Mortgage Fraud Is on the Rise

Mortgage fraud — which peaked in 2006 — rose 17 percent last year after falling 57 percent in the prior two years, reports CoreLogic.

Analyzing about 7 million home loans made by hundreds of lenders, the research firm found that $14 billion in loans were originated with fraudulent application data in 2009.

Lenders have tightened criteria and look more closely at mortgage applications since the collapse of the real estate market; but fraudsters now are relying more on falsifying documents, recruiting loan officers and other bank insiders to work for them, and stealing identities to get loans.

Source: The Wall Street Journal, Robbie Whelan (08/23/10)

Front Gate Properties, We’re selling the BEST Real Estate in Aiken, SC.

VA Expands Forbearance in the Gulf

Veterans in Gulf Coast states may qualify for delayed payments if the Department of Veterans Affairs (VA) already guarantees their mortgages.

The VA is asking all mortgage companies to waive late payments and suspend negative reporting to credit bureaus on borrowers affected by the oil spill who are out of work.

VA has information on its Web site. Veterans in need of mortgage counseling may also contact their nearest VA regional loan center at (877) 827-3702 for help and information, regardless of whether or not they have a VA home loan.

Source: U.S. Department of Veterans Affairs (08/20/2010)

Front Gate Properties, We’re selling the BEST Real Estate in Aiken, SC.

Investors Turn to Flipping for Quick Profits

Private equity firms and other groups of wealthy people are purchasing foreclosures at distressed prices, rehabbing them, and selling them for a quick profit.

This used to be a game for amateurs, but because of the lack of other investment opportunities, the money-management pros have stepped in.

The influx of new players is pushing up auction prices and making it harder to make a profit. The average discount at auctions — the difference between a home’s sale price and its actual value — is 21.6 percent, down from 28 percent in January 2009, according to ForeclosureRadar.

“In crisis there’s opportunity,” says Rick Hudson, president of investment firm Prosperity Group Real Estate in Irvine, Calif. “Right now there’s huge opportunity with flipping houses.”

Source: Los Angeles Times, Walter Hamilton and Alejandro Lazo (08/20/2010)

Front Gate Properties, We’re selling the BEST Real Estate in Aiken, SC.

Three Reasons to Buy a Home Now

Stocks are up 50 percent from the March 2009 bottom. Some commodities have risen dramatically. The only asset class left in the cellar is real estate, says Michael Murphy, editor of the New World Investor stock newsletter.

As a result, Murphy is advising investors to buy now for these three reasons:

• Desperate sellers: Both home owners and lenders are eager to unload a flood of foreclosed and underwater properties. Buyers with the patience to push through these complex deals can save a bundle.

• Little competition. Because most people don’t have what it takes to negotiate their way through short sales and REOs, patient investors are winners.

• Low rates. Mortgage rates are at their lowest level in 40 years. If you believe inflation is inevitable, lock in now.

Source: MarketWatch, Michael Murphy (08/19/2010)

Front Gate Properties, We’re selling the BEST Real Estate in Aiken, SC.

Americans Still Want to Own a Home

More than 72 percent of American adults say that home ownership is a part of their personal American dream, down from 77 percent six months ago, according to a survey for

About 23 percent said their attitude toward homeownership has grown more positive in the last six months, while 19 percent say they feel more negatively.

Among those adults who are renting a home, 27 percent say they never intend to buy. Of the renters who do plan to purchase eventually, 68 percent said it would be more than two years before they do.

The factors that would encourage them to buy now are:

• Able to save a down payment, 47 percent
• Land a new job, 28 percent
• Interest rates stay low or fall lower, 27 percent
• Some other factor that persuades them that buying makes financial sense, 24 percent
• Get a raise, 23 percent
• Local real estate market stabilizes, 9 percent

Source: (08/18/2010)

Front Gate Properties, We’re selling the BEST Real Estate in Aiken, SC.

Home Owners Becoming More Realistic

Home owner confidence about the value of their home has declined in the second quarter, compared to the previous three quarters of this year and last, reports in its second quarter real estate market report.

About 30 percent of home owners predict that values will increase in the next six months, down from 42 percent who believed that in the first quarter. More than 28 percent believe market values will fall in the next six months.

About 34 percent of homes actually increased in value in the second quarter, according to Zillow, but only 24 percent of home owners say their own homes’ values increased.

If they see signs of a recovering market, 5 percent of home owners say they are likely to put their homes up for sale.

“Home owners have become much more responsive to current market conditions than they were just two years ago, when a more typical reaction was denial,” said Stan Humphries, chief economist at

“Our forecast remains largely unchanged: We’re in for an L-shaped recovery that will likely keep annualized home value appreciation very low for the next three to five years.”

Source: Zillow

Front Gate Properties, We’re selling the BEST Real Estate in Aiken, SC.

Fed: Give Borrowers Time to Change Their Minds

The Federal Reserve released a proposal Monday to give mortgage applicants three days to change their minds.

The proposal was part of a 930-page document that clarifies and finalizes the new financial reform law.

