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Category: Lending (page 34 of 56)

December 1, 2009

HAFA, HAMP and other assorted worthless acronyms….

by

Mortgage Officer

Author website

Okay, I’ve got to admit, it’s been one of those days, but I can’t stand by and not say what I’m thinking about this new “short sale” program.    I’m already hearing a lot of Realtors and others saying, “This is great news!”    Well, hold on a minute…..

I’m going to go through some of the main points of the HAMP Update that was issued yesterday and that our President spoke about today.    You can find the entire thing at Hamp Update if you want to read it for yourself.  If you want to read the entire directive, you can find that at Directive.   The bold and italicized portions are quotes from the official documents.   The regular print is my thoughts…….

Supplemental Directive 09-09 provides guidance to servicers
There’s the first clue that something’s not going to go well.   It provides guidance. 

The definition of guidance according to Wikipedia is: Advice (opinion), an opinion or recommendation offered as a guide to action, conduct. 

See where the problem is?   It’s guidance, it’s not mandatory.   So, Uncle Sam can say, “Now, Mr. Banker, you really should do this……”    And the Banker can say, “(Well, we really shouldn’t print that.)”

provides servicers with the option to determine the extent to which short sales or deeds-in-lieu will be offered under this program.  (This is actually from the Directive).    

It provides options.   It allows the servicer to determine the extent to which they offer them under this program.

So, once again, what do we have?   We have Uncle Sam saying, “Now, Mr. Banker, it would be really nice if you did this……”   And the Banker can say, “____________________.”

The effective date of this Supplemental Directive is April 5, 2010.
Excuse me, but what the heck is the rush for?   I mean, they rolled out the HASP refi program to lenders the day that they made it public to consumers so we were getting calls on it before we even knew what was what.    Now they are giving the banks four months to decide whether they want to participate?    Why not next Monday?

With either the HAFA short sale or DIL, the servicer may not Read more

December 1, 2009

The Next Step….

by

Mortgage Officer

Author website

I’ve had a lot of people ask me lately, “Tom, what do you see is coming next?   What’s the next step in this mess?”

A couple of thoughts at this point:

  • Anyone short of Nouriel Roubini, Paul Krugman, Meredith Whitney and maybe a few others who tell you that they KNOW how this is all going to end is lying.   (Did you notice how I didn’t include Treasury Secretary Geithner or anyone in Washington in that list?)
  • But there are some people who have the ability to peer a little farther out into the fog than most do.
  • Anyone who tells you this isn’t a confusing and potentially scary time is lying to you as well.   Never in our life times have we seen the kind of financial devastation and economic pain that is currently happening.   

The things that are going on are causing lots of people to question a lot of things that they weren’t questioning before.   Things like: 

  1. Will I be able to retire?  
  2. Can I ever trust a mortgage lender again?  
  3. Will real estate still be a good investment?  
  4. What’s happening in the stock market?  
  5. Is my financial advisor telling me the whole story?  
  6. What are mortgage rates going to do? 
  7. How does the actions of the Federal Reserve impact the financial markets? 
  8. What are the long and the short term ramifications of the deficits that the government is currently running?
  9. How does the value of the dollar impact real estate and mortgages?

Those are just a smattering of the types of questions that I’ve been hearing from people lately.   Okay, some of them aren’t quite in the format that I spelled them out but they have basically been asking that.  Frankly, I think the consumer’s desire to ask more questions is a good thing and a healthy thing in the long run.

So where am I going with this?   I’m getting to it…….

I’ve been fortunate to “hook up” with two of the experts in other areas of the financial spectrum (one of whom is our own Jeff Brown) and we’re setting up a new source for financial and real estate market insight and understanding.   As Read more

November 30, 2009

The System is Broke? Humpty Dumpty

by

Mortgage Officer

Author website

I’m just quoting the conclusion of the article that was up on Calculated Risk over the weekend.  It was about a lot of the technical aspects of mortgage servicing and the way that mortgages are sold and bundled.    A couple of main comments and then read the conclusion below:

  • Many of the problems in the mortgage world are because of the way that the mortgage world is structured.   That means that it is going to take systematic and structural changes to get us back to a system that really works.
  • When there is a lack of accountability, things won’t work the way they are planned.
  • Do you think that this lack of accountability and lack of responsibility is part of the reason why short sales and foreclosures are so hard to get approved?   There is no incentive for the servicer to make the decisions that need to be made.

Check it out below…..

