OREGON REAL ESTATE ROUND TABLE

Tag: Multnomah

  • 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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  • House is Gone but Debt Lives On; Expect Huge Surge in Deficiency Lawsuits, by Mike “Mish” Shedlock


    Forty-one states allow lenders to sue for mortgage debt if a home fetches less than the mortgage in a foreclosure sale. It always will. Such lawsuits are one of the reasons I have consistently advised people to consult an attorney before walking away.

    For a nice write-up on deficiency judgments please consider the Wall Street Journal article House Is Gone but Debt Lives On.

    Joseph Reilly lost his vacation home here last year when he was out of work and stopped paying his mortgage. The bank took the house and sold it. Mr. Reilly thought that was the end of it.

    In June, he learned otherwise. A phone call informed him of a court judgment against him for $192,576.71. It turned out that at a foreclosure sale, his former house fetched less than a quarter of what Mr. Reilly owed on it. His bank sued him for the rest.

    The result was a foreclosure hangover that homeowners rarely anticipate but increasingly face: a “deficiency judgment.”

    Until recently, “there was a false sense of calm” among borrowers who went through foreclosure, Mr. Englett says. “That’s changing,” he adds, as borrowers learn they may be financially on the hook even after the house is gone.

    Some close observers of the housing scene are convinced this is just the beginning of a surge in deficiency judgments. Sharon Bock, clerk and comptroller of Palm Beach County, Fla., expects “a massive wave of these cases as banks start selling the judgments to debt collectors.”

    Because most targets have scant savings, the judgments sell for only about two cents on the dollar, versus seven cents for credit-card debt, according to debt-industry brokers.

    Silverleaf Advisors LLC, a Miami private-equity firm, is one investor in battered mortgage debt. Instead of buying ready-made deficiency judgments, it buys banks’ soured mortgages and goes to court itself to get judgments for debt that remains after foreclosure sales.

    Silverleaf says its collection efforts are limited. “We are waiting for the economy to somewhat heal so that it’s a better time to go after people,” says Douglas Hannah, managing director of Silverleaf.

    Investors know that most states allow up to 20 years to try to collect the debts, ample time for the borrowers to get back on their feet. Meanwhile, the debts grow at about an 8% interest rate, depending on the state.

    Laws vary from state to state and things may depend on whether or not the loan is a recourse loan or not. Once again, before walking away, and before considering a short-sale or bankruptcy, please consult an attorney who knows real estate laws for your state.

    Mike “Mish” Shedlock
    http://globaleconomicanalysis.blogspot.com

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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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  • U.S. Housing Market Shows Economic Divide, by Michelle Conlin , The Associated Press


    In the United States, it’s starting to feel as if there are two housing markets: one for the rich and one for everyone else.

    Consider foreclosure-ravaged Detroit. In the historic Green Acres district, a haven for hipsters, a pristine, three-bedroom brick Tudor recently sold for $6,000 — about what a buyer would have paid during the Great Depression.

    Yet just 24 kilometres away, in the posh suburban enclave of Birmingham, bidding wars are back. Multimillion-dollar mansions are selling quickly. Sales this August were up 21 per cent from the previous year. The country club has ended its stealth discounts on new memberships. And Main Street’s retail storefronts are full.

    “We’re getting more showings, more offers and more sales,” says Ronni Keating, a real estate agent with Sotheby’s International.

    Think of this housing market as bipolar. In the luxury sector, the recession is a memory and sales and prices are rising. But everywhere else, the market is moving sideways or getting worse.

    In the housing market inhabited by most Americans, prices have fallen 30 per cent or more since the peak in 2007. That’s a steeper decline than during the Depression. Some people have had their homes on the market for a year without a single offer.

    Almost a quarter of American homeowners owe more on their houses than they’re worth. Another quarter have less than 20 per cent equity. About half of homeowners couldn’t get a mortgage if they applied today, says Paul Dales, senior U.S. economist for Capital Economics.

    Then there is the other housing market, occupied by 1.5 per cent of the U.S. population, according to Zillow.com. The one with outdoor kitchens and in-home spas; with his-and-her boudoirs and closets the size of starter houses. The one that is not local but global, with international buyers bidding in all cash. And where the gyrations of the stock market are cause for conversation, not cutting expenses.

    In this land of luxury properties, the Great Recession seems over. Prices of $1-million-plus properties have risen 0.7 per cent since February, according to Zillow. Prices of houses under $1 million have fallen more than 1.5 per cent.

    Normally, these two segments of the housing market rise and fall together.

    “Luxury is the best-performing segment of the housing market right now,” says Zillow.com chief economist Stan Humphries.

    After every recession since Second World War, housing has led the economic recovery, until now. The renewed vitality in the comparatively small market for luxury homes is not enough to power a full-blown recovery. This bifurcation in the market is yet another reason Michelle Meyer, the chief economist at Bank of America Merrill Lynch, says her housing outlook is “increasingly downbeat.”

