68 percent, according to HSH Associates Inc.
Few Loans
Los Angeles borrowers are paying an average 7.87 percent, while Miami mortgage seekers are being charged 8.03 percent, indicating that few loans with low rates from Fannie Mae and Freddie Mac are being offered, according to HSH.
The companies' purchases of their own securities are making them riskier because they retain 100 percent of the credit and interest-rate exposure on those assets, said William Poole, president of the St. Louis Federal Reserve until March and now a senior fellow at the Cato Institute.
``Any legislation today that simply expands what they do is going in the wrong direction,'' Poole, 71, said. ``It's potentially digging the taxpayer in deeper.''
To contact the reporter on this story: Dawn Kopecki in Washington at dkopecki@bloomberg.net.
Instead of using powers granted by Congress to buy jumbo loans for the first time, Freddie Mac and Fannie Mae are purchasing their own mortgage-backed securities, helping reduce losses, company filings show. The large loans, above $417,000, made up almost a third of the U.S. market last year, according to the Mortgage Bankers Association.
Since the rule change took effect in March, Fannie Mae has packaged $24 million of jumbo loans into securities, while Freddie Mac added $220 million, according to the Inside Mortgage Finance newsletter. In April, the companies spent more than $32.4 billion to buy their own instruments, regulatory filings show.
``They were granted expanded opportunity to help recovery in a troubled housing market and yet have appeared to focus on their own recovery,'' said former U.S. Representative Richard Baker, a critic of the companies who left office earlier this year to run the Managed Funds Association in Washington.
Congress had kept Fannie Mae and Freddie Mac out of the jumbo market to force them to concentrate on low- and moderate- income borrowers.
The change places taxpayers at greater risk ``without facilitating the policy goals I believe the Congress had in mind when they eased these portfolio limits,'' said Baker, 60, a Louisiana Republican.
Worse Slump
The slowness of Fannie Mae and Freddie Mac in injecting cash for new jumbo loans may have exacerbated the housing slump in markets including California and Florida, where prices have already fallen more than the national average, said Jerry Howard, 53, president of the National Association of Home Builders.
``Had they been quicker into the marketplace, they could have helped slow the downward spiral in housing prices,'' Howard said.
Congress created Washington-based Fannie Mae and Freddie Mac of McLean, Virginia, to promote home ownership by increasing financing and providing market stability. The companies own or guarantee almost half of the $12 trillion in U.S. residential mortgage debt. They profit by holding assets that yield more than their debt costs and from fees charged to guarantee bonds they create.
Fannie Mae and Freddie Mac posted record losses of $11.8 billion in the past three quarters as defaults on mortgages soared to the highest in 30 years.
Less Impact
The National Association of Realtors estimated last year that Fannie Mae and Freddie Mac would buy $150 billion of jumbo loans in 2008. UBS AG analysts now say the amount may be $74 billion; the companies' own projections indicate that they may not even reach that figure.
Freddie Mac said it would purchase $10 billion to $15 billion in jumbo loans and securities in 2008. Fannie Mae hasn't made any public commitments to buy a set amount of the assets this year.
``So far, we haven't seen as much impact as we anticipated,'' said Paul Bishop, managing director of research for the Realtors.
Fannie Mae added $4.05 billion in net purchases of its mortgage-backed securities in April, taking its portfolio to $728.4 billion, according to company filings. Freddie Mac net purchases were $28.4 billion, bringing holdings to $737.5 billion, filings show. Buying existing debt may help prop up prices for the companies' instruments.
The $168 billion fiscal-stimulus bill signed by President George W. Bush on Feb. 13 temporarily allowed Fannie Mae and Freddie Mac to buy jumbo loans in 91 of the most expensive U.S. housing markets.
Increased Limits
The increased lending power, combined with an agreement to reduce the companies' capital requirements, are part of congressional efforts to revive housing starts and the economy following restrictions placed on the companies two years ago.
Both ousted their chief executives after more than $11 billion in accounting errors were revealed. Fannie Mae restated earnings for 2002 through 2004. Freddie Mac did the same for 2000 through 2002.
Fannie Mae shares have fallen 29 percent and Freddie Mac has lost 31 percent in New York trading since Bush signed the bill.
