Reverse mortgages are gaining steam again, as more home owners 62 and older look to borrow against their home’s equity.
But the Consumer Financial Protection Bureau warns in a new report
that reverse mortgages aren’t being used as they were originally
intended by lawmakers. The watchdog group also says that these complex
mortgages are confusing seniors who don’t fully understand the risks
involved, and ultimately that misunderstanding could cost them their
homes if they’re not careful.
“People are quite confused about reverse mortgages,” says Hubert
Humphrey III, who heads the CFPB’s Office of Older Americans. “People
need to better understand reverse mortgages. What is the best way to use
them? What are the risks and what are the costs associated with it?”
One of the main points of confusion, the report finds, is that many
home owners don’t even view reverse mortgages as a loan but as a way to
get money out of their homes. However, reverse mortgages have monthly
interest charges, fees, and other costs. These payments are added to the
loan balance, which “over time the home equity decreases while the loan
balance increases,” MSNBC.com reports.
The report says that these loans have changed quite a bit in the last
few years. Reverse mortgages used to be mostly adjustable-rate loans,
in which seniors could get money out of their homes by choosing monthly
payments to cover everyday expenses or a line of credit for major
expenses, or even a combination of the two. The report says that 70
percent of these loans now are fixed-rate and have a lump-sum payment.
“You take out that loan and get all of the money instantly,” Humphrey
says. “And yet you have all of your life left to live and you may not
have the resources you need when you really need it.”
A growing number of home owners who take out reverse mortgages are at
risk of foreclosure because they are failing to pay taxes and
insurance, the report shows.
The CFPB is considering recommending new federal regulations to
reverse mortgages. You can find more information about reverse mortgages
at its ASK CFPB database, fact sheet, or consumer guide.
Source: “Reverse Mortgages Confuse Elderly, Report Finds,” MSNBC.com (June 28, 2012)
Friday, June 29, 2012
Monday, June 18, 2012
Banks Profit From Helping Home Owners Refinance
By helping home owners refinance their mortgages into low interest rates, banks are finding unexpected profits.
Banks stand to earn as much as $12 billion in revenue this year by refinancing mortgages under the government program known as Home Affordable Refinance Program (HARP), Nomura Holdings Inc. estimates.
The government revised its HARP program last year to encourage more banks to refinance mortgages of underwater home owners, helping these home owners take advantage of record low interest rates and cut their monthly mortgage payments. But critics say the change in the HARP rules make it easier for borrowers to refinance their mortgages with their existing lender, who may not always offer the best rates.
"There's essentially a monopoly on refinancing," said Shaun Donovan, secretary of Housing and Urban Development. "Whoever holds their current loan, whoever is the servicer, they can charge them—and we're seeing this—very high fees."
The Wall Street Journal reports that some banks are charging HARP borrowers up to 0.53 percentage points more than the market rate on refinanced loans. Meanwhile, the Federal Housing Finance Agency says they charge around 0.1 percentage points, on average, for Fannie Mae borrowers.
Bank giants, such as Wells Fargo and Bank of America, told The Wall Street Journal that they offer competitively priced refinancing options to their customers.
The Obama administration, however, is pushing lawmakers to make it easier for borrowers to refinance with different lenders.
Source: “Homeowner Aid Boosts Big Banks,” The Wall Street Journal (June 17, 2012)
Banks stand to earn as much as $12 billion in revenue this year by refinancing mortgages under the government program known as Home Affordable Refinance Program (HARP), Nomura Holdings Inc. estimates.
The government revised its HARP program last year to encourage more banks to refinance mortgages of underwater home owners, helping these home owners take advantage of record low interest rates and cut their monthly mortgage payments. But critics say the change in the HARP rules make it easier for borrowers to refinance their mortgages with their existing lender, who may not always offer the best rates.
"There's essentially a monopoly on refinancing," said Shaun Donovan, secretary of Housing and Urban Development. "Whoever holds their current loan, whoever is the servicer, they can charge them—and we're seeing this—very high fees."
The Wall Street Journal reports that some banks are charging HARP borrowers up to 0.53 percentage points more than the market rate on refinanced loans. Meanwhile, the Federal Housing Finance Agency says they charge around 0.1 percentage points, on average, for Fannie Mae borrowers.
Bank giants, such as Wells Fargo and Bank of America, told The Wall Street Journal that they offer competitively priced refinancing options to their customers.
The Obama administration, however, is pushing lawmakers to make it easier for borrowers to refinance with different lenders.
