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
Monday, March 31, 2008
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
Friday, March 14, 2008
NEWS NEWS AND MORE NEWS
There was just so much news today I just couldn’t resist the chance to do a little of my own commentary. Remember about my opinions, they are not based in fact or intellectual validity. For the record:
Inman news reported that Fitch (who is a rating agency) cut Countrywide’s debt rating to near junk. I am not sure if that is a technical term or just Inman’s opinion. The actual rating they imposed was BBB- which stands for Bad Bad Bad I think. Bank of America’s deal is still on even though good ole B of A has a Rating Watch which is Negative. They may get a rating out of this as DDD. (You decide). Full steam ahead B of A, I am rooting for you.
In other news Henry Paulson (he has something to do with the Treasury Dept and is a forgettable politician for sure) has suggested that all mortgage brokers should be licensed and should be held to strict licensing standards. He must not know that most states already have these standards and they are pretty much worthless as are his suggestions. So here are some questions for Mr. Paulson, what is going to be different than the current laws that were supposed to regulate bad mortgage people? Also who’s going to enforce these great new laws, and do you think it will really do any good when it hasn’t so far. Do you think the crooks are going to stand down? Paulson is typical saying to much way to late with no concept of why things got the way they got. Mr. Paulson, go get oil prices reduced if you want to work on something. With leaders like this no wonder we are in the shape we are in.
Mortgage Fraud is worse than believed. (Are you kidding) (Who would have thunk it) A leader of a company who deals with Mortgage Fraud detection found 42,000 mortgages that had fraud in them and these are the ones they detected. The report said they hoped these loans were not made. (Exquise me) I think Mortgage Fraud being worse than believed is the understatement of the century. Good report however maybe you should send it to Mr. Paulson so he would have something else to talk about.
Now this; FHA reform hopeful of being passed. Problem is the politicians are fighting (among other things) over the maximum loan limits. I will believe the bill will get passed when I see it. This legislation has been in the works since 2006 and I will be shocked if it ever gets passed in the first place and short of loan amounts being increased it will do very little to help us dig out of the hole the industy is in. This is a wonderful commentary on just how worthless the political process can be. My guess it will never get passed, I hope I am wrong on this one.
On the good news it is reported by MARI that Fraud is spread more evenly among the states. We should all be relieved, shouldn’t we? These guys ought to be the opening act for Lewis Black. (He is a comic if you don't know) Lewis could really sink his teeth into this type of dribble.
Enough for now! Good Grief!
More to come
Lonny
Inman news reported that Fitch (who is a rating agency) cut Countrywide’s debt rating to near junk. I am not sure if that is a technical term or just Inman’s opinion. The actual rating they imposed was BBB- which stands for Bad Bad Bad I think. Bank of America’s deal is still on even though good ole B of A has a Rating Watch which is Negative. They may get a rating out of this as DDD. (You decide). Full steam ahead B of A, I am rooting for you.
In other news Henry Paulson (he has something to do with the Treasury Dept and is a forgettable politician for sure) has suggested that all mortgage brokers should be licensed and should be held to strict licensing standards. He must not know that most states already have these standards and they are pretty much worthless as are his suggestions. So here are some questions for Mr. Paulson, what is going to be different than the current laws that were supposed to regulate bad mortgage people? Also who’s going to enforce these great new laws, and do you think it will really do any good when it hasn’t so far. Do you think the crooks are going to stand down? Paulson is typical saying to much way to late with no concept of why things got the way they got. Mr. Paulson, go get oil prices reduced if you want to work on something. With leaders like this no wonder we are in the shape we are in.
Mortgage Fraud is worse than believed. (Are you kidding) (Who would have thunk it) A leader of a company who deals with Mortgage Fraud detection found 42,000 mortgages that had fraud in them and these are the ones they detected. The report said they hoped these loans were not made. (Exquise me) I think Mortgage Fraud being worse than believed is the understatement of the century. Good report however maybe you should send it to Mr. Paulson so he would have something else to talk about.
