OREGON REAL ESTATE ROUND TABLE

Author: Fred Stewart

  • Fannie Mae tries to stimulate market for foreclosed homes, By Kenneth R. Harney, Latimes.com


    The mortgage giant quietly launches the HomePath program, which offers subprime-era terms for buyers: minimal down payments, no appraisals, no mortgage insurance and lower minimum credit scores.

    If you’re a buyer with little cash or a small-scale investor looking for a deal on a foreclosed house, a little-publicized national lending program could be just what you need this fall.

    Here’s what it offers:
    • Minimal down payments — 3% for buyers who plan to live in the house, 10% for investors. Most of your down payment can come from documented gifts from relatives or others with no direct connection to the transaction.
    • No requirement for an appraisal on the property unless you’re applying for additional money to renovate the house. This is crucial because lowball appraisals can be deal-killers, especially when the house needs cosmetic or other repairs.
    • Generous “seller contribution” limits of up to 6% of the price, effectively reducing the cash you’ll need to pay closing costs.
    • No requirement for mortgage insurance coverage, despite your high loan-to-value ratio at purchase.
    • A minimum credit score of 660 — significantly lower than the 700-plus scores many lenders now demand for conventional loans on favorable terms.
    • Maximum loan amounts tied to standard conventional loan limits: $729,750 in the highest cost markets, $625,500 in others, and $417,000 everywhere else.

    Who is offering such an unusual package of come-ons like this in an era of stringent underwriting requirements? It’s Fannie Mae, the mortgage investment giant that got into deep trouble when the housing bubble burst and is now bleeding red ink in prodigious quantities under federal conservatorship. As a result of its past problems, Fannie is saddled with a bulging portfolio of tens of thousands of foreclosed homes. It needs to sell those houses, is willing to finance their transfer to new owners and has come up with a program it calls HomePath to do so. In recent weeks, HomePath loans have been rolled out through mortgage brokers and a network of 50 lenders, so it’s probably available on houses in your area.

    The basics on HomePath: The program is restricted to Fannie Mae foreclosure holdings. The full lineup of listings can be viewed state by state at http://www.HomePath.com. Participating real estate brokers are listed on the same site; Fannie Mae will entertain only offers that come through those brokers, not directly from consumers. Most properties are open to bids from owner-occupant buyers and investors, but some designated “First Look” are reserved for bids from owner-occupants during the initial 15 days after listing.

    There are two main options with HomePath: mortgage financing to buy the house in its current “as is” condition and “renovation” financing, in which Fannie lends additional amounts needed for what it describes as “light to moderate” fix-ups, such as a roof repair or replacement of a heating, ventilation and air conditioning system. Standard HomePath listings are all in “move-in condition,” according to Fannie. That is, the company has inspected them, performed at least cosmetic repairs as needed, and determined them to be structurally sound with no code violations and all systems in working order. Listings eligible for renovation financing generally require some work to be funded through add-on amounts to the mortgage that are held in escrow by the lender after closing and disbursed as repairs are completed during the succeeding six months. The maximum rehab amount is $30,000 or 20% of the projected “as completed” value of the renovated house.

    Interest rates on both options are slightly higher than prevailing conventional or FHA-insured loan rates. For example, Peter Boutell, co-owner of Santa Cruz Home Finance in Santa Cruz, Calif., says that in mid-August, when 30-year fixed rates on owner-occupied home loans dropped to the 4 3/8% range, applicants making less than 20% down payments were required to pay mortgage insurance premiums that pushed their effective rate to about 4 7/8%. At the same time, HomePath loans with 5% down payments were available at 5 1/8%. “This is an amazing program” for people looking for a foreclosure at a low price who don’t have big down payment cash, Boutell said. “You cannot buy a fix-up with conventional financing anywhere. Lenders just won’t do them.”

    Are there potential downsides to HomePath? Absolutely. Although Fannie Mae says it owns foreclosed houses in a wide variety of neighborhoods, mortgage brokers say they are more likely to be found in lower- to moderate-priced areas that took deeper hits when the housing market unraveled. Buyers looking for pristine properties with zero defects might not find what they want on the HomePath listing board. But check it out. Fannie’s loan terms will be hard to beat.

  • Is Debt Really The Problem… or is it something else?, By Bill Westrom, Truthinequity.com


    Mainstream media, the Government and consumers themselves vilify debt as the root of the consumer’s financial plight and the root of a weakening country. Debt is not the problem; it’s the management of debt and the way debt is structured that is creating the problem not the debt itself. Unless you win the lottery, invent a cure for cancer or get adopted by Bill Gates or Warren Buffett, debt will be something you will have to face somewhere along the course of your adult life; it’s a natural component of our society.

    In today’s economic environment hard working American’s are experiencing a level of fear and financial uncertainty they have never been faced with. This is keeping them up at night wondering how they are going to sustain a life they have worked so hard to build. Americans are also wondering why those we have trusted for all these years; the banks, money managers and politicians, are thriving financially, but don’t seem to be contributing anything of real value to the public? Today, the predominant questions being asked by the American public as it relates to their financial future are; what am I going to do, what can I do, how am I going to do it? We all work way too hard to be faced with these questions. The answers to these frightening questions are right in front of us. The answers lie in the use of the financial resources we use every day. You just need to know how to use them to your advantage.

    The crux of the problem for consumers and the country alike lie with misaligned, improper or a shear lack of education on the use of the banking tools we use every day. The three banking tools that we use every day; checking accounts, credit cards and loans are simply being used improperly. The solution lies in educating consumers and institutions to use these tools in the proper sequence and function to manage debt properly, regain control of income and possess the authority to control the repayment of debt. It’s as simple as that. By exposing the failed business model of conventional banking and borrowing practices, realigning them into a model that actually helps consumers get more out of what they own and what they earn, we can once again grow individually, as a society and a nation.

    The Truth Is In The Proof.
    TruthInEquity.com

  • How Ruthless Banks Gutted the Black Middle Class and Got Away With It, by Devona Walker, Truth-out.org


    The real estate and foreclosure crisis has stripped African-American families of more wealth than any single event in history.

    The American middle class has been hammered over the last several decades. The black middle class has suffered to an even greater degree. But the single most crippling blow has been the real estate and foreclosure crisis. It has stripped black families of more wealth than any single event in U.S. history. Due entirely to subprime loans, black borrowers are expected to lose between $71 billion and $92 billion.

    To fully understand why the foreclosure crisis has so disproportionately affected working- and middle-class blacks, it is important to provide a little background. Many of these American families watched on the sidelines as everyone and their dog seemed to jump into the real estate game. The communities they lived in were changing, gentrifying, and many blacks unable to purchase homes were forced out as new homeowners moved in. They were fed daily on the benefits of home ownership. Their communities, churches and social networks were inundated by smooth-talking but shady fly-by-night brokers. With a home, they believed, came stability, wealth and good schools for their children. Home ownership, which accounts for upwards of 80 percent of the average American family’s wealth, was the basis of permanent membership into the American middle class. They were primed to fall for the American Dream con job.

    Black and Latino minorities have been disproportionately targeted and affected by subprime loans. In California, one-eighth of all residences, or 702,000 homes, are in foreclosure. Black and Latino families make up more than half that number. Latino and African-American borrowers in California, according to figures from the Center for Responsible Lending, have foreclosure rates 2.3 and 1.9 times that of non-Hispanic white families.

    There is little indication that things will get much better any time soon.

    The Ripple Effect

    If anything, the foreclosure crisis is likely to produce a ripple effect that will continue to decimate communities of color. Think about the long-term impact of vacant homes on the value of neighborhoods, and about the corresponding increase in crime, vandalism and shrinking tax bases for municipal budgets.

