Owners Upbeat About Their Home Values

DAILY REAL ESTATE NEWS | MONDAY, MARCH 02, 2015 

Home sales may be off to a sluggish start this year, but home owners are still upbeat when it comes to the value of their homes. They’re willing to spend to preserve that value too. 

Home-improving giants Lowe’s Co. and Home Depot Inc. reported “blowout fourth quarter profits,” which beat expectations with sales advancing more than 7 percent at both retailers, Bloomberg News reports. Purchases greater than $500 surged 13 percent at Lowe’s. What’s more, January is showing strong gains too, which could prove a boon heading into the spring selling season.

"Consumers are feeling better about their jobs, their wages, and certainly feeling better about the value of their home," Lowe’s Chief Executive Officer Robert Niblock told Bloomberg. "They are re-engaging in projects that they have put off."

With these big box home-improvement stores, home values are key to growth, company officials say. That’s because when home owners feel good about the value of their home, they tend to be more willing to spend on repairs and remodels.

And home prices have been on the rise: The median price of an existing single-family home in the past year rose in 86 percent of the 175 metro areas tracked, according to the National Association of REALTORS®.

Lowe’s, which surveys consumers every quarter, says that its most recent poll showed that 50 percent of the home owners surveyed reported that the value of their home is rising – marking a survey high (ever since Lowe’s began polling home owners in 2007).

"That’s certainly good for their willingness to spend on the home," Niblock says, adding that rising values of existing houses will be the single-biggest driver of Lowe’s business.

The remodeling industry also confirms the gains. The number of remodeling companies seeing increases in major projects and committed work for the next three months are at all-time highs, according to a fourth quarter survey conducted by the National Association of Home Builders.

Source: “Americans Are Still Housing Bulls, Just Ask Home Depot or Lowe’s,” Bloomberg News (Feb. 25, 2015)

Foreclosures on a Free Fall, 66% Below Peak

DAILY REAL ESTATE NEWS | WEDNESDAY, FEBRUARY 11, 2015

Foreclosures are making up a much smaller share of many markets’ housing inventories and slowly falling back in line with historical norms. Completed foreclosures totaled about 39,000 nationwide in December 2014, a 13.7 percent year-over-year decrease and a 66 percent plunge from the peak in September 2010, according to CoreLogic’s December National Foreclosure Report.

What’s more, the 12-month sum of completed foreclosures for 2014 — 563,294 — is at its lowest point since November 2007, according to the report. Completed foreclosures have fallen every month for the past 34 consecutive months. Historically, prior to the housing crisis, completed foreclosures averaged 21,000 per month nationwide.

"Completed foreclosures last year were less than half the 1.2 million peak in 2010, but remain twice the level of normal activity over 10 years ago," says Sam Khater, CoreLogic’s deputy chief economist.

Yet, "the steady decline in the number of completed foreclosures is a good sign of healing in the U.S. housing market," adds Anand Nallathambi, president and CEO of CoreLogic. "Nonetheless, there remain many pockets of the country with very high foreclosure inventories, underscoring the unevenness of the nation's housing recovery."

Completed foreclosures reflect the total number of homes actually lost to foreclosure. Since the financial crisis began in September 2008, about 5.5 million completed foreclosures have occurred across the country.

While foreclosures overall are falling, many markets continue to struggle with the clearing of foreclosures from their pipelines. About 552,000 homes nationwide, as of December 2014, are in some state of foreclosure, known as foreclosure inventory. That represents a 34 percent year-over-year decrease. Also, all states posted double-digit year-over-year decreases in foreclosure inventory, except for West Virginia (which saw a 9.5 percent decrease) and the District of Columbia (which posted a 21.7 percent increase).

In its latest existing-home sales report, the National Association of REALTORS® reported that many markets are seeing foreclosure and short sales fetch higher dollars at sale with discounts slowly shrinking. Foreclosures sold for an average discount of 15 percent below market value in December, down from 17 percent in November. Short sales were discounted, on average, by 12 percent below market value, compared to 13 percent in November.

5 States With the Highest Completed Foreclosures

Five states alone accounted for nearly half of all completed foreclosures nationally. The following five states posted the highest number of completed foreclosures for the 12 months ending December 2014, according to CoreLogic’s report:

Florida: 118,000
Michigan: 49,000
Texas: 35,000
California: 29,000
Ohio: 28,000
5 States With Highest Foreclosure Inventory

The following states saw the highest foreclosure inventory as a percentage of all mortgaged homes in December 2014:

New Jersey: 5.2%
New York: 4%
Florida: 3.7%
Hawaii: 2.7%
District of Columbia: 2.4%

Source: “CoreLogic Reports 39,000 Completed Foreclosures in December 2014,” CoreLogic (Feb. 10, 2015)

The "Equity Rich" Home Owner is Back

DAILY REAL ESTATE NEWS | MONDAY, JANUARY 26, 2015

About 20 percent of all properties with a mortgage – or 11.3 million -- are now considered “equity rich,” with home owners who have at least 50 percent positive equity in their properties. The number has been steadily climbing, up from 9.1 million a year ago, according to RealtyTrac’s U.S. Home Equity & Underwater Report for the fourth quarter of 2014.

