Fannie Mae to Prohibit ‘Appraisal Cutting’
Fannie Mae is banning a common practice known as “appraisal cutting,” starting next week.
When lenders selling loans to the firm challenge a valuation, the underwriter will have to contact the appraiser directly; if the lender is unable to settle the dispute, its only option will be to order a second appraisal.
Lenders will be unable to simply cut the value of the appraisal or shop around for the best appraisal.
Source: American Banker, Kate Berry and Marc Hochstein (08/26/10).
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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)
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Decision on Fannie and Freddie May Come Soon
Government and banking experts meet next week to decide the future of Fannie Mae and Freddie Mac.
The likeliest solution is a complex one. The Mortgage Bankers Association is proposing a system where risk-based fees on a class of mortgage-backed securities would be charged in exchange for a government guarantee against losses.
Whatever the outcome, it is unlikely that Fannie and Freddie will be able to pay back the nearly $150 billion in taxpayer bailout money that they have received since 2007.
Source: Reuters News (08/12/2010)
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Fannie, Freddie Will Not Forgive Underwater Debt
Despite rumors to the contrary sweeping Wall Street and Washington, D.C., the White House says it is not planning to order Fannie Mae and Freddie Mac to forgive a portion of the mortgage debt of millions of people who owe more than their homes are worth.
“The administration is not considering a change in policy in this area,” said Treasury spokesman Andrew Williams.
Mortgage bond prices stabilized after that rumor was quashed.
Source: Reuters News (08/05/2010)
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Fannie Mae: No More Overly Easy Loans
Fannie Mae CEO Michael Williams said Wednesday that Fannie’s current book of business is its strongest in 10 years.
In a speech to the group Women in Housing and Finance, Williams said Fannie is emphasizing long-term, fixed-rate loans based on more accurate appraisals to borrowers with higher credit ratings who can thoroughly document their income.
Williams called the tougher standards “the new realism” in the housing market that will make owning a home more challenging.
“Step-by-step, we are putting in place a new foundation for our industry,” he said. “It’s a foundation based on the right lending standards and on a broad re-examination of what constitutes sensible risk.”
Source: The Wall Street Journal, Jessica Holzer (07/28/2010)
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Fannie Mae Reviews Last-Minute Credit Checks
Fannie Mae announced last week that it is reviewing the rule it put in place earlier this year requiring lenders to do a second credit check shortly before closing.
The goal of the rule is to identify new debt that might undermine an applicant’s ability to pay, but for both home buyers and lenders, the second check is problematic. The search can uncover a short-term debt — medical bills that insurance is likely to pay — that would nevertheless derail a purchase.
“We keep telling people: ‘Don’t open new accounts. Don’t close existing accounts. Don’t do anything whatsoever that will alter your credit situation,’” says Eric Gates, a mortgage broker for Apex Home Loans. “But there will be people who can’t avoid increasing their credit card balances, or already have, and that’s where the problems will crop up.”
Lenders are particularly concerned about the rule because Fannie can require them to buy back loans in default up to two years after closing if there is evidence that the borrower had more debt than was disclosed at the time of closing.
Source: Washington Post, Dina ElBoghdady (07/16/2010)
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Fannie Mae Needs $8.4 Billion More
After posting a first-quarter net loss of $11.5 billion, Fannie Mae has petitioned the federal government for an additional $8.4 billion in aid.
The government-sponsored enterprise’s 11th consecutive quarterly loss would have been deeper without accounting changes that reduced its deficit. Fannie Mae now has recorded total losses of almost $145 billion, or nearly twice its profits for the previous 35 years.
Source: Wall Street Journal, Nick Timiraos (05/11/10)
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Fannie Adds Incentive to Avoid Foreclosure
Beginning in July, Fannie Mae will allow financially troubled home owners to complete a “deed in lieu of foreclosure” or a short sale and be eligible to apply for a new Fannie-backed mortgage in two years.
Currently, borrowers who have completed a deed-in-lieu must wait four years to apply for a loan that Fannie will purchase. Home buyers who go through foreclosure must wait five years.
All these waiting periods can be reduced further, if the potential buyer can show extenuating circumstances. “We are beginning to think about post-recession, how you address borrowers who became unemployed through no fault of their own … and now deserve the right to re-enter the housing-finance system,” said Federal Housing Association Commissioner David Stevens.
Source: The Wall Street Journal, Nick Timiraos (04/26/2010)
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Fannie Survey Finds Home Owners Are Skeptical
The housing crisis has changed how Americans view homeownership, according to a survey of public attitudes by Fannie Mae.