    “The American dream for individuals has now become the nightmare for cities,” said James Mitchell, a councilman in Charlotte, NC who heads the National Black Caucus of Local Elected Officials. In the nearby community of Peachtree Hills, he says roughly 115 out of 123 homes are in foreclosure. In that environment, it’s impossible for the remaining homeowners to sell, as their property values have been severely depressed. Their quality of life, due to increases in vandalism and crime, diminished. The cities then feel the strap of a receding tax base at the same time there is a huge surge in the demand for public services.

    Charlotte, N.C. Baltimore, Detroit, Washington D.C. Memphis, Atlanta, New Orleans, Chicago and Philadelphia have historically been bastions for the black middle class. In 2008, roughly 10 percent of the nation’s 40 million blacks made upwards of $75,000 per year. But now, just two years later, many experts say the foreclosure crisis has virtually erased decades of those slow, hard-fought, economic gains.

    Memphis, where the majority of residents are black, remains a symbol of black prosperity in the new South. There, the median income for black homeowners rose steadily for two decades. In the last five years, income levels for black households have receded to below what they were in 1990, according to analysis by Queens College.

    As of December 2009, median white wealth had dipped 34 percent while median black wealth had dropped 77 percent, according to the Economic Policy Institute’s “State of Working America” report.

    “Emerging” Markets Scam v. Black Credit Crunch

    While the subprime loans were flowing, communities of color had access to a seemingly endless amount of funding. In 1990, one million refinance loans were issued. It was the same for home improvement and refinance loans. By 2003, 15 million refinance loans were issued. That directly contributed to billions in loss equity, especially among minority and elderly homeowners. Also at the same time, banks developed “emerging markets” divisions that specifically targeted under-served communities of color. In 2003, subprime loans were more prevalent among blacks in 98.5 percent of metropolitan areas, according to the National Community Reinvestment Coalition.

    One former Wells Fargo loan officer testifying in a lawsuit filed by the city of Baltimore against the bank says fellow employers routinely referred to subprime loans as “ghetto loans” and black people as “mud people.” He says he was reprimanded for not pushing higher priced loans to black borrowers who qualified for prime or cheaper loans. Another loan officer, Beth Jacobson, says the black community was seen “as fertile ground for subprime mortgages, as working-class blacks were hungry to be a part of the nation’s home-owning mania.”

    “We just went right after them,” Jacobson said, according to the New York Times, adding that the black church was frequently targeted as the bank believed church leaders could convince their congregations to take out loans. There are numerous reports throughout the nation of black church leaders being paid incentives for drumming up business.

    Due in part to these aggressive marketing techniques and ballooning emerging market divisions, subprime mortgage activity grew an average of 25 percent per year from 1994 to 2003, drastically outpacing the growth for prime mortgages. In 2003, subprime loans made up 9 percent of all U.S. mortgages, about a $330 billion business; up from $35 billion a decade earlier.

    Now that the subprime market has imploded, banks have all but abandoned those communities. Prime lending in communities of color has decreased 60 percent while prime lending in white areas has fallen 28.4 percent.

    The banks are also denying credit to small-business owners, who account for a huge swath of ethnic minorities. In California ethnic minorities account for 16 percent of all small-business loans. In the mid-2000s roughly 90 percent of businesses reported they received the loans they needed. Only half of small businesses that tried to borrow received all or most of what they needed last year, according to a survey by the National Federation of Independent Business.

    In addition, minority business owners often have less capital, smaller payrolls and shorter histories with traditional lending institutions.

    Further complicating matters is the fact that minority small-business owners often serve minority communities and base their business decisions on things that traditional lenders don’t fully understand. Think about the black barber shop or boutique owner, who knows there is no other “black” barber shop or boutique specializing in urban fashions within a 30-minute drive. While that lender may understand there is such a niche market as “urban fashions,” they likely won’t understand the significance of being “black-owned” in the market as opposed to corporate-owned. Or think of the Hispanic grocer with significant import ties to Mexico who knows he can bring in produce, spices and inventory specific to that community’s needs, things people cannot get at chain grocery stores. That lender might only understand there is a plethora of Wal-Marts in the community where he wants to grow his business.

    Minority business owners are often more dependent upon minority communities for survival, which of course are disproportionately depressed due to subprime lending. Consequently, minority business owners have a lower chance of success. Banks, understanding that, are even less likely to lend. It’s like a self-fulfilling prophecy, and it’s beginning to resemble the traditional “redlining” of the 1980s and 1990s.

    “After inflicting harm on neighborhoods of color through years of problematic subprime and option ARM loans, banks are now pulling back at a time when communities are most in need of responsible loans and investment,” said Geoff Smith, senior vice president of the Woodstock Institute.

    Believe it or not, no one in a position of power to stop all this from unfolding was blindsided. Ben Bernanke was warned years ago about the long-term implications of the real estate bubble and subprime lending. Still, he set idly by. He told the advocates who warned him that the market would work it all out. Perhaps they thought the fallout would be limited to minority communities, or perhaps they just didn’t care.

    Devona Walker has worked for the Associated Press and the New York Times company. Currently she is the senior political and finance reporter for theloop21.com. 

     

  • Rescue from foreclosure? Frustration, anger grow, By Sanjay Bhatt, Seattletimes.com


    When he tried to change the terms of his home loan, Michael Guzman was rejected because the bank didn’t consider his joblessness a long-term hardship.

    Kamie Kahlo’s bank offered her a modified mortgage on her Queen Anne home but later told her the lower payments weren’t permanent.

    And Leslie Oldham was stunned her bank moved to foreclose on her Kent home before it gave her a decision on a loan modification.

    “I tried everything I could to work it out with the bank,” said Oldham, 58, “because the last thing I wanted to do was file a bankruptcy.”

    More than a year since President Obama announced an unprecedented national foreclosure-prevention program, many homeowners’ experiences with the program have left them feeling frustrated and angry at mortgage servicers.

    The program gives servicers financial incentives to permanently lower the monthly payments of homeowners who qualify for and successfully complete a three-month trial period. Servicers can modify a mortgage by lowering the interest rate, extending the loan’s terms or deferring payment of principal.

    Federal auditors say the Treasury Department has failed to hold banks and other servicers accountable for following the loan-modification program’s guidelines, and state regulators say there’s little they can do.

    Some examples from the Government Accountability Office:

    • Delayed decisions: After three months of accepting payments on a modified trial loan, banks are supposed to decide whether to make the new terms permanent. But some banks have a backlog of thousands of homeowners who have been making trial payments for six months or longer.

    • Inconsistent treatment: Fifteen of the 20 largest servicers in the program didn’t follow federal guidelines for evaluating borrowers’ loans and may have treated similarly situated borrowers differently.

    • No meaningful appeals: The Treasury does not independently review borrowers’ application or loan files, nor does it have clear penalties for servicers who violate the program’s rules.

    The program was intended to keep 3 million homeowners from foreclosure, but it had produced only about 435,000 permanent modifications through July.

    Treasury officials say the program’s impact can’t be measured by a single statistic. Many homeowners who were deemed ineligible for the federal program have been offered private loan modifications by their servicer.

    Still, six of every 10 seriously delinquent borrowers are not getting help, according to a new study by the State Foreclosure Prevention Working Group. Struggling homeowners are alienated by the mixed messages and long delays, the group said, and almost three-quarters of modified mortgages leave borrowers owing more, not less.

    “That is not a sustainable solution,” said Roberto Quercia, who consulted on the study and is director of the Center for Community Capital at the University of North Carolina, Chapel Hill. “For people underwater, making the hole deeper is a recipe for disaster.”

    Jumbled paperwork

    In March 2009, Treasury officials launched the federal Home Affordable Modification Program (HAMP), its cornerstone effort to rescue the nation’s housing market, in which property values have fallen at a rate not seen since the Great Depression.

