OREGON REAL ESTATE ROUND TABLE

Tag: Mortgages

You will find links to mortgage coompanies I feel that are staffed with experienced proffessionals that can help you with your mortgage and real estate lending needs.

  • Successful Short Sales: It All Starts with the Seller, by Gee Dunsten, Rismedia.com


    RISMEDIA, Monday, February 13, 2012— Last month, I outlined the reasons why you should get back on the short sales bandwagon if you’ve fallen off. In the current market, more and more lenders are coming around to the realization that short sales are a favorable option after all and, therefore, are processing and closing short sales at a much faster pace.

    That said, there are critical steps that must be taken throughout the short sale process.

    First and foremost, make sure the home seller is truly eligible for a short sale. A credible, documented financial hardship resulting from a loss of employment, divorce, major medical crisis, death, etc., must exist. This financial hardship needs to be proven with proper documentation as well as detailed financial statements, paystubs, bank statements and tax returns.

    To properly identify and qualify a potential short sale client, conduct a thorough interview right up front—and be sure to leave no stone unturned. This will prevent you from futilely pursuing a short sale with the lender. I use the following Short Sale Seller Questionnaire with my clients:

    1. Is your property currently on the market? Is it listed with an agent?
    2. Is this your primary residence?
    3. When was the property purchased?
    4. What was the original purchase price?
    5. Who holds the mortgage?
    6. What kind of loan do you have?
    7. Do you have any other liens against your property?
    8. Who is on the title (or deed) for the property?
    9. Who is on the mortgage?
    10. Do you have mortgage insurance?
    11. Are you current with your payments? If not, how far in arrears are you?
    12. How much do you owe?
    13. Why do you need/want to sell?
    14. What caused you or will be causing you to miss your mortgage payment obligation?
    15. Do you have funds in accounts that could be used to satisfy the deficiency?
    16. Are you currently living in the property? If not, is the property being maintained?
    17. How soon do you need to move?
    18. Are you up to date on your condo or HOA payments (where applicable)?
    19. Do you owe any back taxes?
    20. Are you considering filing for bankruptcy protection?
    21. Are you currently pursuing a loan modification with your lender?
    22. Who is occupying the property?
    23. Do you hold or are you subject to any type of security clearance related to your job?
    24. What are your plans after you sell?
    25. Are you looking to receive any money from the sale of your home?
    26. How much income are you currently making from all sources?
    27. Do you anticipate any income change in the not-too-distant future?
    28. Do you have a pen and a piece of paper to make a couple of notes?

    Emphasize that inaccurate or missing information will potentially delay or completely thwart the short sale process. Next month, we’ll take a close look at working with lenders to secure a short sale.

    George “Gee” Dunsten, president of Gee Dunsten Seminars, Inc., has been a real estate agent and broker/owner for almost 40 years. Dunsten has been a senior instructor with the Council of Residential Specialists for more than 20 years. To reach Gee, please email, gee@gee-dunsten.com. For an extended version of this article, please visit www.rismedia.com.

     

     

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  • Fannie, Freddie overhaul unlikely, by Vicki Needham, Thehill.com


    An overhaul of Fannie Mae and Freddie Mac is unlikely again this year despite recent Republican efforts to move the issue up the agenda.

    Congressional Republicans, along with some Democrats — and even GOP presidential candidate Newt Gingrich — are renewing calls to craft an agreement to reduce the involvement of Fannie and Freddie in the nation’s mortgage market.

    But without a broader accord, passage of any legislation this year is slim, housing experts say.

     

    Jim Tobin, senior vice president of government affairs for the National Association of Home Builders, concedes that despite a mix of Democratic and Republican proposals, including a push by the Obama administration last year, congressional leaders probably won’t get far this year on a plan for Fannie and Freddie, the government-controlled mortgage giants.

     

    Tobin said there are “good ideas out there” and while he expects the House to put some bills on the floor and possibly pass legislation, the Senate is likely to remain in oversight mode without any “broad-based legislation on housing finance.”

    “We’re bracing for a year where it’s difficult to break through on important policy issues,” he said this week.

    While the issue makes for a good talking point, especially in an presidential election year, congressional efforts are largely being stymied by the housing market’s sluggish recovery, prohibiting the hand off between the government and private sector in mortgage financing, housing experts say.

    David Crowe, chief economist with NAHB, said that the market has hit rock bottom and is now undergoing a “slow climb out of the hole.”

    The House has taken the biggest steps so far — by mid-July the Financial Services Committee had approved 14 bills intended to jump-start reform of the government-sponsored enterprises.

    “As we continue to move immediate reforms, our ultimate goal remains, to end the bailout of Fannie, Freddie and build a stronger housing finance system that no longer relies on government guarantees,” panel Chairman Spencer Bachus (R-Ala.) said last summer.

    Meanwhile, a number of GOP and bipartisan measures have emerged — Democrats and Republicans generally agree Fannie and Freddie are in need of a fix but their ideas still widely vary.

    There are a handful of bills floating around Congress, including one by Reps. John Campbell (R-Calif.) and Gary Peters (D-Mich.), and another by Reps. Gary Miller (R-Calif.) and Carolyn Maloney (D-N.Y), which would wind down Fannie and Freddie and create a new system of privately financed organizations to support the mortgage market.

    “Every one of those approaches replaces them [Fannie and Freddie] with what they think is the best alternative to having a new system going forward that would really fix the problem and would really give certainty to the marketplace and allow housing finance to come back, and therefore housing to come back, as well,” Campbell said at a markup last month.

    There’s another bill by Rep. Jeb Hensarling (R-Texas) and bills in the Senate being pushed by Sens. Bob Corker (R-Tenn.) and Johnny Isakson (R-Ga.).

    Corker, a member of the Senate Banking Committee, made the case earlier this week for unwinding government support for the GSEs while promoting his 10-year plan that would put in place the “infrastructure for the private sector to step in behind it.”

    “A big part of the problem right now is the private sector is on strike,” Corker said.

    He has argued that his bill isn’t a silver bullet, rather a conversation starter to accelerate talks.

    “So what we need to do is figure out an orderly wind-down,” Corker said in November. “And so we’ve been working on this for some time. We know that Fannie and Freddie cannot exist in the future.”

    He suggested getting the federal government this year to gradually wind down the amount of the loans it guarantees from 90 percent to 80 percent and then to 70 percent.

    “And as that drops down, we think the market will send signals as to what the difference in price is between what the government is actually guaranteeing and what they’re not,” he said.

    Even Gingrich, who has taken heat for his involvement with taking money while doing consulting work for the GSEs, called for an unwinding during a December interview.

    “I do, in fact, favor breaking both of them up,” he said on CBS’ Face the Nation. “I’ve said each of them should devolve into probably four or five companies. And they should be weaned off of the government endorsements, because it has given them both inappropriate advantages and because we now know from the history of how they evolved, that they abused that kind of responsibility.”

    In a white paper on housing last week, the Federal Reserve argued that the mortgage giants should take a more active role in boosting the housing market, although they didn’t outline suggestions for how to fix the agencies.

    The central bank did argue that “some actions that cause greater losses to be sustained by the GSEs in the near term might be in the interest of taxpayers to pursue if those actions result in a quicker and more vigorous economic recovery.”

    Nearly a year ago, Treasury Secretary Timothy Geithner asked Congress to approve legislation overhauling Fannie Mae and Freddie Mac within two years — that deadline appears to be in jeopardy.

    The Obama administration’s initial recommendations called for inviting private dollars to crowd out government support for home loans. The white paper released in February proposed three options for the nation’s housing market after Fannie and Freddie are wound down, with varying roles for the government to play.

    About the same time last year, Bachus made ending the “taxpayer-funded bailout of Fannie and Freddie” the panel’s first priority.

    While an overhaul remains stalled for now there is plenty of other activity on several fronts.

    In November, the Financial Services panel overwhelmingly approved a measure to stop future bonuses and suspend the current multi-million dollar compensation packages for the top executives at the agencies.

    The top executives came under fire for providing the bonuses but argued they need to do something to attract the talent necessary to oversee  $5 trillion in mortgage assets.

    Earlier this month, the Federal Housing Finance Agency announced that the head of Fannie received $5.6 million in compensation and the chief executive of Freddie received $5.4 million.

    Under the bill, the top executives of Fannie and Freddie could only have earned $218,978 this year.

    Last week, Fannie’s chief executive Michael Williams announced he would step down from his position once a successor is found. That comes only three months after Freddie’s CEO Charles Haldeman Jr. announced that he will leave his post this year.

    The government is being tasked to find replacements, not only for the two mortgage giants which have cost taxpayers more than $150 billion since their government takeover in 2008, but there is talk that the Obama administration is looking to replace FHFA acting director Edward DeMarco, the overseer of the GSEs.

    In a letter to President Obama earlier this week, more than two dozen House members said DeMarco simply hasn’t done enough to help struggling homeowners avoid foreclosure.

    The lawmakers are pushing the president to name a permanent director “immediately.”

    Also, in December, the Securities and Exchange Commission (SEC) sued six former executives at Fannie and Freddie, alleging they misled the public and investors about the amount of risky mortgages in their portfolio.

    In the claims, the SEC contends that as the housing bubble began to burst, the executives suggested to investors that the GSEs were not substantially exposed to sub-prime mortgages that were defaulting across the country.