Source: “Homeowner Aid Boosts Big Banks,” The Wall Street Journal (June 17, 2012)
Wednesday, June 6, 2012
HARP Refinances Surge in First Quarter; More Underwater Borrowers Helped
Washington, D.C. – The quarterly number of loans refinanced through the Home Affordable
Refinance Program (HARP) has nearly doubled since HARP 2.0 was rolled out in January,
according to the Federal Housing Finance Agency’s (FHFA) March 2012 Refinance Report.
HARP refinances topped 180,000 in the first quarter of this year compared to approximately
93,000 in the fourth quarter of 2011. The increased HARP volume is attributed to
enhancements to the program announced last fall. The enhancements include the removal of
the loan-to-value (LTV) ceiling for borrowers who refinance into fixed-rate loans and the
elimination -- or lowering -- of fees for certain borrowers. Only loans that are owned or
guaranteed by Fannie Mae and Freddie Mac are eligible to participate in HARP.
Also in the report:
Refinance volume surged in the first quarter of 2012 in response to historically low
mortgage interest rates.
One in seven refinanced loans during the quarter was through HARP.
The number of loans refinanced through HARP in the first quarter of 2012 nearly
doubled compared to the number of loans refinanced through HARP in the fourth
quarter of 2011, driven by a sharp increase in the number of loans refinanced above 105
percent LTV.
In March alone, there were nearly 80,000 HARP refinances, a quarter of them on loans
with LTVs greater than 105 percent.
More than 4,400 loans with LTVs greater than 125 percent were refinanced since the
beginning of the year; over half these loans were refinanced in the states of California,
Florida and Arizona.
With this report, FHFA returns to separate reporting of refinance and other foreclosure
prevention data in an effort to make the refinance information available more quickly. Other
foreclosure prevention actions will continue to be reported in the monthly and quarterly
foreclosure prevention reports. The refinance report will be released on a monthly basis.
Link to Refinance Report
Friday, June 1, 2012
Lenders Try to Catch Borrowers' ‘White Lies’
Daily Real Estate News |
Friday, June 01, 2012
“Little white lies,” as a Chicago Tribune article notes, can get mortgage applicants into big trouble, even if just inflating income by a tad, saying you’re going to make a home your primary residence when you plan to rent it out, or slightly exaggerating your job description.
There are "more fraud checks than ever, and it's on every loan, not just a sample," David Kittle, who chaired the Mortgage Bankers Association in 2009, told the Chicago Tribune.
A swell of mortgage fraud during the housing crisis has prompted lenders to become extra vigilant. The FBI estimates mortgage fraud costs about $3 billion a year.
As such, lenders are making more effort to uncover fraud before issuing a loan, instead of finding out after the fact. In 40 percent of the suspicious activity reports in 2011 submitted to the Financial Crimes Enforcement Network, lenders said they rejected the applicant for a new mortgage, refinancing, or short sale because they suspected fraud.
Lenders are doing more background checks to verify the information that applicants’ provide. Besides making phone calls to verify information, they’re using databases with a wealth of information to doublecheck information. For example, some sites they’re using can be used to verify salary data for the type of work the applicant does, reveal any judgments or liens against other properties the person may own, or even reveal hidden relationships between the buyer and seller. The IRS also is providing electronic copies of borrowers’ tax returns to lenders to help verify income.
"There are tons of databases available to validate the information you give us. ... You can't lie about income anymore," Becky Walzak, a quality assurance consultant in Deerfield Beach, Fla., told the Chicago Tribune. "There are too many ways we can find out whether or not you are telling the truth."
Source: “Lenders Sniffing out Dishonest Applicants,” Chicago Tribune (May 17, 2012)
Tuesday, May 29, 2012
Short-Sale Process Expected to Speed Up in June
Daily Real Estate News |
Tuesday, May 29, 2012
The short-sale process is expected to get shorter starting June 15. New guidelines issued under the Federal Housing Finance Agency will require Fannie Mae and Freddie Mac to give home buyers of short sales notice of their final decision within 60 days. The new guidelines also will require the mortgage giants to respond to initial short-sale requests within 30 days of receiving an offer from a potential buyer.
The speedier process is expected to be a boost to the housing market, Michael McHugh, president of the Empire State Mortgage Bankers Association, told the New York Times. Home buyers and sellers often have to wait months before they receive a decision from a lender on an offer for a short sale. Some deals fall apart just from the long wait alone.
Short sales have been increasing in recent months, as many lenders find them more appealing than foreclosures, which can be much more costly and take longer to remove from their books.