Tom Vanderwell

Calculated Risk: Thanksgiving Weekend Mortgage Litigation Roundup

In other words, as many of you suspected all along, “hoocoodanode?” was officially part of the plan for creating mortgage backed securities. Systematic and willful ignorance was incentivized. If Wall Street created a system where each bogus mortgage passed through the hands of a couple of intermediaries who had no ability to do any due diligence on the quality of the loan, then the end buyer of the loan would, legally speaking, be in a better position to collect than the original lender by virtue of BFP status. Did the mortgage broker tell the borrower the loan was fixed rate when it really wasn’t? Oh well, no way the mortgage pool trustee could have known about that after the loan passed through the hands of an originating lender, an unrelated depositor and a legally separate issuer.

Whether for better or for worse, this system is pretty clearly not playing out as intended. BFP status does nothing to protect lenders from broke borrowers and half price houses, both of which were foreseen by knowledgeable people who were not willfully ignorant of details about loan origination. And even the limited protection of BFP status may not be available in Read more

October 26, 2009

7 Things Every Home Buyer Should Know – Part 2 – Don’t Worry

by

Mortgage Officer

Author website

Time to take a look at the second installment in the 7 things series.   If you recall, last time, we looked at the fact that, in a rapidly changing market like we are, 6 months ago is ancient history.    What someone paid 6 months ago…… Well, just read about that at 7 Things – Part 1.

So what’s Part 2 about?   Here’s what I wrote last time:

2. Don’t worry so much about what you paid for your house. Instead, look at the difference between what you can expect to sell your house for and what it’s going to cost you to buy the new one that you want. I expect you’ll find that those are much more important numbers (unless you end up without any equity, in which case you don’t sell).

There are a couple of things that I think still hold true and one big thing that I think doesn’t hold true any more.    First the things that hold true:

  • If you are selling one home to buy another, the most important number is not what you paid for the existing home, the most important number is the difference between the two homes.   If the value of your home has fallen by $40,000 but you’re in a situation where you can buy a newer home with less maintenance and 1000 square foot bigger for a “net” difference of $20,000, then it might very well be a good deal.   
  • If your family situation has changed (i.e. – We got married and are expecting our second set of twins in the last 2 years! – Yikes!) then what you paid for your house doesn’t matter.   I’ve got a client who is negotiating on a house where the seller has to sell within the next three weeks but they are “hung up” on what they paid for the house.   If you need to do something, don’t worry about what you paid for your house, just focus on what the financial and logistical aspects and make the move.    I’m working with Read more
October 20, 2009

I was joking – honestly, I was really joking!

by

Mortgage Officer

Author website

Approximately a month ago, I was getting a client approved for a mortgage with mortgage insurance and while going over the details of what we needed to document the deal, the customer deadpanned to me, “Where do I go to get the bloodwork done?”    My response, “Nah, we don’t need that —- yet.”

The report below is actually from England but it now appears that the government is going to start requiring mortgage lenders in England to ask questions about how much their borrowers spend on tobacco and alcohol.

Now, if you ask me, I think that tighter restrictions in terms of downpayments, debt to income ratios, credit scores, job histories, cash reserves, etc. all make sense.   But whether my neighbor spends more or less on alcohol than I do, I can’t see what substantive difference that makes in our ability to repay our mortgages.  (Hint – I’m not the one who spends more on alcohol.)

The pendulum is swinging too far in the other direction in some areas and not far enough in others.

Tom Vanderwell

Homebuyers face questions on alcohol and smoking under new mortgage rules – Times Online

Homebuyers could be forced to provide detailed information about the amount of money they spend on alcohol each month to qualify for a new mortgage under a new clampdown on reckless lending.

In a sweeping review of the mortgage market published today, the Financial Services Authority (FSA) said lenders needed to be far more rigorous about their financial checks of potential borrowers.

It said lenders should delve deeper into homebuyers’ personal spending including the amount they spend on alcohol and tobacco.

Spending on shoes, clothes and childcare could also be assessed under a new, industry-wide “affordability test”.

At present, the FSA does not prescribe rules about assessing a consumers’ ability to repay a mortgage and practices vary from one lender to the next.

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October 17, 2009

A Look Back – What Has Changed and What Hasn’t…..

by

Mortgage Officer

Author website

In July of 2008, I wrote a piece as a guest post on Paul Kedrosky’s site, Infectious Greed.    I called that piece The Top 7 Things Every Home Buyer Should Know.   The piece got a lot of “press” and actually got me interviewed by the New York Times.    I was talking with the reporter who I’ve gotten to know at the New York Times about a month ago and we realized that it was almost exactly a year since he had ran the piece, “Considering the 7 Year Plan.”    He made a comment at that point, “It would be interesting to see what, if anything, has changed over the last year in your opinion of what a home buyer needs to think about.”     I agreed and decided at that point to do that.

So this is the introduction to what will be a 7 part series over the course of the next week or so.   I’m going to take each item, one by one, and look at what my view was in July of last year and then factoring in what I think has or has not changed over the last 15 months.