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  • Mortgage Guaranty Insurance — Market Collapsing, Insurers Next?, by Gavin Magor, Weissratings.com


    This week, President Obama announced that the Federal Housing Finance Agency (FHFA) would be extending the Home Affordable Refinance Program (HARP) to an estimated additional one million homeowners.  In practice what this means is that homeowners that have a Fannie Mae (OTCBB: FNMA) or Freddie Mac (OTCBB: FMCC) backed loan and owe more than 125% of the value of their home may qualify for a restructuring.

    Mortgage insurers were pummeled by claims in the first half of the year, losing $2.4 billion in the six months through June–$618 million in the first quarter plus another $1.7 billion in the second quarter. The third-quarter numbers are not yet available; however, with no sign of significant improvement in the economy for the remainder of the year it appears that 2010 losses will be matched in 2011.

     

    Gavin Magor, senior financial analyst at Weiss Ratings, has more than 25 years of international experience in credit-risk management, insurance, commercial lending and analysis. He leads the firm’s insurance ratings division and developed the methodology for Weiss’ Sovereign Debt Ratings.

     

    http://weissratings.com/news/articles/mortgage-guaranty-insurance-market-collapsing-insurers-next/

     

    Given the state of the mortgage guaranty market, will the insurers even be there to support these loans, or more broadly, any loans?

    The mortgage guaranty industry is dominated by six insurance groups.  Subsidiaries of MGIC Investment Corporation (NYSE: MTG), Radian Group (NYSE: RDN), Genworth Financial (NYSE: GNW), PMI Group (NYSE: PMI), American International Group (NYSE: AIG) and Old Republic International Corporation (NYSE: ORI) wrote 93% of the $4.4 billion of premiums in 2010 with just five companies writing 80% of the total.

    These same companies also recorded $1.7 billion or 71% of the combined $2.4 billion losses.  United Guaranty Residential Insurance Co (an AIG subsidiary) is the only large insurer that recorded a profit during 2010 and for the first two quarters of 2011.  Mortgage Guaranty Insurance Corp (MGIC) recorded a profit in 2010 after reserve adjustments.

    Mortgage Insurance Companies of America, a group representing the major mortgage insurers, reports that new insurance written increased each month from April through August. It is this business that reflects an improved borrower profile according to the insurers and is expected to perform better than the pre-2008 policies.

    On the downside, it reports that primary defaults have increased each month since March and the cure rate, reflecting the resolution of defaults, has declined as many months as it has improved, but the trend is down. A report from RealtyTrac on October 13 reported that first-time defaults rose 14% between July and September 2011 over the prior quarter.  Consequently, in-force insurance declined on a month-by-month basis, since February, down a total of $27.1 billion or 4.4% to $598.6 billion at the end of August.

    Earned premiums dropped 7.9% during 2010, with the larger insurers dropping 9.1%.  With $3.5 billion out of the $4.4 billion of premiums earned by the largest insurers, only Radian Guaranty Inc experienced a rise in premiums, increasing 3.5%.  The remainder experienced declines anywhere from 6.4% to 21.6%.  

    Capital and surplus reported by mortgage insurers dropped 7% from the first to second quarters of 2011, and $1 billion or 13% since December 2010. Assets declined $608 million or 2.3% between March and June.

    Two substantial groups, PMI and Old Republic, wrote 24.6% of 2010 earned premiums but were forced to effectively withdraw from the market at the end of the third quarter of 2011. Two PMI subsidiaries were placed into receivership by the state insurance regulator.  One, PMI Mortgage Insurance Company, recorded 11.6% of the total mortgage premiums earned in 2010.

    The market for mortgage guaranty paper has therefore shrunk. The line of business is not profitable at this stage for the majority of insurers. The concern is that the losses will continue to grow and, with limited growth in real estate sales requiring mortgage insurance, there will be additional withdrawals from the market and or potential failures.

    Two of the largest mortgage insurers are Mortgage Guaranty Insurance Corporation (MGIC), a subsidiary of Mortgage Guaranty Insurance Corp. and Genworth Mortgage insurance Corporation (Genworth), a subsidiary of Genworth Financial Inc.  These two companies, ranking first and third respectively in market share, hold 35% of the market with Radian sandwiched in between. 

    Despite the apparent similarities, they could not have more disparate approaches and confidence in the mortgage guaranty market. Both companies write only one line of business and both increased their market penetration in 2010, but the similarities end there.  MGIC represents 72% of the assets of its parent while Genworth only represents 2.5% of its parent and thus  is not the major focus of the group. This difference in relevance within each group is demonstrated in the contrasting approaches to the current market difficulties.

    1. MGIC slightly increased its market penetration during 2010, from 22.9% to 23.1%, despite a 7.3% fall in earned premiums from $1.1 billion to $1.02 billion. This increase did not translate into profits however. Only a $619 million release ofclaims reserves prevented a loss in 2010.  It’s noteworthy though that MGIC was profitable for each of the “Great Recession” years of 2007 to 2009.
    2. Although MGIC recognizes that the loan origination market is not growing, it contends that it is positioned to operate in the restricted market and that it is sufficiently capitalized to take advantage of the better quality business now available.
    3. Like MGIC, Genworth slightly increased its market penetration during 2010, from 11.7% to 11.9%, despite a 6.4% fall in earned premiums from $558.2 million to $522.6 million. Unlike MGIC it recorded losses in each of the years from 2008 to 2010.
    4. On the other hand, Genworth sees that the future of the mortgage insurance market lies in the regulatory and legislative actions taken to change the real estate market. It recognizes that there could be some industry consolidation.

    What these two insurers appear to be demonstrating clearly is that whether the mortgage guaranty business is core to a group or not the odds are currently stacked against them because of the legacy business. 

    Mortgage insurers have traditionally, like most property and casualty insurers, earned substantial income from investments. A drop in investment income should be expected to continue based on the current interest rate environment and bond pricing, drying up this revenue source

    The investment dilemma is a challenge for all P&C insurers.  There is a growing reliance on investments for profits; at the same time there are reduced yields in the current investment environment. With unsustainable underwriting losses, insurers must navigate among undesirable alternatives:  1) seeking higher investment returns by purchasing riskier securities; or 2) increasing premiuns at the risk of dampening demand for mortgages

    This is another area where MGIC and Genworth have differed. Genworth has increased its junk bond investments from 1.7% of its total portfolio in 2008 to 3.4% in 2010.  This is in line with the general trend among all P&C insurers. MGIC has, on the other hand, reduced its junk holdings which has resulted in an annualized decline of 21% in investment income putting additional pressure on the profitability of the main underwriting business.

    Something has to give and, as we saw in the third quarter, both PMI and Old Republic International Corp were forced to stop writing new policies due to insufficient capital.  PMI is on the brink of collapse, and two subsidiaries were seized by the regulator in September. Despite opportunities to write more, and presumably profitable, business with a smaller competitive field it seems reasonable to assume that there will be additional insurers that withdraw from the market, are seized by regulators, or are sold. 

    Genworth appears to be a prime example of a company in the wrong place at the wrong time and it could be jettisoned by its parent sooner rather than later.  MGIC on the other hand IS the business and appears to be girding its loins for the fight ahead, hoping that it will be able to successfully get through the unprofitable pre-2008 book of business and emerge stronger, with a profitable book of new business and positioned to take advantage of future recoveries in the housing market.

     

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  • What the heck does “loan-to-value” mean?


    There are lots of terms we use in the mortgage industry that aren’t part of everyday parlance. Today, I’ll talk a little bit about “loan-to-value”, or LTV for short.

    In fact, I have a video that’s less than 90 seconds long if you’re in a hurry:

    Loan-to-value

    So, just to recap what I said in the video, your loan-to-value is the percentage of your home’s value that you finance with your home loan.

    Whether you a purchasing a home, or refinancing your existing mortgage, LTV is an extremely important factor in making an educated decision about your home loan.

    I’ll give you an example:

    FHA – When purchasing a home using an FHA home loan, you can finance up to 96.5% of the appraised value of the property. If you are refinancing, you have two options: “rate & term” or “cash-out”. Rate & term means you are refinancing to lower your rate or change the length of your loan. A rate & term refinance is capped at a 97.75% LTV for FHA. Cash-out FHA refinances are limited to 85 per cent of the value of your home. If your current mortgage is an FHA loan, you can refinance with an FHA streamline, which does not have an LTV limitation.

    So your needs define your loan-to-value, which helps define what home loan program you are going to apply for.

    If you would like to learn more about loan-to-value, other mortgage terminology, or home loans in Oregon and Washington, I invite you to visit my site or contact me. I am long on answers and short on sales pitches 🙂

    Thanks for taking a minute to read this post!

    Picture: Jason HillardJason Hillard – homeloanninjas.com

    Mortgage Advisor in Oregon and Washington MLO#119032

    Pinnacle Mortgage Bankers

    a div of Pinnacle Capital Mortgage Corp

    503.799.4112

    jason@mypmb.us

    1706 D St Vancouver, WA 98663

    NMLS 81395 WA CL-81395

    Equal Housing Lender

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  • Oregon’s Shadow Inventory – The “New Normal”?, by Phil Querin, Q-Law.com


    The sad reality is that negative equity, short sales, and foreclosures, will likely be around for quite a while.  “Negative equity”, which is the excess by which total debt encumbering the home exceeds its present fair market value, is almost becoming a fact of life. We know from theRMLS™ Market Action report that average and median prices this summer have continued to fall over the same time last year.  The main reason is due to the volume of  “shadow inventory”. This term refers to the amorphous number of homes – some of which we can count, such as listings and pendings–and much of which we can only estimate, such as families on the cusp of default, but current for the moment.  Add to this “shadow” number, homes already 60 – 90 days delinquent, those already in some stage of foreclosure, and those post-foreclosure properties held as bank REOs, but not yet on the market, and it starts to look like a pretty big number.  By some estimates, it may take nearly four years to burn through all of the shadow inventory. Digging deeper into the unknowable, we cannot forget the mobility factor, i.e. people needing or wanting to sell due to potential job relocation, changes in lifestyle, family size or retirement – many of these people, with and without equity, are still on the sidelines and difficult to estimate.

