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Category: Lending (page 33 of 56)

January 14, 2010

2010 Mortgage Broker Renaissance

by

Commercial Real Estate Finance Expert
Structured Debt and Equity
Licensed Real Estate Broker in AL, CA, and FL

Author website

Is the business of broking mortgage loans dead?  About two years ago, Morgan Brown predicted our demise on Blown Mortgage.  His conclusion was that the industry would need a scapegoat for the poor lending practices and that “blaming” mortgage brokers was convenient (and not necessarily fair).  His conclusion suggested that the big lenders were trying to gobble up market share to the detriment of the consumer.

Morgan predicted that the brunt of the regulatory changes would be aimed squarely at the mortgage broker; he was correct.  He predicted that the big lenders would tighten up their standards and practices in the wholesale lending channel; he was correct.

That scheme backfired on the big banks. Congress is really pissed that they haven’t been doing more with the TARP funds federal largesse to make loans and they are coming down hard on whom President Obama calls the “fat cat bankers on Wall Street”.

Bawld Guy Axiom:  Lenders Lend

Brady Corollary: Lenders lend unless it’s more profitable to do something else.

Government-subsidies proved that in 2009.  The TARP funds allowed big banks to borrow money at a ridiculously low cost-of funds.  The government guarantee on all agency products indemnified those big banks from losses.  Essentially, the big banks could buy their product  (a dollar) for $1.01 and sell it for $1.05; that’s a 500% markup and a helluva business.  It would be natural for them to “crowd out” mortgage brokers, through poor pricing and horrible service, to benefit their retail lending channel.

Here’s what those big banks didn’t expect:  public outrage over bonus pay and a proposed “windfall profits tax” on their guaranteed profits.  While I hate excessive government interference, you gotta wonder why the bankers thought they could get paid like Gordon Gekko as wards of the Government.  One would think they’d lay low at a GS-15 salary, for a year or two, after they repaid the TARP money.

The profits party is over for bankers and now they have to EARN those bonuses.

Guess what they’re doing?  They’ve turned to mortgage brokers again as a viable loan delivery channel. How do I know this?  The biggest banks (Bank Read more

January 11, 2010

What form should BloodhoundBlog Unchained take this May?

by

Suburban Phoenix Real Estate Broker

Author website

I’ve heard from a number of people privately asking about the prospects for another BloodhoundBlog Unchained in Phoenix this May. So far I’ve not done anything about this — this for a couple of reasons.

First, I don’t know what to do in terms of content. We’re doing a lot of interesting things, but I’m not sure it’s the kind of material I can teach. Of course, there’s all kinds of other stuff out there, but I’m not sure how it coheres.

Second, I don’t know what to do about the show. The format we used last year — 72 hours of total immersion — was very successful, but it was also a boatload of work. (When the RE.net trolls get caught with their hands in the cookie jar, they like to come here and insist that Unchained is a profit-making business. I’m sure my wife will be gratified to learn this.)

To my mind, the most satisfying Unchained experience so far was the
Scenius on Swallow Hill Road. Not the show we did in Orlando, which was good, but the more or less continuous Scenius we ran from the house we rented as our accommodations for the trip.

That’s an appealing scenario, but it’s decidedly limited in the number of people who can attend. That’s not necessarily a bad thing — for me — but it might not work so well for you.

So: I think I need to hear from you. If you want to do Unchained this year, speak up. But if you do want to do this, be prepared to put up your money. Whatever we choose for meeting space and accommodations, they’re going to want to see the dough before they commit to anything.

Here’s my pledge, in return: If we do Unchained this year, we will do it to nine decimal places, as always. We will take you places no one else is going, to put you even further beyond your competition.

But don’t dawdle. I’m going to have to make a go or no-go decision shortly. If you want to do Unchained this year, make the leap now.

January 2, 2010

Mortgage Market Year in Review

by

Mortgage Officer

Author website

So Long 2009! (Note – I originally sent this out as part of my weekly e-mail series – Mortgage Market Week in Review – but the response was so positive that I thought I’d repost it here.)

Rather than doing my normal Mortgage Market Week in Review, I thought I’d send out something a bit different.   I’m going to, instead, take a look back at what I think were the three biggest issues in the mortgage market in 2009.    On Monday, I’m going to take a look at the top 5 issues that I believe we’ll be facing going forward in 2010.

