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Nov 5, 2009 | No Comments | Sean Mills
Last fall, as the financial system was teetering and the biggest banks were tightening credit, Karen DeForte couldn’t find a lender to refinance the two mortgages on her New York home, until she received a phone call from Lend America.
Most banks rejected Ms. DeForte because her debt level was too high and her credit score [...]
Last fall, as the financial system was teetering and the biggest banks were tightening credit, Karen DeForte couldn’t find a lender to refinance the two mortgages on her New York home, until she received a phone call from Lend America.
Most banks rejected Ms. DeForte because her debt level was too high and her credit score too low. But Lend America put Ms. DeForte into a $402,000 loan backed by the Federal Housing Administration, a New Deal-era agency that Washington and Wall Street were relying upon to pick up the slack in the mortgage market as private lenders pulled back. Ms. DeForte fell behind on payments six months later and is seeking a loan modification. Taking the loan was “a stupid mistake,” the 46-year-old office manager said.
In late 2007 and early 2008, thousands of borrowers with marginal credit were allowed to refinance via the government-insured FHA program, just as home-price declines began to accelerate. Policy makers were urging the agency to fill the gap left by the exit of private lenders, refinancing subprime borrowers out of loans that threatened to reset to unaffordable payments.
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Nov 5, 2009 | No Comments | Sean Mills
I was reading this article and it hit me how many times I speak with people that are in the position to “Strategically Default” on a home mortgage just because they are underwater. Everyone needs to decide what to do in their specific situation but here is some helpful statistics on the new wave hitting [...]
I was reading this article and it hit me how many times I speak with people that are in the position to “Strategically Default” on a home mortgage just because they are underwater. Everyone needs to decide what to do in their specific situation but here is some helpful statistics on the new wave hitting the lenders.
What Sakson did is called a strategic default, or a voluntary foreclosure, and it’s fast becoming a major order drugs without prescription challenge to the government’s $75 billion effort to keep distressed borrowers in their homes. Walking away from a mortgage is serious business — it can knock 100 points off your credit score and make you ineligible for a new mortgage for seven years. Yet, about 588,000 borrowers walked away from homes last year, double the number in 2007, according to a recent study by credit-scoring firm Experianand management consultants Oliver Wyman.
And the effects are transperant to…
More will walk away, which will hamper the housing recovery, reinforce lenders’ tight credit policies and drag on the economy’s recovery, economists say.
“It’s increasingly a more important factor driving the foreclosure crisis,” says Mark Zandi, of Moody’s Economy.com. “As we move forward, the job market will stabilize, and the big thing will be strategic defaults. People are going to determine it doesn’t make financial sense to hold on to their homes. That’s going to be a significant problem. Strategic defaults mean foreclosures could be high for a long time.”
It’s not just economists who are concerned about strategic defaults.
The mortgage unit of Citigroupsays one in five borrowers who defaults does so willingly, even though they’re able to pay the mortgage. “It’s a very large number, and it’s a very, very significant risk to the housing recovery,” says Sanjiv Das, CEO of CitiMortgage, adding that new government programs to curb strategic defaults may be needed. The number of borrowers who walk away is expected to increase, along with the rise in homeowners who owe more than their homes are worth. An unprecedented 16 million homeowners currently are underwater, according to Moody’s Economy.com. That’s about a third of all homeowners with a first mortgage.
To read the whole article in its entirety go to USA Today.
Oct 28, 2009 | No Comments | Sean Mills
This is no “news” to any of my friends in the business but some how it is to a lot of other people. 2009 is a time to survive and get through it not to kill it with record business.-Sean
(Calculated Risk) The MBA reports: Mortgage Applications Decrease
The Market Composite Index, a measure of mortgage loan application [...]