    As long as we have shadow inventory, prices will remain depressed.[1] Why? Because many of the homes coming onto the market will be ones that have either been short sold due to negative equity, or those that have been recently foreclosed.  In both cases, when these homes close they become a new “comp”, i.e. the reference point for pricing the next home that goes up for sale.  [A good example of this was the first batch of South Waterfront condos that went to auction in 2009.  The day after the auction, those sale prices became the new comps, not only for the unsold units in the building holding the auction, but also for many of the neighboring buildings. – PCQ]

    All of these factors combine to destroy market equilibrium.  That is, short sellers’ motivation is distorted.  Homeowners with negative equity have little or no bargaining power.  Pricing is driven by the “need” to sell, coupled with the lender’s decision to “bite the bullet” and let it sell.  Similarly, for REO property, pricing is motivated by the banks’ need to deplete inventory to make room for more foreclosures.  A primary factor limiting sales of bank REO property is the desire not to flood the market and further depress pricing. Only when market equilibrium is restored, i.e. a balance is achieved where both sellers and buyers have roughly comparable bargaining power, will we see prices start to rise. Today, that is not the case – even for sellers with equity in their homes.  While equity sales are faster than short sales, pricing is dictated by buyers’ perception of value, and value is based upon the most recent short sale or REO sale.

    So, the vicious circle persists.  In today’s world of residential real estate, it is a fact of life.  The silver lining, however, is that most Realtors® are becoming much more adept – and less intimidated – by the process.  They understand these new market dynamics and are learning to deal with the nuances of short sales and REOs.  This is a very good thing, since it does, indeed, appear as if this will be the “new normal” for quite a while.

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  • No End in Sight: Mortgage Loans Harder in High-Foreclosure Areas by Brian O’Connell, Mainstreet.com


    NEW YORK (MainStreet) — Here’s another bitter pill for homeowners to swallow: If you live in an area with a high foreclosure rate, the chances of someone getting a loan to buy your house significantly decreases.

    The news comes from the Federal Reserve’s latestreport, in which it concluded that mortgage lending was dramatically lower in communities and neighborhoods where foreclosures were surging, using data from the Neighborhood Stabilization Program (NSP) and from the Home Mortgage Disclosure Act (HMDA).

    “Home-purchase lending in highly distressed census tracts identified by the Neighborhood Stabilization Program was 75% lower in 2010 than it had been in these same tracts in 2005,” the report said. “This decline was notably larger than that experienced in other tracts, and appears to primarily reflect a much sharper decrease in lending to higher-income borrowers in the highly distressed neighborhoods.”

    The Fed uses the term “highly distressed” in place of the word “foreclosure”, but the message is clear: Banks and mortgage lenders are taking a big step back from lending to buyers who want a home in a high-foreclosure neighborhood.

    It’s the same deal for borrowers who want to actually live in a home and buyers who want to purchase the property as aninvestment, as neither party seems to be having much luck in getting a home loan in a highly distressed neighborhood, according to the Fed. The lack of credit extended to investors could really hurt neighborhoods crippled by foreclosures.

    “In the current period of high foreclosures and elevated levels of short sales, investor activity helps reduce the overhang of unsold and foreclosed properties,” the Federal Reserve says.

    Overall, the Fed reports that 76% fewer mortgage loans were granted to “non-owner occupant” buyers in 2010, compared to 2005.

    The Fed’s report reveals some other trends in the mortgage market:

    • Mortgage originations declined from just under 9 million loans to fewer than 8 million loans between 2009 and 2010. Most significant was the decline in the number of refinance loans despite historically low baseline mortgage interest rates throughout the year.  Home-purchase loans also declined, but less so than the decline in refinance lending.
    • While loans originated under the Federal Housing Administration (FHA) mortgage insurance program and the Department of Veterans Affairs‘ (VA) loan guarantee program continue to account for a historically large proportion of loans, such lending fell more than did other types of lending.
    • In the absence of home equity problems and underwriting changes, roughly 2.3 million first-lien owner-occupant refinance loans would have been made during 2010 on top of the 4.5 million such loans that were actually originated.
    • A sharp drop in home-purchase lending activity occurred in the middle of 2010, right alongside the June closing deadline (although the deadline was retroactively extended to September). The ending of this program during 2010 may help explain the decline in the incidence of home-purchase lending to lower-income borrowers between the first and second halves of the year.

    All in all, the report offers a pretty bleak – but even-handed and thorough – review of today’s home-purchase market.

    Read more about the continuing effects of the housing crisis at MainStreet’s Foreclosure topic page.

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  • Court rulings complicate evictions for lenders in Oregon, by Brent Hunsberger, The Oregonian


    Another Oregon woman successfully halted a post-foreclosure eviction after a judge in Hood River found the bank could not prove it held title to the home.

    Sara Michelotti’s victory over Wells Fargo late last week carries no weight in other Oregon courts, attorneys say. But it illustrates a growing problem for banks  — if the loans’s ownership history isn’t recorded properly, foreclosed homeowners might be able to fight even an eviction. 

    “There’s this real uncertainty from county to county about what that eviction process is going to look like for the lender,” said Brian Cox, a real estate attorney in Eugene who represented Wells Fargo. 

    Michelotti’s case revolved around a subprime mortgage lender, Option One Mortgage Corp., that went out of business during the housing crisis. Circuit Court Judge Paul Crowley ruled that it was not clear when or how Option One transferred Michelotti’s mortgage to American Home Mortgage Servicing Inc., which foreclosed on her home and later sold it to Wells Fargo. 

    Since the loan’s ownership was not properly recorded in Hood River County records, as required by Oregon law, Crowley ruled that Wells Fargo could not prove it had valid title to the property to evict. Crowley presides over courts in Hood River, Gilliam, Sherman, Wasco and Wheeler counties. 

    In June, a Columbia County judge blocked U.S. Bank’s eviction of Martha Flynn after finding the loan’s ownership history wasn’t properly recorded. But unlike Flynn’s case, Michelotti’s loan did not involve the Mortgage Electronic Registration Systems – a lightening rod for lawsuits over whether lenders properly foreclosed n homeowners. 

    “A lot of people get lost in ‘Oh it’s all MERS,’” said Michelotti’s attorney, Thomas Cutler of Harris Berne Christensen in Lake Oswego. “The problem runs broader than that.” 

    Crowley also rejected the bank’s argument that if Michelotti had paid her mortgage, the eviction would never have occurred. 

    “(Wells Fargo)’s counter argument to the effect that ‘if (Michelotti) had paid the mortgage we wouldn’t be here’ does not prevail at this junction because the question remains: are the right we here?’” Crowley wrote. 

    H&R Block Inc. sold Option One in 2008 to Wilbur Ross & Co., a distressed-asset investor, who merged it with American Home Mortgage Investment Corp. 

    But Crowley said he found no evidence of when the merger took place or why Option One’s name continued to be used on loan documents. 

    Cox said Wells Fargo had not yet decided how to respond to the ruling.

     
     

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  • The New Homestead Act: Update, by Dr. Ed’s Blog


    President Barack Obama recently promised that he has a plan to create jobs, which will be disclosed in September, after he takes 10 days off in Martha’s Vineyard. I certainly hope he comes up with a good plan. If he needs one, how about the one that Carl Goldsmith and I proposed at the beginning of August? [1] I met with my congressman, Gary Ackerman, last Tuesday to pitch the plan. He liked it well enough to issue a press release on Wednesday of this week endorsing it and promising to introduce the “Homestead: Act 2” when Congress returns from its August recess.[2]

    The Act aims to reduce the huge overhang of unsold homes by offering a matching down payment subsidy of up to $20,000 for homebuyers, who do not currently own a home, and exempting newly acquired rental properties from taxation for 10 years. The cost of these incentives would be offset by the tax revenues collected by lowering the corporate tax rate on repatriated earnings to 10%. 

    Congressman Gary Ackerman is presently serving his fifteenth term in the US House of Representatives. He represents the Fifth Congressional District of New York, which encompasses parts of the New York City Borough of Queens and the North Shore of Long Island, including west and northeast Queens and northern Nassau County. Ackerman serves on the powerful Financial Services Committee, where he sits on two Subcommittees: Financial Institutions and Consumer Credit as well as Capital Markets and Government-Sponsored Enterprises (of which he is the former Vice Chairman). The stock market rose sharply after March 12, 2009, when Mr. Ackerman, during a congressional hearing, leaned on Robert Herz, the head of FASB, to suspend the mark-to-market rule. FASB did so on April 2. I had brought this issue to the congressman’s attention in a meeting we had during November 2008.

