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September 14, 2011

More California Homeowners Stuck in Underwater Loans

Category: Mortgage Reform News – admin – 1:08 pm

According to the LA Times, economists consider high loan payments on homes that are less than the mortgage as a risky position for investors because of the likelihood of loan default. The LA Times explained that homeowners in this type of financial situation often feel hopeless and trapped by the poor decisions they made during the housing boom. The underwater mortgages are most likely to default and add to the rising foreclosure rate.

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President Obama, in his address to Congress last week, said that helping homeowners refinance their loans could free up a considerable chunk of spending each year for families. Home loan rates have fallen to historic lows amid concerns the economy is sinking again. In response, the Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac, said last week that it would review its policies to see if more homeowners would qualify for the administration’s Home Affordable Refinance Program.

This government loan relief program is only offered to borrowers that have mortgages originated before June 2009 and owned or guaranteed by Fannie Mae or Freddie Mac.  Read the original LA Times Article


September 13, 2011

More Obama Mortgage Refinancing Programs

Category: Mortgage News,Mortgage Reform News – admin – 2:23 pm

According to the Wall Street Journal, nearly 25% of all U.S. borrowers could eventually gain access to an Obama mortgage refinance program to secure low rate mortgages. At issue are millions of so-called “underwater” borrowers who owe more than their home is worth and can’t refinance to current low rates using traditional means.

The Obama administration’s Home Affordable Refinance Program, also known as HARP, has sought to provide a “home refinance loan”  to some of these underwater borrowers who have no equity in their homes.  To qualify, borrowers must have a mortgage is backed by Fannie Mae and Freddie Mac.

HARP currently only allows borrowers to refinance at lower rates with a mortgage that is at most 25% more than their home’s current value. However, that may soon change and millions more could be eligible. The FHFA, the regulator for Fannie and Freddie, said last week it is analyzing whether it would allow borrowers who are even more underwater those homeowners owing even more than that cap to participate.

Approximately 9.8 million mortgages or 25% of all U.S. homeowners have loan finances that are 20% or more underwater. RealtyTrac reported that almost half of all U.S. home loans 16 million of the 40 million U.S. mortgages are underwater. These statistics do not exactly motivate new buyers to go get 1st home-buyer loans even if the interest rates have never been lower.

Analysts at J.P. Morgan said Friday that they believe changes to HARP mortgage financing are coming, but those changes will happen in “weeks” rather than days.  However, both groups of analysts believe another idea that has been floated to encourage banks to refinance underwater mortgages is likely off the table.


October 28, 2010

HUD Implements Measures to Reduce Mortgage Foreclosures

Category: Mortgage Reform News – admin – 6:08 am

U.S. Housing and Urban Development Secretary Shaun Donovan talks about the government’s probe into home foreclosure practices.  Donovan says federal regulators haven’t found evidence of “systemic issues” in legal documents at the center of the turmoil over foreclosure processing. He talks with Mark Crumpton on Bloomberg Television’s “Bottom Line

HUD Secretary Donovan Talks Foreclosures

Dept. Housing and Urban Development Takes Measures to Prevent Foreclosures:

  • Tighter FHA Guidelines for Home Buying
  • Raised 2013 FHA Requirements
  • Reduced FHA Loan Limits in 2012
  • Increased Mortgage Insurance Premiums

October 18, 2010

Bank of America Foreclosing on Homes Again

Category: Mortgage Reform News – admin – 4:45 pm

Bank of America said it has reviewed its foreclosure procedures in 23 judicial states, resubmitted affidavits that were in dispute, and anticipates cranking up REO sales in a few weeks. The bank estimates that less 30,000 foreclosure sales were scuttled by its temporary moratorium.  According to Illinois lender, Jerry Mlinar, “Many homeowners are struggling to get a approved for a refinance or a loan modification to save their home.”

B of A said that on Monday it “began the process of preparing foreclosure affidavits for submission in 102,000 foreclosure actions in which judgment is pending.”  It added that, “We anticipate that by Monday, Oct. 25, the first foreclosure affidavits will be resubmitted to the courts. Upon judgment, foreclosure dates will be set and Bank of America will resume foreclosure sales in such proceedings in the 23 judicial states.  The bank noted that it will continue to delay foreclosure sales on a “state by state basis” in the remaining 27 states until its reviews are completed.   B of A ranks first among all residential servicers with $2.197 trillion in receivables and a market share of 22.21%.


October 4, 2010

Mortgage Reform from Dodd & Frank Will Be Interesting

Category: Financial News,Mortgage Reform News – admin – 4:32 pm

It’s pretty amazing that the government officially that played a major role in the housing crisis are now roll out a financial reform bill that is supposed to protect consumers and ensure that the mortgage industry stays on the up and up. The bottom line is that these guys passed laws that pushed the limits of mortgage lending in an effort to expand homeownership to the under-privileged Americans. These guys lobbied hard for Fannie Mae, Freddie Mac and FHA loan programs to accept borrowers with low income and poor credit.

  Apparently this bill exempts Non-Accelerated Filers from SOX Auditor Attestation Requirement Dodd-Frank Act Governance and Compensation Requirements: A “Punch List” of Action ItemsThe provisions of Dodd-Frank are wide-ranging, as noted by the impact of the law on employee complaints discussed in this alert.  Sign up for up to the minute mortgage news alerts.