The number of people who view homeownership as a safe investment declined from 83 percent in 2003 to 70 percent in 2009. In addition:
* 48 percent of those surveyed said banks should foreclose on people who don’t pay their mortgages. 53 percent blamed borrowers – instead of banks – for taking out bigger loans than they could afford.
* 15 percent of respondents said it is acceptable for borrowers who are underwater to walk away.
Source: The Washington Post, Renae Merle (04/06/2010)
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White House Props Up Fannie and Freddie
More than a year after the global financial meltdown, Fannie Mae and Freddy Mac remain at the center of the U.S. government’s efforts to keep real estate afloat. So far, the government has given the two companies a total of nearly $111 billion to buy mortgages originated by others, keeping some as investments and repackaging other for sale to investors as securities.
Together, Fannie and Freddie fund 90 percent of U.S. mortgages. They also have reignited lending by state and local housing-finance agencies by guaranteeing $24 billion in debt. And they are supporting the apartment sector by lending to builders and buyers.
The situation is unlikely to change soon because by relying on Fannie and Freddie, Obama can bypass Congress. The government is “running Fannie and Freddie as an instrument of national economic policy, not as a business,” says Daniel Mudd, who was forced out as Fannie Mae’s CEO in September 2008 when the government took control.
Assistant Treasury Secretary Michael Barr defends the status quo, saying that Fannie and Freddie are “owned by the taxpayers in the middle of the biggest housing crisis in 80 years” and the administration’s actions have been “prudent” and “consistent with taxpayer protection.”
Source: The Wall Street Journal, Nick Timiraos and James R.
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Fannie, Freddie Go After Bad Loans
Accountants at Fannie Mae and Freddie Mac are auditing mortgage files to uncover loans with improper documentation about a borrower’s income, and then forcing banks and savings and loans to buy the loans back.
Freddie required lenders to buy back $2.7 billion of loans in the first nine months of 2009. Fannie Mae won’t disclose its figures, but the mortgage trade publication Inside Mortgage Finance said Fannie made $4.3 billion in loan-repurchase requests in the first nine months of 2009.
One result is that banks are underwriting mortgage loans even more carefully than they were last year, which can further slow the lending process.
“If you’re being hit with a lot of repurchases very suddenly, the easiest thing to do is to tighten your standards rapidly,” said Glenn Boyd, a Barclays analyst.
Source: The Wall Street Journal, Nick Timiraos (01/30/2010)
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Fannie to Offer Closing Cost Aid on Foreclosures
Fannie Mae, the largest provider of residential home funding in the United States, announced Friday that it would pay the closing costs on purchases of foreclosed homes in its inventory.
The government-controlled company said buyers of qualified properties will get up to 3.5 percent in closing costs, or an equivalent amount for the purchase of new appliances.
The goal of Fannie is to clear out the nearly 50,000 properties it has in inventory— listed on HomePath.com, the Web site created by Fannie Mae last year to sell the growing number of foreclosed homes.
“Attracting qualified buyers to the market and reducing inventory of vacant homes is critical to stabilizing neighborhoods and helping the market recover,” said Terry Edwards, executive vice president for credit portfolio management, in a statement.
Source: Reuters News, Al Yoon (01/28//2010)
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Fannie Mae: New Affordable Housing Options
Fannie Mae announced Tuesday that it has launched several initiatives designed to stabilize neighborhoods and promote purchases by owner occupants and low-income buyers.
Fannie Mae’s “First Look” initiative offers buyers who intend to live in the home, particularly low-income buyers, an opportunity to make an offer during the first 15 days the property is on the market. Investors can only make an offer after the first 15 days have passed.
Other programs aimed at stabilizing neighborhoods include:
* Deposit Waivers. Fannie Mae will waive the earnest money/deposit requirement for public entities using public funds to purchase a Fannie Mae-owned property. Individual home buyers who have qualified for public funds and want to purchase a Fannie Mae-owned property do not have to meet the usual earnest money/deposit requirement either. Deposits for these buyers can be as low as $500.
* Reserved Contract Period. Upon receipt of an acceptable offer, buyers have the ability to renegotiate their offer after obtaining an appraisal.
* Extra Time for Closing. Buyers receive up to 45 days to close – 15 days more than is usually permitted for purchases of Fannie Mae-owned properties.
Source: Fannie Mae (11/24/2009)
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Credit Disputes Could Bar Home Loans
Mortgage loan applicants with a credit dispute on their records may find it impossible to get a loan even if they have a score above 800 and a large down payment, warn consumer watchdogs.
The problem stems from a Fannie Mae policy that requires lenders to hand-underwrite these loans because that practice makes it harder for scammers to use the credit dispute law to hide bad credit experiences.