House Financial Services Committee Chairman Barney Frank, a Massachusetts Democrat, said in February that Fannie Mae and Freddie Mac should buy bigger mortgages ``because we're in an economic crisis and need a short-term response.'' Frank has since said that the companies are moving too slowly and should get ``more bang for the buck'' from their spending power. Making the higher limits permanent may encourage purchases, he said.
`Some Liquidity'
Fannie Mae has moved to ``help provide some liquidity and impact on rates in this market segment,'' spokesman Brian Faith said in an e-mail. ``We're eligible to buy these loans and we want that business.''
The companies' entry into the jumbo market has increased financing and lowered rates where they are allowed to compete, Freddie Mac spokesman Brad German said. Fannie Mae and Freddie Mac can't buy multimillion mortgages so some data from high-cost markets such as Los Angeles may be skewed, he said.
``In the products where we are competing, the rates are a lot lower than for the products we can't buy,'' German said. ``We're doing what Congress intended us to do.''
Freddie Mac may do more jumbo business than it estimated this year, he said.
While jumbo loans accounted for about 29 percent of the $2.42 trillion of mortgages issued last year, they represented a fifth of applications in May, according to Inside Mortgage Finance and the Mortgage Bankers Association. About half of the market should be available for purchase by Fannie Mae and Freddie Mac. Stricter criteria set by the companies mean that less than 16 percent of loans eligible for the program actually can qualify, according to UBS and Mortgage Bankers Association data.
10 Percent
For a loan of more than $417,000, Fannie Mae and Freddie Mac require a minimum down payment of 10 percent and a credit score of 660. That compares with 3 percent and 580 for loans under $417,000 at Fannie Mae; and 5 percent, with no minimum score, at Freddie Mac. The rankings, which range from 300 to 850, are used by lenders to predict whether a borrower will repay.
``Fannie and Freddie are catering to low-risk homeowners with high credit scores and a lot of equity in their homes,'' said Dan Green, a loan broker at Mobium Mortgage Group Inc. in Cincinnati and Chicago. ``I'm sure there will be some high-cost areas in the country that will benefit. They just don't happen to be Florida, Michigan, California, Nevada.''
Jumbo loans bought by Fannie Mae and Freddie Mac carry an interest rate of 6.59 percent, more than a percentage point below regular jumbo rates of 7.68 percent, according to HSH Associates Inc.
Few Loans
Los Angeles borrowers are paying an average 7.87 percent, while Miami mortgage seekers are being charged 8.03 percent, indicating that few loans with low rates from Fannie Mae and Freddie Mac are being offered, according to HSH.
The companies' purchases of their own securities are making them riskier because they retain 100 percent of the credit and interest-rate exposure on those assets, said William Poole, president of the St. Louis Federal Reserve until March and now a senior fellow at the Cato Institute.
``Any legislation today that simply expands what they do is going in the wrong direction,'' Poole, 71, said. ``It's potentially digging the taxpayer in deeper.''
To contact the reporter on this story: Dawn Kopecki in Washington at dkopecki@bloomberg.net.
Wednesday, June 18, 2008
Paulson & Co. Says Writedowns May Reach $1.3 Trillion
By Tom Cahill and Poppy Trowbridge
June 18 (Bloomberg) -- John Paulson, founder of hedge fund Paulson & Co., said global writedowns and losses from the credit crisis may reach $1.3 trillion, exceeding the International Monetary Fund's $945 billion estimate.
``We're only about a third of the way through the writedowns,'' Paulson, 52, told the GAIM International hedge fund conference in Monaco today. ``There are a lot of problems out there and it will continue to be felt through the year. We don't see any signs of stabilizing.''
Paulson, whose company manages about $33 billion, shorted subprime-mortgage debt after he noticed ``bubble like'' prices that made a collapse ``inevitable.'' His Paulson Partners fund has risen about 18 percent a year since it was founded in 1994, while one of his main funds for betting on declines in subprime debt rose 591 percent last year.
The U.S. is heading into a recession as falling home prices weigh on consumer spending, Paulson said. The second half of this year will be worse than the first as the economic slowdown continues into 2009, he said. Signs of stress are ``accelerating'' in the housing market.
``I don't consider myself a bull or a bear,'' he told the audience at Monaco's Grimaldi Forum. ``I'm a realist.''