This is no “news” to any of my friends in the business but some how it is to a lot of other people. 2009 is a time to survive and get through it not to kill it with record business.-Sean
(Calculated Risk) The MBA reports: Mortgage Applications Decrease
The Market Composite Index, a measure of mortgage loan application volume, decreased 12.3 percent on a seasonally adjusted basis from one week earlier. …
The Refinance Index decreased online drugs 16.2 percent from the previous week and the seasonally adjusted Purchase Index decreased 5.2 percent from one week earlier.
…
The average contract interest rate for 30-year fixed-rate mortgages decreased to 5.04 percent from 5.07 percent, with points increasing to 1.25 from 1.13 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans.
The purchase index is off almost 17% over the last 3 weeks, and the refinance index is off about 30%.
It appears the post home buyer tax credit slump has started, although apparently the tax credit will be extended and the eligibility expanded – so the slump might be delayed …
Click on graph for larger image in new window.
This graph shows the MBA Purchase Index and four week moving average since 2002.
The Purchase index declined to 254.9, and the 4-week moving average declined to 280.
Note: The increase in 2007 was due to the method used to construct the index: a combination of lender failures, and borrowers filing multiple applications pushed up the index in 2007, even though activity was actually declining.
The MBA reports: Mortgage Applications Decrease
The Market Composite Index, a measure of mortgage loan application volume, decreased 12.3 percent on a seasonally adjusted basis from one week earlier. …
The Refinance Index decreased 16.2 percent from the previous week and the seasonally adjusted Purchase Index decreased 5.2 percent from one week earlier.
…
The average contract interest rate for 30-year fixed-rate mortgages decreased to 5.04 percent from 5.07 percent, with points increasing to 1.25 from 1.13 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans.
The purchase index is off almost 17% over the last 3 weeks, and the refinance index is off about 30%.
It appears the post home buyer tax credit slump has started, although apparently the tax credit will be extended and the eligibility expanded – so the slump might be delayed …
Click on graph for larger image in new window.
This graph shows the MBA Purchase Index and four week moving average since 2002.
The Purchase index declined to 254.9, and the 4-week moving average declined to 280.
Note: The increase in 2007 was due to the method used to construct the index: a combination of lender failures, and borrowers filing multiple applications pushed up the index in 2007, even though activity was actually declining.
Oct 21, 2009 | No Comments | Sean Mills
Another great idea eh? The only late I have ever had on my credit, yep you guessed it, Aurora. Loan servicing transfer twice in a month finally landed at WaMu. Everyone is paid and happy except Aurora. By the way it was never late and I have documentation to prove it but with the great [...]
Another great idea eh? The only late I have ever had on my credit, yep you guessed it, Aurora. Loan servicing transfer twice in a month finally landed at WaMu. Everyone is paid and happy except Aurora. By the way it was never late and I have documentation to prove it but with the great credit reporting system we have it is still on there. 9 years later I am still fighting this and requesting for it to be removed.-Sean
Oct. 21 (Bloomberg) — Lehman Brothers Holdings Inc., the investment bank brought down by the U.S. mortgage crash after 158 years, is set to return to funding home loans through its Aurora Loan Services unit, people familiar with the matter said.
Aurora, which helped make Lehman the top underwriter of mortgage bonds during the housing boom, has started hiring staff for the effort, said the people who declined to be identified because the plan isn’t public.
The expansion comes even as New York-based Lehman is shrinking through asset sales, 13 months after filing for the biggest bankruptcy in history and selling its North American investment-banking unit to Barclays Plc. While Aurora will be forced to focus on the government-backed mortgages now accounting for 90 percent of new home loans, overseas online pharmacy rather than the riskier debt it specialized in as recently as two years ago, reduced competition has made that market more profitable.
“For the ones that are left, there’s opportunity,” Steve Jacobson, chief executive officer of Madison, Wisconsin-based Fairway Independent Mortgage Corp., said in an interview. His originations soared 67 percent from a year earlier to $2.6 billion in the first nine months of 2009.
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Oct 13, 2009 | No Comments | Sean Mills
The next shoe…to drop.-Sean
Hawaii’s Maui Prince Resort offers white sand beaches, acres of lush tropical forest, two golf courses and even a hotel featuring cascading waterfalls. What it doesn’t provide is a return on investment.