    The phenomenon is not limited to real estate. You can see the same split in other gauges of the economy. Sales at Saks versus Walmart. Pay on Wall Street versus Main Street. Corporate profits versus family balance sheets.

    The divide is also making credit a perk of the rich. Mortgage rates are the lowest in decades, but what good are cheap rates if you can’t get a mortgage? The banks aren’t granting credit to anyone “who even has a smudge on their application,” says Jonathan Miller, founder of real estate consulting firm Miller Samuel. Applications for new mortgages are at 10-year lows.

    Across the country, prices on high-end homes fell after the subprime crash in the fall of 2008. The price on the $25 million mansion became $20 million, then $15 million. Such “bargains” are pushing more luxury buyers to commit to more deals.

    There are other factors, too. In Detroit, a recovering auto industry is helping propel high-end sales. All those car executives who have helped turn around the American auto industry used to rent. Now they are using their performance bonuses to buy homes.

    Wall Street’s recovery has brought back the market for mansions in the Hamptons, on Long Island, where the number of closings has returned to the 2007 level, and for luxury co-ops in New York City. Because of social-network riches in Silicon Valley, twice as many homes have sold for $5 million or more this year as last.

    But in the other housing market, an apartment tower built in 2007 in San Jose, Calif., recently converted to all-rental. The building had not sold a single unit. In Miami, a city that exemplifies the foreclosure epidemic, idled cranes dot the skyline. Unemployment shot up again this summer from 12 per cent to 14 per cent, a level not seen since the energy crisis in 1973. There are so many two-bedroom condos in gated communities with golf courses, private pools and rustic jogging paths that you can pick one up for $25,000, 66 per cent off the price five years ago. But luxury condos priced at $1 million or more are selling as rapidly as they did during the boom.

    “In the 20 years that I have been in South Florida real estate, I have never seen a greater divide between those who have and those who have not,” says Peter Zalewski, founder of the real estate firm Condo Vultures.

    One big factor in the divide is foreign cash, at least in the world of property. For international buyers, U.S. real estate is the new undervalued asset, and they are big buyers of luxury properties. International clients bought $82 billion worth of U.S. residential real estate last year, up from $66 billion in 2009. In states like Florida, international buyers account for a third of purchases, up from 10 per cent in 2007.

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  • U.S. To Have Tough Time in Suits Against 17 Banks Over Mortgage Bonds, by Jim Puzzanghera, Los Angeles Times


    Federal regulators allege the banks misled Fannie Mae and Freddie Mac over the safety of the bonds. But analysts say the two mortgage giants should have known that the loans behind the bonds were toxic.

    Reporting from Washington—

    The government’s latest attempt to hold large banks accountable for helping trigger the Great Recession could fall as flat as earlier efforts to punish Wall Street villains and compensate taxpayers for bailing out the financial industry.

    Federal regulators, in landmark lawsuits this month, alleged that 17 large banks misled Fannie Mae and Freddie Mac on the safety and soundness of $200 billion worth of mortgage-backed securities sold to the two housing finance giants, sending them to the brink of bankruptcy and forcing the government to seize them.

    Targets of other federal lawsuits and investigations have deflected such claims by arguing, for example, that the collapse of the housing market and job losses from the recession caused the loss in the value of mortgage-backed securities.

    The big banks, though, might have a more powerful defense: Fannie Mae and Freddie Mac were no novices at investment decisions.

    The two companies were major players in the subprime housing boom through the mortgage-backed securities market they helped create, and they should have known better than anyone that many of the loans behind those securities were toxic, some analysts and legal experts said.

    “I can’t think of two more sophisticated clients who were in a better position to do the due diligence on these investments,” said Andrew Stoltmann, a Chicago investors’ lawyer specializing in securities lawsuits. “For them to claim they were misled in some form or fashion, I think, is an extremely difficult legal argument to make.”

    But the Federal Housing Finance Agency, which has been running Fannie Mae and Freddie Mac since the government seized them in 2008, argued that banks can’t misrepresent the quality of their products no matter how savvy the investor.

    “Under the securities laws at issue here, it does not matter how ‘big’ or ‘sophisticated’ a security purchaser is. The seller has a legal responsibility to accurately represent the characteristics of the loans backing the securities being sold,” the FHFA said.

    The sophistication of Fannie and Freddie is expected to be the centerpiece of the banks’ aggressive defense. Analysts still expect the suits to be settled to avoid lengthy court battles, but they said the weakness of the case meant that financial firms would have to pay far less money than Fannie and Freddie lost on the securities.

    Stoltmann predicted that a settlement would bring in only several hundred million dollars on total losses estimated so far at about $30 billion.

    In the 17 suits, the FHFA alleged that it was given misleading data.

    For example, in the suit against General Electric Co. over two securities sold in 2005 by its former mortgage banking subsidiary, the FHFA said Freddie Mac was told that at least 90% of the loans in those securities were for owner-occupied homes.

    The real figure was slightly less than 80%, which significantly increased the likelihood of losses on the combined $549 million in securities, the suit said.