Ambac Financial Group Inc., the second-biggest bond insurer, is ``the most leveraged, troubled company out there,'' Paulson said. It is at risk of being downgraded to non-investment grade, Paulson said.
The housing and credit-market slump pushed Ambac to three straight quarterly losses after more than a decade of profit. It has written down $5.2 billion since the collapse of the U.S. subprime mortgage market last year.
A spokesman for New York-based Ambac couldn't immediately be reached for comment.
June 18 (Bloomberg) -- John Paulson, founder of hedge fund Paulson & Co., said global writedowns and losses from the credit crisis may reach $1.3 trillion, exceeding the International Monetary Fund's $945 billion estimate.
``We're only about a third of the way through the writedowns,'' Paulson, 52, told the GAIM International hedge fund conference in Monaco today. ``There are a lot of problems out there and it will continue to be felt through the year. We don't see any signs of stabilizing.''
Paulson, whose company manages about $33 billion, shorted subprime-mortgage debt after he noticed ``bubble like'' prices that made a collapse ``inevitable.'' His Paulson Partners fund has risen about 18 percent a year since it was founded in 1994, while one of his main funds for betting on declines in subprime debt rose 591 percent last year.
The U.S. is heading into a recession as falling home prices weigh on consumer spending, Paulson said. The second half of this year will be worse than the first as the economic slowdown continues into 2009, he said. Signs of stress are ``accelerating'' in the housing market.
``I don't consider myself a bull or a bear,'' he told the audience at Monaco's Grimaldi Forum. ``I'm a realist.''
Ambac Financial Group Inc., the second-biggest bond insurer, is ``the most leveraged, troubled company out there,'' Paulson said. It is at risk of being downgraded to non-investment grade, Paulson said.
The housing and credit-market slump pushed Ambac to three straight quarterly losses after more than a decade of profit. It has written down $5.2 billion since the collapse of the U.S. subprime mortgage market last year.
A spokesman for New York-based Ambac couldn't immediately be reached for comment.
Tuesday, June 17, 2008
Mortgage Relief Available for Victims of Flooding in the Midwest; Fannie Mae Announces Grant to American Red Cross
News Release
June 17, 2008
Washington, DC -- Fannie Mae (FNM/NYSE) has mortgage relief provisions in place for borrowers facing hardships as a result of the floods that began June 6 and have caused widespread destruction and damage throughout several Midwestern states, including Iowa, Indiana and Wisconsin.
Using Fannie Mae's single-family servicing guidelines on disaster relief, lenders are to evaluate each individual case to determine the appropriate relief measures needed if borrowers are unable to make their mortgage payments. These may include suspending or reducing the borrower's mortgage payments for up to six months and/or offering mortgage loan repayment plans that may extend for up to 18 months. Such assistance is designed to meet the individual needs of single-family mortgage borrowers.
Fannie Mae's servicing guidelines also advise lenders to counsel borrowers on the availability of appropriate relief provisions, and to inform borrowers of disaster relief available from federal agencies. Payment relief may be available for single-family mortgages (including condominiums) serviced by Fannie Mae lenders in areas affected by the floods.
In addition, Fannie Mae, through its Office of Community and Charitable Giving, announced a $25,000 grant to the American Red Cross to help them provide emergency shelter, food, and assistance.
Helping borrowers take care of their existing home and mortgage obligation continues to be the most important work for our customers and for Fannie Mae. Homeowners who have experienced disaster hardships should contact the lender to whom they send their monthly mortgage payment. Our Resource Center can answer additional questions: 1-800-7FANNIE.
June 17, 2008
Washington, DC -- Fannie Mae (FNM/NYSE) has mortgage relief provisions in place for borrowers facing hardships as a result of the floods that began June 6 and have caused widespread destruction and damage throughout several Midwestern states, including Iowa, Indiana and Wisconsin.
Using Fannie Mae's single-family servicing guidelines on disaster relief, lenders are to evaluate each individual case to determine the appropriate relief measures needed if borrowers are unable to make their mortgage payments. These may include suspending or reducing the borrower's mortgage payments for up to six months and/or offering mortgage loan repayment plans that may extend for up to 18 months. Such assistance is designed to meet the individual needs of single-family mortgage borrowers.
