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July 8, 2010

Wells Fargo Announces Significant Job Cuts in Consumer Finance

According to Mortgage News Source, Wells Fargo is laying off nearly 4,000 employees from its’ Consumer Finance Division that was responsible for non-prime mortgage lending.  The company announced that they were ceasing to originate subprime mortgages in an effort to mitigate loan portfolio risks.  Mortgage News indicated that Wells Fargo “had been struggling with delinquencies and loan defaults from their own bad credit home mortgages.”  Acquiring the loan portfolios from the Wachovia merger may have pushed their subprime risks too far.

Wells Fargo announced they were closing 638 Wells Fargo Financial offices, which increased its number of retail branches to 6,600 after the Wachovia merger. The bank also has 2,200 Wells Fargo Home Mortgage offices and will eliminate about 2,800 employees from its Wells Fargo Financial unit and will most likely slash another 1,000 jobs in the next year. Read the original news article, > Almost 4,000 Wells Fargo Mortgage Layoffs


June 5, 2009

Refinance or Mortgage Modification with Bad Credit or No Equity

In a recent article, California mortgage broker, Jeff Morris, formerly with GMAC and Ditech estimated that one in ten of homeowners who visit him online are able to get approved for a conventional or FHA-refinance.  Morris said, “People simply don’t qualify with the mortgage lenders tighter guidelines and lack of home equity.“ Borrowers seeking home refinancing, outside of California, Arizona and Nevada may have a better chance because fewer borrowers in the mid-west and south are under water with their mortgages being greater than their home’s value.  Even with mortgage lenders extending 97% FHA and 105% mortgage refinancing, California homeowners have little opportunities to be approved because home values have declined so significantly since they bought their properties years ago.   


The goal should be for homeowners to invest in a home that they can afford and if refinancing with a lower mortgage payment is an option, then borrowers would be foolish not to seize the savings opportunity. Morris added that “the demand for loan modifications has not waned and he sees an increase in loan workout requests for borrowers who are stuck in jumbo mortgage loans that have interest rates set to adjust.” The banks just aren’t handing out loan modification agreements to just anyone anymore.  Homeowners seeking foreclosure prevention alternatives from their mortgage lender must be able to document that they have the income to support the modified home loan payment. 


In Maui, Caleb Palmer, a broker, said “Consumers should stop whining about things they can’t control and focus the affordable home buying opportunities that have become available since the housing market crashed in 2006.” Palmer continued, “Mortgage rates were under 5% for thirty year fixed rate loans and inventories were beginning to open up in neighborhoods that haven’t been available for years.”  Palmer believes that 2010 will see more buying opportunities in Hawaii and California before the market shifts back to appreciation mode. 


In addition, if you’re older than 40, shortening your mortgage term now could help leave you mortgage-free in retirement, reducing the income you’ll need to generate from your battered 401(k).
But before you jump in, you should know that most single-family home loans today need to fall within Fannie Mae and Freddie Mac limits — up to $417,000 in most places, and up to $729,750 in certain high-cost cities such as San Francisco and New York. “Jumbo” mortgages, or those larger than those limits, are still very hard to find. Then you’ll need two crucial and tough-to-acquire bits of information: your credit score and your home’s current value. Those will determine whether you can refinance at all and how close you can get to the lowest rates available. Even then, you may find the process unusually long and unpleasant; some banks are taking up to 90 days to complete a refinancing.  If you got your current mortgage in the past few years, when less documentation was needed, you may be surprised by the financial colonoscopy that awaits you. You need pay stubs, bank statements, brokerage statements and maybe tax returns to convince the lender that you can and will repay the loan. If you’re self-employed, you may be asked for a profit-and-loss statement for this year; if you rely on bonus income, expect the lender to assume this year’s bonus will be a lot less than last year’s.


What is home equity? Having some equity in your house is essential to qualifying for a new mortgage loan. If your current mortgage is less than 80% of the value of your home or less than 75% of your condominium, you should have refinancing options as long as you don’t have late mortgage payments and bad credit scores.  Subprime refinancing and bad credit mortgage options have disappeared with the exception of VA and FHA loans.  VA home loans are only offered to military veterans and FHA mortgage guidelines require full income documentation and most bad credit home loan applicants need a stated income program.