Neither one of them is going to be an extremely pleasant list, but I can guarantee you that they’ll be honest lists!

Tom Vanderwell

E-mail Me

1.  Without a doubt, the Read more
December 29, 2009

Anyone think that Fannie and Freddie are “out of the woods?”

by

Mortgage Officer

Author website

Then check out this chart marking delinquencies at Fannie Mae.  

Calculated Risk: Fannie Mae: Delinquencies Increase Sharply in October

Fannie Mae reported today that the rate of serious delinquencies – at least 90 days behind – for conventional loans in its single-family guarantee business increased to 4.98% in October, up from 4.72% in September – and up from 1.89% in October 2008.

December 29, 2009

‘Twas the Night Before Christmas

by

Mortgage Officer

Author website

and all through the country, people were paying more attention to Christmas than they were to the government and to the financial mess that is making our country struggle.

So what did the Treasury do?   They did two things:

  • They expanded the nationalization of Fannie Mae and Freddie Mac from $200 Billion each (that’s $200,000,000,000) to an unlimited amount of funding.   In other words, the US Treasury just handed their checkbook to Fannie Mae and Freddie Mac.
  • They did it on the day when no one was watching and they did it 9 days before it would have required congressional approval.

How nice and how timely.

Nothing to see here, move along, move along……

Tom Vanderwell

Heard on the Street: Fannie and Freddie – WSJ.com

That was a nice holiday gift to taxpayers.

As expected, the Treasury on Christmas Eve increased the amount of money it can plow into Fannie Mae and Freddie Mac to keep them solvent. Before, the U.S. had pledged up to $200 billion to each. Now, over the next three years, the Treasury can spend as much as is needed to prevent their net worth going negative. Such a change would have required congressional consent after Dec. 31. Given that each U.S. household had effectively committed $3,800 to both firms, the Treasury should have waited till the New Year so the people’s representatives could have had their say.

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December 26, 2009

Interest rates have been trending upward, but what happens when Uncle Sugar quadruples the sugar supply at Fannie and Freddie?

by

Suburban Phoenix Real Estate Broker

Author website

From the Wall Street Journal:

The Obama administration’s decision to cover an unlimited amount of losses at the mortgage-finance giants Fannie Mae and Freddie Mac over the next three years stirred controversy over the holiday.

The Treasury announced Thursday it was removing the caps that limited the amount of available capital to the companies to $200 billion each.

Unlimited access to bailout funds through 2012 was “necessary for preserving the continued strength and stability of the mortgage market,” the Treasury said. Fannie and Freddie purchase or guarantee most U.S. home mortgages and have run up huge losses stemming from the worst wave of defaults since the 1930s.

“The timing of this executive order giving Fannie and Freddie a blank check is no coincidence,” said Rep. Spencer Bachus of Alabama, the ranking Republican on the House Financial Services Committee. He said the Christmas Eve announcement was designed “to prevent the general public from taking note.”

Treasury officials couldn’t be reached for comment Friday.

So far, Treasury has provided $60 billion of capital to Fannie and $51 billion to Freddie. Mahesh Swaminathan, a senior mortgage analyst at Credit Suisse in New York, said he didn’t believe Fannie and Freddie would need more than $200 billion apiece from the Treasury. But he and other analysts have said the market would find a larger commitment from the Treasury reassuring.

What’s your take? Are we looking at another two years of 30-year fixed mortgages under 5%?

December 17, 2009

VA Condominium Complex Approvals: Navigating the Maze of Paperwork

by

Commercial Real Estate Finance Expert
Structured Debt and Equity
Licensed Real Estate Broker in AL, CA, and FL

Author website

We helped to secure a lot of VA condominium complex approvals in 2009.    The VA Regional Home Loan Center-Phoenix is one of the best government agencies with whom I’ve had the pleasure to work.  The folks working there are professional and committed.  It helps that they know that we do our homework prior to submission for a condominium complex approval.

Sometimes, the system breaks down. My goal today is to explain how better to manage the process, for all parties involved.

The key component to the VA condominium complex approval is the Attorney’s Opinion Letter.  Essentially, the VA relies on the expertise of an independent attorney to evaluate the condominium documents and offer an opinion as to whether or not those documents comply with the VA regulations.  An attorney opinion letter is NOT a requirement for the submission package but attempting this without one is not recommended.  While it adds another layer of cost to the approval process, the result is a greatly reduced examination time at the VA.