Fannie Mae's servicing guidelines also advise lenders to counsel borrowers on the availability of appropriate relief provisions, and to inform borrowers of disaster relief available from federal agencies. Payment relief may be available for single-family mortgages (including condominiums) serviced by Fannie Mae lenders in areas affected by the floods.
In addition, Fannie Mae, through its Office of Community and Charitable Giving, announced a $25,000 grant to the American Red Cross to help them provide emergency shelter, food, and assistance.
Helping borrowers take care of their existing home and mortgage obligation continues to be the most important work for our customers and for Fannie Mae. Homeowners who have experienced disaster hardships should contact the lender to whom they send their monthly mortgage payment. Our Resource Center can answer additional questions: 1-800-7FANNIE.
Monday, June 16, 2008
RISKY LOANS ON GOVERNMENT-BACKED MORTGAGES
BUSH ADMINISTRATION RENEWS EFFORT TO ADDRESS RISKY LOANS ON GOVERNMENT-BACKED MORTGAGES
Proposal would help stabilize housing market, protect FHA's financial solvency, and reduce foreclosures
WASHINGTON- The Bush Administration today renewed its efforts to address risky government-backed seller-funded downpayment assistance loans that are significantly more likely to lead to foreclosure. HUD's Federal Housing Administration (FHA) will reopen the public comment period on a proposed rule that would ban seller-funded downpayment assistance on mortgage transactions insured by the FHA. The proposed rule will be re-published in the Federal Register and comments will be accepted for 60 days following publication. The rule can also be viewed on FHA's website.
In a speech to the National Press Club, HUD's Assistant Secretary for Housing-Federal Housing Commissioner Brian D. Montgomery warned FHA must take action because these loans, which now make up one third of FHA's portfolio, are causing substantial losses. This year, as a result of its annual re-estimate, FHA had to book an additional of $4.6 billion in unanticipated long-term losses, mostly due to the increased number of certain types of seller-funded loans in the FHA portfolio.
"Given these concerns, we cannot just stand by. No private mortgage insurance companies back these types of loans. We are concerned about this business because the substantial losses affect FHA's bottom line and FHA's ability to serve American citizens who need access to prime-rate home loans," Montgomery stressed.
Stressing that FHA is still solvent with reserves of about $21 billion, Montgomery also noted: "However, no insurance company can sustain that amount of additional costs year after year and still survive. Unless we take action to mitigate these losses, FHA will soon either have to shut down or rely on appropriations to operate. That, I think, would have a far-reaching impact on the economy: it would severely reduce the number of new homeowners each year; and it would also sharply reduce the need for the services required to build and maintain homes. In other words, the negative impact goes far beyond the individuals who would not be able to purchase homes, and would likely be felt across the entire economy."
The primary focus of HUD's rule is to establish appropriate standards for downpayment assistance that is categorized as a gift. Specifically, it would prohibit downpayment assistance provided before, during, or after closing of the sale by the seller, any other person or entity that financially benefits from the transaction, or any third party or entity that is reimbursed directly or indirectly by any of the parties benefiting from the sale.
The rule would clarify that downpayment funds for FHA-insured mortgages cannot be derived from sellers - directly or indirectly - or any other party that stands to benefit from the transaction financially. "The IRS, GAO and our own Inspector General have previously expressed concerns with these circular financing schemes. Data clearly demonstrates that FHA loans made to borrowers relying on seller-funded downpayment assistance go to foreclosure at three times the rate of loans made to borrowers who make their own downpayments," noted Montgomery.
"In its entire 74-year history, FHA has been self-sustaining. That means that our income has exceeded our costs and we have not needed an appropriation of taxpayer dollars to cover FHA's operations. That's pretty unique for a federal program," Montgomery said.
Permissible sources of gifts as a source of the homebuyer's investment include a family member, a governmental or public agency, the borrower's employer or labor union, and a charitable organization that qualifies as a tax-exempt charitable or educational organization.
In these cases, there is a clear quid pro quo between the homebuyer's purchase of the property and the seller's "contribution" or payment to the charitable organization. Often, these contributions function as an inducement to purchase the home. One of FHA's primary concerns with these transactions is that the sales price may be increased to ensure that the seller's net proceeds are not diminished, and such increase in sales price is often to the detriment of the borrower and FHA.