    GE said it “plans to vigorously contest these claims.” The company said it had made all its scheduled payments to date and had paid down the principal to about $66 million.

    The federal agency also has taken on some of the titans of the financial industry, including Goldman Sachs & Co., Bank of America Corp. and JPMorgan Chase & Co., to try to recoup some of the losses on the securities. That would help offset the $145 billion that taxpayers now are owed in the Fannie and Freddie bailouts.

    The suits represent one of the most forceful government legal actions against the banking industry nearly four years after the start of a severe recession and financial crisis brought on in part by the crash of the housing market.

    The FHFA had been negotiating separately with the banks to recover losses from mortgage-backed securities purchased by Fannie and Freddie, but decided to get more aggressive.

    “Over the last couple of years, they’ve been doing sort of hand-to-hand combat with each of the banks,” said Michael Bar, a University of Michigan law professor who was assistant Treasury secretary for financial institutions in 2009-10. “The suits are an attempt to consolidate those fights over individual loans.”

    Bar thinks the government has a legitimate case.

    “The banks will say, ‘You got what you paid for,’” he said. “And the investors will say, ‘No we didn’t. We thought we were getting bad loans and we got horrible loans.’”

    Edward Mills, a financial policy analyst with FBR Capital Markets, said the FHFA has a fiduciary responsibility to try to limit the losses by Fannie and Freddie. But the independent regulatory agency also probably felt political pressure to ensure that banks be held accountable for their actions leading up to the financial crisis, he said.

    “There’s still a feeling out there that most of these entities got away without a real penalty, so there’s still a desire from the American people to show that someone had to pay,” Mills said.

    Although the suits cover $200 billion in mortgage-backed securities, the actual losses that Fannie and Freddie incurred are much less. For example, the FHFA sued UBS Americas Inc. separately in July seeking to recover at least $900 million in losses on $4.5 billion in securities.

    The faulty mortgage-backed securities contributed to combined losses of about $30 billion by Fannie and Freddie, but a final figure is likely to change as the real estate market struggles to work its way through a growing number of foreclosures.

    Some experts worry that the uncertainty created by the lawsuits makes it more difficult for the housing market to recover, which adds to the pressure on the FHFA and the banks to settle.

    The government case also could be weakened by an ongoing Securities and Exchange Commission investigation into whether Fannie and Freddie did to their own investors what they’re accusing the banks of doing — not properly disclosing the risks of their investments.

    Banks are expected to make that point as well. But both sides have strong motives to settle the cases and move on, said Peter Wallison, a housing finance expert at the American Enterprise Institute for Public Policy Research.

    “Within any institution there are people who send emails and say crazy things, and the more these things are litigated, the more they get exposed,” Wallison said.

    Because of flaws in its case and political pressures, the FHFA also will be motivated to settle, Wallison said.

    “There will be a settlement because the settlement addresses the political issue … that the government is going to get its pound of flesh from the banks,” he said.

    jim.puzzanghera@latimes.com

  • 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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  • Promoting Housing Recovery Part 3: Proposed Solutions For The Housing Market


    This is the final part of a three-part, two-post series.  Click here to read parts I and II, which focus on recognizing the fundamental economic problems, and fixing the underlying economic issues (such as unemployment)

    Part Three – Proposed Solutions For The Housing Market

    Home Prices

    Home prices in many parts of the country are still inflated. People cannot afford the homes and cannot refinance to lower payments, so the homes go into default and are foreclosed up. Other homes remain on the market, vacant because there are no qualified buyers for the property at that price. This is a problem that can take care of itself over time, if the government gets out of the way.

    Currently the government, in cooperation with banks, is doing everything to support home prices instead of letting them drop. Doing so prevents homeowner strategic defaults, and others going into defaults. It also lessens the losses to lenders and investors. In the words of Zig Zigler, this is “stinkin thinkin”.

    Maintaining home prices artificially high will not stabilize the market. It is mistakenly thought this is the same as supporting home values. But inflating a price does not increase value, by definition. It just delivers an advantage to the first ones in at the expense of those coming later (think of the first and second homebuyer tax credits, which created two discernible “bumps” in home prices and sales in 2009 and 2010, both of which reversed).

    We must allow home prices to drop to a more reasonable level that people can afford. Doing so will stimulate the market because it brings more people into the market. Lower home prices mean more have an ability to purchase. More purchases mean more price stability over a period of time.

    To accomplish a reduction in home prices several steps need to be taken.

    Interest Rates

    The first thing to be done is that the fed must cease its negative interest rate policy. Let interest rates rise to a level that the market supports. Quit subsidizing homeowner payments on adjustable rate mortgages by the lower interest rates.

    Allowing interest rates to return to market levels would initially make homeownership more difficult and would result in people qualifying for lower loan amounts. However, this is not a bad thing because it eventually forces home prices down and all will balance out in the end. Historically, as interest rates decrease, home prices increase, and when rates increase, home prices drop. So it is time to let the market dictate where interest rates should be.