Now this; FHA reform hopeful of being passed. Problem is the politicians are fighting (among other things) over the maximum loan limits. I will believe the bill will get passed when I see it. This legislation has been in the works since 2006 and I will be shocked if it ever gets passed in the first place and short of loan amounts being increased it will do very little to help us dig out of the hole the industy is in. This is a wonderful commentary on just how worthless the political process can be. My guess it will never get passed, I hope I am wrong on this one.
On the good news it is reported by MARI that Fraud is spread more evenly among the states. We should all be relieved, shouldn’t we? These guys ought to be the opening act for Lewis Black. (He is a comic if you don't know) Lewis could really sink his teeth into this type of dribble.
Enough for now! Good Grief!
More to come
Lonny
Wednesday, March 12, 2008
BLOG BLOG
One of the definitions of a Blog might be a bunch of stuff written by a non writer that really has not much to do with anything except an opinion that falls on the ears of few and matters in fact to fewer. So a Blog Blog would be a multiple of that definition if you were into defining things. Some would say a Blog is like a diary of ones happenings and goings on so today you can choose one of the above definitions or choose anything else you like.
I was sitting in The Rail Head Restaurant at Montgomery and I30 yesterday and I was shaken out of my chair when a large explosion rocked the place. I thought something in the kitchen had blown up but actually an older gentleman had backed his car through the wall (I think it was a Town Car) and into the serving line. No one was hurt and if you saw the piece on the news it was reported that several people had to dive for their lives. No one was hurt luckily and from my perspective my day got less exciting after that. The old gentleman looked dazed after the accident and my guess he was dazed before the accident.
I was regrettably out of gas yesterday (in more ways than one I admit) and had the real pleasure of getting hosed at the gas pump. I will tell you I think we are in for a long line of getting hosed with the current trend of the speculators of oil. I keep looking for the upside for the consumer. The traders drive the price up and we have to buy the stuff no matter what. To me this seems like the perfect crime. I asked my X oil buddy Tommy what he thought about it and he theorized it was an attempt by one political party to overthrow the sentiment of the public so they would blame the other party so the vote would go the first groups’ way. Another theory is that the world is using oil like a currency now and with the declining value of the dollar so goes oil prices. I guess choose whatever theory you want and while you do don’t forget to bend over.
According to other news the FBI is investigating 14 other lenders along with Countrywide. This will probably turn into the mass incrimination of anyone associated with the sub prime melt down. I am glad I am not Countrywide. All the big banks will be exposed along with a lot of others before this is over.
Enough for today, I think I will head off to The Rail Head for Coffee this morning and see if I can get my day started off correctly.
More to come
Lonny
I was sitting in The Rail Head Restaurant at Montgomery and I30 yesterday and I was shaken out of my chair when a large explosion rocked the place. I thought something in the kitchen had blown up but actually an older gentleman had backed his car through the wall (I think it was a Town Car) and into the serving line. No one was hurt and if you saw the piece on the news it was reported that several people had to dive for their lives. No one was hurt luckily and from my perspective my day got less exciting after that. The old gentleman looked dazed after the accident and my guess he was dazed before the accident.
I was regrettably out of gas yesterday (in more ways than one I admit) and had the real pleasure of getting hosed at the gas pump. I will tell you I think we are in for a long line of getting hosed with the current trend of the speculators of oil. I keep looking for the upside for the consumer. The traders drive the price up and we have to buy the stuff no matter what. To me this seems like the perfect crime. I asked my X oil buddy Tommy what he thought about it and he theorized it was an attempt by one political party to overthrow the sentiment of the public so they would blame the other party so the vote would go the first groups’ way. Another theory is that the world is using oil like a currency now and with the declining value of the dollar so goes oil prices. I guess choose whatever theory you want and while you do don’t forget to bend over.
According to other news the FBI is investigating 14 other lenders along with Countrywide. This will probably turn into the mass incrimination of anyone associated with the sub prime melt down. I am glad I am not Countrywide. All the big banks will be exposed along with a lot of others before this is over.
Enough for today, I think I will head off to The Rail Head for Coffee this morning and see if I can get my day started off correctly.