Discussing the Bush Administration's effort to help families stay in their homes, Montgomery also called on Congress to pass legislation that modernizes FHA, which includes addressing the risks associated with seller-funded downpayment assistance. "Frankly, we need reasonable solutions to the housing crisis. And I think there is considerable common ground on confronting it. There is surely a consensus on a number of actions. But some in Congress are advancing legislation that, while well intentioned, could be problematic for the economy and the country. Some of the proposed Congressional actions could actually weaken FHA and endanger the housing market by turning FHA into a less stable, less solvent, more bureaucratic entity," stressed Montgomery.
Clearly, this matter remains an area of significant concern for FHA, and HUD looks forward to receiving and reviewing public comments on the proposed rule. Commissioner Montgomery's full remarks can be found on HUD's website.
Proposal would help stabilize housing market, protect FHA's financial solvency, and reduce foreclosures
WASHINGTON- The Bush Administration today renewed its efforts to address risky government-backed seller-funded downpayment assistance loans that are significantly more likely to lead to foreclosure. HUD's Federal Housing Administration (FHA) will reopen the public comment period on a proposed rule that would ban seller-funded downpayment assistance on mortgage transactions insured by the FHA. The proposed rule will be re-published in the Federal Register and comments will be accepted for 60 days following publication. The rule can also be viewed on FHA's website.
In a speech to the National Press Club, HUD's Assistant Secretary for Housing-Federal Housing Commissioner Brian D. Montgomery warned FHA must take action because these loans, which now make up one third of FHA's portfolio, are causing substantial losses. This year, as a result of its annual re-estimate, FHA had to book an additional of $4.6 billion in unanticipated long-term losses, mostly due to the increased number of certain types of seller-funded loans in the FHA portfolio.
"Given these concerns, we cannot just stand by. No private mortgage insurance companies back these types of loans. We are concerned about this business because the substantial losses affect FHA's bottom line and FHA's ability to serve American citizens who need access to prime-rate home loans," Montgomery stressed.
Stressing that FHA is still solvent with reserves of about $21 billion, Montgomery also noted: "However, no insurance company can sustain that amount of additional costs year after year and still survive. Unless we take action to mitigate these losses, FHA will soon either have to shut down or rely on appropriations to operate. That, I think, would have a far-reaching impact on the economy: it would severely reduce the number of new homeowners each year; and it would also sharply reduce the need for the services required to build and maintain homes. In other words, the negative impact goes far beyond the individuals who would not be able to purchase homes, and would likely be felt across the entire economy."
The primary focus of HUD's rule is to establish appropriate standards for downpayment assistance that is categorized as a gift. Specifically, it would prohibit downpayment assistance provided before, during, or after closing of the sale by the seller, any other person or entity that financially benefits from the transaction, or any third party or entity that is reimbursed directly or indirectly by any of the parties benefiting from the sale.
The rule would clarify that downpayment funds for FHA-insured mortgages cannot be derived from sellers - directly or indirectly - or any other party that stands to benefit from the transaction financially. "The IRS, GAO and our own Inspector General have previously expressed concerns with these circular financing schemes. Data clearly demonstrates that FHA loans made to borrowers relying on seller-funded downpayment assistance go to foreclosure at three times the rate of loans made to borrowers who make their own downpayments," noted Montgomery.
"In its entire 74-year history, FHA has been self-sustaining. That means that our income has exceeded our costs and we have not needed an appropriation of taxpayer dollars to cover FHA's operations. That's pretty unique for a federal program," Montgomery said.
Permissible sources of gifts as a source of the homebuyer's investment include a family member, a governmental or public agency, the borrower's employer or labor union, and a charitable organization that qualifies as a tax-exempt charitable or educational organization.
In these cases, there is a clear quid pro quo between the homebuyer's purchase of the property and the seller's "contribution" or payment to the charitable organization. Often, these contributions function as an inducement to purchase the home. One of FHA's primary concerns with these transactions is that the sales price may be increased to ensure that the seller's net proceeds are not diminished, and such increase in sales price is often to the detriment of the borrower and FHA.