If your mortgage is between 80% and 105% of your home value, you’re current on your payments and your loan was bought by Fannie Mae or Freddie Mac, you may be able to refinance under a two-month-old government program called “Making Home Affordable.” Some kinks are still being ironed out, and Fannie and Freddie have different requirements, so go to the program’s Web site at MakingHomeAffordable.gov or contact your mortgage servicer to see if you qualify.

Sometimes under this program, Fannie and Freddie will waive appraisals and other underwriting steps. And if you’re refinancing a Veterans Administration or Federal Housing Administration loan, a new appraisal isn’t needed. 


March 19, 2009

Moodys May Reduce $241 billion Jumbo Home Loan Debt

Reuters reported a widening stress in the U.S. housing market, Moody’s Investors Service said on Thursday it may downgrade $240.7 billion of securities backed by prime-quality “jumbo” U.S. residential mortgages because defaults will be higher than expected.  Jumbo mortgage loans are typically larger than $417,000, and go to borrowers with good credit. But Moody’s said in the last six months, there have been “substantial increases in serious delinquencies and decreases in prepayment rates, levels that are unprecedented in this asset class.”  The securities under review are backed by U.S. home loans issued between 2005 and 2008. Moody’s had late last year downgraded $110 billion of securities issued in 2006 and 2007, almost all of which had originally been rated “Aaa.”

Moody’s on Thursday said it may downgrade 4,988 classes of jumbo residential mortgage loan securities with a current outstanding balance of $173.3 billion, and the original $240.7 billion balance.  It said it now expects cumulative losses of 1.7 % for 2005 securitizations, 3.55 % for 2006, 5.05 % for 2007 and 6.20 % for 2008.  Downgrades can force some investors to sell the debt, and can increase capital strains on banks and insurance companies that own it.  Bad credit mortgages have already been downgraded when the subprime mortgage market crashed a few years back.

The top fifty U.S. banks added $109 billion of mortgage-backed debt in the fourth quarter, although most was not jumbo home loans, Barclays Capital said. Falling mortgage interest rates could spur an increased supply of jumbo mortgage securities, it said.


March 17, 2009

FHA Home Loan Defaults Rise

Category: FHA,Foreclosure Crisis News,Home Loan News – admin – 3:23 pm

Washington Post reporters studied federal data and discovered that FHA home mortgage loans defaults are increasing rapidly. The home loan default research shows that the number of borrowers who failed to make more than one payment before defaulting nearby tripled over the past year.

According to the article by Dina ElBoghdady and Dan Keating, “Many mortgage industry experts attribute the jump in these instant defaults to factors that include the weak economy, lax scrutiny of prospective borrowers, and most notably, foul play among unscrupulous lenders looking to make a quick buck.”

If someone defaults on their home loan because they have suddenly lost their job or face a health crisis, that’s understandable these days. But, after everything our country has faced since the subprime mortgage lending debacle began a few years ago, it is criminal to think that lenders are once again committing fraud and failing to do the work to make sure the people they are lending to can actual repay their loans. Do we have to learn this lesson again?

Even scarier is the fact these mortgages are government-backed. So, guess who pays when these borrowers default? Not the FHA lenders who wrote the paper for the bad mortgages. The FHA has make good on those home mortgages from government reserves. If the FHA reserves run out, Congress will be expected to bail out the FHA, with more taxpayer dollars.


March 9, 2009

Report Suggest 20% of Home Loans Underwater from Declining Home Values

A new report from First American Core Logic suggested that more than 8.3 million U.S. home mortgages had negative equity as of year-end, compared with 7.6 million just a few months prior.  Another 2.2 million owner-occupied properties have homes worth only about 5% more than their debt, so they are approaching negative equity as home values slide. More than 20% of all properties carrying a mortgage nationwide have negative equity, with more owed on their home loans than the homes are worth, according to a report being released today.   Borrowers are having a difficult time qualifying for a refinance loans or cash refinancing for debt consolidation.