    Homeowners must pass three tests to be considered: First, they must have an eligible hardship, such as unemployment. Second, their mortgage must exceed 31 percent of their gross monthly income.

    Finally, the bank applies a “net present value” test to see if it will lose more money from foreclosing on their home than from modifying the mortgage.

    Through July, homeowners in the program saw a median 36 percent, or more than $500, savings in their monthly payment after permanent modification, according to the Treasury.

    But the number of homeowners making trial payments who were dropped from the program — more than 600,000 — now exceeds the number with permanent modifications.

    “Paperwork has been the No. 1 reason homeowners have not been able to convert to permanent modifications,” Treasury spokeswoman Andrea Risotto said.

    The second most common reason, she said, is that homeowners are unable to keep up with payments during the trial period.

    Housing counselors and lawyers for homeowners say servicers misplace documents or wrongly reject eligible applicants for no good reason — even after they’ve made trial payments for six months or longer.

    “The servicers are claiming that the files are a mess or are incomplete,” said Marc Cote, a housing counselor who coordinates Washington state’s foreclosure-prevention hotline. “We have confirmation the fax was received. Then you call back in two days and there’s no record of it. That’s not uncommon.”

    Regulators at the state Department of Financial Institutions say they’ve been flooded with consumer complaints about mortgage issues — such as banks failing to properly credit homeowners for payments.

    Department director Scott Jarvis says a series of federal court decisions since 2002 has made it nearly impossible for regulators to force national banks and thrifts to comply with state consumer-protection laws.

    “It’s a massive shell game,” Jarvis said. “The pea is the consumer, and the consumer ends up getting shuffled around the shells and rarely gets anything resolved.”

    For their part, big banks and other servicers say they’re helping distressed borrowers, while being fair to the majority of homeowners who pay their mortgages on time.

    This year, Chase opened a loan-modification office in Tukwila that focuses on screening homeowners with Chase mortgages in Washington and Oregon.

    And a coalition of big banks recently announced support for a Web portal called HOPE LoanPort that housing counselors can use to submit complete applications, verify their receipt and get status updates.

    “In the end I think we all share a common goal, which is to help as many customers as possible stay in their homes,” said Rebecca Mairone, Bank of America’s national default-servicing executive.

    Left in limbo

    Cote, the housing counselor, recounts this story: On Aug. 6, a national bank told an elderly owner of an Issaquah house that her application for loan assistance — submitted March 3 — was still under review.

    A week later, a trustee let the bank repossess the woman’s house. The bank had denied the woman’s application but never notified her in writing, as required.

    “They’re violating the guidelines,” said Cote, whose agency doesn’t allow him to identify the national bank.

    Some Seattle-area homeowners echo Cote.

    Guzman, of Lake Stevens, has been unemployed for more than two years and was told — incorrectly — by Chase last year that his joblessness did not count as a permanent hardship.

    “Servicers continue to evolve their implementation of HAMP,” Chase said in a statement.

    Moreover, Chase said, it asked Guzman to reapply for loan assistance, but he has refused.

    Guzman said he’s already submitted paperwork three times.

    “Millions of people have gone through this wringer like I have,” he said.

    Kahlo, who bought her Queen Anne home in 1999, said she did everything Bank of America asked her to do to qualify for relief under the federal program.

    After the bank told her it wasn’t permanently modifying her mortgage, she sued, alleging it had violated the federal program’s rules.

    Bank of America sought to dismiss the suit, saying the lower monthly payment it offered her was an alternative to the federal program.

    “A participating servicer is not required to modify every HAMP-eligible loan,” the bank stated in court.

    Without a permanent modification, Kahlo says, she’s in limbo. “I don’t know if I’m sleeping in their home or my home,” she said.

    Declaring bankruptcy was a last resort for Oldham, a widow in Kent who manages payroll for a small construction company.

    But she believed she had no recourse because Bank of America foreclosed on the manufactured home she’s lived in for 15 years.

    Oldham said she got behind on her mortgage because of medical bills.

    She applied for a modification last year, but the bank tacked a foreclosure notice on her door before she received an answer.

    Oldham complained to the state Attorney General’s Office, which passed her on to the state Department of Financial Institutions. That department routinely forwards such complaints — about 540 so far this year — to federal regulators.

    With Oldham, though, the state department lost track of her complaint, finally sending it along last month.

    Sanjay Bhatt: 206-464-3103 or sbhatt@seattletimes.com

  • 66% of homeowners who seek foreclosure counseling cite job losses for trouble, Craig Wolf, Poughkeepsiejournal.com


    Two-thirds of the people seeking foreclosure -prevention counseling in the major local program say it was their loss of jobs or income that got them in trouble.

    And the majority of people counseled did not have subprime mortgages, but conventional, fixed-rate mortgages, according to Hudson River Housing Inc., a Poughkeepsie-based nonprofit.

    The group said its count of counseled homeowners has exceeded 1,500 since beginning the program in 2008.

    Mary Linge, director of home ownership and education, said that 66 percent of homeowners currently cite loss of jobs and reduced income as primary reasons they face foreclosure.

    In foreclosure, a lender who isn’t being paid takes possession of the property.

    Of those who have recently sought services, 79 percent have conventional loans, compared with 43 percent in late 2008 when the program began, Linge said.

    “The foreclosure crisis is now largely being driven by economic pressures, not bad mortgage products,” Linge said.

    Recent research by the Poughkeepsie Journal found that foreclosure filings in state Supreme Court rose in 2009 by nearly 20 percent over 2008. For the first seven months of this year, filings are on course to show a further 10 percent increase.

    Hudson River Housing has received three federal grants totalling $308,602 for counseling people through the Hudson Valley Foreclosure Prevention Services.

    Linge said the National Foreclosure Mitigation Counseling program that has funded her group has done research on results nationally.

    Homeowners who got counseling were 60 percent more likely to avoid losing their homes than people who did not seek help. Clients were more likely to get a loan modification and, on average, saved $454 a month on mortgage payments.

    Reach Craig Wolf at cwolf@poughkeepsiejournal.com or 845-437-4815.

  • New Program for Buyers, With No Money Down, John Leland, Nytimes.com


    MILWAUKEE — When the housing bubble burst, one of the culprits, economists agreed, was exotic mortgages, including those that required little or no money down.

    But on a recent evening, Matthew and Hannah Middlebrooke stood in their new $115,000 three-bedroom ranch house here, which Mr. Middlebrooke bought in June with just $1,000 down.

    Because he also received a grant to cover closing costs and insurance, the check he wrote at the closing was for 67 cents.

    “I thought I’d be stuck renting for years,” said Mr. Middlebrooke, 26, who earns $32,000 a year as a producer for a Christian television ministry.

    Although home foreclosures are again expected to top two million this year, Fannie Mae, the lending giant that required a government takeover, is creeping back into the market for mortgages with no down payment.

    Mr. Middlebrooke’s mortgage came from a new program called Affordable Advantage, available to first-time home buyers in four states and created in conjunction with the states’ housing finance agencies. The program is expected to stay small, said Janis Smith, a spokeswoman for Fannie Mae.

    Some experts are concerned about the revival of such mortgages.

    “Loans that have zero down payment perform worse than loans with down payments,” said Mathew Scire, a director of the Government Accountability Office’s financial markets and community investment team. “And loans with down payment assistance” — like Mr. Middlebrooke’s — “perform worse than those that do not.”

    But the surprise is the support these loans have received, even from critics of exotic mortgages, who say low down payments themselves were not the problem, except when combined with other risk factors like adjustable rates or lax underwriting.

    Moreover, they say, the housing market needs such nontraditional lending, as long as it is done prudently.