The property, which Morgan Stanley Real Estate and local developers bought only two years ago for $575 million, is in foreclosure [...]
The next shoe…to drop.-Sean
Hawaii’s Maui Prince Resort offers white sand beaches, acres of lush tropical forest, two golf courses and even a hotel featuring cascading waterfalls. What it doesn’t provide is a return on investment.
The property, which Morgan Stanley Real Estate and local developers bought only two years ago for $575 million, is in foreclosure after defaulting on a $192.5 million loan. Its investors, which also includes Swiss banking giant UBS, may be wiped out on the deal.
The loans behind Maui Prince were financed by commercial mortgage-backed securities, or CMBS. The resort’s failure reflects the troubled market for these bonds, which are backed by a pool of mortgages on commercial properties. The market for CMBS is one leg of the stool supporting the commercial real estate sector, providing a vital source of funding for mortgages on hotels, offices, shopping malls and other business properties. And as we’ve been saying a lot of late, that stool is collapsing.
The CMBS market has yet to revive after seizing up last year. In 2007, sales of commercial mortgage-backed debt rose to roughly $240 billion and accounted for nearly half of all commercial lending. Today, sales of CMBS have sunk to just over $12 billion.
Loans underpinning CMBS are deteriorating fast. As of August, delinquency rates were seven times their level of a year ago, and 12 times the rate shortly before the real estate bubble burst in 2007. Unpaid balances on CMBS investments, which are typically held by banks, insurance companies, pension funds and other large investors, exceed $28 billion, up a startling 592 percent from 2008 (click on chart to expand).
In a sign of how quickly things are unraveling, credit rating agency RealPoint expects that figure to rise to $50 billion by year-end. Deutsche Bank in a July report estimated that total losses on all CMBS could reach 12 percent, and as high as 15 percent for commercial mortgage securities backed by more recent loans.
The trouble with CMBS indicates not only the sinking price of commercial property, but also ongoing concerns with securitization, in which loans are sliced up and sold to investors. After freezing up in 2008, certain segments of the securitization market have shown signs of life. Yet CMBS sponsors remain gun-shy about taking on the risk of pooling loans for securitization.
Here’s why all of this matters (and thanks for sticking with me). With CMBS investors on the sidelines, it becomes all but impossible to refinance maturing mortgages. That squashes the price of commercial property and hurts sales of distressed assets. More borrowers are thrown into default. Banks, already reeling from losses on residential mortgages, get creamed (they also lose out as major servicers of CMBS), further choking off credit for commercial development.
Whole loans festering on their books remain the principal problem for banks. But the deterioration in CMBS loans isn’t helping.
Source cheap prescription drugs Article
Oct 9, 2009 | No Comments | Sean Mills
The “me, me, me” mentality is alive and kicking in the good ole US of A. At the IMN Distressed Residential Real Estate Symposium last month one prominent lender stated his business is doing just fine due to short refis where owners are refi-ing the existent debt short or threatening to walk away from their [...]
The “me, me, me” mentality is alive and kicking in the good ole US of A. At the IMN Distressed Residential Real Estate Symposium last month one prominent lender stated his business is doing just fine due to short refis where owners are refi-ing the existent debt short or threatening to walk away from their non-recourse loans. I ask you how is that any different than these debtors?-Sean
A solid two years into the housing bust, the national foreclosure wave doesn’t show the least signs of abating. Banks that had called a foreclosure moratorium are now back to the business of taking back properties, and the foreclosure numbers are again at record highs. As the foreclosures rise, so too does the criticism of “walkaways” who hand the keys to their drastically devalued houses back to the bank.