Over 30% of homes nationally are owned outright, and they were not included in the statistics. The near-negative equity homes, combined with the underwater homes, account for a full quarter of all U.S. mortgaged properties, the research company said. The numbers are ominous because negative equity is half of the formula that usually leads to foreclosure.  “Being underwater is a necessary but not sufficient condition for home loan default and foreclosure,” said Mark Fleming, chief economist for First American in Washington, D.C. “The other necessary but insufficient condition is inability to make your mortgage payment due to job loss, divorce, a significant change in the payment because of an adjustable interest rate mortgage. The new loan modification plans are more aggressive with incentives for lenders to renegotiate the principal amount owed on the property.


Over the past year, the total value of U.S. homes has fallen $2.4 trillion, going from $21.5 trillion in December 2007 to $19.1 trillion at the end of 2008. California, where more than $1.2 trillion of housing value evaporated last year, accounted for half that decline. That’s vastly disproportionate to California’s share of the mortgage market, estimated to be 16% to 20%, Fleming said.  However, despite the steep declines, California overall is in better shape than some neighboring states because it still has a stock of mortgages taken out over two decades ago on homes that now have accumulated significant equity. On average, Californians with mortgage loans have 30% equity in their homes. By comparison, the average equity for all homes that still have mortgages in Nevada is just 3% – the worst in the nation. “Las Vegas is a city that exploded over the past 10 years,” Fleming said. Now that values have tumbled, “the last 10 years is a do-over.” 


February 24, 2009

Obama’s Mortgage Plan for Fannie Mae & Freddie Mac Need Legal Nod

Category: Foreclosure Crisis News,Home Loan News,Loan Programs – admin – 1:00 pm

In a recent Bloomberg article, President Barack Obama rolls out plan to use mortgage lending giants Fannie Mae and Freddie Mac to refinance as many as 5 million home mortgages may face legal challenges over whether the administration is overstepping its authority.   The proposal may violate requirements that homeowners put up at least 20% of the appraised value of a home or carry mortgage insurance, said U.S. Representative Scott Garrett of New Jersey, the ranking Republican on a panel that oversees the mortgage companies.  


Fannie and Freddie’s chief regulator, James Lockhart, has said the changes are exempted from mortgage-insurance rules written into the companies’ charters and won’t require new appraisals. Lockhart said the strategy will make it easier to help struggling homeowners to refinance and get more affordable mortgage loans with lower monthly payments.  


Loan-to-Value Ratio

Fannie and Freddie’s charters prohibit the acquisition of new loans with a loan to value ratio of more than 80% — meaning the homeowner has less than 20% equity in the property — unless mortgage insurance or some other credit backing is used.   Regulators will work around that requirement by treating the refinance loans as a loan modification programs “for charter purposes,” not as new mortgage loans, Lockhart, director of the Federal Housing Finance Agency, said in a February 20th letter to a mortgage insurance trade group.   The difference is that a mortgage modification retains the original contract, changing its terms. Mortgage refinancing requires an entirely new mortgage, which Fannie and Freddie would have to repurchase and repackage into a new security, according to analysts and the companies.   “The new home loan is treated as a new origination because the old loan is paid off,” said Amy Bonitatibus, a Fannie spokeswoman.


No Appraisals Required with New Refinance Program

The Obama mortgage rescue plan would temporarily approve Fannie Mae and Freddie Mac to provide refinance loans that they own or guarantee with loan-to-value ratios (LTV’s) of as much as 105% without appraising the property or requiring additional mortgage insurance.  



February 9, 2009

Comparing Subprime Home Loans to Alt-A Mortgages

C.D. Davies discusses the difference between subprime home loans and Alt A mortgage financing.