“Median home prices bottomed out in March 2012 and since then have increased 35 percent, lifting 5.8 million home owners out of seriously underwater territory,” says Daren Blomquist, vice president at RealtyTrac. “While the remaining seriously underwater properties continue to be a millstone around the neck of some local markets, the growing number of equity rich home owners should help counteract the downward pull of negative equity in many markets, empowering those housing markets — and by extension their local economies — to walk on water in 2015.”

Equity rich properties rose nearly by 2.2 million in 2014 alone.

What’s more, equity has returned to many properties in distress too. The number of distressed properties – those in some stage of foreclosure – with positive equity is higher than the share of distressed properties that were seriously underwater in the fourth quarter, according to RealtyTrac’s report. At the end of the fourth quarter, 42 percent of distressed properties had positive equity compared to 31 percent a year ago.

“Over the last year and a half I have had more people come to me thinking they need a short sale only to be shocked by the current market value and the positive equity in their home,” Frank Duran, broker at RE/MAX Alliance in Westminster, Colo., told RealtyTrac. In the Denver metro area, for example, 81 percent of distressed home owners had positive equity at the end of 2014 – which is the highest percentage of any market tracked by RealtyTrac nationwide.

Additional major markets where the number of distressed properties that have positive equity of more than 60 percent include: Pittsburgh (81%); Oklahoma City (76%); Austin, Texas (73%); Nashville (70%); San Antonio (63%); San Francisco (62%); and Raleigh, N.C. (61%).

Meanwhile, the number nationwide of home owners who are seriously underwater – where the borrower’s mortgage amount is at least 25 percent higher than the property’s estimated market value – continues to fall. Seriously underwater properties comprised about 13 percent of all homes with a mortgage by the end of 2014, significantly down from a peak reached in the second quarter of 2012 when that percentage stood at 29 percent.

Source: RealtyTrac

2 Bank Giants Fined for Mortgage Kickbacks

DAILY REAL ESTATE NEWS | FRIDAY, JANUARY 23, 2015

Government regulators have ordered Wells Fargo and JPMorgan Chase to pay $35.7 million to settle charges for their part in an illegal mortgage marketing kickback scheme that involved a title company that sought consumer referrals from lenders in exchange for cash.

On Thursday, the Consumer Financial Protection Bureau and the Maryland Attorney General’s Office accused a former title company, Genuine Title, of offering the banks’ loan officers cash, marketing materials, and other consumer information in exchange for business referrals. Such actions violate the Real Estate Settlement Procedures Act – RESPA – which prohibits giving a “fee, kickback, or thing of value” in exchange for a referral of business related to a real estate settlement service.

Genuine Title, based in Maryland, closed in April 2014.

“Home owners were steered toward this title company, not because they were the best or most affordable, but because they were providing kickbacks to loan officers who referred consumers to them,” says Maryland Attorney General Brian Frosh. “This type of quid pro quo arrangement is illegal, and it’s unfair to other businesses that play by the rules.” 

Regulators have ordered Wells Fargo to pay $24 million, as well as $10.8 million to consumers. JPMorgan will pay $600,000 and another $300,000 in redress to consumers, according to the CFPB.

"These banks allowed their loan officers to focus on their own illegal financial gain rather than on treating consumers fairly,” CFPB Director Richard Cordray said in a statement. “Our action today to address these practices should serve as a warning for all those in the mortgage market.”

Wells Fargo says the bank has taken “strong corrective action” as a result, citing that it’s terminated any involved staff members and that it is improving the monitoring of its processes and team members. JPMorgan issued a statement that said “these former employees clearly violated our policies, procedures, and training.”

Source: “CFPB Takes Action Against Wells Fargo and JPMorgan Chase for Illegal Mortgage Kickbacks,” Consumer Financial Protection Bureau (Jan. 22, 2015) and “U.S. Fines Wells Fargo, JPMorgan Over ‘Illegal Mortgage Kickbacks,’” Reuters (Jan. 22, 2015)

Consumers WiIl Have Access to FICO Scores

DAILY REAL ESTATE NEWS | TUESDAY, JANUARY 13, 2015 

Bank of America and J.P. Morgan Chase, two of the largest lenders in the U.S., have agreed to start showing some of their borrowers their FICO scores for free. FICO scores are a key metric lenders use to decide who to lend to and what interest rate to charge.

President Barack Obama announced the move on Monday at the Federal Trade Commission, emphasizing the importance of making these "once-secretive scores" more transparent to millions of consumers. In February 2014, the Consumer Financial Protection Bureau called on large credit-card lenders to make credit scores more available to consumers. CFPB says it received complaints from consumers who couldn't access their credit score.

FICO scores are used in about 90 percent of consumer-lending decisions, according to financial services research firm CEB TowerGroup. Consumers can purchase some of their scores, but everyone has several FICO scores — and they can't necessarily see the one the lender is using.

By knowing their credit score, consumers can take steps to improve it over time, which may result in greater loan savings and making credit more available to them, financial experts note.

Bank of America says that it will begin providing its consumer credit-card users with their FICO score later this year. Ally Financial plans to offer car-loan customers their score in February and roll it out to all customers in the summer. Chase plans to offer FICO credit scores at no charge to the roughly 10 million users of its "Slate" credit card.

FICO, through its growing list of partnerships, told The Wall Street Journal that it expects nearly 60 million consumers in the U.S. to soon have access to their FICO scores.