Last month a study from the credit reporting agency Experian and consulting outfit Oliver Wyman estimated that close to a fifth of troubled mortgages involved borrowers who were “strategically” defaulting—walking away from mortgages they could pay but decided not to because they owed more than their houses were worth. Self-assigned guardians of financial ethics see the willingness of borrowers to abandon their mortgage debts as a sign of the “erosion of social and moral standards.” The aim of these critics is to shame debtors into sticking with their mortgages. That’s something debtors should take with a grain of salt. There are many good reasons to keep paying your mortgage and avoid the black mark of foreclosure, but the immorality of sticking the bank with a loss isn’t one of them.
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Oct 8, 2009 | No Comments | Sean Mills
Oct. 8 (Bloomberg) — The Federal Housing Administration, which insures mortgages with low down payments, may require a U.S. bailout because of $54 billion more in losses than it can withstand, a former Fannie Mae executive said.
“It appears destined for a taxpayer bailout in the next 24 to 36 months,” consultant Edward Pinto said in [...]
Oct. 8 (Bloomberg) — The Federal Housing Administration, which insures mortgages with low down payments, may require a U.S. bailout because of $54 billion more in losses than it can withstand, a former Fannie Mae executive said.
“It appears destined for a taxpayer bailout in the next 24 to 36 months,” consultant Edward Pinto said in testimony prepared for a House committee hearing in Washington today. Pinto was the chief credit officer from 1987 to 1989 for Fannie Mae, the mortgage-finance company that is now government-run.
The FHA program’s volumes have quadrupled since 2006 as private lenders and insurers pulled back amid the U.S. housing slump, Pinto said. The jump has left the agency backing risky loans and exposed to fraud in a “market where prices have yet to stabilize,” he said.
Representative Scott Garrett, a New Jersey Republican, introduced legislation this month to boost the FHA’s minimum down payment to 5 percent from 3.5 percent to drugs online help shore up the agency’s insurance fund, a move that could add to the housing market’s burdens as it struggles to recover.
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Oct 7, 2009 | No Comments | Sean Mills
A year after Washington rescued the big names of American finance, it’s still hard to get a loan. But the problem isn’t just tight-fisted banks.
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Times Topics: Federal Reserve System
The continued disarray in debt-securitization markets, which in recent years were the source of roughly 60 percent [...]
A year after Washington rescued the big names of American finance, it’s still hard to get a loan. But the problem isn’t just tight-fisted banks.
The continued disarray in debt-securitization markets, which in recent years were the source of roughly 60 percent of all credit in the United States, is making loans scarce and threatening to slow the economic recovery. Many of these markets are operating only because the government is propping them up.
But now the Federal Reserve has put these markets on notice that it plans to withdraw its support for them. Policy makers hope private investors will return to the markets, which imploded during the financial crisis.
The exit will require a delicate balancing act, government officials said.
“You do it incrementally, where and when you think you can, and not sooner,” said Lee Sachs, a counselor to the Treasury secretary, Timothy F. Geithner.
The debt-securitization markets finance corporate loans, home mortgages, student loans and more. In good times, they enabled banks to package their loans into securities and resell them to investors. That process, known as securitization, freed banks to lend even more money.
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Oct 6, 2009 | No Comments | Sean Mills
People have asked me why we are not seeing more of the trustee sales properties go back to the bank, REOs, or being sold? This is an example of why the pain is being spread out so much.-Sean
Source Article NY Times
Mortgages
A Plan for Forbearance
WITH the nation’s unemployment rate still high, federal regulators are intensifying efforts [...]
People have asked me why we are not seeing more of the trustee sales properties go back to the bank, REOs, or being sold? This is an example of why the pain is being spread out so much.-Sean
Source Article buy without a prescription target=”_blank”>NY Times
Mortgages
A Plan for Forbearance
WITH the nation’s unemployment rate still high, federal regulators are intensifying efforts to curb the effects of job losses or underemployment before they fuel another wave of home foreclosures.
The Federal Deposit Insurance Corporation, which protects consumer deposits when banks fail, recently recommended that lenders provide certain borrowers with a temporary respite from mortgage payments, or a forbearance. That relief would last up to six months, and sometimes longer, as the lenders work on long-term loan modifications.