Short sales now outpace foreclosure sales in many parts of the country. Short sales represent more than 14 percent of existing-home sales, according to CoreLogic housing data from March, the most recent month available.
McHugh says that a faster short-sale process may be particularly helpful in speeding the recovery in judicial states, where foreclosures must go through the courts before they are approved. For example, in New York, judicial foreclosures can take a year or longer to be approved. Now short sales may be viewed by defaulting home owners as more of an option in avoiding foreclosure.
“There should be a significant improvement in the turnaround,” McHugh said regarding housing markets with judicial foreclosure processes.
Source: “Speeding Up Short Sales,” The New York Times (May 24, 2012)
The short-sale process is expected to get shorter starting June 15. New guidelines issued under the Federal Housing Finance Agency will require Fannie Mae and Freddie Mac to give home buyers of short sales notice of their final decision within 60 days. The new guidelines also will require the mortgage giants to respond to initial short-sale requests within 30 days of receiving an offer from a potential buyer.
The speedier process is expected to be a boost to the housing market, Michael McHugh, president of the Empire State Mortgage Bankers Association, told the New York Times. Home buyers and sellers often have to wait months before they receive a decision from a lender on an offer for a short sale. Some deals fall apart just from the long wait alone.
Short sales have been increasing in recent months, as many lenders find them more appealing than foreclosures, which can be much more costly and take longer to remove from their books.
Short sales now outpace foreclosure sales in many parts of the country. Short sales represent more than 14 percent of existing-home sales, according to CoreLogic housing data from March, the most recent month available.
McHugh says that a faster short-sale process may be particularly helpful in speeding the recovery in judicial states, where foreclosures must go through the courts before they are approved. For example, in New York, judicial foreclosures can take a year or longer to be approved. Now short sales may be viewed by defaulting home owners as more of an option in avoiding foreclosure.
“There should be a significant improvement in the turnaround,” McHugh said regarding housing markets with judicial foreclosure processes.
Source: “Speeding Up Short Sales,” The New York Times (May 24, 2012)
Thursday, May 10, 2012
Mortgage Giant Offers Another Sign of Stabilizing Market
Daily Real Estate News |
Thursday, May 10, 2012
Fannie Mae, which backs the most loans in the country, announced that it would not need taxpayer aid to cover losses for the first time since the federal government took control over the mortgage giant in 2008.
Fannie posted a profit in the first quarter of the year, reporting a net income of $2.7 billion compared to a $6.5 billion loss they reported in the first quarter of 2011.
“We expect our financial results for 2012 to be significantly better than 2011,” says Susan McFarland, Fannie Mae’s chief financial officer. “As our serious delinquency rate declines and home prices stabilize, we expect to reduce our reserves, which combined with revenue from our high-quality new book of business, will drive our future results.”
Several analysts say there are signs of the housing market stabilizing: The decline in home prices is slowing, more Americans are buying homes than a year ago, and housing starts have climbed in the last year.
Freddie Mac, also a government-sponsored enterprise and mortgage giant, recently reported a profit as well — a $577 million quarterly net income for the first quarter.
Source: “Fannie Mae Profit Signals a Stabilizing Housing Market,” The New York Times (May 9, 2012)
Fannie Mae, which backs the most loans in the country, announced that it would not need taxpayer aid to cover losses for the first time since the federal government took control over the mortgage giant in 2008.
Fannie posted a profit in the first quarter of the year, reporting a net income of $2.7 billion compared to a $6.5 billion loss they reported in the first quarter of 2011.
“We expect our financial results for 2012 to be significantly better than 2011,” says Susan McFarland, Fannie Mae’s chief financial officer. “As our serious delinquency rate declines and home prices stabilize, we expect to reduce our reserves, which combined with revenue from our high-quality new book of business, will drive our future results.”
Several analysts say there are signs of the housing market stabilizing: The decline in home prices is slowing, more Americans are buying homes than a year ago, and housing starts have climbed in the last year.
Freddie Mac, also a government-sponsored enterprise and mortgage giant, recently reported a profit as well — a $577 million quarterly net income for the first quarter.
Source: “Fannie Mae Profit Signals a Stabilizing Housing Market,” The New York Times (May 9, 2012)
Tuesday, May 8, 2012
B of A Starts Writing Off Borrowers Mortgage Debt
More than 200,000 underwater home
owners with mortgages through Bank of America may be eligible to have a
reduction in the amount they owe on their loan, which could possibly
trim their monthly payments by up to 35 percent.
Bank of America has sent letters to home owners who may be eligible to take part in a program to write-off a portion of underwater home owners’ mortgage principal, reducing it by, on average, $150,000 each.