    Furthermore, by allowing interest rates to increase, it makes lending money more attractive. Profit over risk levels return, and lenders are more willing to lend. This creates greater demand, and would assist in stabilizing the market.

    Fannie & Freddie

    We have to eliminate the Federal guarantee on Fannie and Freddie loans. The guarantee of F&F loans only serves to artificially depress interest rates. It does nothing to promote housing stability. Elimination of the guarantees would force rates up, leading to lower home values, and more affordability in the long run.

    It is seriously worth considering privatizing Fannie and Freddie. Make them exist on their own without government intervention. Make them concerned about risk levels and liquidity requirements. Doing so will make them responsive to the profit motive, tighten lending standards, and lessen risk. It will over time also ensure no more government bailouts.

    Allow competition for Fannie and Freddie. Currently, they have no competition and have not had competition since the early 1990s. Competition will force discipline on F&F, and will ultimately prove more productive for housing.

    The new Qualified Residential Mortgage rules must not be allowed to occur as they stand. If the rules are allowed to go forward, it will only ensure that Fannie and Freddie remain the dominant force in housing. Make mortgage lending a level playing field for all. Do not favor F&F with advantages that others would not have like governmental guarantees. We must create effective competition to counter the distorting effects of F&F.

    Government Programs like HAMP

    When government attempts to slow or stop foreclosures, it only offers the homeowner false hopes that the home can be saved. The actions will extend the time that a homeowner remains in a home not making payments, and also extend the length of time that the housing crisis will be with us. Nothing else will generally be accomplished, except for further losses incurred by the lender or investor.

    When modifications are advanced to people who have no ability to repay those modifications, when the interest rates adjust in five years, all that has happened is that the problem has been pushed off into the future, to be dealt with later. This is what government programs like HAMP achieve.

    If the government wants to play a role in solving the housing crisis, it must take a role that will be realistic, and will lead to restoration of a viable housing market. That role must be in a support role, creating an economic environment which leads to housing recovery. It must not be an activist and interventionist role that only seeks to control outcomes that are not realistic.

    Portfolio Lenders

    Usually, the portfolio lender is a bank or other similar institution that is subject to government regulations, including liquidity requirements. Because of liquidity issues and capital, it is not possible for many banks to lend, or in sufficient numbers to have a meaningful effect upon housing recovery at this time. Additionally, the number of non-performing loans that lenders hold restricts having the funds to lend do to loan loss reserve issues. Until such is addressed, portfolio lending is severely restricted.

    To solve the problem of non-performing loans, and to raise capital to address liquidity requirements, a “good bank – bad bank scenario” scenario must be undertaken. Individual mortgage loans need to be evaluated to determine the default risk of any one loan. Depending upon the risk level, the loan will be identified and placed into a separate category. Once all loans have been evaluated, a true value can be established for selling the loans to a “purchase investor”. At the same time, the “bank investor” is included to determine what capital infusion will be needed to support the lender when the loans are sold. An agreement is reached whereby the loans are sold and the new capital is brought into the lender, to keep the lender afloat and also strengthen the remaining loan portfolio.

    The homeowner will receive significant benefit with this program. The “purchase investor” should have bought the loans for between 25 and 40 cents on the dollar. They can then negotiate with the homeowner, offering them significant principal reductions and lowered payments, while still having loans with positive equity. Default risk will have been greatly reduced, and all parties will have experienced a “win-win” scenario.

    However, portfolio lending is still dependent upon having qualified borrowers. To that end, previous outlined steps must be taken to create a legitimate pool of worthy borrowers to reestablish lending.

    MERS

    Anyone who has followed the foreclosure crisis, the name MERS is well known. MERS (Mortgage Electronic Registrations System) represents the name of a computerized system used to track mortgage loans after origination and initial recording. MERS has been the subject of untold articles and conspiracy theories and blamed for the foreclosure process. It is believed by many that the operation of MERS is completely unlawful.

    To restart securitization efforts, a MERS-like entity is going to be required. (MERS has been irrevocably damaged and will have to be replaced by a similar system with full transparency. Before anyone gets upset, I will explain why such an entity is required.)

    Securitization of loans is a time consuming process, especially related to the tracking and recording of loans. When a loan is securitized, from the Cut-Off date of the trust to the Closing Date of the trust when loans must be placed into the trust, is 30 days. During this 30 day period of time, a loan would need to be assigned and recorded at least twice and usually three times. To accomplish this, each loan would need assignments executed, checks cut to the recorder’s office, and the documents delivered to the recorder’s office for recording.

    Most recorder’s offices are not automated for electronic filing with less than 25% of the over 3200 counties doing electronic filing. The other offices must be done manually. This poses an issue in that a trust can have from several hundred to over 8000 loans placed into it. It is physically impossible to execute the work necessary in the 30 day time period to allow for securitization as MERS detractors would desire. So, an alternative methodology must be found.