Discussing the Bush Administration's effort to help families stay in their homes, Montgomery also called on Congress to pass legislation that modernizes FHA, which includes addressing the risks associated with seller-funded downpayment assistance. "Frankly, we need reasonable solutions to the housing crisis. And I think there is considerable common ground on confronting it. There is surely a consensus on a number of actions. But some in Congress are advancing legislation that, while well intentioned, could be problematic for the economy and the country. Some of the proposed Congressional actions could actually weaken FHA and endanger the housing market by turning FHA into a less stable, less solvent, more bureaucratic entity," stressed Montgomery.
Clearly, this matter remains an area of significant concern for FHA, and HUD looks forward to receiving and reviewing public comments on the proposed rule. Commissioner Montgomery's full remarks can be found on HUD's website.
Friday, June 13, 2008
Countrywide eliminating Non-Conforming Fast & Easy stated-income loans today
Published by Morgan
posted by http://anthonylandaeta.blogspot.com/
Breaking news today from Countrywide. Effective today Countrywide wholesale will no longer offer the Non-Conforming Fast & Easy document waiver program. Fast & Easy is Countrywide’s version of stated income. Non-conforming loan amounts will no longer be eligible for stated income regardless of credit score.
This is a huge guideline change for the company that prided itself on offering jumbo loans with no income documentation in the past. The elimination of stated income loans from Countrywide should further depress home prices in expensive states where income and home prices just don’t line up.
From an internal email regarding the change:
Effective 8:00 pm (PT), Friday June 13, 2008, the Non-Conforming Fast & Easy document waiver program will no longer be available.
Guideline ImpactThe following LPGs will be updated effective, June 13, 2008:LPG 12.10 - Non Conforming Programs, Fixed Rate, Fixed Period ARMs, Short Term ARMs, Full, Alt, and Fast and Easy (sm) Documentation
Pipeline Protection
Loans currently in the pipeline are eligible under the old guidelines only if submitted to CAWL via CWBC or boarded in EDGE and Approved by 8:00 pm (PT) Friday, June 13.
Loans in the pipeline must be locked on or before June 27, 2008, and must fund/close on or before Monday, July 14, 2008.
Any lock extension/re-lock will be subject to current lock extension/re-lock polices, and the loan must still fund on or before Thursday, July 14, 2008.
If any material changes are made to a loan currently in the pipeline at any time after loan approval and prior to funding/closing, the original loan approval is no longer valid and the loan must be countered to full doc. Examples of material changes include, but are not limited to: FICO Score, Loan Amount, LTV, CLTV, Income, Employment, Assets, or Program and/or ratios.
Loans that are not eligible under the old guidelines are subject to the new guidelines, and must generally either be Counteroffered or Declined (as applicable).
posted by http://anthonylandaeta.blogspot.com/
Breaking news today from Countrywide. Effective today Countrywide wholesale will no longer offer the Non-Conforming Fast & Easy document waiver program. Fast & Easy is Countrywide’s version of stated income. Non-conforming loan amounts will no longer be eligible for stated income regardless of credit score.
This is a huge guideline change for the company that prided itself on offering jumbo loans with no income documentation in the past. The elimination of stated income loans from Countrywide should further depress home prices in expensive states where income and home prices just don’t line up.
From an internal email regarding the change:
Effective 8:00 pm (PT), Friday June 13, 2008, the Non-Conforming Fast & Easy document waiver program will no longer be available.
Guideline ImpactThe following LPGs will be updated effective, June 13, 2008:LPG 12.10 - Non Conforming Programs, Fixed Rate, Fixed Period ARMs, Short Term ARMs, Full, Alt, and Fast and Easy (sm) Documentation
Pipeline Protection
Loans currently in the pipeline are eligible under the old guidelines only if submitted to CAWL via CWBC or boarded in EDGE and Approved by 8:00 pm (PT) Friday, June 13.
Loans in the pipeline must be locked on or before June 27, 2008, and must fund/close on or before Monday, July 14, 2008.
Any lock extension/re-lock will be subject to current lock extension/re-lock polices, and the loan must still fund on or before Thursday, July 14, 2008.
