One of the recurring themes I have written about is the elimination of loans for the group of folks who are struggling to get down payment or have credit issues. I think the article below is just more of the same. Fannie Mae and Freddie Mac have been criticized for eliminating affordable housing mortgages. I am not entirely sure of which programs were considered affordable housing mortgages. Each agency had a $0 down loan that did not have as many restrictions as their normal loan programs so I guess that is what the complaint is about. Those were eliminated in the recent flurry of changes that have taken place. I am not sure you would have called them affordable housing mortgages however.
No matter what the argument both Fannie Mae and Freddie Mac have eliminated programs that helped many buyers and are currently price fixing (my opinion of course) their rates on buyers with lower credit scores. Note the fact I said lower credit scores, not bad credit. I think the price gouge starts on anyone who has a credit score below 700. Maybe Fannie and Freddie should buy some oil company stock; I am sure the oil companies could give them a few more tips on how to take advantage of the consumer.
I don’t know if the criticism below is entirely warranted but believe me Fannie and Freddie should take a good look at their policies, I know the consumer is paying dearly to do business with them.
This article was taken from the Mortgage Banker News;
Fannie Reconsidering AH Changes April 24, 2008
In response to strong criticism from fair-lending groups, Fannie Mae has indicated that it is reconsidering recent moves to tighten underwriting standards on affordable housing mortgages and impose new fees. "We have met extensively with advocates, listened to their concerns, and are considering making some changes to our methodologies," Fannie spokesman Brian Faith said. Freddie Mac has also met with the fair-housing and civil rights organizations that have accused the two government-sponsored enterprises of abandoning their affordable housing mission. "While we disagree with their conclusions, we have had helpful discussions with the housing groups and take their concerns very seriously," a Freddie spokesman said. The GSEs can be found online at http://www.fanniemae.com/ and http://www.freddiemac.com./
Monday, April 28, 2008
Friday, April 25, 2008
MORE OF THE SAME STUFF
Well anyone who is checking into the Blog of late has not found a lot of activity. I have been looking for something different, perhaps a bit more interesting news, or perhaps some light at the end of the tunnel that might not be a continuation of the same train wreck. To tell you the truth the events and news of the day is just more of the same ole stuff.
Loan programs age going away, lenders are tightening up more and more. The average borrowers who don't have spotless credit are being charged more and more or have no loan funds available at all. Fannie Mae and Freddie Mac are profiteering any way they can, investors who buy FHA loans are charging more and more and not buying into the Government programs like the FHA Secure loan.
Politicians are still spouting and fantasizing about thinking some investors and lenders who own mortgage paper are going to reduce the amount owed on the mortgage so someone will refinance the loan that no investor will buy.
In the mean time someone from Countrywide called me yesterday, lied about wanting to refinance his loan and then tried to recruit me to go to work for them. I simply laughed out loud and told him he had to be crazy.
More non specifically the beat goes on, the tail continues to wag the dog and this thing is far from over. I wish I knew which round of the battle the industry was now in. We will see.
I am getting requests to do more blogging and I will be back at it hopefully.
More to come
Lonny
Loan programs age going away, lenders are tightening up more and more. The average borrowers who don't have spotless credit are being charged more and more or have no loan funds available at all. Fannie Mae and Freddie Mac are profiteering any way they can, investors who buy FHA loans are charging more and more and not buying into the Government programs like the FHA Secure loan.
Politicians are still spouting and fantasizing about thinking some investors and lenders who own mortgage paper are going to reduce the amount owed on the mortgage so someone will refinance the loan that no investor will buy.
In the mean time someone from Countrywide called me yesterday, lied about wanting to refinance his loan and then tried to recruit me to go to work for them. I simply laughed out loud and told him he had to be crazy.
More non specifically the beat goes on, the tail continues to wag the dog and this thing is far from over. I wish I knew which round of the battle the industry was now in. We will see.
I am getting requests to do more blogging and I will be back at it hopefully.
More to come
Lonny
Wednesday, April 2, 2008
CHEATS & TRICKS PART 2
Enjoy part 2 Cheats and Tricks
Exactly how deeply this attitude was in the business of making loans was revealed by this memo. It involves Zippy, Chase's in-house automated loan underwriting system.
The memo's title: "Zippy Cheats & Tricks."
It provides a rare glimpse into the corporate mentality that has been a key factor in the current mortgage crisis (a Chase spokesperson denied that Zippy Cheats & Tricks was official policy; thus we are reassured that this was only "unofficial policy").
