Analysts Question Fannie Mae Plan
Fannie Mae intends to file lawsuits against so-called strategic defaulters and force them to wait seven years before obtaining another mortgage backed by the organization. But experts wonder how the firm will determine which home owners defaulted strategically.
Experts also question whether the policy is viable given its departure from White House initiatives to bolster the housing market.
The policy is intended to force borrowers to pursue short sales or surrender the deed, rather than enter foreclosure, says Fannie Mae.
Source: New York Times, David Streitfeld 06/25/10
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Housing Still Lacks Stable Funding
There still isn’t enough private capital in the home loan market – a sign of a “very sick system,” said Federal Housing Administration Commissioner David Stevens, who spoke to the Mortgage Bankers Association at their convention on Monday.
Without a 20 percent down payment, “it’s very difficult to find a solution with private capital,” Stevens said. “We need to find a way to bring private capital back to the market.”
Stevens called on banks to provide more remedies for responsible borrowers who are underwater, which he said would go a long way toward stabilizing the market.
Source: Reuters News (05/24/2010)
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Borrowers Would Do Things Differently
Borrowers say they spend no more time researching a mortgage loan today than they did two years ago before the market meltdown, according to a survey by Zillow.com. And that’s unfortunate, says Zillow Chief Economist Stan Humphries
“The last few years should have driven home the lesson that understanding one’s home loan is critically important, but mortgages continue to be something that most people don’t want to spend time thinking about,” he says.
The survey found that of the 16 percent of U.S. adults who obtained or refinanced a home loan in the last five years, 65 percent would do things differently if they could.
• 58 percent would like to compare terms for loans on an apples-to-apples basis.
• 56 percent would like fees standardized and easier to understand.
• 52 percent would like it to be easier to shop around for rates.
• 50 percent would like to get more than one quote without sharing personal information.
• 19 percent would want to learn more about the mortgage process.
• 15 percent would want it to be easier to choose a lender based on other’s experiences.
Source: Zillow.com (04/29/2010)
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Mortgage Modification Plan Falls Short
Only 65,000 people – about 7 percent of those who applied – have successfully navigated President Obama’s plan to help borrowers who are in trouble, the Treasury Department said last week.
About 49,000, or 5 percent, have dropped out of the program because they don’t qualify. Most of the remainder are still waiting.
Bank of America, the largest company in the program, has completed fewer than 2 percent of the modifications for 200,000 borrowers who signed up. The most successful lenders include Ocwen Financial Corp. and Carrington Mortgage Services, which have modified loans for 40 percent of their enrolled borrowers.
Source: Associated Press, Alan Zibel (01/15/2010)
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Higher Rates Will Require Lender Explanation
Under new rules from the Federal Reserve Board and the Federal Trade Commission, borrowers who are loaned money at less-favorable rates because of their credit ratings must be notified and given a free copy of their credit scores.
Currently, lenders don’t have to offer any explanations. These rules apply to mortgage lenders as well as other sorts of financing firms. It takes effect Jan.1, 2011.
Consumers who are given terms “materially less favorable” than “a substantial proportion” of the lenders’ other customers must receive the information, according to the report in the federal register.
Source: Bloomberg, Jeff Plungis (12/22/2009)
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Option-ARM Borrowers Facing Resets
About 93 percent of option-ARM buyers chose to pay a minimum amount less than the interest due, according to a report released last week by Standard & Poors. That means that nearly all of the 350,000 option-ARM borrowers now owe more than they owed when they first purchased their homes.
Many of these loans were written in 2004 and are close to their five-year reset when the loans convert to a standard amortization. Some more recent loans will reset early if the accumulated interest has pushed the loan-to-value ratio above 110 percent.
In one example outlined in the S&P report, the payment on a $400,000 mortgage goes from $1,287 to $2,593.
The authors of the report say that many ARM borrowers aren’t good candidates for refinancing or modification because their loan-to-value ratios are too high for the government’s Making Home Affordable program. Also, about 80 percent of option-ARM loans were stated-income loans and borrowers could be held legally liable for deliberate inaccuracies on their original applications.
Source: CNNMoney.com, Les Christie (11/26/2009)
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One-Fourth of Borrowers Are Underwater
More than 23 percent of people with mortgages owe more on their properties than they are worth, according to a report released Tuesday by research firm First American CoreLogic.
Another 2.3 million homeowners are within 5 percent of being underwater, bringing the total of those who are upside down or close to it to about 28 percent.
About 5.3 million U.S. households have mortgages that are at least 20 percent higher than their home’s value, the First American report says. Borrowers owing more than 120 percent of their home’s value are the most likely to default, First American calculates.
The majority of underwater mortgages are in the following states:
1. Nevada: 65 percent of home owners are underwater
2. Arizona: 48 percent
3. Florida: 45 percent
4. Michigan: 37 percent
5. California: 35 percent
The report also notes that most U.S. homeowners have home equity, and nearly 24 million owner-occupied homes don’t have any mortgage at all, according to the U.S. Census Bureau.
Source: The Wall Street Journal, Ruth Simon and James R. Hagerty (11/24/2009)
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Why the Foreclosure Plan Isn’t Working
Why can’t mortgage servicers process more than 9 percent of the applications of borrowers eligible for a government retooling of their loans?
Here are five reasons spelled out:
1. Fax machines. Most loan servicers require that applications be faxed. “It’s archaic. Given all the problems we’ve had with lost faxes, it seems unreasonable to use a fax system,” said Michael van Zalingen, director of homeownership services for Neighborhood Housing Services of Chicago.
2. Too many forms. Each servicers has its own form, as does Freddie Mac and Fannie Mae.
3. Outdated info. By the time the multiple forms get through the fax machine, the info is outdated and applicants have to start all over.
4. Green personnel. Servicers are hiring and training staff by the thousands and most of them haven’t been on the job long enough to understand the process.
5. Too complicated to comprehend. Some eligible borrowers are receiving loan modification offers without even applying, but the paperwork is such gobbledygook that they mistake it for trash and throw the offers away.
Source: CNNMoney, Tami Lubby (08/11/2009)
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Finding the Best Mortgage Deal Takes Work.
Home buyers who investigate mortgage options themselves as opposed to using a broker are likelier to get a better deal, according to a study for the Department of Housing and Urban Development published last year.
The study found that borrowers paid about $300 to $425 more in fees when they worked with a broker as opposed to working directly with a lender.
But comparison shopping can be tricky. Home buyers should try to devote a whole day to comparison shopping and include at least one credit union, a community bank, multiple national banks and an investment firms.
They should compare one type of loan at a time–for instance, a 30-year, fixed rate with no points. Their research should include a request for a guarantee that both the rate and the good-faith estimate will be exactly as initially presented. This standard could be difficult for a buyer to find, but it’s worth trying to find it, experts say.
Source: The New York Times, Ron Lieber (04/04/2009)
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