If any material changes are made to a loan currently in the pipeline at any time after loan approval and prior to funding/closing, the original loan approval is no longer valid and the loan must be countered to full doc. Examples of material changes include, but are not limited to: FICO Score, Loan Amount, LTV, CLTV, Income, Employment, Assets, or Program and/or ratios.
Loans that are not eligible under the old guidelines are subject to the new guidelines, and must generally either be Counteroffered or Declined (as applicable).
Thursday, June 12, 2008
MBA: HUD and Federal Reserve Must Work Together on RESPA Reform
As a critical comment period for proposed reform to the Real Estate Settlement and Procedures Act by the U.S. Department of Housing and Urban Development expires today, the Mortgage Bankers Association on Thursday weighed in with a stern warning for HUD officials: work with the Fed on updating the Truth in Lending Act in conjunction with RESPA, or risk hopelessly bungling both.
MBA president and CEO Jonathan L. Kempner said that while the trade organization “applauded” HUD for its effort to re-define RESPA criteria, updating the Act needed to be part of a larger effort to simplify the overall origination process for consumers.
“Recent events demonstrate that borrowers also need additional clarity about the terms and cost of credit,which falls under the Fed’s responsibility under TILA,” said Kempner. “For that reason, we strongly believe that HUD should link its efforts with the Board of Governors of the Federal Reserve so that both agencies work together in a careful, coordinated and comprehensive manner to truly simplify and improve the mortgage process for consumers.”
Specifically, the MBA said it wants to see HUD and Fed officials produce a combined TILA and good-faith-estimate (GFE) form to replace current disclosures given to borrowers.
Related links:
read the MBA’s full letter to HUD
“The Board has already issued proposed new rules under TILA and the Home Ownership and Equity Protection Act (HOEPA) concerning the mortgage market generally and is expected tosoon embark on further reform efforts concerning TILA disclosures specifically,” wrote Kempner in a letter to HUD officials.
“HUD’s efforts should be linked to the Board’s efforts.”
While the MBA is pushing for a collaborative reform approach, HUD’s efforts to reform RESPA have come under much stronger fire from the National Association of Realtors and the American Land Title Association.
“We believe that RESPA reform cannot be resolved in one sweeping change without considering and appreciating the many moving parts of a residential real estate transaction,” ALTA president Gary Kermott said in testimony during a recent hearing at the House Committee on Small Business.
Among ALTA’s concerns are changes to RESPA procedures that it argues will result in more confusion, red tape and cost for people both buying and selling a home.
Kermott pointed to the imposition of responsibility on the closing agent to read and interpret the closing script on behalf of the borrowers as one such example of unneeded red tape, which he said “will increase costs for both sellers and borrowers.”
Adam Cockey Jr., chair of the NAR Real Estate Services Forum, argued in testimony to the same House panel that the current reform proposal “tips the balance in favor of the largest financial industry players, opens the door to legal challenges, and does little if anything to benefit consumers.”
The NAR has called for the RESPA reform proposal to be withdrawn altogether.
MBA president and CEO Jonathan L. Kempner said that while the trade organization “applauded” HUD for its effort to re-define RESPA criteria, updating the Act needed to be part of a larger effort to simplify the overall origination process for consumers.
“Recent events demonstrate that borrowers also need additional clarity about the terms and cost of credit,which falls under the Fed’s responsibility under TILA,” said Kempner. “For that reason, we strongly believe that HUD should link its efforts with the Board of Governors of the Federal Reserve so that both agencies work together in a careful, coordinated and comprehensive manner to truly simplify and improve the mortgage process for consumers.”
Specifically, the MBA said it wants to see HUD and Fed officials produce a combined TILA and good-faith-estimate (GFE) form to replace current disclosures given to borrowers.
Related links:
read the MBA’s full letter to HUD
“The Board has already issued proposed new rules under TILA and the Home Ownership and Equity Protection Act (HOEPA) concerning the mortgage market generally and is expected tosoon embark on further reform efforts concerning TILA disclosures specifically,” wrote Kempner in a letter to HUD officials.
“HUD’s efforts should be linked to the Board’s efforts.”
While the MBA is pushing for a collaborative reform approach, HUD’s efforts to reform RESPA have come under much stronger fire from the National Association of Realtors and the American Land Title Association.