Here's an excerpt from the Oregonian:
"During the boom, it was common for lenders and brokers to get paid more for risky subprime loans than for 30-year fixed-rate loans because the higher-interest loans fetched a higher price on Wall Street.
Chase, the nation's second-largest bank, originates mortgage loans itself but also operates a wholesale arm that underwrites and funds loans brought to them by a network of mortgage brokers. The "Cheats & Tricks" memo was instructing those brokers how to get difficult loans approved by Zippy.
"Never fear," the memo states. "Zippy can be adjusted (just ever so slightly)."
The Chase memo deals specifically with so-called stated-income asset loans, one of the most dangerous of the mortgage industry's innovations of recent years. Known as "liar loans" in some circles because lenders made little effort to verify information in the borrowers' loan application, they have defaulted in large number since the housing bust began in 2007...
The Chase memo is "a perfect example of one of the big five banks out and out telling mortgage brokers to commit fraud," said Todd Williams, a broker with Evergreen Ohana Group in Portland. "And this has been going on for years." Williams and other mortgage brokers gave a copy of the memo to Oregon financial regulators.
Three other facts make this story incredibly intriguing:
1. State regulators recognized signs of fraud early on, but attempts to curtail it were prevented. The White House asserted that it was the Feds -- and not states -- that have jurisdiction over federally chartered banks.
And the Feds? They did nothing until 2008.
2. Tammy Lish, a Portland, Oregon account representative for Chase, accidentally forwarded the memo by email. Chase fired her days after discovering this.
3. Chase no longer makes any stated-income loans; the bank wrote down $1.3 billion in nonperforming mortgages in 2007.
The entire episode is amazing. I expect that more and more of these smoking guns will be finding their way into public view. Perhaps we can ask the Oregonian to make the actual email available online.
Now of course Chase denies this, you decide, good grief.
More to come
Lonny
Exactly how deeply this attitude was in the business of making loans was revealed by this memo. It involves Zippy, Chase's in-house automated loan underwriting system.
The memo's title: "Zippy Cheats & Tricks."
It provides a rare glimpse into the corporate mentality that has been a key factor in the current mortgage crisis (a Chase spokesperson denied that Zippy Cheats & Tricks was official policy; thus we are reassured that this was only "unofficial policy").
Here's an excerpt from the Oregonian:
"During the boom, it was common for lenders and brokers to get paid more for risky subprime loans than for 30-year fixed-rate loans because the higher-interest loans fetched a higher price on Wall Street.
Chase, the nation's second-largest bank, originates mortgage loans itself but also operates a wholesale arm that underwrites and funds loans brought to them by a network of mortgage brokers. The "Cheats & Tricks" memo was instructing those brokers how to get difficult loans approved by Zippy.
"Never fear," the memo states. "Zippy can be adjusted (just ever so slightly)."
The Chase memo deals specifically with so-called stated-income asset loans, one of the most dangerous of the mortgage industry's innovations of recent years. Known as "liar loans" in some circles because lenders made little effort to verify information in the borrowers' loan application, they have defaulted in large number since the housing bust began in 2007...
The Chase memo is "a perfect example of one of the big five banks out and out telling mortgage brokers to commit fraud," said Todd Williams, a broker with Evergreen Ohana Group in Portland. "And this has been going on for years." Williams and other mortgage brokers gave a copy of the memo to Oregon financial regulators.
Three other facts make this story incredibly intriguing:
1. State regulators recognized signs of fraud early on, but attempts to curtail it were prevented. The White House asserted that it was the Feds -- and not states -- that have jurisdiction over federally chartered banks.
And the Feds? They did nothing until 2008.
2. Tammy Lish, a Portland, Oregon account representative for Chase, accidentally forwarded the memo by email. Chase fired her days after discovering this.
3. Chase no longer makes any stated-income loans; the bank wrote down $1.3 billion in nonperforming mortgages in 2007.
The entire episode is amazing. I expect that more and more of these smoking guns will be finding their way into public view. Perhaps we can ask the Oregonian to make the actual email available online.
Now of course Chase denies this, you decide, good grief.