     

    Dr. Ed’s Blog
    http://blog.yardeni.com/

     

     

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  • RATES WAY DOWN, APPS WAY UP… THAT’S GOOD, RIGHT?, by Diane Mesgleski, Mi–Explode.com


    Last week mortgage applications rose a whopping 21.7% from the previous week according to the Mortgage Bankers Association’s Weekly Mortgage Applications Survey.  Great news for the industry to be sure.  Great news for the housing market?  Not so much, when you consider that the bulk of the applications are refinances, not purchases.  Refis rose 31% from the previous week, while purchases remain low. Actually they dropped a skooch.  Low purchase numbers mean continued stagnation in the housing market and continued increase in inventory as foreclosures continue to be added to the count.  Which means lower values. Kind of a vicious cycle.  Those of us in the mortgage biz were not surprised by last week’s numbers, since low rates spur refis and rising interest rates signal a purchase market.  You don’t even need to understand the reason why, you just know that is how it works. It is comforting to know that something is working the way it always has.

    What is not comforting is the bewildered Fed chairman, and many baffled economists who don’t understand why the present policies are not working.  Even if rates could go lower it would not have an impact on the housing market.  There is no lack of money to lend, there is a lack of qualified borrowers.  And that situation is not improving with time, it is getting worse.   At the same time Washington is tightening their stranglehold on lenders with ever increasing regulation, then wondering why banks are not lending.  No matter what you believe should be the course, whether more regulation or less, you have to agree that government intervention has not and is not helping.

    Has anybody else noticed, the only winner in this current climate are the Too Big To Fail banks?   They have plenty of cash, since they cannot lend it.  One article I read put it this way, their balance sheets are “healing”.   Sounds so soothing you almost forget to be angry.

    There is one other factor in the current housing crisis worth mentioning: the lack of consumer confidence.  Nobody is going to buy a house when the prices are continuing to fall.  And even in areas where the prices are stable, people have no confidence in the economy or in Washington’s ability or willingness to fix it. They are simply afraid to make the biggest investment of their lives in this climate.   If our leaders would actually lead rather than play political games we might actually start seeing change.

    But only if we give them another four years.   No wonder Ben does not think that anything will get better until 2013….now I get it.

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  • The Meat of the Matter – In Re: Veal Analyzed, by Phil Querin, Q-Law.com


     

    “When a note is split from a deed of trust ‘the note becomes, as a practical matter, unsecured.’ *** Additionally, if the deed of trust was assigned without the note, then the assignee, ‘having no interest in the underlying debt or obligation, has a worthless piece of paper.’” [In re Veal – United States Bankruptcy Appellate Panel of the Ninth Circuit (June 10, 2011)]

    Introduction. This case is significant for two reasons: First, it was heard and decided by a three-judge Bankruptcy Appellate Panel for the Ninth Circuit, which includes Oregon.  Second, it represents the next battleground in the continuing foreclosure wars between Big Banks and Bantam Borrowers: The effect of the Uniform Commercial Code (UCC”)on the transferability of the Promissory Note (or “Note”).

    Remember, the Trust Deed follows the Note.  If a lender is the owner of a Trust Deed, but cannot produce the actual Note which it secures, the Trust Deed is useless, since the lender is unable to prove it is owed the debt.  Conversely, if the lender owns the Note, but not the Trust Deed, it cannot foreclose the secured property. [For a poetic perspective on the peripatetic lives of a Note and Trust Deed, connect here. – PCQ]

    By now, most observers are aware that Oregon’s mandatory recording statute, ORS 86.735(1), has been a major impediment to lenders and servicers seeking trying to foreclose borrowers.  Two major Oregon cases, the first in federal bankruptcy court, In re McCoy, and the other, in federal district trial court, Hooker v. Bank of America, et. al, based their decisions to halt the banks’ foreclosures, squarely on the lenders’ failure to record all Trust Deed Assignments.  To date, however, scant mention has been made in these cases about ownership of the Promissory Note. [Presumably, this is because a clear violation of the Oregon’s recording statute is much easier to pitch to a judge, than having to explain the nuances – and there are many – of Articles 3 and 9 of the UCC.  – PCQ]

    Now we have In re: Veal, which was an appeal from the bankruptcy trial judge’s order granting Wells Fargo relief from the automatic stay provisions under federal bankruptcy law.   Such a ruling meant that Wells Fargo would be permitted to foreclose the Veals’ property.  But since this case arose in Arizona – not Oregon – our statutory law requiring the recording of all Assignments as a prerequisite to foreclosure, did not apply.  Instead, the Veals’ lawyer relied upon the banks’ failure to establish that it had any right under the UCC to enforce the Promissory Note.

    Legal Background. For reasons that do not need to be explained here, the Veals filed two contemporaneous appeals. One was against Wells Fargo Bank, which was acting as the Trustee for a REMIC, Option One Mortgage Loan Trust 2006–3, Asset–Backed Certificates Series 2006–3.  In the second appeal, the Veals challenged the bankruptcy court’s order overruling their objection to a proof of claim filed by Wells Fargo’s servicing agent, American Home Mortgage Servicing, Inc. (“AHMSI”).

    Factual Background. In August 2006, the Veals executed a Promissory Note and Mortgage in favor of GSF Mortgage Corporation (“GSF”). On June 29, 2009, they filed a Chapter 13 bankruptcy.  On July 18, 2009, AHMSI filed a proof of claim, on behalf of Wells Fargo as its servicing agent.  AHMSI included with its proof of claim the following documents:

    • A copy of the Note, showing an indorsement[1] from GSF to “Option One”[2];
    • A copy of the GSF’s Mortgage with the Veals;
    • A copy of a recorded “Assignment of Mortgage” assigning the Mortgage from GSF to Option One; and,
    • A letter dated May 15, 2008, signed by Jordan D. Dorchuck as Executive Vice President and Chief Legal Officer of AHMSI, addressed to “To Whom it May Concern”, stating that AHMSI acquired Option One’s mortgage servicing business.[3]

    The Veals argued that AHMSI [Wells’ servicing agent] lacked standing since neither AHMSI or Wells Fargo established that they were qualified holders of the Note under Arizona’s version of the UCC.

    In a belated and last ditch effort to establish its standing, Wells Fargo filed a copy of another Assignment of Mortgage, dated after it had already filed for relief from bankruptcy stay.  This Assignment purported to transfer to Wells Fargo the Mortgage held by “Sand Canyon Corporation formerly known as Option One Mortgage Corporation”.

    The 3-judge panel noted that neither of the assignments (the one from GSF to Option One and the other from Sand Canyon, Option One’s successor, to Wells) were authenticated – meaning that there were no supporting affidavits or other admissible evidence vouching for the authenticity of the documents.  In short, it again appears that none of the banks’ attorneys would swear that the copies were true and accurate reproductions of the original – or that they’d even seen the originals to compare them with.  With continuing reports of bogus and forged assignments, and robo-signed documents of questionable legal authority, it is not surprising that the bankruptcy panel viewed this so-called “evidence” with suspicion, and did not regard it as persuasive evidence.

    • As to the Assignment of Mortgage from GSF (the originating bank) to Option One, the panel noted that it purported to assign not only the Mortgage, but the Promissory Note as well.[4]
    • As to the Assignment of Mortgage from Sand Canyon [FKA Option One] to Wells Fargo[created after Wells Fargo’s motion for relied from stay], the panel said that the document did not contain language purporting to assign the Veals’ Promissory Note.  As a consequence[even had it been considered as evidence], it would not have provided any proof of the transfer of the Promissory Note to Wells Fargo. At most, it would only have been proof that the Mortgage had been assigned.

    After considerable discussion about the principles of standing versus real party in interest, the 3-judge panel focused on the latter, generally defining it as a rule protecting a defendant from being sued multiple times for the same obligation by different parties.

    Applicability of UCC Articles 3 and 9. The Veal opinion is well worth reading for a good discussion of the Uniform Commercial Code and its applicability to the transfer and enforcement of Promissory Notes.  The panel wrote that there are three ways to transfer Notes.  The most common method is for one to be the “holder” of the Note.  A person may be a “holder” if they:

    • Have possession of the Note and it has been made payable to them; or,
    • The Note is payable to the bearer [e.g. the note is left blank or payable to the “holder”.]
    • The third way to enforce the Note is by attaining the status of a “nonholder in possession of the [note] who has the rights of a holder.” To do so, “…the possessor of the note must demonstrate both the fact of the delivery and the purpose of the delivery of the note to the transferee in order to qualify as the “person entitled to enforce.”

    The panel concluded that none of Wells Fargo’s exhibits showed that it, or its agent, had actual possession of the Note.  Thus, it could not establish that it was a holder of the Note, or a “person entitled to enforce” it. The judges noted that:

    “In addition, even if admissible, the final purported assignment of the Mortgage was insufficient under Article 9 to support a conclusion that Wells Fargo holds any interest, ownership or otherwise, in the Note.  Put another way, without any evidence tending to show it was a “person entitled to enforce” the Note, or that it has an interest in the Note, Wells Fargo has shown no right to enforce the Mortgage securing the Note. Without these rights, Wells Fargo cannot make the threshold showing of a colorable claim to the Property that would give it prudential standing to seek stay relief or to qualify as a real party in interest.”

    As for Wells’ servicer, AHMSI, the panel reviewed the record and found nothing to establish that AHMSI was its lawful servicing agent.  AHMSI had presented no evidence as to who possessed the original Note.  It also presented no evidence showing indorsement of the Note either in its favor or in favor of Wells Fargo.  Without establishing these elements, AHMSI could not establish that it was a “person entitled to enforce” the Note.