Here’s a hint for you – out of the 7 parts, I think that we’re going to find that at least 3 or 4 of them have changed substantially.

I’ll have the first one up in a day or two.

Thanks for listening in/reading what my thoughts are…..

 

Tom Vanderwell

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October 15, 2009

Why I write on the Bloodhound Blog….

by

Mortgage Officer

Author website

and on Zillow’s Mortgages Unzipped Blog and on the Straight Talk About Mortgages. I was asked that question the other day and the answer I gave surprised the person who asked it.   I found that intriguing, so I thought I’d share both the question and the answer.

Why do I write on these blogs?   The person who asked it reads a lot of what I write on these blogs and other places, so they know that even though writing comes rather easy for me, I do spend a lot of time on it.

Here’s my answer:

  • I write on these blogs because the mortgage world can be terribly confusing and I want to try to help educate people, and that’s true even in the best of times.
  • I write on these blogs because sharing my understanding and knowledge of what’s happening and what it means helps to elevate the professionalism and expertise of the mortgage and real estate professions.
  • I write on these blogs because we are in horrendously confusing times and the full ramifications of what’s happening won’t be truly felt for decades.
  • I write on these blogs because there are a lot of people who have experienced and are going through severe financial disruptions and need someone to help them understand what’s going on.
  • I write on these blogs because the economy is going through what I believe we’ll see to be “seismic shifts” in consumers attitudes toward credit, saving, investments, banking, and real estate.  I’ve based my entire mortgage career on helping people manage their money wisely and making solid decisions and this is a logical extension of that.

The person who asked the question was surprised at my response.   He said, “I would have guessed that the reason you write on these is to write more loans!”

Have I written more mortgages that I wouldn’t have otherwise?   Yes.   Is that why I’m doing it?   Nope.

And that brings me to the main point of this post.   I’m working on something new.   Let me explain:

  • There are a lot more facets to people’s financial condition than just mortgages.
  • There’s a lot of people who are struggling to understand what’s happening Read more
October 14, 2009

Some Updates from the Marble Tower

by

CEO, PA Association of Realtors

Author website

Here are a few pieces of kibble from NAR that I thought the Pound might want to chew on…

 

Pent-up Demand Seen in Purchase-Ready Renters

There are more than 16 million renter households in the U.S. with enough income to buy a home at the national median price, far more than in 2000, before the housing boom, says NAR Chief Economist Lawrence Yun. This large number of renters with the financial wherewithal to buy is one indication of the pent-up demand in the housing market that can be tapped if Congress extends the home buyer tax credit. It’s also an indication that the tax credit won’t just be attracting households that would buy anyway. Hear Yun’s remarks on market conditions and the tax credit in an audio podcast.

 

New FHA Condo Process Could Face More Delay
HUD is looking at delays to its new FHA condo approval process. Changes outlined in Mortgagee Letter 2009-19 slated to take effect for case numbers assigned on or after Oct. 1 have been delayed to apply to case numbers assigned on or after Nov. 2, and that start date could be pushed back as well. Other condo rules, including permission for lenders to offer spot loans, remain in effect. NAR continues to press for changes to federal policy to make FHA financing more viable for condos. Among other things, NAR wants a reduction in the owner-occupancy requirement and an increase in or outright elimination of the concentration limit.

 

2008 HMDA Data: FHA Credit Quality Remains High
FHA’s market share of home loan originations expanded to 30 percent while the credit quality of its loans improved, latest federal mortgage data gathered under the Home Mortgage Disclosure Act (HMDA) finds. In 2008, FHA’s FICO scores increased significantly while loan-to-value (LTV) ratios decreased. More than 60 percent of FHA’s increased purchase volume was to borrowers with prime quality FICO scores (above 660), while FHA insured mortgages with LTVs above 95 percent fell from 72 percent  to 67 percent.

October 1, 2009

BloodhoundBlog Radio: FHA/VA in 2010 (with Tony Gallegos)

by

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

Author website

Wondering about the future of VA home loans and FHA mortgages?  Listen to my interview with Bloodhound Blog contributor, Tony Gallegos.  We discuss:

  • San Diego County VA mortgage statistics (the market share number is going to astound you) 
  • Why VA loans have the lowest default rate among all four major loan types (including conventional prime).
  • Why FHA isn’t really going broke (contrary to my earlier statement, it’s doing quite well)
  • Why lenders are initiation stricter guidelines on FHA loans than HUD requires
  • Why I suggest that HUD is asking FHA-approved lenders to do the “heavy lifting” for them

The interview last about 40 minutes; the perfect treadmill companion. 

Listen to it here.