Source: “Millions More to See Their FICO Scores,” The Wall Street Journal (Jan. 12, 2015)

A Guide to Finding Mortgage Savings

DAILY REAL ESTATE NEWS | TUESDAY, JANUARY 13, 2015 

Many borrowers are paying more than they need to for a mortgage because they didn't shop around for lenders enough, according to a new study released by the Consumer Financial Protection Bureau. In response, CFPB is releasing an interactive online toolkit called "Owning a Home," which aims to help consumers better understand the mortgage process, compare lenders, and find the best deal.

Three out of four borrowers apply only with one lender or broker when seeking a mortgage, according to the study, which was based on consumers who took out a mortgage in 2013. That means most aren't checking with multiple lenders to see which one can offer them the best deal.

"Consumers put great thought into the choice of a home, but the mortgage process continues to be intimidating," says CFPB Director Richard Cordray. "The 'Owning a Home' toolkit makes it easy to see how shopping for a mortgage can translate into big dollars saved in the long run. We want to enable consumers to be more savvy shoppers."

Consumers who inquire about mortgages with multiple lenders or brokers are finding greater savings. CFPB found that interest rates can vary by more than half a percent among lenders for a conventional mortgage going to a borrower with a good credit rating and a 20 percent down payment. That means a borrower seeking a 30-year fixed-rate loan of $200,000 may snag an interest rate of 4 percent instead of 4.5 percent -- a savings of about $60 per month. Over five years, the borrower could save $3,500 in mortgage payments. The lower interest rate also means the borrower would be able to pay an additional $1,400 to the mortgage principal in the first five years and build greater equity, CFPB notes.

The agency's online toolkit offers up a guide to loan options, terminology, costs, and a closing checklist to help borrowers through the mortgage process. It includes a Rate Checker tool, still in beta testing, that helps consumers understand the interest rates available to them based on the same underwriting variables that lenders use, including loan type, property value, loan amount, and credit score.

With the Rate Checker, borrowers can see the rates that lenders are offering as well as a graph of how many lenders are offering each rate. The tool also allows borrowers to compare different interest rates and how much they will cost over the life of a loan, as well as apply different down payments to see how they would impact the cost of the mortgage. The CFPB is also providing steps consumers can take to get a better interest rate.

"Knowing the rates lenders are offering to consumers in a similar situation -- buying a home of equal value, in a comparable area, with the same credit score -- enables a consumer to enter conversations with multiple lenders armed with greater information and prepared with better questions," CFPB said in a statement. "'Owning a Home' also demystifies mortgage jargon, so consumers can have conversations with lenders more confidently."

Source: Consumer Financial Protection Bureau

FHA Lowers Its Mortgage Costs

DAILY REAL ESTATE NEWS | THURSDAY, JANUARY 08, 2015 

The Federal Housing Administration is reducing its annual mortgage insurance premiums by 0.5 percentage points in a move "to expand responsible lending to creditworthy borrowers," the White House said in a statement Wednesday afternoon.

FHA also said it would take added steps over the next few months to "cut red tape and clarify lending standards" in reducing mortgage costs for hundreds of thousands of creditworthy borrowers, according to the White House.

The FHA's move comes after several calls from industry trade groups, associations, and members of Congress urging the agency to lower its insurance premiums, which were increasingly blamed for sidelining thousands of would-be buyers. FHA-backed loans allow buyers to put down as little as 3.5 percent of the purchase price, and they are a major financing resource for first-time buyers.

FHA's mortgage insurance premiums will be reduced from 1.35 percent to 0.85 percent. The reduction in premiums on mortgages could save an average borrower $1,000 a year on a $200,000 loan, says Mark Zandi, chief economist at Moody's Analytics.

"We are optimistic that more affordable FHA loans will have a positive impact on first-time buyers who have been entering the market at a lower-than-normal rate," National Association of REALTORS® President Chris Polychron said in a statement. "NAR is a strong supporter of the FHA and its vital role in the mortgage marketplace for home buyers. We will continue our work with the administration to help make the dream of home ownership a reality for millions more Americans."

In 2013, the FHA required a $1.7 billion bailout from the government after suffering losses from a high number of loan defaults in the aftermath of the financial crisis. Since 2008, FHA has increased its annual premiums for FHA borrowers five times. The National Association of REALTORS® has estimated that nearly 400,000 creditworthy borrowers were priced out of the housing market in 2013because of the higher costs in FHA insurance premiums. But in recent months, FHA has turned a profit, which has renewed calls from other groups to lower their insurance premiums to help open the credit box to more qualified borrowers.

"This action will make home ownership more affordable for over two million Americans in the next three years," says Julian Castro, secretary of the Department of Housing and Urban Development, which oversees FHA. "By bringing our premiums down, we're helping folks lift themselves up so they can open new doors of opportunity."

President Barack Obama is expected to announce more about FHA's new policy on Thursday in a speech in Phoenix. The housing policy is expected to go into effect by the end of the month.

Source: “White House Says FHA to Cut Mortgage Insurance Premiums,” Reuters (Jan. 7, 2015) and “Plan Trims Cost of Some Mortgages,” The Wall Street Journal (Jan. 7, 2015)

Mortgage Debt Forgiveness Officially Extended

DAILY REAL ESTATE NEWS | TUESDAY, DECEMBER 30, 2014 

President Obama signed into law the Mortgage Debt Forgiveness Act, which will grant tax relief to home owners who did short sales in 2014.