The video talks about home mortgage industry and how mortgage lenders made bad subprime loans to risky borrowers that could not afford the mortgage payment as soon as it adjusted. Alt-A home loans were not much better because many of these loans were stated income with no income documentation required. Who could forget the ridiculous 1% teaser rate on loans that had negative amortization features that actually caused mortgage balance to rise.  Many of the foreclosures came from the no-money down home loans made from Alt-A and subprime lenders.


December 5, 2008

Home Loan Delinquencies Rise in Wake of Foreclosure Crisis

Category: Foreclosure Crisis News,Home Loan News – admin – 12:52 pm

One in ten American homeowners fell delinquent on their mortgage loan payments or were in foreclosure during the 3rd quarter as the world’s largest economy shed jobs and real estate prices tumbled.  The share of home loans thirty days or more overdue rose to a seasonally adjusted 6.99 % while mortgage loans already in foreclosure rose to 2.97 %, both all-time highs in a survey that goes back 29 years, the Mortgage Bankers Association said in a report today. The increase in mortgage delinquencies was driven by an increase of home loans with payments 90 days or more overdue.   “Until we see a turnaround in the job situation, we’re not going to see these numbers improve,” said Jay Brinkmann, chief economist of the Washington-based bankers group, in an interview. “We’re seeing more home loans build up in the 90-days bucket as lenders move to offer loan modifications and states put in place programs that delay foreclosures.”   

The U.S. economy has lost 1.91 million jobs this year, while falling house prices have made it difficult for homeowners who are unable to pay their mortgage loans or sell their property without incurring a loss in a short sale. Payrolls declined in each month of 2008 through November, the Labor Department said today in Washington.  New home foreclosures dropped to 1.07 % from 1.08 % in the 2nd quarter as some states enacted laws to temporarily stop home repossessions and mortgage lenders increased efforts to modify the terms of loans, Brinkmann said.


November 26, 2008

Will $800 Billion More Cure the Mortgage and Credit Crisis?

Category: FHA,Foreclosure Crisis News,Home Loan News – admin – 12:50 am

US authorities launched fresh efforts Tuesday to unfreeze credit and limit the economic downturn with programs to buy up to 800 billion dollars in mortgage loans and asset-backed securities.  The initiatives call for up to 600 billion dollars in Federal Reserve purchases of home loan securities, and a separate 200 billion dollars for asset-backed securities to assist consumers with more credit lines.  The Federal Reserve and Bush administration continue efforts to stimulate the economy with cash injections intended to jump-start American credit markets that have nearly been frozen shut since October.   The government has not made their intentions to increase liquidity while decreasing the home loans costs for borrowers looking to refinance or purchase a home.  Last month, HUD introduced FHA home loans for distressed homeowners who were 90 days or more delinquent on their mortgage, but after thousands of borrowers completing the applications for this Hope for Homeowners program, only a few actually were approved by FHA mortgage lenders. 

With the housing sales plummeting and the foreclosure crisis worsening, the government wants mortgage lenders to provide loan modification to prevent foreclosures.  According to mortgage marketing executive, Bryan Dornan, “Clearly, the sub-prime mortgage meltdown ignited sparks through the financial markets and has spread like wild fires burning our economy and many American’s home equity in the process.”  Dornan continued, “The lure of low mortgage rates has faded because the traditional refinance has completely disappeared because lenders continue to tighten credit guidelines beyond Main St. America.”

Economist Marie-Pierre Ripert noted in a recent article, “Both these measures are clearly a significant step in the action implemented by the Fed in trying to avoid a deeper recession and to prevent the economy to fall in a deflationary spiral.”  The US central bank said it planned to buy up to 100 billion dollars of bad mortgages and debt obligations of housing-related government-sponsored entities like Freddie Mac and Fannie Mae in the next week and purchase 500 billion more in a home loan modifications scheduled to roll out by the end of this year.  The 500 billion dollars in mortgage securities is said to be bought by asset managers selected in a competitive mortgage servicing process “with a goal of beginning these purchases before year-end,” the Federal Reserve said.  These purchases “are expected to take place over several quarters.”  Many real estate analysts believe that we have not seen the bottom of the housing market and this foreclosure crisis and lending drama may just be the beginning of a much more severe decline with no real solutions achieving any measurable success rectifying the lack of credit. 