More to come
Lonny
Tuesday, April 1, 2008
CHEATS & TRICKS PART 1
One of the things I have been sure was going to happen was how the big banks are going to be exposed during this time of upheaval in the business. The big boys will try to come off as innocent and not part of the problem but the reality will be once all the dust settles that they (in my opinion) were as much to blame if not more so than anyone else. Sure the originators are just as guilty but the greed motive by the big banks fueled the wreck in my opinion.
I ran across an article written by Barry Ritholtz who is Chief Market Strategist for Ritholtz Research, an independent institutional research firm. He “claims” that JP Morgan/Chase sent out a memo instructing their mortgage brokers on how to get questionable loans approved by their system.
Now if that is a fact it is pretty revealing about the tactics of at least this bank in contributing to the problem we have today. Think about it, a Federally Chartered Bank instructing originators on how to produce fraud in their system. I don’t acknowledge that this is factual but sure looks like it, you decide.
Enjoy part one of two:
3 "handy steps" for getting a questionable loan approved by JPM Chase's (JPM) automatic system:
1. Lump all of an applicant's compensation as the applicant's base income, rather than breaking out commissions, bonuses and tips.
2. Do not disclose use of gifts for down payments.
3. If all else fails, simply inflate the applicant's income. "Inch it up $500 to see if you can get the findings you want. Do the same for assets.
Thus reads an internal memo from Chase that accidentally found its way into the hands of journalist Jeff Manning of The Oregonian. It was the basis for an article titled; Chase mortgage memo pushes 'Cheats & Tricks'.
Fraud has been a frequent theme of ours regarding Housing during the Boom, circa 2001-06. From appraisal fraud to the payola of the Ratings agencies, the entire system has been corrupted. Some will act as apologists for the worst tendencies of the banking industry, and others may debate who is to blame. We long ago reached a verdict as to where the culpability lay.
Anyone with even a modicum of experience in the mortgage industry will confirm the rampant disregard for lending standards and the corner cutting and shortcuts that were all but official corporate policy during the boom years. There was headlong rush to originate, process and securitize mortgages -- and the ability to repay the loans be damned. (Predatory Borrowing my ass!)
Part 2 tomorrow,
More to come
Lonny
I ran across an article written by Barry Ritholtz who is Chief Market Strategist for Ritholtz Research, an independent institutional research firm. He “claims” that JP Morgan/Chase sent out a memo instructing their mortgage brokers on how to get questionable loans approved by their system.
Now if that is a fact it is pretty revealing about the tactics of at least this bank in contributing to the problem we have today. Think about it, a Federally Chartered Bank instructing originators on how to produce fraud in their system. I don’t acknowledge that this is factual but sure looks like it, you decide.
Enjoy part one of two:
3 "handy steps" for getting a questionable loan approved by JPM Chase's (JPM) automatic system:
1. Lump all of an applicant's compensation as the applicant's base income, rather than breaking out commissions, bonuses and tips.
2. Do not disclose use of gifts for down payments.
3. If all else fails, simply inflate the applicant's income. "Inch it up $500 to see if you can get the findings you want. Do the same for assets.
Thus reads an internal memo from Chase that accidentally found its way into the hands of journalist Jeff Manning of The Oregonian. It was the basis for an article titled; Chase mortgage memo pushes 'Cheats & Tricks'.
Fraud has been a frequent theme of ours regarding Housing during the Boom, circa 2001-06. From appraisal fraud to the payola of the Ratings agencies, the entire system has been corrupted. Some will act as apologists for the worst tendencies of the banking industry, and others may debate who is to blame. We long ago reached a verdict as to where the culpability lay.
Anyone with even a modicum of experience in the mortgage industry will confirm the rampant disregard for lending standards and the corner cutting and shortcuts that were all but official corporate policy during the boom years. There was headlong rush to originate, process and securitize mortgages -- and the ability to repay the loans be damned. (Predatory Borrowing my ass!)
Part 2 tomorrow,
More to come
Lonny
Monday, March 31, 2008
FHA Secure Loan Reality
I want to tell you a story about a recent loan I completed. You may recall part of the President’s economic stimulus package included provisions for a FHA loan called the Secure Loan. It gave a homeowner, who had an adjustable rate mortgage that had adjusted to a level that they could not pay, the opportunity to refinance it into a “safe” FHA loan. Among other things the loan required the borrower to be current when the loan adjusted, as I recall they had to be behind on their loan after the adjustment, and they had to have equity in their home to satisfy the current FHA down payment requirements.