    “MERS 2.0″ is the solution. The new MERS must be developed with full transparency. It must be designed to absolutely conform with agency laws in all 50 states. MERS “Certifying Officers” must be named through corporate resolutions, with all supporting documentation available for review. There can be no question of a Certifying Officer’s authority to act.

    Clear lines of authority must be established. The duties of MERS must be well spelled out and in accordance with local, state, and Federal statutes. Recording issues must be addressed and formalized procedures developed. Through these and other measures, MERS 2.0 can be an effective methodology for resolving the recording issues related to securitization products. This would alleviate many of the concerns and legal issues for securitization of loans, bringing greater confidence back into the system.

    Securitization & Investors

    Securitization of loans through sources other than Fannie and Freddie represented 25% of all mortgage loans done through the Housing Boom. This source of funding no longer exists, even though government bonds are at interest rates below 1%, and at times, some bonds pay negative interest. One would think that this would motivate Wall Street to begin securitization efforts again. However, that is not the case.

    At this time, there is a complete lack of confidence in securitized loan products. The reasons are complex, but boil down to one simple fact: there is no ability to determine the quality of any one or all loans combined in a securitization offering, nor are the ratings given to the tranches of reliable quality for the same reasons. Until this can be overcome, there can be no hope of restarting securitization of loans. However, hope is on the way.

    Many different companies are involved in bringing to market products and techniques that will address loan level issues. Some products involve verification of appraisals, others involve income and employment verification. More products are being developed as well. (LFI Analytics has its own specific product to address issues of individual loan quality.)

    What needs to be done is for those companies developing the products to come together and to develop a comprehensive plan to address all concerns of investors for securitized products. What I propose is that we work together to incorporate our products into a “Master Product”, while retaining our individuality. This “Master Product” would be incorporated into each Securitization offered, so that Rating Agencies could accurately evaluate each loan and each tranche for quality. Then, the “Master Product” would be presented to Investors along with the Ratings Agency evaluation for their inspection and determination of whether to buy the securitized product. Doing so would bring confidence back into the market for securitized products.

    There will also need to be a complete review of the types of loans that are to be securitized, and the requirements for each offering. Disclosures of the loan products must be clear, with loan level characteristics identified for disclosure. The Agreements need to be reworked to address issues related to litigation, loan modifications, and default issues. Access to loan documentation for potential lender repurchase demands must be clarified and procedures established for any purchase demand to occur.

    There must be clarification of the securitization procedures. A securitized product must meet all requirements under state and Federal law, and IRS considerations. There must be clear guidance provided on how to meet the requirements, and what is acceptable, and what is not acceptable. Such guidance should seek to eliminate any questions about the lawfulness of securitization.

    Finally, servicing procedures for securitization must be reviewed, clarified, and strengthened. There can no longer be any question as to the authority of the servicer to act, so clear lines of authority must be established and agency and power of attorney considerations be clearly written into the agreements.

    Borrower Quality

    Time and again, I have referenced having quality borrowers who have the ability to buy homes and qualify for loans. I have outlined steps that can be taken to establish such pools of buyers and borrowers by resolving debt issues, credit issues, and home overvaluation issues. But that is not enough.

    Having examined thousands of loan documents, LFI Analytics has discovered that not only current underwriting processes are deficient in many areas still, but the new proposed Qualified Written Mortgage processes suffer from such deficiencies as well. This can lead to people being approved for loans who will have a high risk of default. Others will be declined for loans because they don’t meet the underwriting guidelines, but in reality they have a significantly lower risk of default.

    Default Risk analysis must be a part of the solution for borrower quality. Individual default risk must be determined on each loan, in addition to normal underwriting processes, so as to deny those that represent high default risk, and approve those that have low default risk.

    This is a category of borrower that portfolio lenders and securitization entities will have an advantage over the traditional F&F loan. Identifying and targeting such borrowers will provide a successful business model, as long as the true default risk is determined. That is where the LFI Analytics programs are oriented.

    Summary

    In this series of articles, I have attempted to identify stresses existing now and those existing in the future, and how the stresses will affect any housing recovery. I have also attempted to identify possible solutions for many of the stresses.

    The recovery of the housing market will not be accomplished in the near future, as so many media and other types represent. The issues are far too complex and interdependent on each other for quick and easy remedy.

    To accurately view what is needed for the housing recovery, one must take a macro view of not just housing, but also the economic and demographic concerns, as I have done here. Short and long term strategies must be developed for foreclosure relief, based upon the limiting conditions of lenders, borrowers, and investor agreements.

    Lending recovery must be based upon the economic realities of the lenders, and the investors who buy the loans. Furthermore, accurate methods of loan evaluation and securitization ratings must be incorporated into any strategy so as to bring back investor confidence.

    Are steps being taken towards resolving the housing crisis and beginning the housing recovery? In the government sector, the answer is really “no”. Short term “solutions” are offered in the form of different programs, but the programs are ineffective for most people. Even then, the “solutions” only treat the symptom, and not the illness. Government is simply not capable of taking the actions necessary to resolve the crisis, either from incompetence or from fear of voter reprisal.