The document checklist is available in Chapter 16 of the VA Lender’s Handbook.  Specifically, the table of required documents is available on page 16A.03.    I suggest that the loan originator AND both real estate agents AND the escrow officer review this table as soon as an agreement of sale is executed.  At first glance, the list appears to be ominous (lots of dead trees).  Upon more careful scrutiny, it is plain to see that only 5-6 documents are required; the other 20 or so are only required IF AVAILABLE.  The VA condominium complex requirements then are almost identical to what would be required for an FHA or conventional loan.

Still, the required documents are the required documents.  Failure to provide those documents can result in lengthy delays.  The reason is not because of the process, it is because of “trust”.  The VA trusts the attorney to properly vet those documents, the attorney trusts the lender to properly organize those documents, and the lender trusts the escrow officer and title officer to properly provide those documents in an expeditious manner.

Simply put, if you show that “you Read more

December 15, 2009

Manufacturing Inflation (How Art Laffer Got It Wrong)

by

Commercial Real Estate Finance Expert
Structured Debt and Equity
Licensed Real Estate Broker in AL, CA, and FL

Author website

If you’ve wondered where that inflation was, you might start seeing signs of it today.  Economic data released today are a great example of why inflation is a monetary consequence and not an economic one:

New York metro manufacturing activity slowed WAY less than expected:

Factories in the New York region unexpectedly expanded at the slowest pace in five months in December, indicating manufacturing may provide less of a thrust for the economy in coming months.

Wholesale prices jumped WAY more than expected:

The 1.8 percent increase in prices paid to factories, farmers and other producers was more than twice as large as anticipated and followed a 0.3 percent gain in October, according to Labor Department data released today in Washington. Excluding food and fuel, so-called core prices also exceeded the median estimate of economists surveyed by Bloomberg News.

Industrial production rose a tad, mostly from exports which may be a consequence of a weaker dollar :

Manufacturers are benefiting from rising demand overseas as the global economy recovers from the worst slump since World War II. A 12 percent drop in the value of the dollar from a four- year high on March 3 against its major trading partners is making American goods more competitive. Exports have risen for six consecutive months since reaching a three-year low in April.

What’s this all mean? It could very well mean that all this cheap money is starting to work its way into the economy…from the producers’ side.  If those producers can’t pass along the higher prices to the consumer, because of a paradigm shift in consumer demand, we’re going to see a lot more business failures.  That could lead to higher unemployment.

OR…it could mean something much worse; it could mean the feared currency collapse is underway.

Art Laffer once suggested that America’s “great export is our monetary policy” (VIDEO).  Since that utterance to Peter Schiff,   Laffer’s written a book admonishing the Government for the very strategy he endorsed.   Laffer’s lost credibility aside, it is instructional to note that we, as a Nation, have become overly reliant on foreign capital.  It looks like that party could be over.  If Read more

December 14, 2009

The Rates Aren’t The Only Thing That Matters….. (My thoughts on how to create healing in the housing market)

by

Mortgage Officer

Author website

A couple of thoughts about this article from the New York Times:

  • It’s true.   Anecdotally, I’d have to say that depending on the day, anywhere from 30-50% of the people who I discuss refinancing with are either not able to do it because their income has fallen or because property values have dropped.  Now wait, you’re probably thinking, “I thought that the government was allowing people to refinance even if their mortgage was over 100% of the value of their property.    They are, but there are a couple of caveats to that:
  • The loan has to be with either Fannie Mae or Freddie Mac and a substantial portion of the market isn’t with either one of those.   If you want to find out whether your loan is with either one of them, check Fannie Mae Loans or check Freddie Mac Loans to find out.
  • If you have a second mortgage/home equity line of credit on your house and the combined balance of the two loans exceeds 105% of the value of your home (but is less than 125%) then you can still refinance, but the pricing adjustments that Fannie and Freddie charge are so extensive that unless your interest rate is over 6%, it’s probably not worth refinancing.
  • If you are like a LOT of people in today’s economy, your credit score isn’t quite as high as it used to be.   It might be because you’ve had struggles to make some payments on time, it might be because you’ve had some of the credit lines cut on some of your credit cards (thereby lowering your credit scores because you’ve got too much of your available credit tied up), it might be a variety of reasons.   But the end result is the same.   In order to get the best possible rate, you need to have either:
  • A 5% equity position in your house and no second mortgage or
  • A first mortgage of no more than 80% of the Read more
December 11, 2009

Quote of the Day…..

by

Mortgage Officer

Author website

Elizabeth Duke is on the Board of Governors for the Federal Reserve and I think she hit the nail on the head……

Fed’s Duke Outlines New Mortgage Market : HousingWire || financial news for the mortgage market

“Some would argue that most of the really risky behavior is now out of the market,” Duke said. “But, unfortunately, the backlash has restricted a lot of perfectly responsible lending as well. Banks are reluctant to put any but the lowest possible risk loans in their portfolios.”