More to come
Lonny
Monday, March 10, 2008
MORE NEWS OF THE DAY
It looks like mortgage originators will be able to make FHA loans up to the new maximums starting as early as this week. The new maximum loan amounts have been posted on the HUD web site and GMNA has agreed to include them in their mortgage backed securities. The thing I am still interested in seeing is if somehow the rates on these loans will be higher. My bet is they will have a higher interest rate. Just a guess but no one gets any breaks these days for sure.
It may not be so bad as both Fannie Mae and Freddie Mac have defined their next level of price fixing, I mean price gouging, oh my gosh another slip of the tongue. You know I have an opinion about most things. Both Fannie and Freddie have started to increase what they will charge originating lenders based on a combination of down payment and credit scores. That simply stated translates into higher rates and fees for the consumer. Now keep in mind this does not mean you have credit problems, just lower credit scores. Some people with perfect credit have low credit scores that will certainly be in this group of price gouges. Oops said it again, sorry!! It does not mean that you will get to pay less for mortgage insurance, nor does it mean that the groups that have to pay more are among those that spin off more risk to Fannie and Freddie. In my opinion since they can get more they are going to take this opportunity to do so.
What Fannie and Freddie will have to ask themselves (when people like me start using FHA anytime I can rather than even selling conventional loans) is where did all our business go. I guess they think we are all stupid and will just give them their excess profits because we like them. Better guess again. I think the combination of the price gouging, (gosh there I go again) and the increased FHA loan limit is going to kick their collective behinds. I for one am going to send them as few loans as I can.
Oh Countrywide and Mr. Mozolio, their chairman (I think that is the way you spell it) (actually I don't) are in the news again. Something about the FBI opening an investigation into insider trading and securities fraud. Something about Mozolio selling his stock in anticipation of the loans they originated going into the tank. I wonder what they will find out that everyone does not already know. Not to worry Bank of America still is planning on buying Countrywide for 200% of their current stock value. I think B of A is just the group to pull it off too. I bet they won't charge them any closing costs at the closing. Countrywide better watch the rate they get that is all I can tell them.
Things continue to get more interesting and we will see a lot more before all this is finished.
More to come
Lonny
It may not be so bad as both Fannie Mae and Freddie Mac have defined their next level of price fixing, I mean price gouging, oh my gosh another slip of the tongue. You know I have an opinion about most things. Both Fannie and Freddie have started to increase what they will charge originating lenders based on a combination of down payment and credit scores. That simply stated translates into higher rates and fees for the consumer. Now keep in mind this does not mean you have credit problems, just lower credit scores. Some people with perfect credit have low credit scores that will certainly be in this group of price gouges. Oops said it again, sorry!! It does not mean that you will get to pay less for mortgage insurance, nor does it mean that the groups that have to pay more are among those that spin off more risk to Fannie and Freddie. In my opinion since they can get more they are going to take this opportunity to do so.
What Fannie and Freddie will have to ask themselves (when people like me start using FHA anytime I can rather than even selling conventional loans) is where did all our business go. I guess they think we are all stupid and will just give them their excess profits because we like them. Better guess again. I think the combination of the price gouging, (gosh there I go again) and the increased FHA loan limit is going to kick their collective behinds. I for one am going to send them as few loans as I can.
Oh Countrywide and Mr. Mozolio, their chairman (I think that is the way you spell it) (actually I don't) are in the news again. Something about the FBI opening an investigation into insider trading and securities fraud. Something about Mozolio selling his stock in anticipation of the loans they originated going into the tank. I wonder what they will find out that everyone does not already know. Not to worry Bank of America still is planning on buying Countrywide for 200% of their current stock value. I think B of A is just the group to pull it off too. I bet they won't charge them any closing costs at the closing. Countrywide better watch the rate they get that is all I can tell them.
Things continue to get more interesting and we will see a lot more before all this is finished.
More to come
Lonny
Friday, March 7, 2008
WHY NOT
I must admit I have spent a lot of time wondering why a plan would not work that would simply give people the ability to buy a home who would agree to do certain things. Namely, as you recall; pay their bills on time for a period of 6 months, agree to counseling/training once a month for 6 months, not take on any more debt, and be otherwise qualified in earnings and employment.