    In the private sector, baby steps are being taken by individual companies to resolve various issues. These companies are refining their products to meet the needs of all parties, and slowly bringing them to market.

    What is needed now is for the private sector to come together and begin to offer “packages of products” to meet the needs of securitizing entities. The “packages” should be tailored to solve all the issues, so that all evaluation materials are complete and concise, and not just a handful of different reports from different vendors. This is the “far-sighted” view of what needs to be done.

    If all parties cannot come together and present a unified and legitimate approach to solving the housing crisis, then we will see a “lost decade” (or two) like Japan has suffered. Housing is just far too important of an economic factor for the US economy. Housing has led the way to recovery in past recessions, but it not only lags now, it drags the economy down. Until housing can recover, it shall serve to be a drag on the economy.

    I hope that I have sparked interest in what has been written and shall lead to a spirited discussion on how to recover. I do ask that any discussion focus on how to restore housing. Recriminations and blame for what has happened in the past serves no purpose to resolution of the problems facing us now, and in the future.

    It is now time to move past the anger and the desire for revenge, and to move forward with “can-do” solutions.

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  • Promoting Housing Recovery Parts 1 and 2, by Patrick Pulatie


    Previously, I have posted articles regarding housing and foreclosure issues. The purpose was to begin a dialogue on the steps to be taken to alleviate the foreclosure crisis, and to promote housing recovery.   Now, we need to explore how to restart lending in the private sector.  This will be a three part article, with parts I and II herein, and III in the next post.

    To begin, we must understand how we got to the point of where we are today, and whereby housing became so critical a factor in the economy. (This is only an overview. I leave it to the historians to fill in all the details.)

    Part One – Agreeing On The Problems

    Historical Backdrop

    At the beginning of the 20th century, the U.S. population stood about 76,000,000 people. By the end of 2000, the population was over 310 million. The unprecedented growth in population resulted in the housing industry and related services becoming one of several major engines of wealth creation during the 20th century.

    During the Depression, large numbers of farm and home foreclosures were occurring. The government began to get involved in housing to stop foreclosures and stimulate housing growth. This resulted in the creation of an FHA/Fannie Mae– like program, to support housing.

    WWII led to major structural changes in the U.S., both economically and culturally. Manufacturing and technological changes spurred economic growth. Women entered the work force in huge numbers. Returning veterans came back from the war desiring to leave the rural areas, begin families, and enter the civilian workforce. The result was the baby boom generation and its coming influence.

    From the 1950s through the 1970s, the US dominated the world economically. Real income growth was occurring for all households. Homeownership was obtainable for ever increasing numbers of people. Consumerism was rampant.

    To support homeownership, the government created Fannie Mae and Freddie Mac so that more people could partake in the American Dream. These entities would eventually become the primary source of mortgages in the U.S. F&F changed the way mortgages were funded, and changed the terms of mortgages, so that 30 year mortgages became the common type of loan, instead of 5 to 15 year mortgages.

    Storm clouds were beginning to appear on the horizon at the same time. Japan, Korea, Germany, and other countries had now come out of their post war depressions. Manufacturing and industrial bases had been rebuilt. These countries now posed an economic threat to the U.S. by offering improved products, cheaper labor costs, and innovation. By the end of the 1970s, for many reasons, US manufacturing was decreasing, and service related industries were gaining importance.

    In the 1980s and 1990s, manufacturing began to decline in the U.S. Service Industries were now becoming a major force in the economy. With the end of the Cold War in 1989, defense spending began to decline dramatically, further depressing the economy.

    In the early 1990s, F&F engaged in efforts to increase their share of the mortgage market. They freely admitted wanting to control the housing market, and took steps to do so, undermining lenders and competition, and any attempts to regulate them.

    In 1994, homeownership rates were at 64% in the US. President Clinton, along with Congress and in conjunction with Fannie and Freddie, came out with a new program with the intent to promote a 70% homeownership rate. This program was promoted even though economists generally considered 64% to be the maximum amount of homeownership that an economy could readily support. Above 64%, people would be 

    “buying” homes, but without having the financial capabilities to repay a loan. The program focused upon low income persons and minorities. The result was greater demand for housing and homeownership, and housing values began to increase.

    Lenders and Wall Street were being pushed out of the housing market by F&F, and had to find new markets to serve. F&F did not want to service the new markets being created by the government homeownership programs. The result was that Wall Street would naturally gravitate to that market, which was generally subprime, and also to the jumbo market, which F&F could not serve due to loan amount restrictions. This was the true beginning of securitized loan products.

    The events of 9/11 would ultimately stoke the fires of home ownership even further. 9/11 occurred as the US was coming out of a significant recession, and to keep the country from sliding back into recession, the Fed lowered interest rates and kept them artificially low until 2003. Wall Street, recognizing the promise of good financial returns from securitized loans, freed up more and more capital for banks and mortgage bankers to lend. This led to even greater demand for homes and mortgages.