Any mortgage forgiveness in a short sale will not be counted as "phantom income" if the home owners' properties are sold by banks for less than the amount of their mortgage. The law was due to expire at the end of the year. The House and Senate recently passed measures by wide margins in December to extend it.

The average short sale has a mortgage forgiveness of about $75,000.

The extension will only apply to short sales conducted in 2014. Any further extension of the short sale tax break will need to be addressed by the newly elected Congress, which convenes its new session in January.

The National Association of REALTORS® issued a call to action earlier this month, urging REALTORS® to submit letters to their Congressional representatives in support of extending the Mortgage Debt Forgiveness Act.

"NAR applauds Congressional leaders in both chambers for their effort to pass this legislation before adjournment," NAR President Chris Polychron said in a statement at the time. "REALTORS® strongly supported the bipartisan Mortgage Forgiveness Tax Relief Act, which was included in the package to prevent underwater borrowers from paying taxes on any mortgage debt forgiven or canceled by a lender in a workout, or after their home was sold for less money than was owed."

Source: “Short Sale Tax Break Signed Into Law,” HousingWire (Dec. 29, 2014)

Couple Wins $1 Million in Lawsuit From Bank of America After Receiving 700+ Robocalls

Friday, December 12, 2014 12:11PM

A Florida couple recently won a $1 million lawsuit against Bank of America after receiving more than 700 collections calls over the course of four years.

Nelson and Joyce Coniglio of Tampa, Florida received 700+ robocalls from the bank after falling behind on their mortgage payments in 2009, according to WFTS. The couple says their phone would be ringing off the hook from Bank of America robocalls throughout the day. After filing a complaint in Federal court, a judge ordered Bank of America to pay the family $1 million for the harassment or $1,500 per call.

This isn't the first time people have been harassed by Bank of America. According to WFTS, an elderly couple in California claims they received over 2,000 collections calls from the bank. An Arkansas family saw over 350 collections calls from Bank of America, and more than 600 to a family in Indiana.

In 2010, Bank of America was revealed to have been using a collections agency based out of Texas, whose associates were recorded using foul language and racist remarks when attempting to collect on debts, WFTS says. Bank of America stopped working with that firm shortly after the recorded remarks went public, according to WFTS.

Bank of America sent a statement to ABC News regarding the ruling.

"Bank of America has helped 2 million homeowners avoid foreclosure. Our calls to the Coniglios were not to collect a debt, but rather to help them avoid foreclosure after they fell behind on their mortgage payments in 2009," Bank of America Senior Vice President Dan Frahm said. "Because our calls were not answered and our efforts to help the Coniglios avoid foreclosure were urgent, these calls continued. We are committed to help homeowners in need of assistance avoid foreclosure."

ABC Eyewitness News

3% Down Payments May Be Game Changer

DAILY REAL ESTATE NEWS | TUESDAY, DECEMBER 09, 2014

Mortgage giants Fannie Mae and Freddie Mac announced Monday that first-time home buyers can now qualify for loans with down payments as low as 3 percent. That will expand credit for qualified home shoppers who may have been sidelined the last few years because of higher down-payment requirements, housing analysts say.

With Fannie Mae's 3 percent down-payment offering, borrowers must still meet standard eligibility requirements, including underwriting, income documentation, and risk management standards. Any buyer can take advantage of Fannie's loans as long as at least one co-borrower is a first-time buyer. The loans will require private mortgage insurance.Freddie Mac launched Home Possible Advantage, a conventional mortgage with a 3 percent down-payment requirement geared to low- and moderate-income borrowers. It's a conforming conventional mortgage with a maximum loan-to-value ratio of 97 percent. To qualify, first-time home buyers are required to participate in a borrower education program.

"Our goal is to help additional qualified borrowers gain access to mortgages," says Andrew Bon Salle, Fannie Mae executive vice president for single-family underwriting, pricing, and capital markets. "This option alone will not solve all the challenges around access to credit. Our new 97 percent LTV offering is simply one way we are working to remove barriers for creditworthy borrowers to get a mortgage."

The National Association of REALTORS® applauds the move by the Federal Housing Finance Agency, which oversees Fannie and Freddie.

NAR said in a statement that the action by FHFA demonstrates its "commitment to home ownership by serving creditworthy borrowers who lack the resources for substantial down payments, plus closing costs, with a new 3 percent down-payment program that mitigates risk with strong underwriting. The new program ensures that responsible home buyers will have access to safe, affordable mortgage credit."

Source: Fannie Mae and Freddie Mac

Wells Fargo Faces Predatory Lending Charges

DAILY REAL ESTATE NEWS | TUESDAY, DECEMBER 02, 2014

Cook County, Ill., is accusing Wells Fargo of making mortgages more expensive for black and Latino borrowers than whites.

Officials in Cook County, which includes Chicago, allege that the mortgage giant is taking part in predatory lending, and they've filed a complaint with the federal court in Chicago. Other municipal governments in Los Angeles and Miami have recently filed similar complaints.

Cook County officials say Wells Fargo has engaged in "equity stripping" with 26,000 loans, from origination to refinancing loans and foreclosures.