Here is why, (my opinion as usual):
No one sees the magnitude of the problem. A large part of the population can’t buy and that is adding to more foreclosures and bigger inventories. Fewer people can buy homes for sale because they can’t qualify and qualification for mortgages is getting harder every day for a number of reasons. Loan programs are going away and unless I am imagining things more and more errors are on credit reports which in themselves ruin the ability for most to qualify.
It would just make common sense in this day and time to take a chance on people and let them buy a home to help dig housing out of the hole it is in. Problem is Government and common sense is an oxymoron. Most politicians are about themselves and the system is not set up to work it is set up to fail in matters such as these. To many self interests to ever agree on something that is so simple.
Credit scores are taken as gospel. Credit scores are an indicator of the past but are not in themselves an indicator of the future. Credit grantors report credit in error. A credit score can be ruined over night and not fixed for months if at all. Credit scores in many cases are arbitrary and not a good indicator. The credit reporting system is corrupt and riddled with errors.
Politicians think they know best. The two sides of the isle can’t agree on what is best for the consumer but would not bother asking the consumer what they would like to do. A consumer would gladly pay a higher FHA premium to get the chance to buy but politicians think that is bad. Consumers would gladly earn the ability to buy a home but politicians think that is discrimination. Everything is about free, now, and no consequences and no one has the courage to change it.
My plan would work and work well. VA has proved 100% loans work. HUD approved counselors will give you absolute statistics to show counseling does work and works well. Masses of people would jump at the chance to enter the program because their alternative is to live in overpriced rental units.
The reality is this; any program like this it is not likely to happen for the above reasons and a sin of others and that is truly unfortunate.
More to come
Lonny
Here is why, (my opinion as usual):
No one sees the magnitude of the problem. A large part of the population can’t buy and that is adding to more foreclosures and bigger inventories. Fewer people can buy homes for sale because they can’t qualify and qualification for mortgages is getting harder every day for a number of reasons. Loan programs are going away and unless I am imagining things more and more errors are on credit reports which in themselves ruin the ability for most to qualify.
It would just make common sense in this day and time to take a chance on people and let them buy a home to help dig housing out of the hole it is in. Problem is Government and common sense is an oxymoron. Most politicians are about themselves and the system is not set up to work it is set up to fail in matters such as these. To many self interests to ever agree on something that is so simple.
Credit scores are taken as gospel. Credit scores are an indicator of the past but are not in themselves an indicator of the future. Credit grantors report credit in error. A credit score can be ruined over night and not fixed for months if at all. Credit scores in many cases are arbitrary and not a good indicator. The credit reporting system is corrupt and riddled with errors.
Politicians think they know best. The two sides of the isle can’t agree on what is best for the consumer but would not bother asking the consumer what they would like to do. A consumer would gladly pay a higher FHA premium to get the chance to buy but politicians think that is bad. Consumers would gladly earn the ability to buy a home but politicians think that is discrimination. Everything is about free, now, and no consequences and no one has the courage to change it.
My plan would work and work well. VA has proved 100% loans work. HUD approved counselors will give you absolute statistics to show counseling does work and works well. Masses of people would jump at the chance to enter the program because their alternative is to live in overpriced rental units.
The reality is this; any program like this it is not likely to happen for the above reasons and a sin of others and that is truly unfortunate.
More to come
Lonny
Thursday, March 6, 2008
THE PROBLEM, THE SOLUTION
The problem with Down Payment Assistance is that HUD does not like it. They blame DPA for creating bad loans that borrowers can’t repay or choose not to repay. There is a higher incidence of default when there is not an investment in the property by the buyer I don’t doubt that, however; it must not be completely valid because VA loans have always been $0 down and have always performed very well.
The solution is to allow $0 down FHA loans and then set up a plan that insures a higher level of success by making the buyer earn the ability to get the 100% loan. This is accomplished through mandatory education and proper discipline during a 6 month period prior to buying the home. That is correct the buyer who wants the 100% financing must earn the ability to get it, it is not a give away and everyone can’t get it.