    To meet the increased demand, home construction exploded. Ancillary services did well also, from infrastructure, schools, hospitals, roads, building materials, and home decor. The economy was booming, even though this was “mal-investment” of resources. (Currently, as a result of this activity, there are estimated to be from 2m to 3.5m in excess housing units, with approximately 400k being added yearly to housing stock.)

    It did not stop there. Buyers, in their increasing zeal, were bidding for homes, increasing the price of homes in many states by 50 to 100,000 dollars more than what was reasonable. The perception was that if they did not buy now, then they could never buy. Additionally, investors began to purchase multiple properties, hoping to create a home rental empire. This led to unsustainable home values.

    Concurrently, the Fed was still engaged in a loose money policy. This pumped hundreds of billions of dollars into the housing economy, with predictable results. With increasing home values, homeowners could refinance their homes, often multiple times over, pulling cash out and keeping the economy pumped up artificially. A homeowner could pull out 50,000 to 100,000 dollars or more, often every year or two, and use that money to indulge themselves, pretending they had a higher standard of living than what existed. The government knew that this was not a reasonable practice, but indulged in it anyway, so as to keep up an appearance of a healthy economy. Of course, this only compounded the problem.

    The end result of the past 40 years of government intervention (and popular support for that intervention) has been a housing market that is currently overbuilt and still overvalued. In the meantime, real wages have not increased since the mid 1990s and for large numbers of the population, negative income growth has been experienced. Today, all segments of the population, homeowners especially so, are saddled with significant mortgage debt, consumer debt, and revolving credit debt. This has led to an inability on the part of the population to buy homes or other products. Until wage and debt issues are resolved, employment increases, and housing prices have returned to more reasonable values, there can be no housing recovery.

    Current Status

    As all know, the current status of housing in the US is like a ship dead in the water, with no ability to steer except to roll with the waves. A recap:

    Private securitization once accounted for over 25% of all mortgage loans. These efforts are currently nonexistent except for one entity, Redwood Trust, which has issued one securitized offerings in 2010 and one in 2011. Other than this, Wall Street is afraid to invest in Mortgage Products (to say nothing of downstream investors).

    Banks are unable to lend their own money, which represented up to 15% of all lending. Most banks are capital impaired and have liquidity issues, as well as unknown liabilities from bad loans dating to the bubble.

    Additionally, banks are suffering from a lack of qualified borrowers. Either there is no equity in the home to lend on, or the borrowers don’t have the financial ability to afford the loan. Therefore, the only lending that a bank can engage in is to execute loans and sell them to Fannie Mae, Freddie Mac, or VA and FHA. There are simply no other options available.

    F&F are buying loans from the banks, but their lending standards have increased, so the loan purchases are down. F&F still distort the market because of government guarantees on their loans (now explicit instead of implicit), and they are still able to purchase loans above $700k, which was implemented in response to the housing crisis.

    F&F are still having financial issues, with the government having bailed them out to the tune of $140b, with much more to come.

    VA is buying loans and doing reasonably well, but they serve a tiny portion of the market.

    FHA has turned into the new subprime, accepting credit challenged borrowers, and with loan to values of 95% or greater. Default rates on FHA loans are rising significantly, and will pose issues for the government when losses absorb all FHA loss reserves, which may have already happened (depending on how you look at the accounting).

    The Mortgage Insurance companies are financially depressed, with PMI being forced to stop writing new policies due to loan loss reserves being depleted. Likely, they will cease business or be absorbed by another company. Other companies are believed to be similarly in trouble, though none have failed yet.

    The US population is still overburdened with debt. It is believed that the household consumer debt burden is over 11%, for disposable income. This is far too high for effective purchasing of any products, especially high end. (There has been a lessening of this debt from its high of 14% in 2008, but this has primarily been the result of defaults, so most of those persons are not in a position to buy.)

    Patrick Pulatie is the CEO of LFI Analytics. He can be reached at 925-522-0371, or 925-238-1221 for further information. http://www.LFI-Analytics.com, patrick@lfi-analytics.com.

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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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  • PMI to pay underwater borrowers to stay put by by Jacob Gafney, Housingwire.com


    Private mortgage insurer PMI Group (PMI: 1.34 -11.26%) will offer cash incentives to some homeowners in negative equity to help prevent mortgage defaults.

    PMI subsidiary, Homeowner Reward is working with Loan Value Group, to administer the pilot program, called Responsible Homeowner Reward.

    The program launched Monday and will start in select real estate markets where falling house prices left borrowers owing significantly more on their mortgage than what the property is worth.

    Participation in RH Reward is voluntary and there is no cost to the homeowner, according to PMI. The cash will come after a lengthy period of keeping the mortgage current, generally from 36 to 60 months. According to PMI, the reward will be between 10 to 30% of the unpaid principal balance.

    The Loan Value Group works “to positively influence consumer behavior on behalf of residential mortgage owners and servicers,” according to its website.

    LVG programs already delivered more than $100 million in cash incentives to distressed homeowners. However, those programs focus on turnkey solutions such as cash for keys, with an aim to avoid principal forgiveness. The Homeowner Reward program is taking a different path.