"Equity stripping is an abusive form of 'asset-based lending' that maximizes lender profits based on the value of the underlying asset and onerous loan terms, while disregarding a borrower's ability to repay," the complaint alleges.

County officials say the practice uses the bundling of mortgages to sell as securities and allows the lender to make a profit off the loans, even if they fall into foreclosure. Officials are seeking up to $300 million in damages, Bloomberg reports.

Wells Fargo officials call the accusations "baseless."

"It's disappointing they chose to pursue a lawsuit against Wells Fargo rather than collaborate together to help borrowers and home owners in the county," says Tom Goyda, a spokesman for Wells Fargo. "We stand behind our record as a fair and responsible lender."

Source: “Wells Fargo Accused of Predatory Lending in Chicago Area,” Bloomberg (Nov. 28, 2014)

FHA Allows Ex-Owners to Buy Back Homes

DAILY REAL ESTATE NEWS | WEDNESDAY, NOVEMBER 26, 2014

The Federal Housing Finance Agency announced a new policy that will permit some foreclosed home owners to purchase the homes back that they once had lost at fair market value. 

The FHFA, the regulator of Fannie Mae and Freddie Mac, says the new policy likely will lower the principal on the loans of the former home owners if they elect to buy their former homes back. Prior to the policy, the FHFA had required borrowers who had gone through foreclosure and who wanted to buy back their home to pay the entire debt they owed on the mortgage, even if it was much higher than the home’s current value.  To regain ownership, the ex-owners must be able to pay the full current value of the property, and they still must wait at least three years after their foreclosure to regain ownership, which is required to purchase any home using a Freddie Mac or Fannie Mae–guaranteed loan following a foreclosure. 

“This is a targeted but important policy change that should help reduce property vacancies and stabilize home values and neighborhoods,” says FHFA Director Melvin L. Watt. “It expands the number of potential buyers of REO properties and is consistent with the enterprises’ practice of requiring fair-market value for those properties.”

The new policy applies only to buyers’ former primary residence. Second homes and investor properties are not eligible. 

Source: “Regulator OKs Some Fannie, Freddie Foreclosure Buybacks at Fair Value,” Los Angeles Times (Nov. 25, 2014) and the Federal Housing Finance Agency

Credit Unions Step in to Fill Lending Void

DAILY REAL ESTATE NEWS | MONDAY, NOVEMBER 17, 2014

The number of mortgage originations issued from credit unions in the first half of 2014 has climbed 10 percent year-over-year. This has elevated credit unions to having more than 8 percent share of the home loan market—about triple their share prior to the recession—making them a growing option for home buyers looking for financing, according to data from the Credit Union National Association.

In June, the nation’s 6,557 credit unions surpassed 100 million members (you still have to be a member of one to get a loan, but many credit unions are tied to employment, trades, religious groups, or specific communities). Nearly two-thirds of credit unions offer mortgages.

“We’ve seen a very strong increase in originations over the course of the last several years,” Mike Schenk, vice president of economics and research at CUNA, told the Los Angeles Times.

Mortgages comprise about 41 percent of all credit union loans compared to 25 percent in 2000. The average loan amount at a credit union is $130,000, and 70 percent of the loans offered are for 30-year fixed-rate mortgages. But many credit unions do offer different financing options for members. For example, Pentagon Federal, with 1.3 million members nationwide, introduced a 15/15 adjustable mortgage, where rates reset only once at the midterm mark to reflect the current market rate. Also, the National Institutes of Health Federal CU offers the five-year fixed-rate mortgage, dubbed the “see ya” loan, which allows home owners to refinance and coordinate it to a time of a special event, such as retirement or when the children go to college, in order to end their mortgage payments by that time.

Credit unions don’t typically charge cheaper interest rates, but they “tend not to tack on a bunch of superfluous fees that other lenders seem to love,” the Los Angeles Times notes in a recent article. “And because they are local and member-controlled, they are more likely to consider applicants with a story to tell than some underwriter five states over who is forced to stick to standard guidelines.”

Source: “Shopping for a Loan? Credit Unions Can be Consumer-Friendly Option,” Los Angeles Times (Nov. 9, 2014)

Fannie, Freddie to Loosen Up on Lending

DAILY REAL ESTATE NEWS | MONDAY, OCTOBER 20, 2014

The regulator of mortgage giants Fannie Mae and Freddie Mac is reportedly working on a deal with the financing entities that will loosen up lending standards and make mortgages more affordable for those with less-than-perfect credit. The move is expected to expand home buyers’ access to financing, as tight credit the last few years has kept many sidelined. 

The new rules reportedly will include a lower minimum down payment requirement (from 5 percent to 3 percent), in order for lenders to qualify to sell a loan to Fannie Mae and Freddie Mac. That would bring down payment in sync with the Federal Housing Administration, which insures loans made to lower-income borrowers and first-time buyers. Fannie Mae and Freddie Mac guarantee about 59 percent of all mortgages written.

The Federal Housing Finance Agency, which regulates Fannie and Freddie, reportedly will include more safety measures to help lenders protect themselves from making bad loans. Lenders have faced numerous high-dollar settlements after issuing loans that later defaulted. The new agreement would give greater confidence to lenders so they won’t be penalized years after a loan is made, The Wall Street Journal reports. 

