Entries Tagged 'Mortgage' ↓

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While mortgage lending is down 22 percent from the 1st 2007, it did rise 3 percent over the preceding quarter. The top lenders include embattled Countrywide Financial who is still expected to be acquired by the 4^th largest lender, Bank of America.  

It is interesting to see that the banks are now taking a leadership role in mortgage lending as the mortgage brokers have come undone in the credit crunch they created. IndyMac and Washington Mutual were down over 60 percent from last year while Residential Capital was down 40 percent.

Company                  Q1 2008 Originations

Countrywide                   $73.0 billion
Wells Fargo                    $66.0 billion
JPMorgan                       $53.8 billion
Bank of America              $38.6 billion
Citigroup                        $34.3 billion

Source: Mortgage Daily

While we in the real estate blogosphere try to figure out why the mortgage crisis is not resolving itself, the reason might be staring us in the face.

The consumer never learned the rules of the game.

Real estate agents and mortgage brokers got so caught up in the frenzy of selling and doing deals that they forgot to educate the consumer. This let the honest people turn deals quickly but it also let the unscrupulous amongst us scam buyers.

Remember the Sy Sims line from the annoying ads, “An educated consumer is our best customer.”

Well, according to this study by the Federal Trade Commission, the typical mortgage buyer was not an educated customer, and now we are all paying the price for this lack of education. So take the extra time now to make sure your clients are being served and educated. It is in all of our best interests.

The study, put together by the Federal Trade Commission for the Federal Reserve, contained some startling statistics: Of those surveyed, 25% could not identify the annual percentage rate of their mortgage, and 25% could not identify the amount of settlement charges. Half could not correctly identify the amount of the loan. Two-thirds were unaware of prepayment penalties that could be charged during refinancing. Three-quarters did not recognize that the loans included charges for optional credit insurance. via Forbes.com

Mortgage fraud was rampant in the beginning of the century, that is very obvious to anyone who has watched the real estate market recently. That is why the new legislation coming out of Missouri is good to see. 

Missouri is going to make the crime of mortgage fraud it’s own category of law with enforcement and very specific penalties. The legislators were smart and kept the scope of the law looking forward to stop rampant fraud from happening again instead of a cumbersome legislation that would have tried to right the ills of past issues. Some legislators were hoping to add language that would have funded foreclosure protection and subprime legislation in the bill, but that would have diluted any affect on stopping mortgage fraud in Missouri in the future.  

The legislation defines mortgage fraud as making false statements or failing to disclose material facts. It creates fines and allows for the licenses of real estate brokers, agents and appraisers to be revoked. It also bars attempts to influence real estate appraisals through extortion or bribery.
The bill, which had already cleared the Senate, was endorsed 141-5 by the House on Thursday and now goes to the governor.
“What we were really focusing on were people who were breaking the law,” said Pearce, R-Warrensburg.
Pearce’s bill allows for civil fines of up to $2,500 per violation for those who commit mortgage fraud. It also makes mortgage fraud a felony punishable by up to seven years in prison. via the Houston Chronicle.

What should not be a big surprise for any who read this site, now the states are blaming the federal government for not slowing down the rate of foreclosures hitting the market. There has been no slowing of the rate of foreclosures no matter what efforts the states take at counseling or programs they have implemented. And now the states need someone to blame for squandering the taxpayers money.

Of course, it is the Federal Government they are blaming for not throwing even more money at the problem.

The truly sad thing is that we all live under the illusion that bad decisions and circumstances can be re-mediated by the government. Well folks, bad things happen to both good and bad people. But trying to stop it is like King Canute trying to stop the tides. Markets are too powerful and we need to let this housing period run it’s course. Then the markets can get back to normal and people can start feeling positive.

The only thing the government can do is make matters worse and extend the pain for others. Oh, and spend more of our tax money making it seem like they really care.

“While there’s been a lot of effort put in by mortgage servicers and government officials, there has been little change in outcomes for homeowners,” said Mark Pearce, deputy banking commissioner for North Carolina. “We’re still treading water.”

The report comes as state officials, frustrated by what they view as the federal government’s inadequate response to the mortgage crisis, are taking increasingly aggressive steps to address the rising rate of foreclosures.

States such as Maryland, Massachusetts, Minnesota and Virginia are looking at extending the foreclosure process or have already taken such steps in an effort to give borrowers more time to work out repayment plans with their lenders. Rising foreclosures hurt not just troubled borrowers, state officials say, but also their neighbors and communities. via the WSJ.com.

Is this any surprise, both Freddie Mac and Fannie Mae are now being told to moderate their aggressive accounting methods and be more prudent on the numbers they are reporting. The issue is a bit esoteric but coming after the accounting scandals that enveloped the agencies in the past year, any hint of impropriety should be taken seriously.

With the housing and credit markets in trouble, Fannie Mae and Freddie Mac’s role is to be the rock in the sea of turbulence. If they are committing shenanigans and/or fraud they could further undermine the housing markets and create even more turmoil. No one is expecting the companies to post stellar profits, but they expect them to be the ethical foundation of the housing industry.

The regulator for Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE), the Office of Federal Housing Enterprise Oversight, told the government-chartered buyers of mortgage debt Monday that they must be judicious in using fair-value accounting rules or they will be barred from them.