If the potential buyer wants a 100% loan then they must complete a 6 months training course where they learn such things as budgeting, credit basics, why making their mortgage payment on time is not a choice. At the end of 6 months if they have paid all their bills on time, have taken on no more debt and are otherwise qualified they get to apply for the 100% loan. Credit score would not matter; past credit history does not matter as long as they are not in bankruptcy or had a foreclosure. Sorry this is not for those who have had a foreclosure in the past 3 years. This would also teach the attendees how to stay out of the path of predatory lenders and those sellers who will take advantage of them.
The buyer pays a little higher insurance premium to FHA to offset the additional risk and is encouraged to put together a down payment during the 6 months they are in the training. Buyers would flock to the program to just get the chance to buy a home and there would be a high level of success with the program. Only the people that were serious would go through the program, the folks who want something for nothing or think they are entitled would not apply.
A good plan, I think so, will it ever become reality, I doubt it.
Why tomorrow:
More to come
Lonny
The solution is to allow $0 down FHA loans and then set up a plan that insures a higher level of success by making the buyer earn the ability to get the 100% loan. This is accomplished through mandatory education and proper discipline during a 6 month period prior to buying the home. That is correct the buyer who wants the 100% financing must earn the ability to get it, it is not a give away and everyone can’t get it.
If the potential buyer wants a 100% loan then they must complete a 6 months training course where they learn such things as budgeting, credit basics, why making their mortgage payment on time is not a choice. At the end of 6 months if they have paid all their bills on time, have taken on no more debt and are otherwise qualified they get to apply for the 100% loan. Credit score would not matter; past credit history does not matter as long as they are not in bankruptcy or had a foreclosure. Sorry this is not for those who have had a foreclosure in the past 3 years. This would also teach the attendees how to stay out of the path of predatory lenders and those sellers who will take advantage of them.
The buyer pays a little higher insurance premium to FHA to offset the additional risk and is encouraged to put together a down payment during the 6 months they are in the training. Buyers would flock to the program to just get the chance to buy a home and there would be a high level of success with the program. Only the people that were serious would go through the program, the folks who want something for nothing or think they are entitled would not apply.
A good plan, I think so, will it ever become reality, I doubt it.
Why tomorrow:
More to come
Lonny
Wednesday, March 5, 2008
APPRAISALS AND DOWN PAYMENT ASSISTANCE
Concerning the new appraisal restrictions imposed by FNMA and FHLMC, the Mortgage Brokers Association is considering legal action to stop the impending implementation of the new standards. If you recall this would take the appraisal selection process out of the hands of the brokers. The MBA maintains that the action by Andrew Cuomo amount to “de facto regulatory action” that avoids the proper regulatory process. I am not sure I agree or disagree not being the lawyer type but I will tell you I don’t blame the MBA for taking such action.
Among other things it will put honest and ethical honest mortgage brokers at a competitive disadvantage and will not in itself make the appraisal selection process fool proof. If you have a lender/wholesaler who does not mind breaking the rules it will be easy to create a network of like minded brokers, lenders and appraisers and beat the intent of the regulation anyway. This is just another play by those who would like to see brokers go away when there is still plenty of room for the good ones in the market. It keeps the big boys more competitive and that is good.
In other news, the U.S District Court for the Eastern District of California has ruled against the Department of Housing and Urban Development’s ban on seller funded down payment assistance. A little background if you don’t know. DPA companies who are “non profit” by definition started providing down payment assistance funds by getting the funds from the seller, sending then through their companies charging a fee in the middle and then sending the money to the buyer of the home. It really just makes 100% financing available on FHA loans which HUD does not like. HUD tried to get rid of it, Nehemiah Corp. sued HUD, won the suit and they among otherS sued HUD again this last round and have won again.