    Quoting from the opinion:

    “When debtors such as the Veals challenge an alleged servicer’s standing to file a proof of claim regarding a note governed by Article 3 of the UCC, that servicer must show it has an agency relationship with a “person entitled to enforce” the note that is the basis of the claim. If it does not, then the servicer has not shown that it has standing to file the proof of claim. ***”

    Conclusion. Why is the Veal case important?  Let’s start with recent history: First, we know that during the securitization heydays of 2005 – 2007, record keeping and document retention were exceedingly lax.  Many in the lending and servicing industry seemed to think that somehow, MERS would reduce the paper chase.  However, MERS was not mandatory, and in any event, it captured at best, perhaps 60% of the lending industry.  Secondly, MERS tracked only Mortgages and Trust Deeds – not Promissory Notes.  So even if a lender can establish its ownership of the Trust Deed, that alone is not enough, without the Note, to permit the foreclosure.

    As recent litigation has revealed, some large lenders, such as Countrywide, made a habit of holding on to their Promissory Notes, rather than transferring them into the REMIC trusts that were supposed to be holding them.  This cavalier attitude toward document delivery is now coming home to roost.  While it may not have been a huge issue when loans were being paid off, it did become a huge issue when loans fell into default.

    So should the Big Banks make good on their threat to start filing judicial foreclosures in Oregon, defense attorneys will likely shift their sights away from the unrecorded Trust Deed Assignments[5], and focus instead on whether the lenders and servicers actually have the legal right to enforce the underlying Promissory Notes.

    [1] The word “indorsement” is UCC-speak for “endorsement” – as in “endorsing a check” in order to cash it.

    [2] Although not perhaps as apparent in the opinion as it could have been, there were not successive indorsements of the Veals’ Promissory Note, i.e. from the originating bank to the foreclosing bank. There was only one, i.e. from GSF to Option One.  There was no evidence that the Note, or the right to enforce it, had been transferred to Wells Fargo or AHMSI.  Ultimately, there was no legal entitlement under the UCC giving either Wells or its servicer, AHMSI, the ability to enforce that Note.  The principle here is that owning a borrower’s Trust Deed or Mortgage is insufficient without also owning, or have a right to enforce, the Promissory Note that it secures.

    [3] Mr. Dorchuck did not appear to testify.  His letter, on its face, is clearly hearsay and inadmissible.  The failure to properly lay any foundation for the letter, or authenticate it “under penalty of perjury” is inexplicable – one that the bankruptcy panel criticized. This was not the only example of poor evidentiary protocol followed by the banks in this case.  However, this may not be the fault of the banks’ lawyers. It is entirely possible these were the documents they had to work with, and they declined to certify under “penalty of perjury” the authenticity of them. If that is the case, one wonders how long good attorneys will continue to work for bad banks?

    [4] This is a drafting sleight of hand.  Mortgages and Trust Deeds are transferred by “assignment” from one entity to another. But Promissory Notes must be transferred under an entirely different set of rules – the UCC. Thus, to transfer both the Note and Mortgage by a simple “Assignment” document, is facially insufficient, by itself, to transfer ownership of – or a right to enforce – the Promissory Note.

    [5] The successive recording requirement of ORS 86.735(1) only applies when the lender is seeking to foreclose non-judicially.  Judicial foreclosures do not contain that statutory requirement.  However, to judicially foreclose, lenders will still have to establish that they meet the standing and real party interest requirements of the law.  In short, they will have to deal head-on with the requirements of Articles 3 and 9 of the Uniform Commercial Code.  The Veal case is a good primer on these issues.

    Phil Querin
    Attorney at Law
    http://www.q-law.com/
    121 SW Salmon Street, Suite 1100 Portland, OR 97204 
    Tel: (503) 471- 1334

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  • Multnomahforeclosures.com: July 15th, 2011 Update.


    Multnomah County highlighted in Oregon; Portla...
    Image via Wikipedia

    Multnomahforeclosures.com was updated with the largest list of Notice Defaults to date. With Notice of Default records dating back nearly 3 years.  

    If you are planning on investing in real estate, want to learn the status of the home you are renting/leasing or about to rent or lease  you should visit Multnomahforeclosures.com.

    All listings are in PDF and Excel Spread Sheet format.

    Multnomah County Foreclosures

    Multnomah County Foreclosures
    http://multnomahforeclosures.com

     
     

    Fred Stewart 
    Broker
    Stewart Group Realty Inc.
    http://www.sgrealty.us/
    info@sgrealtyinc.com
    503-289-4970 (Phone)

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  • Appraisal Fraud in Clackamas, Oregon? , by Brett Reichel, Brettreichel.com


    Wowza…..pretty bold headline, isn’t it?

    How can that claim be made or the question raised?

    First – a quick note on technicalities on appraisals – Comparable Sales are compared to the Subject property to try to lead the appraiser to a supportable “opinion of value”.   Differences in properties are accounted for by “adjustments” to the comparable sale, which then leads to an “adjusted value” of the comparable.  The adjustments are supposed to equalize differences in properties.  Adjustments are supposed to be supported through market analysis, specifically “matched pair analysis“.

    A simplified example of a “matched pair analysis” would be two houses that are identical in every way, with the exception of one of them having a fireplace.  House A, without the fireplace sells for $100,000, and House B, with the fireplace sells for $101,000.  What’s the value of the fireplace?  Since the houses are identical in every way, the value of the fireplace is clearly $1,000.  In that market area, in that price range, fireplaces are worth $1,000 and until proven differently, the appraiser is justified in adjusting comparable sales $1,000 for fireplaces (having them or not having them).

    One of the things we’ve seen adjustments for lately, is the adjustment in “time”.  This adjustment is made for changes in the market between when a comparable sale is sold and when your subject sold.  If the market is dropping, then the adjustment to the comparable would be downward, and in a rising market, upward.

    As you might suspect, appraisers have been making this adjustment…..a lot….lately.  The problem is, they have been skipping the “matched pair analysis” process and just using median prices to justify the adjustment.  This is NOT acceptable appraisal practice.  But, if it’s become the norm, if it’s become acceptable, it should apply when median prices escalate.

    Thus the headline.  A recent market report indicates that median prices have been on a 90 day upswing in Clackamas, Oregon.  Have the appraisers reversed their course and adjusted upward for time?  No they haven’t.  Why?

    Lender pressure is why.  The whole point of industry reform (HVCC and/or Dodd-Frank) was to eliminate lender pressure, but now the lenders have even greater methods of applying pressure with the new rules.  Really, the problem starts in two places, regulation and the GSE‘s.   The GSE’s are Fannie Mae & Freddie Mac.  Their forms require the use of Median Prices.  Fannie/Freddie, Barney and Chris (a criminal “friend of Angelo”) are behind this lender fraud.  The rest of the market is captive and held to their criminal standards, including the poor appraiser.

    Frankly, this only helps the banks, and it doesn’t do anything for the borrower, the seller.  It doesn’t help stabilize our markets or improve our economy.

    What to do?  Well, don’t shoot the appraiser – he/she can’t do anything about what the lenders force them to do.  Complain to the lender, complain to your legislators, complain to regulators, call Elizabeth Warren, complain long, hard and loud….maybe if enough voices are heard we can get out from under the tyranny of the banks and Fannie Mae and Freddie Mac.

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  • Home equity picture improves, a little, by Wendy Culverwell, Portland Business Journal


    The number of homes worth less than their outstanding mortgages fell slightly in the first three months, according to figures released Tuesday by CoreLogic Inc. (NYSE: CLGX), a Santa Ana, Calif.-based real estate data firm.

    According to CoreLogic, 27.2 percent — or 13.5 million homes — had negative or near-negative equity in the first quarter. That compares to 27.7 percent in the fourth quarter of 2010.

    In Oregon, 17.2 percent of homes are worth less than their mortgages and another 5.8 percent had near-negative equity. Collectively, Oregonians owe $121.9 billion on 696,142 mortgages on properties worth a total of $175 billion.

    “The current economic indicators point to slow yet positive economic growth, which will slowly reduce the risk of borrowers experiencing income shocks,” said Mark Fleming, chief economist with CoreLogic. “Yet the existence of negative equity for the foreseeable future will weigh on the housing market recovery by holding back sale and refinance activity.”

    Negative equity occurs when a borrower owes more than the home is worth. “Near-negative” refers to homes with less than 5 percent equity, a figure that would be wiped out by transaction costs if the property were sold.

    In Washington state, 16.9 percent of homes had negative equity and 5.8 percent had near-negative equity. Collectively, Washingtonians owe $291.7 billion on 1,412,110 mortgages on properties worth a total of $429.1 billion.

    Nevada, where 63 percent of all mortgaged homes are worth less than the outstanding loan balance, led the nation for negative equity. The other top five states were Arizona, 50 percent, Florida, 46 percent, Michigan, 36 percent and California, 31 percent. Nevada, Arizona and Florida showed improvement from the prior quarter.

    The average “underwater” home is worth $65,000 less than the outstanding mortgage balance.

    Read more: Home equity picture improves, a little | Portland Business Journal

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  • Use Caution When Selling REO Properties, by Phil Querin, PMAR Legal Counsel, Querin Law, LLC Q-Law.com


    Foreclosure Sign, Mortgage Crisis
    Image via Wikipedia

    By now, most Realtors® have heard the rumblings about defective bank foreclosures in Oregon and elsewhere. What you may not have heard is that these flawed foreclosures can result in potential title problems down the road. 