November 24, 2008

FHA Improves Hope for Homeowner Loan Program

Category: FHA,Foreclosure Crisis News – admin – 10:56 am

The government’s program to refinance delinquent mortgages into affordable government-insured loans has been enhanced. Among the improvements are increased loan-to-values, extended loan terms and immediate compensation for second mortgage companies.  More than ever before FHA home loans have been the backbone supporting mortgage brokers and lenders with subprime and foreclosure prevention products. 


The maximum LTV on the HOPE for Homeowners program has been raised to 96.5%, the U.S. Department of Housing and Urban Development announced today. The LTV was previously limited to 90, an October mortgagee letter from HUD said.  Many FHA mortgage lenders had indicated that the Hope for Homeowners Programs simply did not connect with the average homeowner that need loan refinancing.


November 19, 2008

Home Sales from Foreclosure Increase in California

Category: Foreclosure Crisis News – admin – 10:51 am

In La Jolla California home sales rose unseasonably last month from September as buyers shook off gloomy financial news and took advantage of often-steep discounts. The median sale price fell to $300,000 – a 67-month low – as foreclosures once again accounted for half of all resales, a real estate information service reported.  Last month’s record annual sales increase reflects two things: Very weak sales a year ago on the heels of the August credit crunch and earlier subprime meltdown, and this year’s big sales gains in inland markets where prices have fallen 30% or more. Depreciation in such areas has triggered record foreclosures, which tend to sell at a discount, attracting bargain hunters.

51% of existing homes that closed escrow in October were foreclosed on at some point in the prior 12 months. That’s up from a revised 50.0% in September and 16.0% in October 2007.  At the county level, these “foreclosure homes sold” ranged from 39.2% of October existing home sales in Orange County to 67.7% in Riverside County. In Los Angeles County homes sold from foreclosure were 40.3% of sales; in San Diego 48.6%; San Bernardino 65.2% and in Ventura County 47.0 %.

High foreclosure levels may explain the Southern California’s $300,000 median sale price in October, the lowest since it was $298,000 in April 2003. Last month’s median was 2.8% lower than $308,500 in September and 32.6% lower than $445,000 in October 2007. The October median stood 40.6% below the peak $505,000 median reached in spring and summer of last year.  Several factors explain the plunge in the median price, the point where half of the house sold for less and half for more: Regionally home price depreciation; much slower high-end sales; and the rising market share of foreclosure home sold, which tend to be located in mid-to lower-cost areas.

Many of the region’s relatively affordable neighborhoods saw October sales more than double from a year ago. Use of FHA-insured loans allowing a down payment of as little as 3% represented nearly one-third of all Southern California’s home loans last month, up from 2% a year earlier.

Meanwhile, use of larger mortgages known as “jumbo mortgage loans,” common in higher-cost coastal neighborhoods, is still far below normal. Before the credit crunch hit in August 2007, 40% of Southland sales were financed with jumbos, then defined as over $417,000. Last month just 13.1% of home purchase loans were over $417,000.

The typical monthly mortgage payment that Southern California home-buyers committed themselves to paying was $1,413 last month, down from $1,458 the previous month, and down from $2,115 a year ago. After inflation adjustments, current payments are 33.9 % below typical payments in the spring of 1989, the peak of the prior real estate cycle. They are 45.8% below the current cycle’s peak in June 2006.  Indicators of market distress continue to move in different directions. Foreclosure activity is at or near record levels, financing with adjustable-rate mortgages is near the all-time low, as is financing with multiple mortgages.

DataQuick also reported Down payment sizes and flipping rates are stable, non-owner occupied buying activity appears flat but might be emerging.  MBA reported this week that home loan activity has decreased, but the home loan modification inquiries continue to soar as the foreclosure crisis worsens.