In the HUD reform legislation currently pending HUD is once again trying to disallow DPA programs by regulation so the DPA companies will have another battle on their hands. I personally don’t ever think DPA will go away because it makes home loans available to consumers who can’t get the down payment and who would be good homeowners. (That is very politically correct and that is what matters these days as you know). If you take the abuse out of the system, control those who can inflate appraisals because they control or own the appraisers and underwrite the loans properly DPA can and does work. Our problem is not the program it is the fact that HUD does not regulate the bad guys and the bad guys get away with whatever they want. Of course that would be my opinion wouldn’t it!!!
A better solution tomorrow:
More to come,
Lonny
Among other things it will put honest and ethical honest mortgage brokers at a competitive disadvantage and will not in itself make the appraisal selection process fool proof. If you have a lender/wholesaler who does not mind breaking the rules it will be easy to create a network of like minded brokers, lenders and appraisers and beat the intent of the regulation anyway. This is just another play by those who would like to see brokers go away when there is still plenty of room for the good ones in the market. It keeps the big boys more competitive and that is good.
In other news, the U.S District Court for the Eastern District of California has ruled against the Department of Housing and Urban Development’s ban on seller funded down payment assistance. A little background if you don’t know. DPA companies who are “non profit” by definition started providing down payment assistance funds by getting the funds from the seller, sending then through their companies charging a fee in the middle and then sending the money to the buyer of the home. It really just makes 100% financing available on FHA loans which HUD does not like. HUD tried to get rid of it, Nehemiah Corp. sued HUD, won the suit and they among otherS sued HUD again this last round and have won again.
In the HUD reform legislation currently pending HUD is once again trying to disallow DPA programs by regulation so the DPA companies will have another battle on their hands. I personally don’t ever think DPA will go away because it makes home loans available to consumers who can’t get the down payment and who would be good homeowners. (That is very politically correct and that is what matters these days as you know). If you take the abuse out of the system, control those who can inflate appraisals because they control or own the appraisers and underwrite the loans properly DPA can and does work. Our problem is not the program it is the fact that HUD does not regulate the bad guys and the bad guys get away with whatever they want. Of course that would be my opinion wouldn’t it!!!
A better solution tomorrow:
More to come,
Lonny
Monday, March 3, 2008
IMPENDING APPRAISAL LAW
In the fraud infested recent past of the mortgage industry there have been plenty of appraisers who have inflated values and were responsible for creating a lot of the problems we are having today. There has been plenty of talk of creating a system that would make the appraisals less controlled by the loan originators and I saw an article that has done just that.
In New York, (and I guess it is only in New York) Fannie Mae and Freddie Mac have signed a settlement with New York Attorney General Andrew Cuomo which implements new appraisal standards which go into effect in Jan. 2009. It says basically that anyone selling loans to Fannie or Freddie can’t use in house or affiliated appraisal firms which Cuomo suggests are pressured into hitting the value by the institutions. Countywide for one owns their own appraisal firm as I recall. Mr. Cuomo said the settlement will transform appraisal practices by state and federally regulated banks that had pressured appraisers to inflate appraisals.
It also requires lenders on brokered loans to certify that the mortgage broker did not select the appraiser. I am a bit confused here, if the originating lender can't pick the appraiser then who does. I guess that suggests that the lender who is closing the loan must select the appraiser or God forbid maybe some government agency appraisal system is set up.
"Now national banks have a clear choice: immediately adopt the new code and clean up fraud in the mortgage industry or stop doing business with Fannie Mae and Freddie Mac," Mr. Cuomo said.
"For the banking regulators, this is kind of tough to swallow because the practices that they had permitted are prohibited by this agreement," mortgage banking consultant Howard Glaser said.
When I was in the banking business a while back, (what a nightmare) the regulators wanted appraisers chosen on a completely random basis to keep there from being any pressure put on the appraiser by the lender or the loan officer. At that time it was suggested that banks should choose the appraiser from a random list. On the surface this does not sound like a bad idea but it does not address the quality of the appraisal itself or service levels competitive pricing etc. No doubt there are a lot of appraisers who don't mind inflating values but that could still happen in any plan. I fear, however, the reality of this is too allow to many appraisers the ability to control the market rather than the market controlling the market. The market has always existed with a borrower and seller agreeing on the price of the home and that set the market value. Appraisals were ordered so the lender would feel comfortable with the amount of loan given. Appraisers always were aware of the value and did not try to jeopardize the deal if the sales price hit in a comfortable range of value. There have always been those appraisers who thought they were smarter than or above the market and should set the values themselves regardless of what the buyer and seller wanted. These guys are as dangerous in my opinion today as those who would inflate the value.
