Friday, January 29, 2010

Fannie Mae Offers Incentives to Buyers

Fannie Mae is offering a 3.5% incentive* for buyers who purchase and close on a Fannie Mae-owned home between January 28 and April 30, 2010. Buyers purchasing properties listed on this site that are closed within this period may receive up to 3.5% of the final sales price for:

•Closing costs;
•The purchase of new Whirlpool® appliances by Fannie Mae; or
•A mix of closing costs and appliances, at the buyer’s discretion, up to the maximum 3.5%.

To be eligible for this incentive:

•Offers must be accepted on or after January 28, 2010
•Property sales must close before May 1, 2010
•Buyers must be owner-occupants, investors are excluded

Contact a Fannie Mae listing broker for more information.

*Lenders may impose their own limitations on the use of the 3.5% incentive, so buyers should consult their lenders for guidance

Thursday, January 28, 2010

Banks Seek Payback from Walkaways

Increasingly aggressive mortgage lenders are seeking to collect deficiencies from former home owners who walked away from their properties or sold them in short sales.

Many states, including Florida, give mortgage holders as long as five years to seek a deficiency judgment. If granted, the bank gets up to 20 years to collect and the option to renew for another 20 years if the debt isn’t paid.

About one-third of U.S. states, including California and Arizona, prohibit collection efforts after foreclosure, but home owners usually waive that protection in a refinance.

Most states allow collection on unpaid home-equity loans.

Banks are most likely to try to collect from people who walk away from a property on which they are still making payments.

“The bank is going to pull your credit report, and if you’re current on your other bills they are going to come after you and potentially ruin you,” said Larry Tolchinsky, a Florida real estate attorney.

Source: Bloomberg, Kathleen M. Howley (01/28/2010)

Wednesday, January 27, 2010


WASHINGTON – Homeowners with FHA-insured mortgage loans who are experiencing financial hardship are now eligible for loss mitigation assistance before they fall behind on their mortgage payments. Previously, these homeowners were not eligible for such assistance until after they had missed payments.

The Helping Families Save Their Home Act of 2009 signed into law by President Obama expanded FHA’s authority to use its loss mitigation tools to assist FHA borrowers avoid foreclosure to include those facing ”imminent default” as defined by the Secretary. FHA today issued guidance to FHA-approved loan servicers on how to assist these FHA borrowers.

“Loss mitigation assistance is beneficial to both borrowers and FHA because it helps borrowers retain their homes while protecting the FHA insurance fund from unnecessary losses,” said FHA Commissioner David Stevens. “FHA has always required lenders to establish early contact with delinquent borrowers to discuss the reason for missing a payment and to evaluate reinstatement options. Now servicers will have additional options for those borrowers who seek help before they go delinquent, which increases the likelihood that the borrower will be able to retain their home.”

Effective immediately, the loss mitigation options of forbearance and FHA’s Home Affordable Modification Program (FHA-HAMP) may be used to assist borrowers facing imminent default.

•FHA defines an “FHA borrower facing imminent default” to be an FHA borrower who is current or less than 30 days past due on the mortgage obligation and is experiencing a significant reduction in income or some other hardship that will prevent him or her from making the next required payment on the mortgage during the month that it is due.

•A forbearance agreement is an agreement by the loan servicer to postpone, reduce or suspend payments due on a loan for a limited and specific time period.

•FHA-HAMP allows qualified FHA-insured borrowers to reduce their monthly mortgage payment to an affordable level by permanently reducing the payment through the use of a partial claim combined with a loan modification. The partial claim defers the repayment of a portion of the mortgage principal through an interest-free subordinate mortgage that is not due until the first mortgage is paid off. The remaining balance is then modified through re-amortization and in some cases, an interest rate reduction.

The borrower must be able to document the cause of the imminent default which may include, but is not limited to, one or more of the following types of hardship:

1.A reduction in or loss of income that was supporting the mortgage loan, e.g., unemployment, reduced job hours, reduced pay, or a decline in self-employed business earnings. A scheduled temporary shutdown of the employer, (such as for a scheduled vacation), would not in and by itself be adequate to support an imminent default.

2.A change in household financial circumstances, e.g., death in family, serious or chronic illness, permanent or short-term disability.

Loan servicers must document the basis for its determination that a payment default is imminent and retain all documentation used to reach its conclusion. The servicer’s documentation must also include information on the borrower’s financial condition.

Additional information and guidance can be found on HUD’s website.

HUD is the nation's housing agency committed to sustaining homeownership; creating affordable housing opportunities for low-income Americans; and supporting the homeless, elderly, people with disabilities and people living with AIDS. The Department also promotes economic and community development and enforces the nation's fair housing laws. More information about HUD and its programs is available on the Internet at and

Wednesday, January 20, 2010

FHA Toughens Downpayment Rules

Federal Housing Administration (FHA) Commissioner David Stevens today announced a set of policy changes to strengthen the FHA’s capital reserves. Two of these changes which most directly affect borrowers are:

New borrowers will now be required to have a minimum FICO score of 580 to qualify for FHA's 3.5% down payment program;

New borrowers with less than a 580 FICO score will be required to put down at least 10%; and

Allowable seller concessions will be reduced from 6% to 3%.

If you are planning to get an FHA loan, check with your lender to see what these changes may mean to your ability to borrow.