    “This is subprime lending done right,” said John Taylor, president of the National Community Reinvestment Coalition, an umbrella group for 600 community organizations, and a staunch critic of the lending industry. “If they had done subprime this way in the first place, we wouldn’t have these problems.”

    At Harvard’s Joint Center for Housing Studies, Eric Belsky, the director, said the loans might be the type of step necessary to restart the housing market, because down payment requirements are keeping first-time home buyers out.

    “If you look at where the market may get strength from, it may very well be from first-time buyers,” he said. “And a very significant constraint to first-time buyers is the wealth constraint.”

    The loans are the idea of state housing finance agencies, or H.F.A.’s, quasi-government entities created to help moderate-income people buy their first homes.

    Throughout the foreclosure crisis, the state agencies continued to make loans with low down payments, often to borrowers with tarnished credit, with much lower default rates than comparable mortgages from commercial lenders or the Federal Housing Administration. The reason: the agencies did not offer adjustable rates, and they continued to document buyers’ income and assets, which many commercial lenders did not do. In 2009, the agencies’ sources of revenue dried up, and they had to curtail most lending.

    Then they created Affordable Advantage. The loans are 30-year fixed mortgages, with mandatory homeownership counseling, available to people with credit scores of 680 and above (720 in Massachusetts). The buyers have to put in $1,000 and must live in the homes.

    All of these requirements ease the risk, said William Fitzpatrick, vice president and senior credit officer of Moody’s Investors Service. “These aren’t the loans that led us into the mortgage crisis,” he said.

    So far Idaho, Massachusetts, Minnesota and Wisconsin are offering the loans. The Wisconsin Housing and Economic Development Authority has issued 500 loans since March, making it the first state to act. After six months, there are no delinquencies so far, said Kate Venne, a spokeswoman for the agency.

    The agencies buy the loans from lenders, then sell them as securities to Fannie Mae. Because the government now owns 80 percent of Fannie Mae, taxpayers are on the hook if the loans go bad.

    The state agencies oversee the servicing of the loans and work with buyers if they fall behind — a mitigating factor, said Mr. Fitzpatrick of Moody’s.

    “They have a mission to put people in homes and keep them in homes,” not to foreclose unless other options are exhausted, he said. The loans have interest rates about one-half of a percentage point above comparable loans that require down payments.

    Ms. Smith, the spokeswoman for Fannie Mae, distinguished the program from loans of the boom years that “layered risk on top of risk.”

    With the new loans, she said, “income is fully documented, monthly payments are fixed, credit score requirements are generally higher, and borrowers must be thoroughly counseled on the home-buying process and managing their mortgage debt.”

    For Porfiria Gonzalez and her son, Eric, the loan allowed them to move out of a rental house in a neighborhood with a high crime rate to a quiet street where her neighbors are retirees and police officers.

    Ms. Gonzalez, 30, processes claims in the foreclosure unit at Wells Fargo Home Mortgage; she has seen the many ways a mortgage holder can fail.

    On a recent afternoon in her three-bedroom ranch house here, Ms. Gonzalez said she did not see herself as repeating the risks of the homeowners whose claims she processed.

    “I learned to stay away from ARM loans,” or adjustable rate mortgages, she said. “That’s the No. 1 thing. And always have some emergency money.”

    When she first started shopping, she looked at houses priced around $140,000. But the homeownership counselor said she should keep the purchase price closer to $100,000.

    “They explained to me that I don’t need a $1,200-a-month payment,” she said.

    The counselor worked with her real estate agent and attended her closing. On May 28, Ms. Gonzalez bought her home for $90,500, with monthly payments of $834. After moving expenses, she has kept her savings close to $5,000 to shield her from emergencies.

    “If I had to make a down payment, it would have wiped out my savings,” she said. “I would have started with nothing.”

    Now, she said, she is in a home she can afford in a neighborhood where her son can play in the yard. A neighbor brought her a metal pink flamingo with a welcome sign to place by her side door.

    “My favorite part is the big backyard,” said Eric, 10. “And that’s pretty much it.”

    “You don’t like it that it’s a quiet, safe neighborhood?” his mother asked.

    “Yeah, I do.”

    “He didn’t go out much with kids in the old neighborhood,” she said.

    “Because they were bad kids,” he said.

    Ms. Gonzalez said that owning a house was much more work than renting, and that when the basement flooded during a heavy rain, her heart sank.

    “But I look at it as an investment,” she said, adding that a similar house in the neighborhood was on the market for $120,000.

    Prentiss Cox, a professor at the University of Minnesota Law School who has been deeply critical of the mortgage industry, said the program met an important need and highlighted the track record of state housing agencies, which never engaged in exotic loans.

    “It’s not a story people want to hear, because it won’t bring back the big profits,” Mr. Cox said. “The H.F.A.’s have shown how the problems of the last 10 years were about having sound and prudent regulation of lending, not just whether the loans were prime or subprime.”

    He added, “One of the great and unsung tragedies of the whole crisis was the end of the subprime market.”

  • Out and About


    It is simply amazing the quality of the housing available right now in the Portland metro area. There is something exciting walking through a 5000 square foot home and realizing that all the owner is looking for is $400,000. Even in today’s market it would cost more than 400k to build a luxury home of that size and quality. With today’s low interest rates people that have been dreaming of owning a well located home with a major amount of “Wow” factor can buy a home that not too long ago would have seemed decades away in their future.

    Buyers have the ability to be choosy in this market and even though banks are harder to deal with than most adults have ever experienced in their life time. Banks know that if they are not lending money, they cannot make money. No one should fear the effort and time it takes to make their dreams come true in this market.

  • Communities Get First Shot at Foreclosed Homes, By Gregory Korte, USA TODAY


    Major mortgage lenders will now give state and local governments the right to buy foreclosed properties before they go on the market, giving them “a leg up” on speculators who have often thwarted local redevelopment efforts, Housing Secretary Shaun Donovan announced Wednesday.

    The First Look program will give communities a 48-hour heads up on foreclosed properties and the ability to buy them at a 1% discount, Donovan said. The effort is intended to help improve the $7 billion Neighborhood Stabilization Program, he said.

    “First Look is good for our housing market because it will bring much-needed speed” to the sale of bank-owned homes, Donovan said. Data show that vacant homes are more than three times more destructive to neighboring home values than those early in the foreclosure process.

    USA TODAY reported in July that more than $1 billion in Neighborhood Stabilization Program funds were unspent two years after Congress authorized the program. Short staffing and confusion over rules were partly to blame, but local governments also said lenders wouldn’t deal their foreclosed properties.

    Often, cities can’t move as quickly as private companies in buying homes especially in highly visible areas or where they’re trying to assemble multiple properties in a land bank.

    “You can’t be successful in neighborhood stabilization unless you control all the pieces on the chess board,” said Craig Nickerson, president of the National Community Stabilization Trust, which runs the clearinghouse.

    The participating mortgage lenders account for 75% of foreclosed homes, Donovan said. They include Bank of America, Chase, Citibank, Wells Fargo and Freddie Mac.

    The banks won’t offer all their foreclosures. “We’re not going to run all our inventory through this engine,” said Steven Nesmith, senior vice president of Ocwen Financial Corp. He said about 20% will be offered to governments and non-profits.

    The plan might come too late to help communities involved in the first round of funding. Many have just days to write contracts or risk losing their federal funding. In all, 143 communities have less than a month to spend their federal money. If they don’t, the Department of Housing and Urban Development will freeze their unused funds as much as $354 million nationally and could take the money back.

    Palm Bay, Fla., has until Friday to spend its $5.2 million, and might fall $200,000 short. “Just with our purchasing requirements, we do not move as quickly as the private sector,” said David Watkins, the city’s growth management director.