Denying people who are good credit risks a loan is frequently an unintended consequence, says Christopher Cruise, a mortgage originator and a founder of Responsible Loan Officers. “There’s no question – when there are lots of other applications and business is good,” applications requiring extra time and research “just aren’t going to move.”
The policy is “extremely unfair to honest consumers who are simply doing what they should – challenging misinformation,” says Evan Hendricks, whose newsletter Privacy Times outlined Fannie Mae’s policy in a recent report.
Fannie Mae says it is reviewing the policy and may change it.
Source: Washington Writers Group, Kenneth R. Harney (10/25/2009)
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FHFA Gets More Funding
The Federal Housing Finance Authority (FHFA) will have a $139.3 million budget for fiscal year 2010, up 15 percent from a year ago. This increase will help the watchdog in supervising Fannie Mae and Freddie Mac.
The FHFA says the two mortgage financiers have refinanced 3.2 million loans this year, and its data indicates that the volume of loan workouts is tied to average mortgage rates. However, the volume of mortgage modifications is still below expectations.
Source: DSNews, Adam Weinstein (10/05/2009)
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Mortgage Bankers: End Fannie and Freddie
The Mortgage Bankers Association is urging the U.S. government to replace Fannie Mae and Freddie Mac with private companies.
The Obama administration is considering a couple of options, including shutting them down or merging them into another federal agency.
The mortgage bankers would replace Fannie and Freddie with federally regulated private companies that would buy loans, sell them as bonds with their own guarantee, and pay the government for reinsurance.
Jaret Seiberg, an analyst at Washington Research Group, said in a research note that the “odds are high for enactment” for the Mortgage Bankers Association’s proposal because this would create a practical way to keep mortgage rates low.
Source: The Associated Press, Alan Zibel (09/02/2009)
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Freddie Mac gets another $6.1B from government
By STEPHEN BERNARD Associated Press NEW YORK — Battered mortgage giant Freddie Mac received $6.1 billion in new funds from the Treasury Department to help offset its mounting liabilities, according to a regulatory filing submitted Wednesday. The company could also be close to naming a new, permanent CEO, according to a report in The Wall [...]
Mortgage Update: Jumbos Remain Elusive
At a time when some mortgage products are showing signs of life, jumbo mortgages are hard to get and expensive, making it difficult for many would-be move-up buyers to take action. What to do? Since the credit crunch hit about two years ago, many lenders have all but abandoned jumbos, which are too big for [...]
Changes in reverse mortgages worry industry.
Almost daily, the reverse mortgage industry is changing, and it’s worrying plenty of people.
For years, reverse mortgages have been reliable, a way for seniors to live off the equity in their homes as they age. While complicated, these loans have been highly regulated in terms of fees and rate disclosures. Geared to homeowners age 62 and above, they provided peace of mind because rates and fees usually were set when the loan process started.
But now, reverse mortgage veterans like John Smaldone in Maryville, Tenn., are concerned about that some sudden changes by Fannie Mae that allow margins to fluctuate almost daily until the funding process is complete. These adjustments can confuse seniors and cause them to question whether they are getting fair treatment.
Fannie Mae – the largest financier in the U.S. mortgage industry – is trying to attract more money to the reverse mortgage market by increasing the amount lenders can make on selling the loans. But raising fees and allowing rates to change can lower the amount of money senior homeowners can borrow. It also can increase the fraud risk as competition for their business increases. More Details
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Fannie taps lifeline after $59B in losses.
Mortgage finance company reports $25 billion quarterly loss and receives $15 billion from the Treasury Department.
NEW YORK (CNNMoney.com) — Hammered by the ailing housing market, mortgage finance giant Fannie Mae said Thursday it would tap its lifeline from the Treasury Department after reporting $58.7 billion in losses for 2008.
The company, a crucial source of funding for mortgage lenders, said it would draw down $15.2 billion of its $200 billion federal line of credit. In return, the government will receive preferred shares. MORE.
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Housing fix leans on troubled firms.
NEW YORK(CNNMoney.com) — Fannie Mae and Freddie Mac won’t be leaving the federal government’s nest anytime soon.
President Obama is leaning heavily on the teetering mortgage finance titans to help stabilize the housing market, even as it pumps hundreds of billions of dollars into them to keep them afloat.
As the housing crisis deepens, the question of the companies’ long-term future has been set aside.
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Fannie Mae won’t evict renters in foreclosures Will sign new leases with tenants while properties are up for sale
WASHINGTON – Mortgage finance company Fannie Mae said Tuesday it has adopted a policy allowing renters to remain in their homes even if their landlord enters foreclosure.
Full story.
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