The potential agreement “would allow credit to flow more freely to lower- and middle-income households,” Mark Zandi, chief economist at Moody’s Analytics, told The Wall Street Journal. “That’s vital to getting the housing recovery moving forward.”

During the financial crisis, the financing giants faced steep losses as home loans defaulted. The spike was blamed on poor underwriting by lenders in ensuring that borrowers could afford their mortgages. In response, the companies, which were seized by the government in 2008, have had banks tighten their credit standards, which some critics say has gone too far and prevented many home buyers from qualifying for a home loan. 

The Urban Institute has estimated that 1.2 million more mortgages would have been issued in 2012 alone if lending standards that were commonly used in 2001 were still in place. 

"Understandably, after the [financial] crisis the pendulum of mortgage credit standards swung to a far extreme” Paul Leonard, California director of the Center for Responsible Lending, told the Los Angeles Times. “It's now working its way back to a more moderate position.”

The FHFA is expected to formally announce the plans later this week. 

Source: “Fannie Mae, Freddie Mac Reach Deal to Ease Mortgage Lending,” Los Angeles Times (Oct. 17, 2014) and “Mortgage Giants Set to Loosen Lending,” The Wall Street Journal (Oct. 17, 2014)

Small Lenders Bend for Risky Borrowers

Borrowers with minor imperfections on their credit applications — like a brief loss of employment or a temporary dip in their credit score — are starting to have better luck at snagging a loan with smaller lenders, Bloomberg reports. At least 15 smaller firms this year are offering slightly riskier mortgages, which in some cases come with higher interest rates and larger down payment requirements and aren’t backed by the government.

 “Some lenders became afraid of their own shadows,” RPM Mortgage Inc. Chief Executive Officer Rob Hirt told Bloomberg. The bank started a program this summer for borrowers who have higher debt burdens or who had sold a home for less than the outstanding mortgage. “The market is beginning to realize that if you make smart and sound loans to people who don’t fit in the narrow box, it doesn’t make them a worse risk.”

On the other hand, larger banks, like Bank of America and JPMorgan Chase & Co., have generally tightened their credit standards over the last few years. The average score on mortgages that government-controlled Fannie Mae and Freddie Mac bought now stands at about 740 – well above the 660 level that is considered subprime. Some of the big banks are reluctant to ease their credit standards, concerned that Fannie, Freddie, and the FHA will force them to buy back bad loans with underwriting errors; the banks do not want to take on the risks of loans that the government programs won’t insure, Bloomberg reports. The lending giants from 2006 through 2012 faced more than $200 billion in losses from home loans, according to Moody’s Analytics data.

But where big banks are stepping back, small banks are stepping in. For example, Shellpoint Partners LLC’s New Penn unit began this summer to offer mortgages for home buyers with debt-to-income ratios up to 55 percent and interest-only loans when borrowers have “high disposable income” or “high income potential due to their line of work.” Lone Star Funds’ Caliber Home Loans Inc. also debuted this summer new programs that offer flexibility for foreign nationals and on purchases of condos without approval for government programs. TD Bank’s Right Step program allows borrowers to put 3 percent down and not have to pay mortgage insurance if they have credit scores of 660 or above. Banc of California is providing loans to borrowers who have a foreclosure or late payments on their records, as long as they can make a down payment of at least 20 percent and show other strong assets in their finances.

“To us, it’s common sense,” says Jeff Seabold, chief lending officer at Banc of California. “There’s quite a few people who are boxed out that shouldn’t be.”

Source: “You Don’t Need to Be Perfect to Get a U.S. Loan Anymore,” Bloomberg Businessweek (Oct. 13, 2014)

Ex-Owners Bamboozled Years After Foreclosure

Y REAL ESTATE NEWS | TUESDAY, OCTOBER 14, 2014

Thousands of Americans who lost their homes to foreclosure years ago may have finally moved on, rebuilt their finances, and even considered home ownership again. But first, they may have to face a rising number of debt collectors who are chasing them down for money they still owe from the foreclosure they thought they had left in the past.

More banks are getting aggressive in pursuing deficiency judgments, finding that the proceeds of foreclosure sales may not have been enough to cover the amount of the loans, plus penalties, legal bills, and other fees.

"Using a legal tool known as a 'deficiency judgment,' lenders can ensure that borrowers are haunted by these zombie-like debts for years, and sometimes decades, to come," Reuters reports. "Before the housing bubble, banks often refrained from seeking deficiency judgments, which were seen as costly and an invitation for bad publicity. Some of the biggest banks still feel that way. But the housing crisis saddled lenders with more than $1 trillion of foreclosed loans, leading to unprecedented losses. Now, at least some large lenders want their money back, and they figure it's the perfect time to pursue borrowers: many of those who went through foreclosure have gotten new jobs, paid off old debts, and, in some cases, bought new homes."

Mortgage giant Fannie Mae is one of the most aggressive in pursuing deficiency judgments. Of the 595,128 foreclosures the government-sponsored enterprise was involved in through owning or guaranteeing the loan, it has referred 293,134 to debt collectors for possible deficiency judgment, according to a report by the Inspector General, reflecting the time period from January 2010 through January 2012.

Some of the largest mortgage lenders — JPMorgan Chase, Bank of America, Wells Fargo & Co., and Citigroup — say they don't usually pursue deficiency judgment, but they do reserve the right to do so.