The bank’s move stems from the $25 billion settlement, which it and four other of the nation’s largest lenders reached earlier this year with federal and state officials over past foreclosure mishandlings. Bank of America agreed to reduce some home owners’ mortgage principles as part of the settlement.
Home owners eligible for the principal write-offs must be “underwater” (owing more on their mortgage than their property is currently worth), have a loan owned or serviced by Bank of America, and be at least 60 days behind on their mortgage payments as of the end of January. In order for the mortgage reductions to be made permanent, home owners must make at least three on-time payments.
“To the extent principal reduction and other modification tools help us turn mortgages headed for possible foreclosure into long-term performing loans, it will be positive for home owners, mortgage investors and communities,” says Ron Sturzenegger, a legacy asset servicing executive.
Source: “Bank of America Starts Mortgage Reduction Effort,” The New York Times (May 7, 2012) and Bank of America
Bank of America has sent letters to home owners who may be eligible to take part in a program to write-off a portion of underwater home owners’ mortgage principal, reducing it by, on average, $150,000 each.
The bank’s move stems from the $25 billion settlement, which it and four other of the nation’s largest lenders reached earlier this year with federal and state officials over past foreclosure mishandlings. Bank of America agreed to reduce some home owners’ mortgage principles as part of the settlement.
Home owners eligible for the principal write-offs must be “underwater” (owing more on their mortgage than their property is currently worth), have a loan owned or serviced by Bank of America, and be at least 60 days behind on their mortgage payments as of the end of January. In order for the mortgage reductions to be made permanent, home owners must make at least three on-time payments.
“To the extent principal reduction and other modification tools help us turn mortgages headed for possible foreclosure into long-term performing loans, it will be positive for home owners, mortgage investors and communities,” says Ron Sturzenegger, a legacy asset servicing executive.
Source: “Bank of America Starts Mortgage Reduction Effort,” The New York Times (May 7, 2012) and Bank of America
Thursday, April 26, 2012
Costco Sells Mortgages to Shoppers
Add to your shopping list: Get a mortgage.
Costco shoppers will now find that they not only can buy their groceries in bulk at the warehouse retailer, but they can also shop for a mortgage too.
Costco announced that it will offer a full-service mortgage lending program on its Web site with First Choice Bank and 10 other lenders. The site gathers quotes from various lenders.
The warehouse retailer has been testing out offering mortgages for a year in some of its locations. Its lending partners have issued more than 10,000 mortgages to Costco members so far.
"I went in to buy some bottled water, big bags of chips, cereal, and some Nutri-Grain bars that I eat on my route," one Georgia shopper told CNNMoney. "I saw a home loan brochure on my way out and picked it up."
The shopper said he went onto the Costco site and was able to get mortgage rates from four lenders, as well as estimated closing costs and terms. He was able to refinance his mortgage and lower his monthly payments by $500 per month.
"We've always known that our members wanted more financial services," says Lauren Kutschka, Costco's manager of financial services, who adds the warehouse retailer also offers health and auto insurance and stock brokerage services. Costco next plans to add auto and student loans to its mix.
Source: “Now on Sale at Costco: Mortgages,” CNNMoney (April 26, 2012)
Costco shoppers will now find that they not only can buy their groceries in bulk at the warehouse retailer, but they can also shop for a mortgage too.
Costco announced that it will offer a full-service mortgage lending program on its Web site with First Choice Bank and 10 other lenders. The site gathers quotes from various lenders.
The warehouse retailer has been testing out offering mortgages for a year in some of its locations. Its lending partners have issued more than 10,000 mortgages to Costco members so far.
"I went in to buy some bottled water, big bags of chips, cereal, and some Nutri-Grain bars that I eat on my route," one Georgia shopper told CNNMoney. "I saw a home loan brochure on my way out and picked it up."
The shopper said he went onto the Costco site and was able to get mortgage rates from four lenders, as well as estimated closing costs and terms. He was able to refinance his mortgage and lower his monthly payments by $500 per month.
"We've always known that our members wanted more financial services," says Lauren Kutschka, Costco's manager of financial services, who adds the warehouse retailer also offers health and auto insurance and stock brokerage services. Costco next plans to add auto and student loans to its mix.
Source: “Now on Sale at Costco: Mortgages,” CNNMoney (April 26, 2012)
Thursday, April 19, 2012
Storm Chasers Scammers Prey on Homeowners
Following a violent storm or
tornado, home owners are left to pick up the pieces and find ways to put
their homes back together. And insurance executives and legislators are
warning storm victims to beware of contractors who try to get home
owners to sign costly contracts before the insurance adjusters arrive.