The Fed’s document says that for closed-end loans secured by real property or a dwelling, a creditor must:

• “Refund any appraisal or other fees paid by the consumer (other than a credit report fee), if the consumer decides not to proceed with a closed-end mortgage transaction within three business days of receiving the early disclosures (fees imposed after this three-day period would not be refundable); and
• “Disclose the right to a refund of fees to consumers before they apply for a closed-end mortgage loan.”

The Fed says this proposal will make it easier and cheaper for consumers to comparison shop. It also acknowledged that borrowers who want to close a transaction in a hurry would be handicapped because most lenders will delay sending out an appraiser for a few days.

Other proposals affecting home buyers included:

• A ban on yield-spread premiums, which encourage mortgage brokers to push buyers toward more profitable mortgages.
• A requirement for lenders to tell borrowers when their mortgage is sold or transferred.
• An explanation of the effects of balloon payments, adjustable loan payment fluctuations, and minimum payments on loan balances.

Source:, Holden Lewis (08/17/2010)

Front Gate Properties, We’re selling the BEST Real Estate in Aiken, SC.

Some Guarantee Will Survive Fannie, Freddie

The dominant thread at the conference earlier this week on the future of Fannie Mae  and Freddie Mac, hosted by Treasury and the U.S. Department of Housing and Urban Development, was about retaining FHA to ensure finance availability for lower- and moderate-income households and re-shaping Fannie and Freddie into something that backstops losses after private insurers take their lumps.

At least for the near term, most of the academics and business leaders participating seem to agree, some form of government backstopping of the mortgage market is necessary, but it won’t be under the terms that we’ve grown familiar with. Rather, the guarantee would be absolutely explicit, not implicit like we saw with Fannie and Freddie, and, in the view of some, would take the form of a limited, maybe even catastrophic-type, backstopping in which the private sector takes first-risk position.

The government-backed secondary market companies would adjust underwriting and terms to provide counter-cyclical restraints (tightening standards as appreciation rises too far from historical norms) and ensure without question that they would have the reserves to meet their commitments to investors should loans go bad. In a pure market, that would mean costs would rise far too high for most borrowers to afford  financing, but with the government’s support, costs would be brought down to a level
appropriate for the great middle of the market. FHA would be retained to play its role making safe, affordable financing available to lower- and moderate-income borrowers.

Would the secondary mortgage market companies be pure government entities like FHA or pure private companies? Not clear, except that Geithner said in his opening remarks that the days of private gains subsidized by public losses — the Fannie and Freddie
models — are over. Perhaps, as Alex Pollack of the American Enterprise Institute said, the GSEs should be divided into three entities: purely private companies for packaging mortgage-backed securities for Wall Street investors, pure government agencies for meeting public policy goals of homeownership, and third entities for liquidating the existing GSEs’ bad debt.

All agree that lack of transparency was one of the great culprits of the mortgage crisis.  Borrowers didn’t know what they were borrowing, investors didn’t know what they were investing in, and no one knew whether the federal government would actually step in should a crisis occur. To correct these shortcomings, transparency would have to be a  hallmark of any reform. “We need transparency, standardization, and disclosure,” said
Susan Wachter of the University of Pennsylvania’s Wharton School.

Vince Malta, NAR vice president and liaison to government affairs, was present on behalf  of REALTORS® on the second day of the conference.

Front Gate Properties, We’re selling the BEST Real Estate in Aiken, SC.

Purchase Applications Decline, Refis Rise

Mortgage applications to purchase homes declined 3.4 percent last week compared to the previous week on an unadjusted basis, according to the Mortgage Bankers Association weekly survey.

On an unadjusted basis, purchases declined 4.6 percent compared with the previous week and were down 38.6 percent from the same week a year ago.

The decline occurred despite unusually low interest rates that drove the refinance index up 17.1 percent to the highest level since May 15, 2009.

Average interest rates rose slightly from the week before:

• 30-year fixed-rate mortgages increased to 4.60 percent from 4.57 percent.
• 15-year fixed-rate mortgages increased to 3.99 percent from 3.95 percent.
• 1-year ARMs decreased to 6.90 percent from 7 percent.

Source: Mortgage Bankers Association (08/18/2010)

Front Gate Properties, We’re selling the BEST Real Estate in Aiken, SC.

Geithner Calls for Cooperation to Modify GSEs

Treasury Secretary Timothy Geithner told attendees at a housing summit on Tuesday that the U.S. government will continue to guarantee mortgages, but its role will be revised to avoid making it a primary backer if Fannie Mae and Freddie Mac face another meltdown.

Geithner urged Democrats and Republicans to work together to rebuild Fannie and Freddie to avoid another crisis. He called remaking the mortgage market one of the most important and complicated economic policy problems the U.S. faces today.

“There is nothing we can do to decrease the significant losses Fannie and Freddie incurred ahead of this crisis. All we can do is to minimize the risk that they get worse,” Geithner said.

Source: The Wall Street Journal, Nick Timiraos (08/17/2010)

Front Gate Properties, We’re selling the BEST Real Estate in Aiken, SC.