If the law that was agreed to in New York is not administered properly and then is duplicated in other states I fear it will just worsen the problem of deflating values and that is just what we don’t need.
Honest lenders should be able to hire honest appraisers and those appraisers should regulate themselves and be professional in their practices. If they don't want to loose their independence they better get busy.
This one will be interesting to watch for sure.
More to come
Lonny
In New York, (and I guess it is only in New York) Fannie Mae and Freddie Mac have signed a settlement with New York Attorney General Andrew Cuomo which implements new appraisal standards which go into effect in Jan. 2009. It says basically that anyone selling loans to Fannie or Freddie can’t use in house or affiliated appraisal firms which Cuomo suggests are pressured into hitting the value by the institutions. Countywide for one owns their own appraisal firm as I recall. Mr. Cuomo said the settlement will transform appraisal practices by state and federally regulated banks that had pressured appraisers to inflate appraisals.
It also requires lenders on brokered loans to certify that the mortgage broker did not select the appraiser. I am a bit confused here, if the originating lender can't pick the appraiser then who does. I guess that suggests that the lender who is closing the loan must select the appraiser or God forbid maybe some government agency appraisal system is set up.
"Now national banks have a clear choice: immediately adopt the new code and clean up fraud in the mortgage industry or stop doing business with Fannie Mae and Freddie Mac," Mr. Cuomo said.
"For the banking regulators, this is kind of tough to swallow because the practices that they had permitted are prohibited by this agreement," mortgage banking consultant Howard Glaser said.
When I was in the banking business a while back, (what a nightmare) the regulators wanted appraisers chosen on a completely random basis to keep there from being any pressure put on the appraiser by the lender or the loan officer. At that time it was suggested that banks should choose the appraiser from a random list. On the surface this does not sound like a bad idea but it does not address the quality of the appraisal itself or service levels competitive pricing etc. No doubt there are a lot of appraisers who don't mind inflating values but that could still happen in any plan. I fear, however, the reality of this is too allow to many appraisers the ability to control the market rather than the market controlling the market. The market has always existed with a borrower and seller agreeing on the price of the home and that set the market value. Appraisals were ordered so the lender would feel comfortable with the amount of loan given. Appraisers always were aware of the value and did not try to jeopardize the deal if the sales price hit in a comfortable range of value. There have always been those appraisers who thought they were smarter than or above the market and should set the values themselves regardless of what the buyer and seller wanted. These guys are as dangerous in my opinion today as those who would inflate the value.
If the law that was agreed to in New York is not administered properly and then is duplicated in other states I fear it will just worsen the problem of deflating values and that is just what we don’t need.
Honest lenders should be able to hire honest appraisers and those appraisers should regulate themselves and be professional in their practices. If they don't want to loose their independence they better get busy.
This one will be interesting to watch for sure.
More to come
Lonny
Sunday, March 2, 2008
WHAT'S UP / WHAT HAPPENED
The title of today's Blog are the words that were sent to me, (well I changed just a little bit) from my friend Paul who is a reader of the Blog. I actually have two Paul's, not one, that read the Blog regularly. Actually 3 if you count my son who's middle name is Paul. I think the last Blog posting was on Feb. 18th or so. I must admit not much seems to be happening different in the things I tend to watch. I admire reporters who find a way to restate the same thing day in and day out and make it sound different.
Just a quick side bar, I was watching a Hillary ad this morning and I actually liked what it said. No worries, I have taped my mouth shut and my counselor has agreed to see me at 6 AM in the morning. She is concerned, very concerned!!!