I knew of one qualified borrower that could qualify if FHA raised the loan limits. Believe it or not they actually did raise the limits temporarily under the same stimulus bill. When the FHA loan limits went up I called the borrowers and told them to apply. Let’s call them the Smith’s to keep it simple. The Smith’s applied and met every facet of the requirements to get the Secure Loan in my opinion. There is always underwriting that has to take place but all in all they met the guidelines and we got them approved. They had equity in their home that made the loan solid with an 87% loan to value ratio and their payment was going down after the adjustment by some $800.00 per month. When the President announced the program he perfectly described the Smith’s and their need for help. To put it more simply if it had not been for this loan the Smith’s would have had to sell their home.
What I didn’t expect was that the investors that buy and service FHA loans for the most part would not buy the loan after we closed it. There was one investor that would finally buy the mortgage and so we did get to close it.
Here’s the problem, the President wants to help the people who have these bad loans but the market place does not want to buy the loan as it would be perceived to have more risk. The loan is almost impossible to qualify for and if you do then the capital markets don’t want it.
If the government is going to do any good and stop playing politics they are going to have to change the way HUD does business by giving some incentive for investors to take the added risk on these type loans. As mortgage funds dry up for the people who need loans and who would be good borrower’s things have got to change. An aggressive posture by HUD through FHA would work if it was well thought out and implemented.
Instead we read the news that the secretary of HUD Alphonso Jackson will probably resign today for multiple reasons. Politics as usual is the name of the game….as usual.
More to come
Lonny
I knew of one qualified borrower that could qualify if FHA raised the loan limits. Believe it or not they actually did raise the limits temporarily under the same stimulus bill. When the FHA loan limits went up I called the borrowers and told them to apply. Let’s call them the Smith’s to keep it simple. The Smith’s applied and met every facet of the requirements to get the Secure Loan in my opinion. There is always underwriting that has to take place but all in all they met the guidelines and we got them approved. They had equity in their home that made the loan solid with an 87% loan to value ratio and their payment was going down after the adjustment by some $800.00 per month. When the President announced the program he perfectly described the Smith’s and their need for help. To put it more simply if it had not been for this loan the Smith’s would have had to sell their home.
What I didn’t expect was that the investors that buy and service FHA loans for the most part would not buy the loan after we closed it. There was one investor that would finally buy the mortgage and so we did get to close it.
Here’s the problem, the President wants to help the people who have these bad loans but the market place does not want to buy the loan as it would be perceived to have more risk. The loan is almost impossible to qualify for and if you do then the capital markets don’t want it.
If the government is going to do any good and stop playing politics they are going to have to change the way HUD does business by giving some incentive for investors to take the added risk on these type loans. As mortgage funds dry up for the people who need loans and who would be good borrower’s things have got to change. An aggressive posture by HUD through FHA would work if it was well thought out and implemented.
Instead we read the news that the secretary of HUD Alphonso Jackson will probably resign today for multiple reasons. Politics as usual is the name of the game….as usual.
More to come
Lonny
Friday, March 21, 2008
ADIOS AMIGO
Well you might have noticed I have been off for a few days. I have been in Minnesota at a training. It snowed 6 inches while I was there. Just doesn't seem right somehow. I was doing much contemplation and thinking and must admit I did not take care of my Blog very well. I will get back with the program I am confident.
I ran across this article in Mortgage Banker News and thought is was interesting. I was wondering how Countrywide was going to do this. Now we know. Can you say, Adios Amigo???
Robinson Offers Update on BoA Countrywide Deal:
Bank of America has a rigid transition process it uses for any of the acquisitions it has done or is doing, said its president for consumer real estate Floyd Robinson. He was asked during a panel session at the Regional Conference of Mortgage Bankers Associations in Atlantic City to provide an update on BofA's acquisition of Countrywide Financial Corp., Calabasas, Calif. The Charlotte, N.C.-based bank is assigning "hundreds" of associates to the transition process. There has been a 30-day look at the practices of both companies, Mr. Robinson said, and one of the items that resonated with him is the disparity in the two companies' respective direct-to-consumer businesses. BoA has done $168 billion in this channel while Countrywide has $113 billion. Much of Countrywide's production comes from the correspondent and wholesale channels, areas that BoA does not do business in, leading Mr. Robinson to point out Countrywide has a very different business model than BoA does. The different approaches and attitudes between the two, he added, could make this one of the most challenging acquisition integrations for BoA. One business the combination will not do is subprime, an area BoA has not been in for several years. The company will not take an inappropriate risk to its reputation, Mr. Robinson said.