At issue is accounting standard No. 159, known as the Fair Value Option for Financial Assets and Financial Liabilities. The standard allows a firm to shift its accounting of an asset from “book value” to “fair market value.” The practice can, in certain situations, produce gains when the value of a security declines.

“It is important that Fannie Mae and Freddie Mac apply fair value in a sound and consistent manner,” said OFHEO Director James B. Lockhart. “Although Fannie Mae and Freddie Mac are using fair value for only a portion of their assets and liabilities, the use of fair value should help dampen fluctuations in earnings caused by their large derivative portfolios.” via Atlanta Business Chronicle:.

When a picture tells a story, as told by Steve Kelley:

Sometimes listening to friends this is exactly my reaction.

Luke Mullins has an excellent interview with former Presidential Gadfly Candidate Ron Paul on the housing crisis and the role Congress may play in it. I would have said fixing it but we all know that is smoke and mirrors.

Paul is very libertarian and on economics we share many of the same principals, let the market work things out. There is a link at the end of the post to read the whole interview, but here is an interesting excerpt of what Ron Paul see’s happening in Congress this year.

I think that if there is something on the floor between now and November [that] will be construed as something to help people getting out of their mortgages, nobody will consider that the responsibility of government is to honor and respect contracts. They are going to go and violate everybody’s contracts and tell people, “Just because you [received] this loan and you can’t pay it [back], we are going to change the rules.” But if you and I had a contract like that, we could see that that’s not right. You owe me that money, or I want my house back. It’s so vague now—who owns these mortgages—they figure, “Well, somebody in China owns these mortgages, so we won’t honor the contract.”

Read the rest at The Home Front at usnews.com.

Fannie Mae is tightening down the ship as foreclosures and bad debt piles up on it’s balance sheet. Previously they did not have a minimum FICO score for buying a loan, now it is 580. Another criteria for buying a loan is that the buyer not have a foreclosure on the record for 5 years, up from 4.

And to avoid showing bad loans on the books Fannie Mae now will allow delinquent borrowers 6 months instead of 4 before the loans need to be recognized as a loss.

The government-sponsored provider of funding for home loans told lenders Monday it will require a minimum credit score of 580 for most loans it buys on an individual basis. Credit scores, which range from 300 to 850, are designed to measure borrowers’ likelihood of repaying loans. In the past, Fannie had no minimum score. The company said it will still acquire loans with lower credit scores in certain circumstances.

Among other changes announced to lenders, Fannie also said it will increase the period needed for borrowers to “re-establish” their credit history after a foreclosure to five years from four years. Fannie said it would allow shorter recovery periods for borrowers with “documented extenuating circumstances” that caused the foreclosure.

Separately, Fannie last week told loan servicers — companies that collect loan payments — that they can increase their forbearance period on delinquent borrowers to as much as six months from four months to allow more time to seek alternatives to foreclosure. Fannie hopes that move will reduce the number of loans on which it needs to recognize losses, though it may be only delaying the pain in some cases. via RealEstateJournal

It is one thing to live in a market that is slow, but it is even worse when folks start telling everyone that it is one of the riskiest housing markets in America. I think the people in Detroit are resigned to the fact that they will lead any indicator of housing distress in the country as they have gone through pure hell the past few years.

But cities such as Orlando, Florida and St. Louis, Missouri are probably shocked that they hold the 2^nd and 4^th positions, respectively. To come up with the criteria for risk in the housing market, Forbes used these criteria; “the country’s 40 largest metros and combined data on foreclosures, from RealtyTrac, a foreclosure listing service; job growth from the Bureau of Labor Statistics; transaction volume data from Radar Logic, a New York real estate research firm; and vacancy and current inventory rates from the U.S. Census Bureau and ZipRealty, an aggregator of multiple listing service data. “

Top 10 Riskiest Real Estate Markets In United States

1. Detroit, Michigan
2. Orlando, Florida
3. Cleveland, Ohio
4. St. Louis, Missouri
5. Miami, Florida
6. Las Vegas, Nevada
7. Sacramento, California
8. Denver, Colorado
9. Tampa Bay, Florida
10. Phoenix, Arizona

via Forbes

Alphonso Jackson, Secretary of Housing and Urban Development, is expected to resign his post as head of the Cabinet Department. The timing of this resignation is not a great indicator of how the White House and Congress are dealing with housing issues.

There have been reports that one of the stumbling blocks is the relationship between Jackson and the Democrats in the Congress. While this can not be a surprise, the Democrats want huge spending programs enacted to counter the housing issues while the administration is fighting for a market solution, it will put back any agreement between the two.

One of the problems facing the housing industry right now is they do no know how Washington is going to react to the housing and credit problems out there. Companies do not want to make the hard decisions if there is a bailout from Washington coming.

Mr. Jackson, a former top housing official in Texas, Washington, D.C., and Missouri, has consistently denied any improper behavior while leading HUD. Still, his poor relationship with Democrats has hurt the White House’s efforts to broker deals in response to the housing crisis. For example, Democrats have criticized the way he handled public housing after Hurricane Katrina, an issue that has dogged him ever since.

HUD, usually out of the spotlight among the federal agencies, has been at the heart of the administration’s attempts to ease problems for homeowners. Mr. Jackson has been the junior partner to Treasury Secretary Henry Paulson in that effort. At events, the HUD secretary generally stressed the human cost of the nation’s housing-induced financial woes, while Mr. Paulson handled the technical details. via WSJ.com.

Hat tip to the Industry Report.