“We believe that RESPA reform cannot be resolved in one sweeping change without considering and appreciating the many moving parts of a residential real estate transaction,” ALTA president Gary Kermott said in testimony during a recent hearing at the House Committee on Small Business.
Among ALTA’s concerns are changes to RESPA procedures that it argues will result in more confusion, red tape and cost for people both buying and selling a home.
Kermott pointed to the imposition of responsibility on the closing agent to read and interpret the closing script on behalf of the borrowers as one such example of unneeded red tape, which he said “will increase costs for both sellers and borrowers.”
Adam Cockey Jr., chair of the NAR Real Estate Services Forum, argued in testimony to the same House panel that the current reform proposal “tips the balance in favor of the largest financial industry players, opens the door to legal challenges, and does little if anything to benefit consumers.”
The NAR has called for the RESPA reform proposal to be withdrawn altogether.
NAMB FIGHT with RESPA
RESPA CALL-TO-ACTION TALKING POINTS
NAMB FIGHT
RESPA Call to Action
1.In today’s mortgage market there is little difference between mortgage brokers and mortgage bankers.a. The distinctions between brokers and lenders have blurred in recent years as lenders themselves typically package and resell loans they originate.b. Consumers are largely unable to distinguish between brokers and lenders, which have similar names, use similar signage, and rely on similar advertising.c. Consumers should not have to figure out these differences because everyone is competing directly. d. Automation has also helped to blur the distinctions between brokers and lenders. Most of the industry uses the same computer software, so the reality is that the difference between a broker transactions and a lender transaction is merely a key stroke on a computer!e. If applicable and you are doing both broker and lender transactions please elaborate on how you are able to function in this manner. Discuss how you can act in multiple capacities and how it can be confusing to consumers because you can do both, yet the disclosures are different.
2.Requiring broker transactions, but not other loan originator transactions, to make compensation disclosures on the Good Faith Estimate (GFE) inhibits competition, is unfair to small business mortgage brokers, limits consumer choice, confuses consumers, increases prices, and hurts borrowers. a. Exhaustive studies of mortgage disclosures by the Federal Trade Commission, the government’s principal consumer protection agency, in 2004 and 2007 show that additional disclosures of mortgage broker compensation created confusion, caused consumers to choose more expensive loans, led to a bias against broker-assisted transactions, and impeded competition, thus hurting consumers.b. In order to promote comparison shopping there should be a corresponding requirement for lenders to disclose compensation paid to their own sales staff. Fees similar to the YSP are present in any mortgage origination distribution channel, regardless of whether a broker is involved. c. Requiring brokers, but not other loan originators, to make compensation disclosures enables the brokers’ competitors to steer consumers away from brokers, even if brokers offer more favorable loans.
The proposed GFE form misleads consumers by perpetuating the fallacy that through a lender a zero-point/zero-cost loan is free to the consumer. The GFE should treat all originator transactions the same.
4.NAMB supports making the GFE form mandatory. However even with this necessary change, the proposed GFE continues to make a distinction between broker transactions and lender transactions, which as stated above hurts borrowers. a. The four page disclosure does not promote simplification and clarity for consumers.b. The GFE should look like the HUD-1. The proposed changes to reorganize the HUD-1 with numbers and names that correspond to the GFE is a step in the right direction, but not enough to aid consumers. c. The period during which the GFE terms are available to the borrower (10 business days) is too long. This will delay contracts and drive-up costs for consumers.
5.NAMB supports the change in the definition of “required use.” The new definition still allows for package bundling (an optional combination of bona fide settlement services at a discount rate); so long as consumers receive a better deal then if they purchased settlement services separately.a. However, we need to avoid any brightline test that sets a dollar amount higher than zero as a threshold for determining what constitutes an economic incentive or disincentive. The threshold for determining incentives and disincentives should be “any thing of value.” HUD should not consider the RESPRO bright-line test, which sets a dollar amount threshold for determining economic incentives / disincentives.
6.As proposed, the current GFE will allow loan officers at lender’s to continue to sell against mortgage brokers by pointing out YSP and not disclosing that they too receive indirect compensation. Should HUD implement the proposed GFE, this practice by lender loan officers should be considered by rule as a deceptive trade practice. The FTC should have enforcement authority to prevent this scenario.
Subscribe to:
Posts (Atom)
Posts