    “If First Look had been available from the beginning, he said, “we might be at least three or four months ahead of where we are now.”

  • FHA puts floor on borrower credit eligibility, by CHRISTINE RICCIARDI, Housingwire.com


    Borrowers with credit scores less than 500 are not eligible for Federal Housing Administration-insured mortgage financing, according to the new credit score and loan-to-value (LTV) requirements released today by the U.S. Department of Housing and Urban Development.

    This is the first time the FHA has had a minimum score to determine borrower eligibility.

    Borrowers with a credit score between 500 and 579 can receive up to 90% LTV  from FHA for a single-family mortgage while any borrower with a score 580 or above is eligible for maximum funding. Non-traditional and insufficient credit is accepted provided that borrowers meet the underwriting guidelines.

    100% financing is available to borrowers using Mortgage Insurance for Disaster Victims with no downpayment, as long as their credit score is above 500.

    The FHA said it is providing a special, temporary allowance to permit higher LTV mortgage loans for borrowers with lower decision credit scores, so long as they involve a reduction of existing mortgage indebtedness pursuant to FHA program adjustments.

    The credit standards will take effect on Oct. 4.

  • Federal Housing Stimulus: How Much More?, Diana Olick, CNBC


    New reports are rolling around Wall Street and Washington today that the Obama Administration is considering yet another economic stimulus package; this round would be for small businesses. This comes just one week after increased chatter about more government stimulus for housing.

    Congress returns the week of September 13th, and as Democrats face an uncertain election this November, you know they’re going to be looking to make average Americans feel more secure about their finances.

    But how much has housing stimulus really helped?

    Through July 3, 2010, the IRS reports a bill of $23.5 for the home buyer tax credit, according to a letter dated yesterday (September 2nd) from the Government Accountability Office to Rep. John Lewis, Chairman of the House Ways and Means Committee’s Subcommittee on Oversight. $16.2 billion for the first time and move-up credits and $7.3 billion for interest-free loans which recipients will begin repaying in January.

    The Department of Housing and Urban Development has also already allocated nearly $6 billion for the Neighborhood Stabilization Program, which gives state and local governments and non-profit housing developers funds to acquire property, demolish or rehabilitate foreclosures and offer assistance to low- to middle-income homebuyers for down payments and closing costs. In the coming weeks it will add $1 billion to that. Just this week HUD Secretary Donovan gave NSP grantees a leg up over investors, by providing a first right of refusal for those grantees to buy foreclosed homes.

    The talk around Washington is for yet another home buyer tax credit, this time perhaps for short sale and foreclosure buyers. Unfortunately every time we get a short-term stimulus, we get an inevitable drop off in sales and prices, as we’re experiencing now. Yes, we saw a mini burst of buying from credits last fall and this spring, but the overall numbers are still way down, and inventories are still far too high.

    The one steady in gauging housing is confidence, and until we get that back, sales will remain weak for the foreseeable future.

    Government stimulus, arguably, sells houses, and we need that to bring down our currently record-high inventories.

    But Government stimulus is also temporary, and everyday buyers and sellers recognize that, which doesn’t add to their already faltering confidence.

    Questions?  Comments?  RealtyCheck@cnbc.com

  • When to refinance a mortgage? , Thetruthaboutmortgage.com


    Mortgage Q&A: “When to refinance a mortgage?”

    With mortgage rates at record lows, you may be wondering if now is a good time to refinance.

    The popular 30-year fixed-rate mortgage slipped to 4.32 percent this week, well below the 5.08 percent seen a year ago, and much better than the six-percent range seen years earlier.

    So should you refinance now?

    Well, that answers depends on a number of factors.

    First, what is the current interest rate on your mortgage(s)? And what will the closing costs be on the new mortgage?  They’ve been rising lately…

    Let’s look at a quick example:

    Loan amount: $200,000
    Current mortgage rate: 5.5% 30-year fixed
    Refinance rate: 4.25% 30-year fixed
    Closing costs: $2,500

    The monthly mortgage payment on your current mortgage (including just principal and interest) would be roughly $1,136, while the refinanced rate of 4.25 percent would carry a monthly payment of about $984.

    That equates to savings of $152 a month.

    Now assuming your closing costs were $2,500 to complete the refinance, you’d be looking at about 17 months of payments before you broke even and started saving yourself some money.

    So if you refinanced again or sold your home during that time, refinancing wouldn’t make a lot of sense.

    But if you plan to stay in the home (and with the mortgage) for many years to come, the savings could be substantial.

    Other Considerations

    If you’re currently in an adjustable-rate mortgage, or worse, an option arm, the decision to refinance into a fixed-rate loan could make even more sense.

    Or if you have two loans, consolidating the balance into a single loan (and ridding yourself of that pesky second mortgage) could result in some serious savings.

    Additionally, you might be able to snag a no cost refinance, which would allow you to refinance without any out-of-pocket costs (the rate would be higher to compensate).

    A cash-out refinance could also contribute to your decision to refinance if you were in need of money and had the necessary equity.

    Finally, if you’re already in a 30-year fixed and want to build equity, you might consider taking a look at the 15-year fixed, which is pricing at a record low 3.83 percent, assuming you could handle a higher monthly payment.

  • Refinance Demand Up as Mortgage Interest Rates Maintain Low Levels, by Rosemary Rugnetta, Freerateupdate.com


    September 2, 2010 (FreeRateUpdate.com) – As mortgage interest rates continue to maintain low levels, refinance demand continues to increase across the nation. According to the Mortgage Banker’s Association, refinances have reached a 15 month high, the highest point since May of 2009. Rates are at the lowest point than any other time since Freddie Mac began keeping track in 1971. Mortgage applications rose for the fourth straight week with refinances accounting for the bulk of the demand. This is due to mortgage interest rates that continue to remain low with the 30 year fixed rate at 4.125% and the 15 years fixed rate at 3.625%.

    The current refinance demand is not surprising considering the record low mortgage rates that have continued for the past several weeks. After a slow start, these low mortgage rates are finally spurring home owner interest. Unfortunately, not all home owners can refinance with these historic rates. Those who are underwater due to the depressed housing market and those whose credit has been compromised will not be able to take advantage of the market’s record low interest rates. On the other hand, for others, especially those who have refinanced within the past two years, it is a great time to do it again. In addition, those home owners who currently have adjustable rate mortgages that are about to reset, could benefit from refinancing at this time into a fixed rate mortgage.

    The demand for refinances, which has continued to increase each week, could also be a positive sign for the weak economy. The current low mortgage interest rates have made it possible for home owners to refinance into a better interest rate loan or a shorter length loan. Many with higher interest 30 year loans are finding that, at today’s rates, it is in their best interest to refinance into a 15 year mortgage which is, in many circumstances, cheaper. By putting extra cash in consumers hands, they are able to pay off outstanding debts, money can be saved or just put back into the economy through spending. Although it is not certain if this refinance boom will do anything to stimulate the economy, this just might be the boost that the sluggish economy is in need of.

    It is anyone’s guess at which way mortgage rates will go from here. If mortgage interest rates maintain these low levels or drop even lower, refinance demand should go up with more home owners deciding to refinance during the fall months just in time for the Holiday season. In the meantime, home owners probably should not wait for rates to go much lower since anything can happen with such a volatile market.

    http://www.freerateupdate.com/refinance-demand-up-as-mortgage-interest-rates-maintain-low-levels-6155

  • Foreclosures Heavey Toll on Health, Suzanne Bohan, Contra Costa Times


    Maria Ramirez is one of the fortunate ones. She’s lived for more than 10 years with her family in ZIP code 94621 in Oakland, one the East Bay neighborhoods hardest hit by home foreclosures. But she fought back when Wachovia Bank began foreclosing on her house in 2009, and won an affordable loan modification.