    Here’s the “Readers Digest” version of the issue: Several recent federal court cases in Oregon  have chastised lenders for failing to follow the trust deed foreclosure law. This law, found inORS 86.735(1), essentially says that before a lender may foreclose, it must record all assignments of the underlying trust deed. This requirement assures that the lender purporting to currently hold the note and trust deed can show the trail of assignments back to the original  bank that first made the loan.

    Due to poor record keeping, many banks cannot easily locate the several assignments that  occurred over the life of the trust deed. Since Oregon’s law only requires assignment as a condition to foreclosing, the reality of the requirement didn’t hit home until the foreclosure crisis was in full swing, i.e. 2008 and after.

    Being unable to now comply with the successive recording requirement, the statute was frequently ignored. The result was that most foreclosures in Oregon were potentially based upon a flawed process. One recent federal case held that the failure to record intervening assignments resulted in the foreclosure being “void.” In short, a complete nullity – as if it never occurred.

    Aware of this law, the Oregon title industry is considering inserting a limitation on the scope of its policy coverage in certain REO sales. The limitation would apply where the underlying foreclosure did not comply with the assignment recording requirement of ORS 86.735(1). This means that the purchaser of certain bank-owned homes may not get complete coverage under their owner’s title policy. Since many banks have not generally given any warranties in their

    REO deeds, there is a risk that a buyer will have no recourse (i.e. under their deed or their title insurance policy) should someone later attack the legality of the underlying foreclosure.

    Realtors® representing buyers of REO properties should keep this issue in mind. While this is  not to suggest that brokers become “title sleuths,” it is to suggest that they be generally aware of the issue, and mention it to their clients, when appropriate. If necessary, clients should be told to consult their own attorney. This is the “value proposition” that a well-informed Realtor®  brings to the table in all REO transactions.

    ©2011 Phillip C. Querin, QUERIN LAW, LLC

    Visit Phil Querin’s web site for more information about Oregon Real Estate Law http://www.q-law.com

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  • The Fed Does It Again: $80 Billion Secretive “Bank Subsidy” Program Uncovered, Providing Bank Loans At 0.01% Interest, Tyler Durden, Zero Hedge Blog


    he Fed does it again. Following consistent allegations that the Federal Reserve operates in an opaque world, whose each and every action has only had a purpose of serving its Wall Street masters, led to repeated lawsuits which went so far as to get the Chairsatan to promise he would be more transparent, Bloomberg’s Bob Ivry breaks news that between March and December 2008 the Fed operated a previously undisclosed lending program, whose terms were nothing short of a subsidy to banks. Says Ivry: “The $80 billion initiative, called single-tranche open- market operations, or ST OMO, made 28-day loans from March through December 2008, a period in which confidence in global credit markets collapsed after the Sept. 15 bankruptcy of Lehman Brothers Holdings Inc. Units of 20 banks were required to bid at auctions for the cash. They paid interest rates as low as 0.01 percent that December, when the Fed’s main lending facility charged 0.5 percent.” 0.01% interest is also known by one other name: “outright subsidy.” It doesn’t get any freer than that: 0.01% interest on one month cash. Just how close to a complete implosion was the financial system if 0.5% interest seemed too high? Not surprisingly, this program was widely used: “Credit Suisse Group AG, Goldman Sachs Group Inc. and Royal Bank of Scotland Group Plc each borrowed at least $30 billion in 2008 from a Federal Reserve emergency lending program whose details weren’t revealed to shareholders, members of Congress or the public…Goldman Sachs, led by Chief Executive Officer Lloyd C. Blankfein, tapped the program most in December 2008, when data on the New York Fed website show the loans were least expensive. The lowest winning bid at an ST OMO auction declined to 0.01 percent on Dec. 30, 2008, New York Fed data show. At the time, the rate charged at the discount window was 0.5 percent. “ Yes, that Goldman Sachs. The same one that perjured itself when it said before the FCIC that it only used de minimis emergency borrowings. Just how many more top secret taxpayer subsidies will emerge were being used by the Fed to keep the kleptocratic status quo in charge?
    From Buisnessweek:
    “This was a pure subsidy,” said Robert A. Eisenbeis, former head of research at the Federal Reserve Bank of Atlanta and now chief monetary economist at Sarasota, Florida-based Cumberland Advisors Inc. “The Fed hasn’t been forthcoming with disclosures overall. Why should this be any different?”
    Congress overlooked ST OMO when lawmakers required the central bank to publish its emergency lending data last year under the Dodd-Frank law.
    “I wasn’t aware of this program until now,” said U.S. Representative Barney Frank, the Massachusetts Democrat who chaired the House Financial Services Committee in 2008 and co- authored the legislation overhauling financial regulation. The law does require the Fed to release details of any open-market operations undertaken after July 2010, after a two-year lag.
    Records of the 2008 lending, released in March under court orders, show how the central bank adapted an existing tool for adjusting the U.S. money supply into an emergency source of cash. Zurich-based Credit Suisse borrowed as much as $45 billion, according to bar graphs that appear on 27 of 29,000 pages the central bank provided to media organizations that sued the Fed Board of Governors for public disclosure.
    New York-based Goldman Sachs’s borrowing peaked at about $30 billion, the records show, as did the program’s loans to RBS, based in Edinburgh. Deutsche Bank AG, Barclays Plc and UBS AG each borrowed at least $15 billion, according to the graphs, which reflect deals made by 12 of the 20 eligible banks during the last four months of 2008.
    And even now, we don’t know how much these individual subsidies were:
    The records don’t provide exact loan amounts for each bank. Smith, the New York Fed spokesman, would not disclose those details. Amounts cited in this article are estimates based on the graphs.

    Stock up with Fresh Food that lasts with eFoodsDirect (AD)

    The usual excuse is used: the purpose of the program was to prevent the Ice-6ing of shadow markets
    One effect of the program was to spur trading in mortgage- backed securities, said Lou Crandall, chief U.S. economist at Jersey City, New Jersey-based Wrightson ICAP LLC, a research company specializing in Fed operations. The 20 banks — previously designated as primary dealers to trade government securities directly with the New York Fed — posted mortgage securities guaranteed by government-sponsored enterprises such as Fannie Mae or Freddie Mac in exchange for the Fed’s cash.
    ST OMO aimed to thaw a frozen short-term funding market and not necessarily to aid individual banks, Crandall said. Still, primary dealers earned spreads by using the program to help customers, such as hedge funds, finance their mortgage securities, he said.
    One name stands out: Goldman Sachs.
    The New York Fed conducted 44 ST OMO auctions, from March through December 2008, according to its website. Banks bid the interest rate they were willing to pay for the loans, which had terms of 28 days. That was an expansion of longstanding open- market operations, which offered cash for up to two weeks.
    Outstanding ST OMO loans from April 2008 to January 2009 stayed at $80 billion. The average loan amount during that time was $19.4 billion, more than three times the average for the 7 1/2 years prior, according to New York Fed data. By comparison, borrowing from the Fed’s discount window, its main lending program for banks since 1914, peaked at $113.7 billion in October 2008, Fed data show.
    Goldman Sachs, led by Chief Executive Officer Lloyd C. Blankfein, tapped the program most in December 2008, when data on the New York Fed website show the loans were least expensive. The lowest winning bid at an ST OMO auction declined to 0.01 percent on Dec. 30, 2008, New York Fed data show. At the time, the rate charged at the discount window was 0.5 percent.
    More on Goldman:
    As its ST OMO loans peaked in December 2008, Goldman Sachs’s borrowing from other Fed facilities topped out at $43.5 billion, the 15th highest peak of all banks assisted by the Fed, according to data compiled by Bloomberg. That month, the bank’s Fixed Income, Currencies and Commodities trading unit lost $320 million, according to a May 6, 2009, regulatory filing.
    The source of the data: a FOIA lawsuit, just because the plebs knowing where billions of their money goes is not really in the best interests of the lords.
    The bar charts were included in the Fed’s court-ordered March 31 disclosure under the Freedom of Information Act. The release was mandated after the U.S. Supreme Court rejected an industry group’s attempt to block it
    So there it is again: a secret bailout program used to “rape” the peasantry by the entitled kleptocrats, which nobody thought would be exposed, and would allow those in control to lie blatantly to Congress. But have no fear: the wheels of justice are turning: instead of having those who rape millions under house arrest, we get the spectacle of those who allegedly rape one. The former, after all, are just a statistic.
    And how long before the peasantry just snaps from the barage of endless lies?

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  • Strategic Default: Inconceivable Assumptions Suddenly Conceivable, by Tim Rood, Mortgagenewsdaily.com


    Until recently it was generally believed that only a small fraction of Americans would willingly choose to skip their monthly mortgage payment, aka “strategically default”, when they found themselves stuck in a negative equity situation.

    The logic driving this belief was based on the notion that borrowers wouldn’t want to damage their credit profile or deal with the social stigma surrounding a public foreclosure. The assumption that most underwater borrowers will continue making their monthly payments (absent a life event) is factored into the analytics of risk managers, buyers and sellers of mortgage related assets, servicing managers, and regulators across the country.

    What if this assumption is wrong? Is that inconceivable?

    It wasn’t long ago when conventional wisdom convinced us that lenders would never make loans to borrowers that had virtually zero likelihood of being able to pay the loans back. In a 2010 study conducted by the Cato Institute, it was estimated that there were over 27 million Alt-A and subprime loans in the system by mid-2008. That’s approximately 50 percent of all loans in the market.  Remember when we thought home price would never fall on a national level? Never been done and won’t ever happen, right? That assumption was shattered when home values nationally dropped between 30-50% from their peak in 2006, wiping out roughly $7 trillion of home equity in the process.