December 10, 2009

ATM Machine? The more I hear, the more I like of this guy…..

by

Mortgage Officer

Author website

Okay, this is actually kind of funny.

Paul Volcker, the former Fed Chairman, the guy who maneuvered us through the inflation mess in the early ’80’s, made a speech on Tuesday to a group of higher level financial executives.    These are the “power” people in the industry, the “who’s who” of the top financial firms.

What does he tell them?   The best thing that they have done in the last 25 years was to invent the ATM machine.

That box where you put your debit card in and it spits cash back to you?   Yeah, that’s the ticket.

What’s his point?  That all of the “exotic” financial tools that have been developed, derivatives, CDO’s, CDS’s, MBS’s, TIPS, and a whole variety of other acronyms really haven’t done anything useful for the world’s economy.

Ouch, that’s a stinging rebuke…..

Tom Vanderwell

Ex-Fed chief Paul Volcker’s ‘telling’ words on derivatives industry – Telegraph

The former US Federal Reserve chairman told an audience that included some of the world’s most senior financiers that their industry’s “single most important” contribution in the last 25 years has been automatic telling machines, which he said had at least proved “useful”.

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December 8, 2009

Modifications are Failing…. (More on the Acronym Soup)

by

Mortgage Officer

Author website

There’s a couple of interesting and yet disturbing points to this report from CNBC:

  • over 2/3rds of the people who are currently in the trial period of loan modifications are not going to qualify for the permanent modifications.   Why?   A couple of likely possibilities:  1) They are too far upside down and are looking at it and saying, “I’m out of here.”   2) They aren’t willing to provide documentation of what their financial position is because it would make it evident that they had lied on their loan application and that’s a federal offense last time I checked.
  • I had a past customer call me on Friday and said that he was never told that his short sale paperwork had an expiration date (which has now past).   He said it took too much work and he’s not going to do the paperwork again.    I didn’t ask him what his plan is from here, but I think it illustrates the pain and frustration that so many people are feeling in the process.   They just throw their hands up in the air and say, “I give up.”
  • If 2/3rds of the loan mods don’t go to permanent status, what do you think that’s going to do to the number of foreclosures?   Yeah, that’s right, it’s going to increase them.

The entire way that the banking industry is handling foreclosures, short sales and loan modifications isn’t designed to encourage participation (or perhaps mandate participation?)   Until we get an organized and systematic way to deal with the facts that:

  1. We have many people who took out loans that they never had a chance of paying on time.
  2. We have many people who took out loans that are worth way more than their houses are.
  3. We have many people who took out responsible loans and have had bad things happen to them and now aren’t able to make their payments.

All three of these require different responses and a different way to effectively resolve the challenges that we’re facing.

If you ask me, the government and the banking industry haven’t figured out the way to deal with them that really works yet.

Tom Vanderwell

P.S. You’re probably Read more

December 3, 2009

1 Full Percentage Point? That would leave a mark…..

by

Mortgage Officer

Author website

Okay, this Mr. Sack guy is the guy who manages the Fed’s day to day dealing with the financial markets.   Here’s what he had to say about rates yesterday:

  • 10 year Treasuries were .50% lower than they would have been without the program.
  • Mortgage rates would be 1% higher if it weren’t for the Fed’s purchase of mortgage backed securities.

The only questions that I see coming from this are:

  • Will those differences automatically reverse themselves when the program stops?   It’s not necessarily a given that they will unwind immediately when the buying by the Fed stops.
  • How long will it take for those positions to unwind?   Will rates climb over 30 days?  6 months?  12 to 18 months?
  • If you are contemplating either refinancing or purchasing relatively soon, why haven’t you done something yet?   Take a look at the list of Bloodhounds on the right side and call any of the lenders on the list or call your favorite local guy, but don’t wait too long.   The window of opportunity is going to be closing some time soon and probably sooner than we all think.