    “We continue to seek creative and effective loss mitigation strategies,” said Chris Hovey, PMI vice president of servicing operations and loss management. “PMI is especially supportive of homeownership retention efforts in states that are facing unprecedented housing challenges.”

    Write to Jacob Gaffney.

    Follow him on Twitter @jacobgaffney.

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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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  • A New Twist on the Old Contractor Lockbox


    Asset managers REO brokers and affiliates, what we show you may scare you.

    Although contractor lockboxes are a necessity in the REO world unfortunately they are also great for inviting unwanted attention to your vacant asset. We try to hide the lockbox on the gas meter or the water spigot, but many times they end up living on the front door knob. Nosey neighbors and bored kids love to try to get into your vacant homes to take a look, sometimes wary travelers or homeless people seek homage in your place. Much of this can be avoided simply by not drawing attention to the fact that the home is vacant.

    Obviously better than leaving the key on top of the outdoor sconce, the contractor lockbox does provide a more difficult way for someone to access the key. However, as you just witnessed in the video above, a handheld hammer and 5 whacks cracks it wide open. Even scarier is how easy it is to pick a push style model. Without force or any damage, the code of a push style contractor lockbox can be easily determined by pressing the clear key and running through the numbers. Within 30 seconds most people can gain access using this method.

     

    The Bottom of the St. Helens RocLok Lock Box model.

    Unfortunately with all of the trade’s people needing access to the place, keeping a key hidden at the property is a must. Electronic Realtor lockboxes offer better security however the electronic key to open them is not available to subs and contractors for the trash out or repairs. So what is the answer? After 7 years as an REO broker, Ryan Belshee came up with a solution to this problem, The RocLok Hide a Key.

    Combining the security of the contractor lockbox and a faux rock that looks, weighs and adapts just like natural stone; the RocLok provides the much needed disguise other key hiding safes lack.

    Just like any other lockbox, the RocLok has a 3 digit, re-adjustable code that safeguards spare keys. The code is set by you and changed as frequently as needed when in the unlocked state. However, the most notable improvement is that instead of screaming, “I’m hiding a key, come and get it,” the RocLok hides in plain sight. Nothing like the little pebble sized plastic rocks that have been around for decades, the RocLok is a 12 pound concrete based rock. It is weather and impact resistant, ages naturally and doesn’t depend on batteries or power to operate.

    The use of the RocLok in your field services will reduce break-ins and reduce the cost of servicing the

    The St. Helens RocLok Lock Box Hides Keys Disguised as a Natural Rock

    asset. As an additional safety precaution the RocLok is now available with the new LokDown System allowing the agent to secure it to the ground, tree or pole meaning no one is going to walk off with your keys without a lot of work. The LokDown was designed to withstand over 250 lbs of lifting force when installed into the ground and much more if attached to a pole or other solid object.

    For more information about the RocLok Hide a Key or to purchase one please visit: www.RocLok.com – Bulk orders are available and can be shipped to multiple locations for easier disbursement. Contact us at: info@roclok.com to obtain accurate pricing.

     

  • Fannie Mae Homepath Review, by Thetruthaboutmortgage.com


    Government mortgage financier Fannie Mae offers special home loan financing via its “HomePath” program, so let’s take a closer look.

    In short, a HomePath mortgage allows prospective homebuyers to get their hands on a Fannie Mae-owned property (foreclosure) for as little down as three percent down.

    And that down payment can be in the form of a gift, a grant, or a loan from a nonprofit organization, state or local government, or an employer.

    This compares to the minimum 3.5 percent down payment required with an FHA loan.

    HomePath financing comes in the form of fixed mortgages, adjustable-rate mortgages, and even interest-only options!

    Another big plus associated with HomePath financing is that there is no lender-required appraisal or mortgage insurance.

    Typically, private mortgage insurance is required for mortgages with a loan-to-value ratio over 80 percent, so this is a pretty good deal.

    HomePath® Buyer Incentive

    Fannie Mae is also currently offering buyers up to 3.5 percent in closing cost assistance through June 30, 2011.

    But only those who plan to use the property as their primary residence as eligible – second homes and investment properties are excluded.

    Finally, many condominium projects don’t meet Fannie’s guidelines, but if the condo you’re interested in is owned by Fannie Mae, it may be available for financing via HomePath.

    Note that most large mortgage lenders, such as Citi or Wells Fargo, are “HomePath Mortgage Lenders,” meaning they can offer you the loan program.

    Additionally, some of these lenders work with mortgage brokers, so you can go that route as well.

    Final Word

    In summary, HomePath might be a good alternative to purchasing a foreclosure through the open market.

    And with flexible down payment requirements and no mortgage insurance or lender-required appraisal, you could save some serious cash.

    So HomePath properties and corresponding financing should certainly be considered alongside other options.

    But similar to other foreclosures, these homes are sold as-is, meaning repairs may be needed, which you will be responsible for. So tread cautiously.

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