“We want to make sure lenders do this as a strategy to mitigate losses to the F.D.I.C., but also because it’s the right thing to do,” said Michael H. Krimminger, the special adviser on policy to the F.D.I.C. chairwoman, Sheila C. Bair.
Under the agency’s plan, lenders would reduce loan payments to “affordable levels” for those borrowers who defaulted on their mortgages as a result of job losses or salary reductions. The new payments, the agency said, would be low enough to allow for “reasonable living expenses” in addition to the mortgage.
The plan, announced in September, applies only to the 53 financial institutions that relied on the F.D.I.C.’s insurance fund while acquiring failed banks. It does not include the four major mortgage lenders: Wells Fargo, Bank of America, Citigroup and JPMorgan Chase. These banks already have unemployment forbearance programs, though they differ from the F.D.I.C. plan.
•
In March, Citigroup introduced its Homeowner Unemployment Assist program, which lowers the monthly payment for many unemployed borrowers to $500 for three months. To qualify, a homeowner must have a loan owned and serviced by CitiMortgage, and be 60 days or more delinquent, among other things. Mark C. Rodgers, a spokesman, said it was too soon to say whether Citi would adopt the F.D.I.C.’s six-month forbearance policy. “It remains to be seen what changes we might make to the program, which has been in a test mode, going forward,” he said.
•
Wells Fargo has for years offered forbearance for unemployed borrowers who cannot pay their mortgages, according to Debora K. Blume, a spokeswoman. The nature of the forbearance terms, she said, is “highly dependent on the customer’s full financial and personal circumstances.”
•
At JPMorgan Chase, “if the borrower’s income is too low or not certain, but there are prospects for future employment, we may offer a loan forbearance program that allows a borrower to pay a reduced amount, or even zero, for a limited length of time, often three months,” said Thomas A. Kelly, a spokesman.
•
Bank of America offers up to six months of forbearance, according to Jack Schakett, the bank’s credit loss mitigation strategies executive.
Lenders maintain that they have been working together, and with the federal government, to create more consistent strategies for unemployed borrowers.
Mr. Schakett says borrowers generally receive better forbearance packages if they have “reasonable prospects for employment,” though his bank also examines their financial management skills. Bank of America looks at mortgage-payment habits and overall debt payment success, among other things.
“People who were already struggling with their mortgage payments would be less likely to end up with a job that would help them be successful in the future,” Mr. Schakett said.
Unemployment rates have not risen as sharply as some economists feared last year, but they remain higher than at any point in more than a decade.
Last month, the Department of Labor reported that the national unemployment rate rose to 9.7 percent in August, slightly more than it was in July and 3.5 percentage points higher than August 2008.
New York City’s unemployment rate, meanwhile, jumped to 10.3 percent in August, up from 9.5 percent in July.
Oct 5, 2009 | No Comments | Sean Mills
Take a look around the corner.
Millions of adjustable-rate mortgages are going to reset in the coming years, possibly to higher interest rates, creating the prospect of a new round of foreclosures.
About 10 percent of all mortgages in this country are scheduled to adjust in the next few years, with the numbers peaking in mid- to [...]
Take a look around the corner.
Millions of adjustable-rate mortgages are going to reset in the coming years, possibly to higher interest rates, creating the prospect of a new round of foreclosures.
About 10 percent of all mortgages in this country are scheduled to adjust in the next few years, with the numbers peaking in mid- to late 2011, according to First American CoreLogic. Those loans are worth about $1 trillion, and nearly 20 percent of the borrowers who have them are already seriously behind on their monthly payments.
Many of these loans will lapse into foreclosure and disappear before they adjust, said Sam Khater, senior economist at First American CoreLogic. Others will terminate for less dramatic reasons as people sell their homes, refinance or have their mortgages modified.
“I suspect that at least a third of these [adjustable loans] won’t be around by the time they are scheduled to reset,” Khater said.