    Her victory doesn’t only secure stable housing for Ramirez and her family. In a little-discussed aspect of the foreclosure crisis gripping the nation, it also protects the Ramirez’s long-term mental and physical health.

    Nearly one in 10 American households with a mortgage are behind on their payments, according the Mortgage Bankers Association. In Oakland, the numbers are even worse: Between 2006 and 2009, one in 4 homeowners with a mortgage entered into foreclosure.

    And a first-of-its kind report released today by the Alameda County Public Health Department and Causa Justa :: Just Cause warns of the looming health consequences of widespread home foreclosures, while also detailing steps to mitigate those harmful effects.

    “We’re trying to get people to understand this is a public health issue,” said Sandra Witt, deputy director of the Alameda County Public Health Department.

    Last year, the health department released a preliminary report on the link between health and foreclosures, and the new report is the most comprehensive yet published on the topic.

    In a door-to-door survey of 388 East Oakland and West Oakland homes

    in the summer of 2009, workers with Causa Justa :: Just Cause, a community action group, conducted an in-depth look at the health effects of home foreclosures on these hard-hit communities. They found that 38 percent of those coping with foreclosure threats reported declining health during the past two years, compared with 24 percent of those unconcerned about foreclosures.

    Mental health also deteriorated.

    Almost a third of those dealing with home foreclosure threats reported that their mental and emotional health had worsened during the past two years, compared with only 16 percent of those in stable housing.

    “This is really about the stress that one feels,” Witt said. The stress also increased the likelihood of developing hypertension and a host of other health conditions, and increases visits to emergency departments.

    The report noted the survey doesn’t establish direct links between foreclosure risk and health outcomes, but “suggests associations.” The report, titled “Rebuilding Neighborhoods, Restoring Health,” is available on the county health department’s website at www.acphd.org.

    These health declines also portend an increasing demand for medical care. “It will absolutely create a demand for more services, both health services and mental health services,” Witt said.

    The new report, however, includes a long list of remedies to mitigate the potential health harms from the stress of facing foreclosure and coping with eviction.

    Those include state and federal policies to promote home loan modifications by banks, as well as foreclosure relief. These remedies are tough to enact, however, as demonstrated by the failure in the state Assembly on Monday of legislation that would protect homeowners from eviction while they’re pursing more lenient loan terms. The bill was supported by consumer groups but opposed by the banking industry.

    But other laws on the books can sometimes help distressed homeowners. And the report urges community groups to join together to educate those facing foreclosures about their rights, as well as strategies for securing loan modifications.

    Homeownership has long been indirectly linked to health and wellness. The federal push to promote home buying began in the early 20th century. And in 1921, then-Commerce Secretary Herbert Hoover, elected President in 1928, held that homeownership “may change the very physical, mental and moral fiber of one’s own children.”

    The new report, conversely, points to marked deterioration in health among homeowners and tenants facing eviction due to foreclosures.

    Suzanne Bohan covers science. Contact her at 510-262-2789. Follow her at Twitter.com/suzbohan.

  • HUD announces new REO purchase program, Hud.gov


    U.S. Housing and Urban Development (HUD) Secretary Shaun Donovan has announced an agreement with the nation’s top mortgage lenders to offer selected state and local governments, and non-profit organizations a “first look” or right of first refusal to purchase foreclosed homes before making these properties available to private investors. The National First Look Program is a first-ever public-private partnership agreement between HUD and the National Community Stabilization Trust (Stabilization Trust). In collaboration with national servicers, Fannie Mae, and Freddie Mac, the First Look program is intended to give communities participating in HUD’s Neighborhood Stabilization Program (NSP) a brief exclusive opportunity to purchase bank-owned properties in certain neighborhoods so these homes can either be rehabilitated, rented, resold or demolished.

    “This groundbreaking agreement will help rebuild neighborhoods that have been struggling with blight and declining home values due to foreclosures,” said HUD Secretary Donovan. “Local communities will now get an exclusive option to buy foreclosed properties in targeted neighborhoods so they can turn the homes into affordable housing or, in some cases, tear them down. This agreement helps us level the playing field to give communities a better chance to stabilize these neighborhoods.”

    “The Stabilization Trust is delighted to be working with HUD Secretary Donovan on the National First Look Program,” said Craig Nickerson, President of the NCST. “By serving as the operations ‘engine’ behind the First Look Program, the Stabilization Trust can facilitate the transfer of more foreclosed property for participating financial institutions to local community buyers, thereby accelerating the road to neighborhood recovery.”

    HUD’s NSP grantees, which include state and local governments and non-profit organizations, often find themselves competing with private investors for real estate-owned (REO) properties, which can hinder their efforts to stabilize neighborhoods with high foreclosure activity. With today’s announcement, HUD and the Stabilization Trust, working with national servicers, Fannie Mae, and Freddie Mac, will standardize the acquisition process for NSP grantees, giving them an exclusive option to purchase foreclosed upon homes in certain targeted neighborhoods.

    The Stabilization Trust pioneered the ‘First Look’ model to create a transparent and streamlined process to facilitate the transfer of foreclosed and abandoned properties from key financial institutions to local government housing providers. First piloted in 2008, the model has gained recognition as a critical tool for positively tipping the scale in neighborhoods hard hit by foreclosures.

    NSP grantees will also be aided by REOMatch, a Web-based mapping and acquisition management tool developed by the Stabilization Trust. REOMatch will assist NSP grantees easily identify REO properties and make more strategic decisions about which properties to acquire, based on real-time data on an interactive mapping platform.

    The nation’s leading financial institutions are participating in the National First Look Program, representing approximately 75 percent of the REO marketplace. Participating institutions include: Bank of America, Chase, Citi, Deutsche Bank, GMAC, Nationstar Mortgage, Ocwen Financial Corporation, Saxon Mortgage Services, U.S. Bank, Wells Fargo, Fannie Mae, Freddie Mac, and the Federal Housing Administration (FHA).

    ►The National First Look Program will allow NSP grantees the exclusive opportunity to purchase available REO properties located within the defined boundaries of NSP target areas. NSP grantees will be immediately notified when a property becomes available and will have 24-48 hours to express interest in pursuing a specific property. Furthermore, these institutions will provide NSP purchasers with the opportunity to purchase REO properties at a discount their appraised value, reflecting the cost savings of a quick sale. NSP grantees may acquire these properties with the assistance of NSP funds for any eligible use.

    ►After expressing interest in a property, the First Look Period will last approximately five to 12 business days during which the NSP Grantee will conduct inspections and establish costs to repair in anticipation of the financial institution’s price offer. In the event that no NSP grantee exercises its preference to purchase an REO property during the First Look period, the financial institution will follow its normal process to sell the home on the open market.

    ►Currently, the Federal Housing Administration (FHA) offers a complementary pilot program in which NSP grantees receive an exclusive option to purchase so-called ‘HUD Homes’ at a discount prior to those homes being made available to the investor community. The FHA pilot, alongside today’s agreement expands the opportunity for NSP grantees to gain access to REO properties through a national first-look standard option.

    HUD’s Neighborhood Stabilization Program was created to address the housing crisis, create jobs, and grow local economies by providing communities with the resources to purchase and rehabilitate vacant homes. NSP grants are helping state and local governments, as well as non-profit developers, acquire land and property; demolish or rehabilitate abandoned properties; and/or offer downpayment and closing cost assistance to low- to middle-income homebuyers. Grantees can also stabilize neighborhoods by creating “land banks” to assemble, temporarily manage, and dispose of foreclosed homes. To date, HUD has allocated nearly $6 billion in funding to state and local governments and non-profit housing developments. In the coming weeks, HUD will allocate an additional $1 billion in NSP funding, which was provided through the Dodd-Frank Wall Street Reform and Consumer Protection Act.