    Fannie Mae recently published it’s latest National Housing Survey and exposed disturbing patterns and sentiments with American homeowners. For example,  46% of borrowers are “stressed” about their underwater mortgage, up from 11% in June 2010. That’s an alarming four-fold increase in three quarters. That statistic becomes even more concerning when viewing the sheer number of borrowers faced with negative equity. At the end of 2010, which doesn’t include the home price declines seen in 2011, CoreLogic estimated that 11.1 million homes, or 23.1 percent of all homes with a mortgage, were underwater. Think about those two stats this way – every morning, 46% of the estimated 11.1 million underwater borrowers wake up and debate why they should keep paying their monthly mortgage payment. Further weighing on borrowers is that  47% of borrowers surveyed reported higher household expenses than the year before…

    From that perspective, it doesn’t seem inconceivable that our assumptions might be off base again. Is principal forgiveness the answer?

    Probably not, and here’s why. Remember how many folks HAMP was supposed to save by giving them new loan terms? The number touted by the administration was over 4 million. In reality, the number is likely to come in around 500-750,000 permanent modifications. Imagine the scenario when a government sponsored principal reduction program is announced. Out of the 11 million underwater borrowers – you’ll probably get three times as many borrowers applying for relief. Maybe one tenth of them will actually qualify and be granted a principal reduction. In the meantime, some 20+ million applicants would have stopped making payments to “qualify” or be considered for qualification. How many of them will be able to or even want to get current again after they are turned down?

    Like it or not, we have got to find ways to stabilize home prices, reward responsible behavior among existing homeowners, and encourage home buying. I don’t see any ideas on the table that would accomplish any of these objectives…. and the effects are starting to show up in data.

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  • Did you order the appraisal yet? – The Ideal Home Loan Process


    Awhile ago I produced a video about some conversations between certain Realtors and my team.

    I also wrote a nice long post about the subject, and Realtor professionalism in general, on my site.

    I like to go back and watch the video from time to time because it makes me laugh, and that is a rare commodity in today’s Real Estate market. While I was watching it, I thought I would share with the audience here what I consider to be the ideal home loan process, and exactly how the appraisal fits in to that timeline.

    1) Pre-application Consultation – Ideally, home loan applicants would sit down with a competent, licensed Mortgage Professional 6 months before they intend to enter the market. Many people have unique circumstances regarding credit, income, employment, etc., and 6 months is usually enough time to work through issues to present the best possible loan file to underwriting.

    2) Gathering of Essentials – Before you apply, you should gather your last 30 days paystubs, 2 most recent bank statements, last 2 years Federal tax returns with w2s & 1099s, & most recent retirement statements. And, if applicable, any divorce decrees, award letters, child support orders, and last 2 years business tax returns for self-employed/business owners.

    3) Fill out a Loan Application – When it’s time to fill out a loan application, do so with somebody you trust and get along with. You will be speaking with your loan officer a lot over the course of the coming weeks, so you might as well make sure that those conversations are with somebody you like and who is professional. They should clearly explain your loan terms, and all of the disclosures that need your signature so that you feel comfortable with the agreement you are entering into.

    4) Behind the Scenes – This is where the real work starts. Your Loan Officer and his/her team will be verifying and documenting your income and assets, dissecting your credit report, pre-approving you through automated underwriting, ordering a preliminary title report and title insurance, and many other things that are just as exciting as they sound, but necessary. This prepares your file to be ideally what we call a “one touch” file in…

    5) Underwriting – Despite the possibility of unexpected snafus, underwriting can still be a fairly smooth process if you have chosen the right Loan Officer to work with. Depending on underwriting turntimes, in a couple of days you should have a conditional approval. Think of this as the “to-do” list that you and your Loan Officer must complete before your loan documents can be drawn up.

    6) Conditions – You will work with your Loan Officer to get all of the “to-dos” done and submitted to the underwriter. Once you are sure that all conditions can be satisfied, this is when you would order the…

    7) APPRAISAL! – Your Loan Officer will order your appraisal through an Appraisal Management Company. Depending on the company used, and the demand for appraisals, this process will take a few days to a week. It has to be completed within 10 days, but it usually doesn’t take that long. Assuming the appraisal comes in at an acceptable value, the next step is to order the…

    8 ) DOCS! HOORAY!! – The docs, or loan documents, are the paperwork you sign at closing. These include the final application, disclosures, the note, and sometimes your last 2 years tax returns need to be signed (if you e-filed the previous 2 years). Next step is…

    9) FUNDING!!! – There will be some “prior-to-funding” conditions, but most of the time its standard escrow items. The escrow company sends all of the documents you signed at closing to the lender, and the lender reviews those documents for accuracy and completeness. If everything is ship-shape (which it should be if you are working with the right people), then you can…

    10) MOVE IN!!!!! – Time to pay for pizza and beer in an attempt to trick your friends into helping you move.

    And there you have it, the ideal home loan process. Each individual loan carries its own set of circumstances, so it isn’t out of the realm of possibility that your process might deviate from these 10 steps. However, if you select the right person to work with, you should have a good idea of what you are up against from the beginning.

    Jason Hillard - @homeloan_ninja
    Jason Hillard

    If you have any questions about Real Estate financing in Oregon or Washington, or the home loan process in general, feel free to shoot me an email at obi-wan_shinobi@homeloanninjas.com or check out the wealth of information at http://www.homeloanninjas.com/! I started the site because I continue to be appalled by the complete lack of reliable information about home loans in the mainstream media. I sincerely hope it is a true resource that helps to educate everyone to become a better home loan consumer.

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  • Fannie vs. Freddie Earnings; Loan Limit Reduction Ahead; Jumbo Market Chatter; Think Tank Opinion on GSEs, by Rob Chrisman. Mortgage News Daily


    Yesterday I went through denial, anger, bargaining, depression, and acceptance – which are now the 5 stages of buying gas.

    Incidents of mortgage fraud dropped from 2009 to 2010. Either that, or incidents rose – it depends who you ask. FRAUD. Regardless, Florida took the “top” honors, followed by New York, California, New Jersey, and Maryland (No. 5).

    The FDIC’s chairman Sheila Bair will indeed be stepping down when her term expires, as has previously been announced. Cake and soda pop will be served in the FDIC’s cafeteria on July 8th – no gifts please.

    Fannie & Freddie recently released results that appear to point to the different focus in the past of their two companies. One reader wrote, “Freddie Mac reported its first true net profit in almost two years, earning $676 million in the first quarter and not asking the taxpayer for more money. But Fannie reported at $6.5 billion loss for the quarter, and asked Treasury for $8.5 billion in taxpayer money. From my vantage point, the difference rests in the amount of Countrywide business that Fannie bought in the past – CW was Fannie’s best customer for several years, selling Fannie a variety of A-paper, alt-A, pay option ARMs, and other products. I bet that if you take Countrywide out of the equation, Fannie would show similar results to Freddie. But last year Fannie agreed to one lump sum from BofA to settle the bulk of buyback claims – good for BofA, bad for Fannie.”

    Last month the Cato Institute published its opinion of the agencies, and it is making the rounds. “Foremost among the government-sponsored enterprises’ deleterious activities was their vast direct purchases of loans that can only be characterized as subprime. Under reasonable definitions of subprime, almost 30 percent of Fannie and Freddie direct purchases could be considered subprime. The government-sponsored enterprises were also the largest single investor in subprime private label mortgage-backed securities. During the height of the housing bubble, almost 40 percent of newly issued private-label subprime securities were purchased by Fannie Mae and Freddie Mac. In order to protect both the taxpayer and our broader economy, Fannie Mae and Freddie Mac should be abolished, along with other policies that transfer the risk of mortgage default from the lender to the taxpayer.”

    Who is going to teach your staff about NMLS? Be sure to scroll down a little for news on NMLS and Federally regulated institutions! NMLSTraining

    For any jumbo mortgage fans, here is some chatter: Jumbo

    By the way, at this point the conforming loan level in the higher-priced areas will indeed drop to $625,500 from $729,750. Although it is not set in stone and could be subject to some political wrangling, few doubt that it will drop. Here is Fannie’s memo stating the loan limits Fannie along with the FHFA’s.

    Aventur Partners & Aventur Mortgage Capital appear to be turning some heads in the jumbo world. Led by the former co-founder and CEO of Thornburg Mortgage (Larry Goldstone) is developing a new mortgage company specializing in jumbo lending. Past and current legal nightmares aside, Thornburg-style companies certainly have their fans in the business, and the former vice president of Thornburg, David Akre, is the serving COO at Aventur.

    “Soldiers do not march in step when going across bridges because they could set up a vibration which could be sufficient to knock the bridge down.” Fortunately not every housing market moves in exactly the same direction and in the same magnitude, but Zillow posted some housing numbers that certainly would make a bridge shake a little. There seem to be dozens of house price indices, but the one from Zillow yesterday showed that home values posted the largest decline in the first quarter since late 2008. Home values fell 3% in the first quarter from the previous quarter and 1.1% in March from the previous month, and Zillow reports prices have now fallen for 57 consecutive months. Our economy needs job & housing, housing and jobs, to truly recover, and although mortgage rates continue to be low, the expiration of the housing tax credit and the continued flow of foreclosures hitting the market aren’t helping prices. Detroit, Chicago and Minneapolis posted the largest declines during the first quarter of the top 25 metro areas tracked by Zillow, while Pittsburgh, Dallas and Washington posted the smallest declines.