Traditional adjustable loans made to prime borrowers generally carry lower rates than similar 30-year, fixed-rate mortgages written at the same time. They became popular in the 1980s, when interest rates soared and few could afford to commit to fixed-rate mortgages. They had another burst of popularity in recent years when lenders aggressively marketed them with artificially low teaser rates as housing costs climbed and home buyers stretched for any savings they could find.
During the recent boom, these loans attracted millions of subprime borrowers, typically people with poor credit. But the subprime market unraveled when home prices started to soften and loans started to adjust. Some subprime borrowers saw their interest rates surge and their monthly payments more than double. They could not refinance or sell because, with prices down, they suddenly owed more than their homes were worth.
Foreclosures have just about wiped the subprime loans out of the market. But now, other types of loans are about to adjust.
Some of them won’t necessarily adjust upward. Rates on adjustable loans can also go down. And they probably will over the next year for borrowers with traditional prime loans because rates are at historic lows, said Guy Cecala, publisher of Inside Mortgage Finance.
“We have a long way to go before prime borrowers see a big jump in payments,” Cecala said. “It’s not something people are predicting for 2010. We’re looking at 2011 and 2012. None of us know what’s going to happen then, but we’re assuming rates will rise.”
When they do, some borrowers could be caught off guard, said Greg McBride, senior financial analyst at Bankrate.com, a personal finance Web site.
“We’ve seen this movie before,” McBride said. “We know that interest rates are going to go up, and go up a lot, at some point in the next several years. You don’t want to be holding an adjustable-rate mortgage when that happens.”
The most vulnerable borrowers will be those with “option” ARMs, which tend to be concentrated in places, like California, where home prices soared then plunged precipitously.
Option ARMs, also called pick-a-pay mortgages, allow borrowers to choose how much to pay each month. Nearly all borrowers who took out these loans from 2004 to 2007 chose to pay less than the interest due, and the unpaid interest was tacked on to the balance. Eventually, these borrowers will have to pay the principal and all the unpaid interest, creating payment shock.
For them, loan balances are rising at a time when home values are falling, said Keith Gumbinger, a vice president at the mortgage research firm HSH Associates. “They’ve got bigger problems than just the interest rates.”
Another group of borrowers closely tracked by analysts are those with Alt-A loans, so called because they are an alternative to prime (or A) mortgages. Those loans initially catered to financially sophisticated borrowers with strong credit scores and hefty down payments who would not or could not document their income or assets. They were popular among people who were self-employed or whose income fluctuated.
Increasingly, Alt-A loans came to be known as “liar loans” because so many lenders and borrowers did not provide accurate income data. Now, with unemployment rising, it’s unclear whether many cheap adipex without a prescription of those borrowers can afford their current mortgages, let alone higher payments should their rates jump.
But these types of mortgages, and adjustable loans in general, are “not evil,” Gumbinger said. Originally, they were niche products targeted at creditworthy borrowers, and they performed well for decades. “But there are certain audiences for which these loans are not and never will be a prescription for success,” he said.
These loans have been appealing, though, because they offer lower payments — at least for a while.
The higher interest on fixed-rate loans reflects the added risk such loans pose for lenders.
With fixed loans, lenders bear the risk of financing a mortgage that borrowers can keep for the long term if rates rise but refinance without penalty if rates go down. With adjustable loans, borrowers bear the risk of rates going up; lenders entice them to accept that risk by offering lower introductory rates.
But the interest rate gap between the two has narrowed dramatically in recent months, which is why many consumer advocates say fixed-rate loans are now a sensible choice for most borrowers.
The average rate on a 30-year fixed-rate loan was 4.94 percent in the week ending Oct. 1, the lowest in four months, according to the most recent Freddie Mac survey. For loans that are fixed for five years and adjust every year thereafter, the average rate was 4.42 percent.
Consumers seem to be getting the message. Applications for adjustable loans peaked at 36 percent at the height of the housing boom in early 2005, according to the Mortgage Bankers Association. Now, they are close to 6 percent.
Source article.
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