    For more information, visit www.hud.gov.

  • FHA LAUNCHES SHORT REFI OPPORTUNITY FOR UNDERWATER HOMEOWNERS, Hud.gov


    WASHINGTON – In an effort to help responsible homeowners who owe more on their mortgage than the value of their property, the U.S. Department of Housing and Urban Development today provided details on the adjustment to its refinance program which was announced earlier this year that will enable lenders to provide additional refinancing options to homeowners who owe more than their home is worth. Starting September 7, 2010, the Federal Housing Administration (FHA) will offer certain ‘underwater’ non-FHA borrowers who are current on their existing mortgage and whose lenders agree to write off at least ten percent of the unpaid principal balance of the first mortgage, the opportunity to qualify for a new FHA-insured mortgage.

    The FHA Short Refinance option is targeted to help people who owe more on their mortgage than their home is worth – or ‘underwater’ – because their local markets saw large declines in home values. Originally announced in March, these changes and other programs that have been put in place will help the Administration meet its goal of stabilizing housing markets by offering a second chance to up to 3 to 4 million struggling homeowners through the end of 2012.

    “We’re throwing a life line out to those families who are current on their mortgage and are experiencing financial hardships because property values in their community have declined,” said FHA Commissioner David H. Stevens. “This is another tool to help overcome the negative equity problem facing many responsible homeowners who are looking to refinance into a safer, more secure mortgage product.”

    Today, FHA published a mortgagee letter to provide guidance to lenders on how to implement this new enhancement. Participation in FHA’s refinance program is voluntary and requires the consent of all lien holders. To be eligible for a new loan, the homeowner must owe more on their mortgage than their home is worth and be current on their existing mortgage. The homeowner must qualify for the new loan under standard FHA underwriting requirements and have a credit score equal to or greater than 500. The property must be the homeowner’s primary residence. And the borrower’s existing first lien holder must agree to write off at least 10% of their unpaid principal balance, bringing that borrower’s combined loan-to-value ratio to no greater than 115%.

    In addition, the existing loan to be refinanced must not be an FHA-insured loan, and the refinanced FHA-insured first mortgage must have a loan-to-value ratio of no more than 97.75 percent. Interested homeowners should contact their lenders to determine if they are eligible and whether the lender agrees the write down a portion of the unpaid principal.

    To facilitate the refinancing of new FHA-insured loans under this program, the U.S. Department of Treasury will provide incentives to existing second lien holders who agree to full or partial extinguishment of the liens. To be eligible, servicers must execute a Servicer Participation Agreement (SPA) with Fannie Mae, in its capacity as financial agent for the United States, on or before October 3, 2010.

    For more information on FHA Short Refinance option, read FHA’s mortgagee letter.

  • Tax Credit Uncertainty Not Benefiting Housing Market, by CJ Moore, Technorati.com


    Could the home buyer tax credit be returning?

    That’s the hot topic right now in housing, as secretary of Housing and Urban Development Shaun Donovan wouldn’t squash the idea when he was asked about it Sunday on CNN’s “State of the Union.”

    “I think it’s too early to say after one month of numbers whether the tax credit will be revived or not,” Donovan said. “All I can tell you is that we are watching very carefully. … We are going to be focused like a laser on where the housing market is moving going forward, and we are going to go everywhere we can to make sure this market stabilizes and recovers.”
    If Donovan were to follow his own advice – making sure the market stabilizes – he would be smart to provide some certainty to housing. By leaving the possibility open, Donovan could be postponing any chance of a recovery.

    The housing market certainly needs a boost after the news last week that new home sales and existing home sales in July dropped to record low levels.

    The tax credit certainly influenced these numbers. Many prospective homebuyers rushed to meet the April 31 deadline so they could receive the tax credit, and that undoubtedly interrupted the month-to-month flow of housing. By leaving the possibility open for another tax credit, it could have the opposite effect. Prospective buyers might hold out and wait to see if the credit returns.

    With Donovan’s wishy-washy response on Sunday, the Obama administration had a chance to give a clearer answer on Monday, and White Press Secretary Robert Gibbs failed to do so, saying that bringing back the tax credit “is not as high on the list as many other things are,” but still leaving the possibility open.
    Another tax credit could provide a boost, but it’s debatable whether that boost would really be beneficial in the long term. It could be best to sit back for a while and see what happens and focus on other areas that could benefit housing, such as unemployment.

    Read more: http://technorati.com/business/finance/article/tax-credit-uncertainty-not-benefiting-housing/#ixzz0yIHYvbvn

  • Borrowers Take Advantage of FHA-Refinance After Inability to Sell Homes, by Vanessa Rodriguez, Freerateupdate.com


    August 31, 2010 (FreeRateUpdate.com) – Homeowners are finding it particularly difficult these days to sell their homes. According to the National Association of Realtors, demand for single family residences has dropped to a 15-year low. Home purchases fell 12 percent in June. In July, they more than doubled the previous month by plunging 27 percent. It is reported that 1 in 5 homeowners is behind in his or her payment. As if the news weren’t bad enough, foreclosures are expected to rise severely this year and next. With these disheartening statistics, homeowners are not left with many options. Fortunately, however, refinancing current mortgage loans is one option, and a viable one at that. Moreover, various government programs are making refinances possible, even for underwater mortgages, and borrowers do not have to have an FHA-insured loan to qualify. Low mortgage rates are definitely strong factors that fuel the refinancing boom. Conforming rates, as of this writing, are 4.125 percent, which is slightly higher than last week’s record low of 4.00 percent, with 0.7 to 1 point origination. As mortgage loan officer Jason Paul from AmCap Mortgage observed, “[We are] absolutely seeing a significant rise in applications for refinances because mortgage rates are so low.” The Mortgage Banks Association reported that refinance applications increased by 17 percent and caused a surge of 13 percent in overall mortgage applications. Last year, the Obama Administration released a new program, the Home Affordable Refinance Program (HARP,) to help homeowners refinance their mortgage loans. This program allows homeowners who owe more on their house than its current value to refinance into better loan terms. The program does not reduce principal amount owed. However, it does permit homeowners to take advantage of ultra low mortgage rates. HARP is also beneficial for interest-only borrowers, adjustable rate mortgage borrowers, and balloon payment borrowers because it allows them to reduce the amount of interest they would pay over the life of the loan.

    To be eligible, the residence must be owner-occupied and the homeowner must be current on his or her mortgage payments. This means that he or she has not missed any payments, does not have more than one 30-day late in the past 12 months. If the loan was originated in less than 12 months, then the homeowner should have never missed a payment. The amounts owed on the mortgage should not exceed 125 percent of the current market value of the property. For example, if a home appraises for $200,000 but the homeowner owes $275,000, then he would not qualify for HARP. However, if he owes less than $250,000, he does qualify. The loan must be owned or guaranteed by one of the GSEs, Fannie Mae or Freddie Mac. The homeowner must also have the reasonable means to afford the new mortgage payment (i.e. steady income.) The program is set to expire June 10, 2011.

    The U.S. Department of Housing and Urban Development (HUD) just announced that it is expanding its refinance program. Starting September 7th, 2010, the Federal Housing Administration, which is regulated by HUD, will offer non-FHA borrowers who are underwater on their loans and current on payments the opportunity to refinance into an FHA Short Refinance option. In order for prospective borrowers to qualify, lenders must agree to write off at least 10 percent of the unpaid principal of the mortgage, which should bring the borrower’s combined loan-to-value ratio less than 115 percent. Borrowers must meet standard FHA underwriting requirements, occupy the property as a primary residence, and their credit score must be equal to or better than 500. This is exciting news especially for homeowners who are denied a loan modification through their banks. Interested borrowers typically foresee financial hardship, primarily due to loss of income, and would greatly benefit from an FHA Short Refinance.