    As an interesting side note to this, housing is certainly more affordable than any time in a few decades, but credit, appraisal, and documentation standards remain tight (many would say they should, and if they were in place 5 years ago we wouldn’t have these issues). One report mentioned that the average credit score on loans backed by Fannie Mae stood at 762 in the first quarter, up from an average of 718 between 2001-2004.

    Franklin American relaxed its conventional condominium guidelines to allow established condominiums with 200 units or more to be approved through DU Limited Review or CPM. FAMC also tweaked its policies for “Purchase of a short sale/foreclosure or REO – Appraisal Requirements” (added the requirement for a full appraisal if the borrower is purchasing a property sold under a short sale in addition to transactions where the borrower is purchasing a foreclosure or REO), required that utilities must be on at time of appraiser’s inspection, and revised the income documentation guidelines for borrowers employed by an interested party to require a written VOE in addition to the most recent 30 day paystub. FAMC announced the introduction of the Conforming Fixed Rate 97 product which allows loans up to 97% through DU, with certain restrictions.

    GMAC Bank Correspondent Funding, echoing FHA Mortgage Letter 2011-11 on the subject of Refinance Transactions, refined its stance on the use of FHA TOTAL Scorecard to underwrite Credit Qualifying Streamlines (will continue to be eligible) and determining the mortgage basis on a Cash-out transaction when a borrower is buying out ground rent. GMAC also reminded clients that the Freddie Mac Relief Refinance Open Access product has been discontinued, and after tomorrow several of its loan program codes will no longer be available. GMACB will not purchase loans where LP feedback states Open Access.

    Wells’ wholesale notified brokers about changes to its “Compensation and Anti-Steering: BYTE Fee Details Now Accepted, Compensation and Anti-Steering: Appraisal Fee Reimbursement, and Best Practices to Avoid FHA Case Number Cancellation. WF’s broker clients were also reminded not to delay in learning about the NMLS Federal Registration*, given a new address for the “Change of Servicer” notifications, updated the processing fee for Guaranteed Rural Housing loans and curing TIL material disclosure errors, and reminded of the final documentation delivery address for VA loan Guaranty Certificates and Rural Development Loan

    Note Guarantees.

    *Three months ago the Board of Governors of the Federal Reserve System, Farm Credit Administration, FDIC, National Credit Union Administration, OCC, and OTS announced the opening of the Nationwide Mortgage Licensing System and Registry for Federally Regulated originators. “All originators (company and loan level) who are federally regulated will have 180 days to complete the SAFE Act requirements and register with the federal S.A.F.E. registry. One should not delay, as at the end of July all federally regulated originators will be required to provide their NMLS Loan Originator and LO Company ID’s: FederalNMLS

    Out in California, First California Mortgage is looking for someone to lead its new Multi-Family division. The person will be handling the full range of processing and monitoring activities associated with the multi-family housing program, along with cultivating new and enhancing established relationships with realtors, builders, community groups/clubs and associates resulting in new loan originations and referrals. In addition, the person will be securing new Agency lending opportunities, working primarily with Freddie and Fannie. (The complete list of duties and requirements is too lengthy for this commentary.) If you’re interested, or know someone who is, contact Shannon Thomson, Director of Human Resources, at sthomson@firstcal.net.

    Parkside Lending, a west coast wholesaler, reminded its brokers that it will fund Non-owner high balance purchase loans up to 80% LTV up to $625,500 through its Freddie Mac Super Conforming product line and subject to other restrictions. Parkside also allows broker/owners to select individual compensation plans for each of their branch offices. “This means one branch could be at 1.0% monthly comp contract while another is at 1.5% monthly comp -and so on, as long as they are under separate branches as recognized by DRE.”

    Wall Street continues to see good interest by investors in mortgage products, “…buying from all investor types…Japanese, Real Money and Central Banks have been the largest – the market continues to under estimate the short base…,” which is another way of saying that Central Banks and investment firms have an enormous amount of cash to be put to work. And specifically for mortgages, banks have been very large buyers of MBS (per the H8 data). Monday was very quiet, with the 10-yr yield closing at 3.14% and MBS prices a shade better/higher as there is still a flight to safety bid on continued worries about European debt issues – particularly related to Greece.

    Just before the funeral services, the undertaker came up to the very elderly widow and asked, “How old was your husband?”

    “98,” she replied. “Two years older than me.”

    “So you’re 96,” the undertaker commented.

    She responded, “Hardly worth going home, isn’t it?”

    Reporters interviewing a 104-year-old woman:

    “And what do you think is the best thing about being 104?” the reporter asked.

    She simply replied, “No peer pressure.”

    I’m happy to announce that I will be writing a twice-a-month blog that you can access at the STRATMOR Group web site located at http://www.stratmorgroup.com. Each blog will address what I regard as an important topic or issue for our industry. My first blog, for example, considers the near and longer-term outlook for jumbo lending. Since you can comment on my blogs, I’m hoping each topic I address will generate a thoughtful dialogue.

    Mortgage News Daily

    http://www.mortgagenewsdaily.com

  • Home sweet home? Now is the time to leverage your home equity, says Thrivent, by Staff Report, Alexandria Echo Press


    Given the economic turbulence of the past several years, the greatest asset that many Americans have is their home. With interest rates still near historical lows, now might be the time to tap into your home equity to help consolidate debt, embark on a home improvement project, start an emergency savings fund or even help pay for college.

    Home equity loans and home equity lines of credit (HELOCs) are two of the most common ways for homeowners to borrow money by leveraging the equity they have in their home. Each offers its own unique benefits and both can offer considerable tax benefits, according to Thrivent Financial Bank.

    The first step in determining which home equity product is right for you is to answer one simple question: How will I use the money?

    “Many people are aware that now might be a good time to borrow against the equity in their home,” said Jill Aleshire, executive vice president of Thrivent Financial Bank. “However, slowing down and taking a closer look at how to best use that equity is the best thing you can do to start the process. “

    Thrivent Financial Bank offers the following tips to help you decide if tapping your home equity is the right choice for you.

    Appreciating assets

    Home equity loans and HELOCS are meant to improve your long-term financial well-being, so think about how best to use the equity toward assets that will increase in value (appreciating assets). Ask yourself, “Will this earn value in the long run?” A college education or a home improvement project can be justified as appreciating investments if they result in a higher lifetime income or property value.

    Emergency reserve savings

    Home equity loans and lines of credit can be a good option if you are in need of protection against job loss, medical emergencies or home and vehicle repair.

    First-time debt consolidation

    One of the most common uses for home equity loans and lines of credit is debt consolidation. Because the interest paid may be tax-deductible and the interest rates can be lower than many creditors’ rates, some homeowners borrow against the value of their home to pay off debt.

    Needs, not wants

    Using your hard-earned equity for extraneous purchases is not a good use of your loan. If you don’t need the funds now, consider waiting to take out a home equity loan until you have a specific need. Borrowing once against the equity in your home can be a great way to strengthen your finances if used wisely, but be careful not to make a habit of borrowing. Limiting your loan spending to needs, not wants, is a good way to keep yourself in check.

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  • The Median Price Fallacy, by Brett Reichel, Brettreichel.com


    Every month or so, the news media generates articles based on the latest statistics from various multiple listing services. In those articles they relate how “Median Prices” have either fallen or increased. What’s that mean? Well, a median price is one where it’s the middle price of all the sales in an area. So, let’s say we have a small city called Brettville. In Brettville last month, there were 15 sales. One sale was at $200,000, 7 were above $200,000 and 7 were below $200,000. Then the middle price, or median price for Brettville last month was $200,000.

    Market analysts watch median prices for changes, and use them as an indicator of market price changes. However, median prices are not a good and clear indicator of an individual houses value, despite what most appraisal reports say today. In fact, when an appraiser uses changes in median prices as a justification for time adjustments to value, it is inaccurate analysis.

    What’s a time adjustment? An appraiser uses comparable sales (comps) to determine their opinion of value on the property they are appraising. The appraiser makes dollar value adjustments on these sales when they compare them to the subject property . A “comp” might be 200 square feet bigger than the subject so the appraiser would adjust for that difference. One thing appraisers do commonly in today’s market is adjust for the difference in time between when a “comp” sold and the date of the appraisal. If a market is appreciating or depreciating at 1% a month, the appraiser would make an adjustment to the value of the comp in comparison to the subject to compensate for the difference in time.

    It’s inaccurate analysis to use median price to justify this time adjustment. Why? Because median price could be affected by more cheap houses selling in an area or more expensive houses selling in a neighborhood. It could have zero to do with any change in value.

    Another factor that makes median prices not appropriate for time adjustments is that different market value ranges could have different changes in value. In some of the markets, larger, move up style homes are depreciating faster than starter homes. Why? Because there are more first time home buyers in the market than move up buyers.

    If you are not happy with your appraisal, review it, and read the comments. If the appraiser justifies the time adjustment with median prices, and not a matched pair analysis, you have a faulty appraisal, and valid grounds for a complaint. Don’t expect your lender to do this, your loan officer doesn’t understand, and the underwriter probably doesn’t either. But the appraiser knows what they are doing. They used to laugh at Realtors for doing this in an appreciating market. Now they’ve jumped on that bandwagon, too.

    For More of Brett’s writing. Go to http://brettreichel.com

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