"We may pursue them on a case-by-case basis, looking at a variety of factors, including investor and mortgage insurer requirements, the financial status of the borrower, and the type of hardship," says Wells Fargo spokesman Tom Goyda.

Many borrowers may be surprised to later learn that their foreclosure from years ago is not really behind them. For example, former home owner Danell Huthsing thought she was in the clear after a foreclosure in 2008 on a home she shared with her boyfriend. But this summer, she was served with a lawsuit demanding $91,000 for the amount of mortgage still unpaid after the home was foreclosed and sold. She plans to appeal, but if she loses, the debt collector who filed the lawsuit will be able to freeze her bank account, garnish up to 25 percent of her wages, and seize her paid-off car, Reuters reports.

"For seven years, you think you're good to go, that you've put this behind you," said Huthsing. "Then wham, you get slapped to the floor again."

Source: “Americans Face Post-Foreclosure Hell as Wages Garnished, Assets Seized,” Reuters (Oct. 14, 2014)

Nearly 1 Million Homeowners Regain Equity

DAILY REAL ESTATE NEWS | FRIDAY, SEPTEMBER 26, 2014

Nearly 950,000 homes returned to positive equity in the second quarter, now bringing the total number of residential homes with equity nationwide to more than 44 million, according to CoreLogic’s Equity Report.  

“The increase in borrower equity of $1 trillion from a year earlier is evidence that things are moving solidly in the right direction,” says Sam Khater, deputy chief economist for CoreLogic. “Borrower equity is important because home equity constitutes borrowers’ largest investment segment and, as a result, is driving forward the rise in wealth for the typical home owner.”

Still, home price rises are needed to help more home owners feel more confident in their equity position. Of the 44 million properties with positive equity, about 9 million – or 19 percent – have less than 20 percent equity (labeled “under-equitied”), and 1.3 million have less than 5 percent (considered “near-negative equity”), according to CoreLogic.

About 5.3 million homes – or 10.7 percent of all residential properties with a mortgage – remained in negative equity as of the second quarter. The number is falling. A year ago, 7.2 million homes – or 14.9 percent –were in negative equity. Negative equity is when borrowers owe more on their mortgages than their homes are currently worth.

“Borrowers who are ‘under-equitied’ may have a more difficult time refinancing their existing homes or obtaining new financing to sell and buy another home due to underwriting constraints,” according to CoreLogic’s report.

If home prices rise by just 5 percent, an additional 1 million home owners currently in negative equity could regain equity, according to CoreLogic’s analysis.

“Many home owners across the country are seeing the equity value in their homes grow, which lifts the economy as a whole,” says Anand Nallathambi, president and CEO of CoreLogic. “With more and more borrowers regaining equity, we expect home ownership to become an increasingly attractive option for many who have remained on the sidelines in the aftermath of the Great Recession. This should provide more opportunities for people to sell their homes, purchase a different home or refinance an existing mortgage.”

State Breakdown

The states with the highest percentage of properties with a mortgage in negative equity as of the second quarter were:

·         Nevada: 26.3%

·         Florida: 24.3%

·         Arizona: 19%

·         Illinois: 15.4%

·         Rhode Island: 14.8%

On a metro level, Tampa-St. Petersburg-Clearwater, Fla., had the highest percentage of mortgaged properties in negative equity at 26.2 percent, followed by Phoenix-Mesa-Scottsdale, Ariz., at 19.5 percent.

On the other hand, the following states had the highest percentage of properties with a mortgage that were in an equity position:

·         Texas: 97.3%

·         Alaska: 96.5%

·         Montana: 96.4%

·         North Dakota: 96%

·         Hawaii: 96%

On a metro level, Houston-The Woodlands-Sugar Land, Texas, boasted the highest percentage of properties with a mortgage in an equity position at 97.5 percent, followed by Dallas-Plano-Irving, Texas, at 97 percent.

Source: CoreLogic

Mortgage Giant Opens Door for Earlier Return of Ex-Home Owners

DAILY REAL ESTATE NEWS | WEDNESDAY, SEPTEMBER 10, 2014

Former distressed borrowers may be able to jump back into home ownership sooner than they expected. Fannie Mae officials say the organization is overhauling its policy to change the minimum waiting period following a pre-foreclosure sale or deed-in-lieu of foreclosure, taking the standard wait-out period from seven years to four years or perhaps even shorter.

Under the new policy, Fannie has removed the LTV requirements. All loans with application dates on or after Aug. 16 now will have a standard waiting period of four years, and only two years under extenuating circumstances.To be eligible for a new mortgage loan, Fannie requires formerly distressed borrowers to show they’ve reestablished their credit after a foreclosure, bankruptcy, preforeclosure sale, or deed-in-lieu. The standard waiting period was two years with a maximum 80 percent loan-to-value ratio and four years with a maximum 90% LTV. Standard eligibility, however, is seven years. In some cases, such as extenuating circumstances where borrowers had a prolonged reduction in income that was beyond their control, they may only have to wait two years with a maximum 90% LTV to get a new mortgage again.  

For example, a borrower who had a preforeclosure sale five years ago — not due to extenuating circumstances — would be eligible for a new loan with as low as a 5 percent down payment (they would not have been eligible prior to the change in the policy unless they at least had a 10 percent down payment). Also, a borrower with a deed-in-lieu two years ago that was due to extenuating circumstances would also be eligible for a new mortgage backed by Fannie with as low as a 5 percent down payment, in which they would not have been otherwise and would have needed at least a 10 percent down payment.