    FHA Commissioner, David Stevens, believes the new program is a much needed “lifeline” for American families. Although the success of the FHA Short Refinance has yet to materialize, many have high hopes because it gives borrowers and lenders another weapon to battle negative equity in the current flagging housing market.

  • Mortgage Comparison Shopping May Get Easier, thetruthaboutmortgage.com


    The Federal Reserve has proposed a new rule that may make it easier for prospective homeowners and those looking to refinance shop around before making a commitment.

    The proposal, which was part of a 930-page document published mid-month in the Federal Register, would allow consumers to cancel mortgage applications within three days and get refunded for certain costs.

    Things like application fees and appraisal fees would be refundable, while credit report fees would not.

    Mortgage shoppers would be entitled to refunds if they canceled an application within three business days of receiving key disclosures, including the Good Faith Estimate and Truth in Lending Act statement.

    The Fed believes such a rule would help consumers shop for the best deal, instead of being locked in with one mortgage lender for fear of losing any up-front costs.

    But many lenders believe the rule will have little effect, as most already wait several days before charging any fees.

    Others are concerned it could delay an already backed-up process, as there will be a waiting period before anything is acted upon or ordered.

    Although, it’s not uncommon for a loan to be “on hold” until it makes it through underwriting and receives a formal decision.

    It’s unclear how the rule would affect mortgage brokers, those who work on behalf of banks directly with consumers.

    A recent Bankrate.com study found that mortgage closing costs rose more than 36 percent this year, with loan origination fees rising nearly 25 percent and third-party fees jumping almost 50 percent.

  • Them Be Fightin’ Words: The Fight Over Foreclosure Fees, by PAUL JACKSON, Stopforeclosurefraud.com


    For the law firms that manage and process foreclosures on behalf of investors and banking institutions, what’s a fair legal fee? What’s a fair filing fee? Should fees to outsourcers be prohibited? And just how much money should it really cost to process a foreclosure?

    As I write this, the answer to these and other questions are being fought out in the trenches, in an out-of-sight but increasingly heated battle involving Fannie Mae and Freddie Mac, the law firms that specialize in creditor’s rights, default industry service providers, and various private equity interests.

    It’s a complex fight that many say will ultimately shape the way U.S. mortgages are serviced over the course of the next decade — and perhaps beyond. It’s also a debate that promises to spill over into how loans are originated and priced.

    “No aspect of the U.S. mortgage business will go untouched by the outcome of this current debate,” said one attorney I spoke with, on condition of anonymity. “This is the single most important issue facing mortgage markets today, and will even determine how securities are structured in the future.”

    How foreclosures are managed

    Typically, a foreclosure involves legal and court filing fees — it is, after all, a legal process involving the forced transfer of a property from a non-paying borrower to secured lender. But the foreclosure process also typically involves a host of other associated fees, including necessary title searches, potential property insurance, homeowner’s association dues, property maintenance and repair, and much more.

    Many of these fees are ultimately tacked onto the “past due” amounts tied to a delinquent borrower — and done so legally. Much like when a credit card becomes past due and the interest rate kicks into high oblivion, consumers looking to catch up on their delinquent mortgage payments must also make up the difference in additional fees in order to successfully do so.

    Legal fees in the foreclosure business, however, aren’t what you might think. Instead of billing hourly for most work, as most attorneys in other fields would do, attorneys that specialize in processing foreclosures are paid on a flat-fee basis, using pre-determined fee schedules.

    Thanks to the market-making power of the GSEs, Fannie Mae and Freddie Mac — both of whom publish allowable fee schedules for every imaginable legal filing and process in the foreclosure repertoire — the entire foreclosure process has been reduced to a set of flat fees.

    And not even negotiated fees, at that. For firms that operate in the field of foreclosure management, the GSE allowable fees amount to a take-it-or-leave-it menu of prices.

    “For us, it doesn’t matter who the client is, even if it isn’t Fannie or Freddie,” said one attorney I spoke with, under condition of anonymity. “We know we’re only going to be able to claim whatever that flat fee schedule they set says we can claim, since other investors tend to employ whatever the GSE fee caps are.”

    Fannie and Freddie as housing HMOs? In the foreclosure business, that’s pretty much what it amounts to.

    But beyond determining the legal fee schedule for much of the multi-billion dollar default services market, the GSEs also largely determine who gets their own foreclosure work. Both Fannie and Freddie maintain networks of law firms called “designated counsel” or “approved counsel” in key states marked with significant foreclosure volume — and they either strongly suggest or require that any servicers managing a Fannie or Freddie loan in foreclosure refer any needed legal work to their approved legal counsel.

    Each state will have numerous designated counsel — sometimes as many as five law firms — but in practice, attorneys say, two to three firms end up with the lion’s share of each state’s foreclosure work. In states hit hard by the housing downturn and foreclosure surge, like Florida, the amount of work can be substantial.

    “The GSEs can force a servicer to use their designated counsel, especially if timeline performance in foreclosure management is out of some set boundary,” said one servicing executive at a large bank, who asked to remain anonymous. “It’s usually easiest to simply use their counsel on their loans, even if we don’t see that firm as best-in-class.”

    With the vast majority of the mortgage market now running through the GSEs, and much of what’s left of the private market following the guidelines Fannie and Freddie establish, it should come as no surprise to find that a few law firms in each state end up with the majority of the foreclosure work, sources say.

    The rise of the ‘foreclosure mills’

    Being designated as approved counsel by Fannie Mae and/or Freddie Mac does carry risk. Just ask Florida’s David Stern, who has seen his burgeoning operation pejoratively branded a ‘foreclosure mill’ by consumer groups, dragged through the press for both alleged and real consumer misdeeds, and facing numerous investor lawsuits surrounding the operation of DJSP Enterprises, Inc. (DJSP: 3.22 -1.23%) — the publicly-traded processing company tied to the law firm.

    While Stern’s operation may win the award for ‘most susceptible to negative publicity,’ how the law firm operates is far from unique in the foreclosure industry.

  • When Buying A House In Portland Narrow Your Search + RMLS Email Updates, by Betty Jung, Re/Max Equity Group


    Last weekend showing property it was brought home to me again how important it is to narrow your search.  I met with two separate buyers in different parts of town.  They knew exactly where they wanted to purchase and their search is contained within those areas.

    Several years ago I had a buyer who was interested in purchasing in Portland.  He told me he wanted to look in Clackamas, Washington, and Multnomah counties – pretty much half the state, or thereabouts.  It was extremely difficult for him to narrow down where he wanted to live because his search parameter was way too large in scope. I kept encouraging him to narrow his choices.  As a result, he thought a house in one part of the State looked extremely appealing when in fact compared to other areas and factors, it wasn’t a good deal at all.  It was like comparing apples to oranges.

    That’s not to say you shouldn’t look at several areas, but the sooner you zero in on the location you would rather live in, the easier it is on you, the buyer.

    One thing I tell my buyers is that I would hate for them to look on one side of the road and never having looked on the other side. When you first start looking for a house, of course, your parameters may not be as narrow.  It’s actually good if you start with a larger area and then narrow it down if you don’t know where you want to live.  But, that’s not to say you should include half the state of Oregon.  The sooner you know where you want to live, the sooner you will find your “dream” home.

    For email updates of property listings direct from our RMLS,™ please click on this link and fill out the form to start receiving them.

    Betty Jung
    http://www.bjung.equitygroup.com
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    http://bettyjung.wordpress.com
    http://lakeoswegolivingphotoblog.wordpress.com
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