Since the last posting rates started going up every day for what at least I think was no good reason and now they have started coming down again for the same no good reason they went up. Oh don't get me wrong there were plenty of reasons, I just don't understand what the relevance is in the reason as it relates to the real problem. Rates should be low in my opinion as oil prices and energy costs continue to gut the consumer from spending their money on things they would rather have. To me that creates inflation of the worst kind because the consumer can't make a choice not to buy. We may see that before long however. Rates today are just about where they were before the Fed. made the initial rate cut. All that flap hoop and holler so a lot of people could trade a lot of interest rate paper to make or lose a lot of money. Far be it from me to understand all that.
The stimulus bill made it possible to make a higher loan limit FHA loan which would help the ailing mortgage industry and a lot of want to be home buyers who have been underwritten out of the ability to own a home or who have been priced gouged because their good credit and average credit score have made it hard to make the inflated payment. But about the limit, mortgage loans are not available yet because of all the wrangling by all the politicians and greedy people trying to see how much profit can be made instead of just making the loans. Just my opinion of course.
I read where the FHA Reform bill was close to passage but a compromise by the Mortgage Bankers is to not challenge allowing Down Payment Assistance programs. That is fine but more buyers will lose the ability too buy a home. Why, 100% loans are becoming available for only the best credit buyers and FHA does not and if I can see the current trend will not allow for a 100% loan. 100% loans can be a reality if FHA would just be careful about it and offer an incentive not to get one. Fat chance if you ask me for that. If you don't think it will work just look at the VA model it has worked very well since day 1. Could FHA be the problem and not 100% loans. DUH!!!
Countrywide is being sued for loan fraud, I am sure the lawyers are licking their chops over that. Merrill Lynch finally dumped First Franklin which was their sub prime company nightmare. RIP sub prime loans, as least as we knew them. Lots of politicians trying to create lots of Predatory Lending laws to make people be ethical and responsible to the customer. Just as well go golfing boys, ain't gonna happen.
Well how bout that, everything is just about the same, or at least so it seems.
More to come
Lonny
Just a quick side bar, I was watching a Hillary ad this morning and I actually liked what it said. No worries, I have taped my mouth shut and my counselor has agreed to see me at 6 AM in the morning. She is concerned, very concerned!!!
Since the last posting rates started going up every day for what at least I think was no good reason and now they have started coming down again for the same no good reason they went up. Oh don't get me wrong there were plenty of reasons, I just don't understand what the relevance is in the reason as it relates to the real problem. Rates should be low in my opinion as oil prices and energy costs continue to gut the consumer from spending their money on things they would rather have. To me that creates inflation of the worst kind because the consumer can't make a choice not to buy. We may see that before long however. Rates today are just about where they were before the Fed. made the initial rate cut. All that flap hoop and holler so a lot of people could trade a lot of interest rate paper to make or lose a lot of money. Far be it from me to understand all that.
The stimulus bill made it possible to make a higher loan limit FHA loan which would help the ailing mortgage industry and a lot of want to be home buyers who have been underwritten out of the ability to own a home or who have been priced gouged because their good credit and average credit score have made it hard to make the inflated payment. But about the limit, mortgage loans are not available yet because of all the wrangling by all the politicians and greedy people trying to see how much profit can be made instead of just making the loans. Just my opinion of course.
I read where the FHA Reform bill was close to passage but a compromise by the Mortgage Bankers is to not challenge allowing Down Payment Assistance programs. That is fine but more buyers will lose the ability too buy a home. Why, 100% loans are becoming available for only the best credit buyers and FHA does not and if I can see the current trend will not allow for a 100% loan. 100% loans can be a reality if FHA would just be careful about it and offer an incentive not to get one. Fat chance if you ask me for that. If you don't think it will work just look at the VA model it has worked very well since day 1. Could FHA be the problem and not 100% loans. DUH!!!
Countrywide is being sued for loan fraud, I am sure the lawyers are licking their chops over that. Merrill Lynch finally dumped First Franklin which was their sub prime company nightmare. RIP sub prime loans, as least as we knew them. Lots of politicians trying to create lots of Predatory Lending laws to make people be ethical and responsible to the customer. Just as well go golfing boys, ain't gonna happen.
Well how bout that, everything is just about the same, or at least so it seems.
More to come
Lonny
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