October 1, 2009

The Jobs Report – what’s it going to mean for mortgage rates?

by

Mortgage Officer

Author website

Okay, it’s hard to believe but tomorrow morning is the first Friday of the month again.    Where has the year gone?   In some ways it has flown by and in other ways it seems like it’s been about two or three years.   Know what I mean?

Any way, tomorrow morning is the jobs report that shows the statistics for the month of September.   I’ve had a lot of people asking me what I think it’s going to show and what I think it’s going to do to mortgage rates.    I’m going to lay out what I think are the four most likely outcomes and their potential impact on mortgage rates.  At the end of the piece, I’ll put my “projections” on which one is most likely to occur.

The Jobs Report Comes In Better Than Expected – Remember, it’s not so much the actual number as it is the difference between market expectations and the actual numbers.   But, if the jobs report comes in better than expected, here’s what I expect will happen:

  • People will feel better than they did about the prospects for a recovery in the economy.
  • People and institutional investors will move money (lots of it – how much depends on how much better) from the bond market and cash and put it into the stock market.
  • The stock market will have a very nice upward swing.
  • The bond market and mortgage backed securities will suffer from the movement of money.
  • Mortgage Rates will go up.

The Jobs Report Comes in about as expected – status quo, mediocre, we just sort of limp along.   If that’s the case, I expect we’d see a “non-reaction” in the markets.

The Jobs Report Comes in Worse Than Expected – a little bit worse, but not a huge amount worse.   If that’s what happens, here’s what I expect:

  • People will feel worse about the prospects for recovery in the economy and we’re Read more
September 19, 2009

Real Estate Investors: Its Time to Come Out of Hibernation

by

Real Estate Investor

Author website

Is it time to start investing in real estate again?

 

First positive sign, I am writing again.  While I write that half-jokingly, there really has not been a lot to write about for the past six months.  My previous advice was to take shelter and start researching the markets.  Well, I have done that and I hope you have too.  It’s just about time to put that great research to work.

 

Second positive sign, mortgage rates are still historically low and the media has begun to talk about a real estate recovery.  Since the news outlets are always about six months behind the real estate market, I would assume we are probably at least six months into a modest real estate recovery.  Low real estate prices and low mortgage rates create an excellent investing climate.

 

Third, mortgage rates are beginning to rise and there is substantial talk of a market recovery.  As the economy recovers, expect mortgage rates to rise.  Depending on the inflation indicators, we could see mortgage rates rise rapidly or we could see a gradual increase interest rates if it remains tame.  Regardless, no one expects rates to get substantially lower, so if you can qualify for a mortgage (and that could be a big IF), it might be time to buy.

 

Expect more from me as I see a general market recovery.  As one of the few real estate investors on this blog, I like to consider myself a slightly more objective analyst of the real estate market, as oppose to the perma-bull Jeff Brown.  Agents should start contacting their investor clients now and investors should start contacting their mortgage brokers.

September 19, 2009

Eliminate the Government Option For a Healthy Mortgage Industry

by

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

Author website

Most loan originators are grateful for the “government option” in the mortgage markets because of the liquidity crunch. I submit that the reason for the mortgage liquidity crunch was TOO much government involvement in housing and its increased involvement has ruined mortgage banking. That’s going to be a hard concept to grasp because all of us have relied on the government, at one time or another, to insure the mortgage loans we make. Lend me your mind for a few minutes and consider what might have been had we weaned ourselves off of the milky government teat for a free market approach to residential real estate loans.

Government lending didn’t really start until the 1920s with farm and home loans. FDR’s New Deal supercharged the idea of US government-backed home loans as a “band-aid” to the Depression-era liquidity crisis. Poorly-trained, high school social studies teachers taught us that the New Deal policies are what saved the American economy. In fact, evidence suggests Federal intervention ultimately prolonged the Depression, curbed creativity and innovation in lending, and turned the residential lending industry into a ward of the Government.

Twice, in recent history, did residential lending attempt to divorce itself from this dependent relationship…twice, we failed. Current legislators use these failures as evidence for why free market capitalism is “dangerous” when left unchecked. In reality, the de-regulatory efforts towards banking in the 1980s, and securitized real estate lending in the earlier part of this decade, were constrained by a government-provided safety net (FSLIC insurance and expansion of the GSE mortgage conduits) akin to bad parenting.

Consider the teenager. Adolescence is the awkward period between a child’s dependence on his parents and the independence from those parents that comes with adulthood. Responsible parenting dictates that greater responsibilities be given, as the adolescent ages. Responsible parenting rewards the adolescent for good choices and levies punitive restrictions as consequences for poor choices. It is when parents indulge the adolescent in freedom without responsibility that adolescence continues to the child’s middle-age years.    In short, if Biff kills his girlfriend in a Read more

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