Who Does It Protect? While the Sarbanes-Oxley Act, in its 2002-2010 form, covered only employees of publicly-traded companies, Dodd-Frank makes an enormous expansion of that coverage: almost every employee in the financial services industry – whether the employer is publicly or privately held – is accorded whistleblower protection of one sort or another.

How Are Claims Made? The Sarbanes-Oxley complaint process contemplated a system in which complaints to regulators, followed by an administrative hearing procedure, were the norm and resort to the full litigation avenue was a narrow exception. Dodd-Frank changes this dramatically, allowing direct access to the courts – what some industry representatives refer to as an “end run,” but what is termed a “private right of action” in the statute – under Section 922 of Dodd-Frank.

Dodd-Frank whistleblower complaints normally go to the Secretary of Labor, just as has been the case with those under Sarbanes-Oxley, and must be filed within 180 days of the action challenged in the complaint. From this point forward, however, the process changes: a Labor Department investigation results in preliminary findings which may include reinstatement “with full back pay,” compensatory damages and costs. However, if the complaint is deemed to be frivolous or filed in bad faith, the employee can recover his “reasonable attorneys’ fees” of up to $1000.

What Steps Should Be Taken? The first step in any action plan should be an assessment of current practices compared to the new legal and practical requirements an employer faces. Depending upon the staffing and sophistication of your organization, you should identify the individuals who should have input into the process and determine whether advice of counsel should be a Based on an underwriting-related portion of Dodd-Frank alone it sounds like home loans and second mortgages on the secondary market are probably going to continue to be underwritten within relatively narrow parameters for some time.


August 17, 2010

Fed Prohibits Bonuses Paid from Lender to Broker for Higher Rates

Category: Financial News,Mortgage News,Mortgage Reform News – admin – 6:47 pm

The Federal Reserve issued the final mortgage rules are effective April 1, 2011, to provide mortgage lenders and loan originators time to develop new originating models and implement necessary changes to their loan originating systems.  The final rules, which apply to closed-end mortgage loans secured by a consumer’s dwelling, will:

  • Prohibit payments to the loan originator that are based on the loan’s interest rate or other terms. Compensation that is based on a fixed percentage of the loan amount is permitted.
  • Prohibit a broker or loan officer from receiving payments directly from a consumer while also receiving compensation from the creditor or another person.
  • Prohibit a broker or loan officer from “steering” a consumer to a mortgage lender offering less favorable terms in order to increase the broker’s or loan officer’s compensation.
  • Provide a safe harbor to facilitate compliance with the anti-steering rule.

Among other provisions, Section 1403 of the Reform Act creates new TILA Section 129B(c). The Board intends to implement Section 129B(c) in a future rulemaking after notice and opportunity for further public comment. Here are a few discrepancies…

  • The Reform Bill gets a bit more specific with the definition of “steering, but the final rules issued today already impose restrictions preventing the originator from steering borrower into loans that are not in their best interest.
  • The final rule issued today does not include a provision in the Reform Bill (TILA Section 129B(c)(2)) that says the borrower may not make any upfront payment to the lender for points or fees on the loan other than certain bona fide third-party charges.  Make sure you read that closely, it says UPFRONT.  Some mortgage lenders charge an appraisal fee disguised an “application fee” and will not refund it if the borrower goes with another lender before the home inspection is completed. This regulation eliminates the borrower paying an “application fee” right after they are issued the GFE.
  • It is unclear whether or not the Reform Bill’s revisions will affect a home equity credit line as well because they are not considered “Closed End Credit”.

The Lead Planet posted an interesting take on the YSP banning > Fed Bans Lenders from Paying YSP to Mortgage brokers


July 28, 2010

Financial Reform Bill Flawed

Much to the surprise of many pundits, the recently signed Financial Reform Bill did not outline guidelines for regulators to begin crafting the future of Fannie Mae, Freddie Mac, and Ginnie Mae.  Although this was viewed as an oversight by most, it was the right move because it will allow our political and financial leadership to focus on repairing the mortgage finance system.  Remember that the government loan programs Fannie, Freddie, VA and FHA loans maintain nearly 96% of the mortgage market-share yet they are exempt from most of the financial reform repercussions.


In April, Treasury outlined their “Housing Finance Reform” objectives. The administration’s proposals will be designed to achieve four objectives.

  1. Mortgage credit should be available and distributed on an efficient basis to a wide range of borrowers.
  2. A well-functioning housing market should provide affordable housing options, both ownership and rental, for low and moderate-income households.
  3. Consumers should have access to mortgage products that are easily understood.
  4. The system should distribute the credit and interest rate risk in an efficient and transparent manner that minimizes risk to the broader economic system an does not generate excess volatility or instability

Demand for home loan financing has hovered near the 13-year low reached earlier this month, showing the lowest mortgage rates on record have yet to spur sales after the expiration of a government tax credit. It will take gains in employment and in consumer confidence to boost housing.   “The housing market is weak,” Paul Anastos, president of Mortgage Master Inc., a Walpole, Massachusetts mortgage lender, said in an interview before the report. “There’s good opportunity out there in the housing market, but because consumer confidence is fairly low, people aren’t really shopping. They’re worried about other things, like jobs.”


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