These insurance executives are being dubbed “storm chasers” or “storm scammers,” who offer quick, costly deals to desperate home owners, USA Today reports.
Several states are considering or already have passed legislation to prevent these “storm scammers” from duping vulnerable home owners following a storm. For example, Iowa lawmakers are considering a bill that would “void repair contracts signed when the contractor represents himself as working for an insurance company, promises to rebate a deductible, or fails to give customers a disclosure about how to cancel the contract,” the USA Today reports. Lawmakers also recently added a provision for consideration to make it so that such contractors can be prosecuted under consumer fraud law. Minnesota, Nebraska, Illinois, Missouri, and South Dakota have already passed similar bills to protect home owners after storms.
"There are some very good contractors who set up their businesses to be able to respond to storms, but there are good ways to do it and bad ways to do it," Bill Good, executive vice president of the National Roofing Contractors Association, told USA Today.
To help safeguard against being scammed, home owners need to make sure the contractor is licensed in the state (if it’s required in their state) and not sign any documents that authorize a contractor to negotiate directly with their insurance company, Good says.
Source: “States Fight Back on Shady ‘Storm Chaser’ Contractors,” USA Today (April 16, 2012)
These insurance executives are being dubbed “storm chasers” or “storm scammers,” who offer quick, costly deals to desperate home owners, USA Today reports.
Several states are considering or already have passed legislation to prevent these “storm scammers” from duping vulnerable home owners following a storm. For example, Iowa lawmakers are considering a bill that would “void repair contracts signed when the contractor represents himself as working for an insurance company, promises to rebate a deductible, or fails to give customers a disclosure about how to cancel the contract,” the USA Today reports. Lawmakers also recently added a provision for consideration to make it so that such contractors can be prosecuted under consumer fraud law. Minnesota, Nebraska, Illinois, Missouri, and South Dakota have already passed similar bills to protect home owners after storms.
"There are some very good contractors who set up their businesses to be able to respond to storms, but there are good ways to do it and bad ways to do it," Bill Good, executive vice president of the National Roofing Contractors Association, told USA Today.
To help safeguard against being scammed, home owners need to make sure the contractor is licensed in the state (if it’s required in their state) and not sign any documents that authorize a contractor to negotiate directly with their insurance company, Good says.
Source: “States Fight Back on Shady ‘Storm Chaser’ Contractors,” USA Today (April 16, 2012)
Tuesday, April 17, 2012
Foreclosure Scams Rise Nearly 60%
Mortgage foreclosure scams — which
seek to dupe struggling home owners with offers to save them from
financial troubles — have soared nearly 60 percent this year. Scammers
are increasingly using federal programs, like refinance programs such as
HARP and HAMP, to try to trick home owners, reports the Homeownership
Preservation Foundation (HPF), a nonprofit group that helps home owners
avoid foreclosure.
“Every new government initiative spawns a slew of foreclosure avoidance scams, often from the same cast of characters doing business under various names to avoid easy detection and identification,” says Colleen Hernandez, CEO of HPF. “Most of these scams involve individuals supposedly offering mortgage foreclosure avoidance assistance that trained HPF counselors provide at no cost. Sadly, with most scams, no meaningful services are ever provided.”
About half of the reported scams to HPF tend to involve claims of specialized “legal services” from attorneys or individuals to help home owners avoid foreclosure.
The HPF warns that scammers also are using the HPF logo and brand to try to dupe home owners in foreclosure rescue scams.
“The only way distressed home owners can be certain they are dealing with a trained HPF counselor is by calling 888-995-HOPE,” Hernandez says.
Source: Homeownership Preservation Foundation
“Every new government initiative spawns a slew of foreclosure avoidance scams, often from the same cast of characters doing business under various names to avoid easy detection and identification,” says Colleen Hernandez, CEO of HPF. “Most of these scams involve individuals supposedly offering mortgage foreclosure avoidance assistance that trained HPF counselors provide at no cost. Sadly, with most scams, no meaningful services are ever provided.”
About half of the reported scams to HPF tend to involve claims of specialized “legal services” from attorneys or individuals to help home owners avoid foreclosure.
The HPF warns that scammers also are using the HPF logo and brand to try to dupe home owners in foreclosure rescue scams.
“The only way distressed home owners can be certain they are dealing with a trained HPF counselor is by calling 888-995-HOPE,” Hernandez says.
Source: Homeownership Preservation Foundation
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