Other programs, such as the FHA's Back to Work program, are also available to formerly distressed borrowers and are curtailing the wait times even more, to as little as 12 months following a foreclosure or short sale. 

Source: “Fannie Mae Widens Credit Box for Failed Home Owners,” HousingWire (Sept. 9, 2014)

Economists Grow More Optimistic About Housing’s Outlook

DAILY REAL ESTATE NEWS | FRIDAY, AUGUST 29, 2014

The strengthening job market has more economists gaining confidence about the direction of the housing market over the next two years, according to a newly released Reuters poll of 29 housing analysts, including investors and economists.

What’s more, economists expect home resales to continue to inch up in 2015, reaching 5.29 million by the second quarter of 2015.The economists surveyed expect existing-home sales to increase to 5.25 million units in the first three months of 2015. Currently, existing-home sales stand at 5.09 million. In May, the economists surveyed had expected much slower gains at 5.1 million expected in the first quarter of 2015.

The job market is why most of the economists are starting to change their tone about housing’s outlook. For the last six consecutive months in July, employers added more than 200,000 jobs.

"Low mortgage rates and improving labor market dynamics should remain conducive to gradual growth in the housing sector," Gennadiy Goldberg, a strategist at TD Securities, said in a recent note to clients.

The housing analysts surveyed expect mortgage rates to rise more slowly than they originally thought in May. Still, they do expect rises are looming with expectations that the Federal Reserve will slowly begin to increase its benchmark interest rate around the middle of next year. The Fed has held the benchmark interest rate near zero since 2008.

The economists polled expect the 30-year, fixed-rate mortgage to rise to 5.25 percent in 2016. That is a slight drop from the 5.68 percent average they had predicted in the May poll.

The 30-year fixed-rate mortgage is currently averaging 4.10 percent, according to Freddie Mac.

Nevertheless, the economists say the housing recovery likely won’t be derailed by a gradual increase in mortgage rates.

"If a rise in mortgage rates comes with a stronger economic recovery, the housing market will be able to absorb it," Alexander Lin, an analyst at Bank of America Merrill Lynch, told Reuters.

Source: “Stronger Hiring Boosts Outlook for U.S. Home Sales: Reuters Poll,” Reuters (Aug. 27, 2014)

Obama Administration Settlement With Bank Of America Will Strengthen FHA Fund, Provide Billions In Consumer Relief

U.S. Department of Housing and Urban Developement

Press Release

August 21, 2014

Washington – The Obama Administration today announced an almost $17 billion global settlement with Bank of America. $1 billion of the total settlement amount resolves claims arising from allegations of fraud involving certain Federal Housing Administration (FHA)-insured single-family mortgage loans and a failure to perform under its servicing contract with the Government National Mortgage Association (Ginnie Mae). Under the terms of the settlement, Bank of America will pay $800 million to resolve the claims relating to FHA and $200 million to Ginnie Mae. The remaining nearly $16 billion of the total settlement amount resolves fraud claims involving the pooling of residential mortgage backed securities, collateralized debt obligations, and other claims by the United States, along with the States of California, Delaware, Illinois, Maryland, New York, and the Commonwealth of Kentucky, and includes $7 billion in consumer relief with a focus on borrowers that were in the hardest-hit areas during the housing crisis.

"Today’s settlement with Bank of America is another important step in the Obama Administration’s efforts to provide relief to American homeowners who were hurt during the housing crisis,” said U.S. Department of Housing and Urban Development (HUD) Secretary Julián Castro. “This global settlement will strengthen the FHA fund and Ginnie Mae, and it will provide $7 billion in consumer relief with a focus on helping borrowers in areas that were the hardest hit during the crisis.  HUD will continue working with the Department of Justice, state attorneys general, and other partners to take appropriate action to hold financial institutions accountable for their misconduct and provide consumers with the relief they need to stay in their homes. HUD remains committed to solidifying the housing recovery and creating more opportunities for Americans to succeed.”

This settlement is part of the ongoing efforts of President Obama’s Financial Fraud Enforcement Task Force’s RMBS Working Group.

Working with the Department of Justice, HUD’s Office of General Counsel, Office of Housing, and Office of the Inspector General worked extensively on the fraud investigation involving FHA-insured single-family mortgage loans that were underwritten by Bank of America during the period from May 1, 2009, to April 1, 2011. HUD also provided assistance with respect to a breach of contract claim involving Bank of America’s role as one of two master subservicers for Ginnie Mae’s portfolio of defaulted single-family mortgages.

The $7 billion in consumer relief will focus on areas that were hardest hit during the housing crisis. Consumer relief will take various forms including loan modification for distressed borrowers, including FHA-insured borrowers, and new loans to credit worthy borrowers struggling to get a loan in hardest hit areas, borrowers who lost homes to foreclosure or short sales, and moderate income first-time homebuyers. Bank of America will also make donations to community development funds, legal aid organizations, and housing counseling agencies to assist individuals with foreclosure prevention and to support community reinvestment and neighborhood stabilization. They will also provide financing for affordable rental housing with a focus on family housing in high-cost areas.  An independent monitor will be appointed to ensure compliance with the terms of the agreement.