Wednesday, January 13, 2010

FHA Cracks Down on Suspect Lenders

Press Release


WASHINGTON - U.S. Department of Housing and Urban Development (HUD) Inspector General Kenneth M. Donohue and Federal Housing Administration (FHA) Commissioner David H. Stevens announced today an initiative focusing on mortgage companies with significant claim rates against the Federal Housing Administration mortgage insurance program.

HUD Office of Inspector General (OIG) subpoenas were served to the corporate offices of 15 mortgage companies across the country demanding documents and data related to failed loans which resulted in claims paid out by the FHA mortgage insurance fund.

Inspector General Donohue said, “The goal of this initiative is to determine why there is such a high rate of defaults and claims with these companies and whether there is wrongdoing involved. We aren’t making any accusations at this time, we have no evidence of wrongdoing, but we will aggressively pursue indicators of fraud. We are members of the President's Financial Fraud Enforcement Task Force and today’s activities reflect our commitment to seeking information on red flags that may arise from data analysis.

” This initiative was prompted, in part, by the FHA Commissioner, David Stevens, who was alarmed by the incidence of claims against the FHA insurance fund by a number of poor performing companies and reached out to the HUD OIG for assistance.

FHA Commissioner David Stevens said, “We are taking risk management extremely seriously. In addition to the policy changes we are implementing and additional changes we plan to announce later this month, we need to hold FHA lenders accountable for the high rates of defaults and claims against FHA. The Inspector General’s initiative will help us determine whether there is fraud and better manage risk in the long run.

” The HUD OIG identified these direct endorsement companies from an analysis of loan data focusing on companies with a significant number of claims, a certain loan underwriting volume, a high ratio of defaults and claims compared to the national average, and claims that occurred earlier in the life of the mortgage. These are key indicators of problems at the origination or underwriting stages. The HUD OIG wants to see why these loans failed.

Some actions available to the HUD OIG are audits, investigations, and inspections and evaluations. In addition, we rely on the support of the Department of Justice (DoJ), and of State and local law enforcement. The DoJ is available to pursue both civil and criminal legal actions against wrongdoers. HUD is available to proceed with administrative sanctions such as suspensions, limited denial of participation, debarment, and civil monetary penalties.

The probe will be conducted by the HUD OIG’s Audit and Investigation staff jointly. They will assess why these companies have high default rates, especially at this unprecedented time when the FHA mortgage insurance program represents such a significant percentage of mortgages currently in force in our country.

This probe is a new type of approach in which HUD OIG is focused on corporate offices rather than individual branch offices. This is a starting point for more detailed reviews if abuses are uncovered, and the HUD OIG anticipates that more probes may follow.

“The FHA market share has skyrocketed,” Inspector General Donohue further said. “Our job is oversight. We work for the American taxpayer. Each loan on this list will be thoroughly examined and we will track down the reasons why it failed. Once we determine the causes, we will look to see whether there is a need for further review or remedial action. We want to send a message to the industry that as the mortgage landscape has shifted we are watching very carefully and that we are poised to take action against bad performers."

The following companies were served OIG subpoenas today:

First Tennessee Bank N.A., Memphis, TN
Alethes LLC, Lakeway, TX
Security Atlantic Mortgage Co., Edison, NJ
Pine State Mortgage Corporation, Atlanta, GA
Birmingham Bancorp Mortgage Corporation, West Bloomfield, MI
Alacrity Financial Services, LLC, Southlake, TX
Assurity Financial Services, LLC, Englewood, CO
D and R Mortgage Corporation, Farmington, MI
Webster Bank, Cheshire, CT
Mac-Clair Mortgage Corporation, Flint, MI
Americare Investment Group, Inc., Arlington, TX
1st Advantage Mortgage, Lombard, IL
American Sterling Bank, Independence, MO
Sterling National Mortgage Company Inc., Great Neck, NY
Dell Franklin Financial LLC, Columbia, MD

Monday, January 11, 2010

Fannie Mae Sells REO's More Quickly

When a bank forecloses on a loan and takes back the property, the property is known as Real Estate Owned, or REO. Fannie Mae is not happy with the amount of time it takes to sell an REO. In the past, if an offer came in on a home insured by Fannie Mae and there was a question as to whether or not the loan met Fannie's requirements, the loan servicer had 15 days to have the file reviewed. If there was a problem, the servicer could look for a better offer or buy it themselves.

This meant the buyer was in limbo for a couple of weeks. Will my offer be accepted? Will the servicer buy it? Will the price go up? Bottom line - it slowed the process and many deals were lost.

Now Fannie Mae has adopted a new policy. In an effort to speed up the sale of REO's, Fannie will now accept offers without notifying the servicer first. If it turns out that the loan did not meet Fannie's requirements, the loan servicers may be required to reimburse Fannie Mae for any loss.

“When Fannie Mae receives an offer to purchase a property that is also subject to an underwriting or servicing review, Fannie Mae may accept the purchase offer without first notifying the servicer, whether or not a final decision has been reached with respect to the review,” Fannie Mae said in its announcement. “If, after completion of the review, Fannie Mae determines that the mortgage loan did not meet its eligibility or underwriting requirements and Fannie Mae has incurred a loss by selling the property, the lender will be required to fully reimburse Fannie Mae for its loss.”

What does this mean for you? If you're in the market for an REO, your deal may close more quickly. In addition, this should help get the glut of REO's sold, thus stabilizing the real estate market.