More to come
Lonny
I ran across this article in Mortgage Banker News and thought is was interesting. I was wondering how Countrywide was going to do this. Now we know. Can you say, Adios Amigo???
Robinson Offers Update on BoA Countrywide Deal:
Bank of America has a rigid transition process it uses for any of the acquisitions it has done or is doing, said its president for consumer real estate Floyd Robinson. He was asked during a panel session at the Regional Conference of Mortgage Bankers Associations in Atlantic City to provide an update on BofA's acquisition of Countrywide Financial Corp., Calabasas, Calif. The Charlotte, N.C.-based bank is assigning "hundreds" of associates to the transition process. There has been a 30-day look at the practices of both companies, Mr. Robinson said, and one of the items that resonated with him is the disparity in the two companies' respective direct-to-consumer businesses. BoA has done $168 billion in this channel while Countrywide has $113 billion. Much of Countrywide's production comes from the correspondent and wholesale channels, areas that BoA does not do business in, leading Mr. Robinson to point out Countrywide has a very different business model than BoA does. The different approaches and attitudes between the two, he added, could make this one of the most challenging acquisition integrations for BoA. One business the combination will not do is subprime, an area BoA has not been in for several years. The company will not take an inappropriate risk to its reputation, Mr. Robinson said.
More to come
Lonny
Monday, March 17, 2008
MORE NEWS MORE COMMENTARY
I read a couple of interesting articles over the past few days. The first has to do with Countrywide’s continued problems with their loan portfolio. It talks about the impending purchase by Bank of America at what I assume is still near twice the stock value. Bank of America is overpaying for problems that have not even completely surfaced yet. Now I am no fool but why would you do that for any cost?
http://www.fool.com/investing/dividends-income/2008/03/14/countrywides-future-is-anyones-guess.aspx
A second article is talking about an announced buyout of Bear Stearns, who went in the tank (so to speak) late last week, by JP Morgan Chase. Unlike B of A deal, J P Morgan Chase is paying a small percentage of the stock value for Bear Stearns. As I recall the value paid is mainly for the value of the assets and no doubt some blue sky value. Now that makes sense to me. Take advantage of a good deal when it presents itself and get a real value in the process.
http://news.yahoo.com/s/ap/20080317/ap_on_bi_st_ma_re/wall_street
The first article talks about why B of A might still be in the deal and suggests it could just be for press, grandstanding etc. I have made no secret that I have a huge problem with the loan origination tactics of Bank of America. They sell you on the fact they have no closing costs and then charge you a high interest rate so they make their money “on the back side”. My opinion is that this is the purest form of deception and false advertising. A consumer may find this is a good choice but only after understanding all the options they have. I hope they get their deal done with Countrywide for the sake of the employees there but I will assure you if I have to put my money in my mattress they will be the last bank I will ever do business with.
Enjoy the articles and take a deep seat for the ride is really going to be interesting for awhile as the mortgage market and other markets continue to adjust to wherever all this is going to finally land.
More to come
Lonny
http://www.fool.com/investing/dividends-income/2008/03/14/countrywides-future-is-anyones-guess.aspx
A second article is talking about an announced buyout of Bear Stearns, who went in the tank (so to speak) late last week, by JP Morgan Chase. Unlike B of A deal, J P Morgan Chase is paying a small percentage of the stock value for Bear Stearns. As I recall the value paid is mainly for the value of the assets and no doubt some blue sky value. Now that makes sense to me. Take advantage of a good deal when it presents itself and get a real value in the process.
http://news.yahoo.com/s/ap/20080317/ap_on_bi_st_ma_re/wall_street
The first article talks about why B of A might still be in the deal and suggests it could just be for press, grandstanding etc. I have made no secret that I have a huge problem with the loan origination tactics of Bank of America. They sell you on the fact they have no closing costs and then charge you a high interest rate so they make their money “on the back side”. My opinion is that this is the purest form of deception and false advertising. A consumer may find this is a good choice but only after understanding all the options they have. I hope they get their deal done with Countrywide for the sake of the employees there but I will assure you if I have to put my money in my mattress they will be the last bank I will ever do business with.
Enjoy the articles and take a deep seat for the ride is really going to be interesting for awhile as the mortgage market and other markets continue to adjust to wherever all this is going to finally land.
More to come
Lonny
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