November 18, 2008

Bank of America’s Loan Modifications Could Hurt Investors

Category: Foreclosure Crisis News,Home Loan News – admin – 10:07 am

Bank of America Corp.’s recent decision to provide $8.4 billion in home loan modifications to settle charges brought by state attorneys general against Countrywide Financial Corp. was hailed as a milestone when the deal was announced this fall. But apparently nobody talked to one group that will shoulder much of the settlement’s costs: investors who hold securities backed by Countrywide home loans.  Now, some of those investors are crying foul, adding to the confusion over what is becoming a central issue in efforts to resolve the wave of foreclosures that is at the root of the global financial crisis.

J.P. Morgan Chase & Co. and Citigroup Inc. recently announced foreclosure-prevention programs that aim to lower mortgage rates, extend repayment schedules and, in the case of Citigroup, reduce loan amounts, to help borrowers keep their homes. But the programs have focused primarily on home loans wholly owned by those companies because they feel they have more authority to provide loan work-outs.  Over $2 trillion in mortgage loans were packaged into mortgage-backed securities and sold to investors by Wall Street, according to Inside Mortgage Finance. But opinions vary regarding the degree to which these mortgages can be modified.  Bank of America settled charges this fall with attorneys general from 15 states. The settlement stemmed from charges that Countrywide engaged in predatory lending practices involving borrowers who took out subprime mortgages and option-ARM mortgage loans that featured a negative amortization. Under the settlement, Bank of America, which acquired Countrywide in July, agreed to modify the mortgages of as many as 400,000 borrowers by providing mortgage refinancing, lowering interest rates and reducing principal amounts. Bank of America neither admitted nor denied wrongdoing.

Background: This fall, Bank of America agreed to an $8.4 billion program to modify mortgages, to settle charges by state attorneys general against Countrywide, which it now owns.  The Concern: Many of the loans covered by the settlement were packaged into mortgage-backed securities. Some investors who own those securities say Bank of America is shifting much of the cost of the settlement to investors.  The Response: Bank of America says its contracts with investors provided it with “delegated authority” to modify many of the loans. It also is talking with investors about their concerns.

Bigger Picture: The dispute comes as mortgage companies are under pressure to do more to keep borrowers in their homes. It isn’t clear just how much authority the companies have to modify loans that were packaged into securities.  Bank of America said it owns about 12% of the roughly 400,000 loans at issue in the settlement and can modify another 75% based on the “delegated authority” provided in its contracts with investors. “We believe the program benefits both customers and investors,” a Bank of America spokesman said. Bank of America didn’t seek investor approval before agreeing to the settlement “because the design of the program was based in large part on the delegated authority” in the contracts, he added.

But some investors believe they should have been contacted first. “Our view is that Countrywide Financial Corp. made this determination without consulting with a representative group of investors,” said Ralph Daloisio, managing director at Natixis SA, which owns securities backed by Countrywide loans. He agreed, though, that if done right, loan modifications can benefit investors.  Other investors said Bank of America is moving much of the cost of the settlement to investors when it should be paying those costs itself. These investors said that they don’t oppose modifying mortgages when it will increase investor returns while keeping borrowers in their homes. But they said that many of these home loans violated representations and warranties made when the mortgages were packaged into securities. As a result, they said, Bank of America should repurchase the loans before modifying them.

“This is literally an attempt to settle a dispute with state attorneys general on predatory lending claims with someone else’s money,” said one money manager. “In 10-plus years in the market, I’ve never seen anything as outrageous as this.”  The Bank of America spokesman said that “no court has made … findings” that the Countrywide loans were “either predatory or unlawfully originated.” He said Bank of America has been “responding to investor questions regarding this program. We believe that these have been positive interactions.” Bank of America believes “the program benefits both customers and investors,” he said.  Under terms of contracts with investors, mortgage companies generally have the authority to rework loans when it is likely to benefit investors. But just how much authority the mortgage companies have is open to debate.  Mortgage loan modifications also can benefit some bondholders at the expense of others. Reducing a borrower’s loan balance, for instance, may hurt holders of the riskiest piece of a mortgage securitization more than investors who bought securities that had higher credit ratings.