Stay Tuned……

Tom Vanderwell

The Fed’s Market’s Guy Eyes Asset Sales and Rate Increases – Real Time Economics – WSJ

Mr. Sack is a key voice on the Fed’s expanding balance sheet, because he manages most of the central bank’s interactions with financial markets and thus many of its asset purchase and money lending programs……

Mr. Sack’s group estimates that the Fed’s purchases of $300 billion in long-term Treasury securities earlier this year helped to push yields on 10-year Treasury notes down by about half a percentage point……

Some critics have argued that the Treasury purchases didn’t have the intended impact of pushing rates down.
But Mr. Sack – a long-time proponent of such purchases – said his estimate is supported by regression analyses by the Fed.

Purchases of mortgage backed securities, he says, pushed those rates down by a full percentage point.

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December 2, 2009

I can’t tell you how disgusted this makes me….

by

Mortgage Officer

Author website

It’s another example of people in the mortgage and real estate world who took advantage of someone who didn’t understand the system.   And they aren’t the ones who paid the price, the borrower is…..

We’ll be better off when all of those types who are motivated soley by profit have been run out of the business.

Tom Vanderwell

Calculated Risk: WaPo: A Liar Loan Example

From Donna St. George at the WaPo: The $698,000 mistake

[A]ll of this began in the heady days of the mortgage boom … [Ms. White] only knew that there seemed to be possibilities, even to those with little means such as herself, which is how a woman who had never paid more than $700 a month in rent and who had relied in recent years on Section 8 housing vouchers suddenly owned a house.

A four-bedroom house.

With 3 1/2 bathrooms. And walk-in closets, black granite countertops and a fireplace.

You can already tell how this story will end.

On settlement day, reality bore down.
…
Papers were read and presented, most of which White did not try to decipher. … White’s papers cited income of $163,320 a year, even though she says her 2005 income-tax earnings were less than $15,000 and she relied at times on food stamps.
…
White signed papers while waiting for the one she cared most about: her monthly payment. … “Please let this be something I can afford,” she said to herself. She was pretty sure she could afford $2,000. She told herself that if her day-care business did well, perhaps she could afford $2,500. If it was $2,800, she would struggle. Here, now, came reality: $5,635 a month.

To get White to sign, the sellers – who were real estate agents – agreed to make the first two mortgage payments for Ms. White. According to the article, White received $40,000 in cash out at closing – and the seller made over $200,000 on the house. Naturally it went into foreclosure Read more

December 2, 2009

It’s going to get harder to get an FHA loan……

by

Mortgage Officer

Author website

We’ll get more details later today, but it looks like it’s going to get harder and be more expensive to get an FHA loan.   A couple of main points to consider:

  • FHA is currently losing money by the truckloads, so something has to change.
  • The increased FICO scores, larger downpayments and reduced seller concessions will probably weed out a few people, but not that many.
  • It will make it more expensive to buy a house FHA.
  • At first glance, the part about scrutiny of the lenders seems like it really wouldn’t affect borrowers, right?   Wrong, here’s why.   If FHA becomes more demanding in terms of their buy back provisions with lenders, guess what, lenders are going to be looking at absolutely every little detail on the loans to make sure that they comply with the guidelines.    Your borrower needs to have 12 months on the same job and he’s only at 11.5 months?  Sorry, wait two weeks.    The paystubs are dated 31 days before application and we need 30 – sorry, got to get another one.    The bank statement, well, you get the picture.

I’m working on a post outlining the details of what Fannie is doing next week Saturday with their new guidelines.   Fun times…..

Tom Vanderwell

FHA to Toughen Mortgage Rules in Lenders Crackdown – Real Estate * US * News * Story – CNBC.com

Amid rising foreclosures and falling home prices, the Federal Housing Administration is proposing new rules to crack down on lenders and asking Congress for the authority to raise certain borrower requirements, all in an effort to reduce risk to its $685 billion mortgage portfolio.

While FHA Commissioner David Stevens said in an interview on CNBC following that release that the FHA would not need additional federal funding to meet its loan losses, he added that FHA will be looking for new ways to reduce risk.

Those steps will include raising minimum borrower FICO scores, requiring larger down payments, and reducing the maximum permissible seller concession from six percent currently to three percent.

It could also include raising up-front and/or annual insurance premiums, which would require Congressional authority. This is according to the testimony HUD Read more

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