Christopher Shearer
By Nick Timiraos
Associated Press
Bank of American and Countrywide offices in Pasadena, Calif., last year.
Bank of America is retiring the Countrywide name and rebranding the home mortgage lender as Bank of America Home Loans.
The Charlotte-based lender acquired Countrywide last July for $2.5 billion, as the housing market imploded, many of Countrywide's loans soured, and the Calabassas, Calif.-based lender struggled to find new sources of capital. Countrywide, founded in 1969, had been blamed for aggressive lending practices that helped, in part, to fuel the housing boom, and the company faces a federal investigation and several lawsuits concerning its business practices.
In launching the new Bank of America Home Loans brand, the bank said it would offer customers a one-page loan summary in "straightforward language" that would explain information on an individual's loans, including closing costs, interest rates, monthly payments and payment terms.
Bank of America's lending volume increased 79% in the first quarter from the previous quarter to $89.3 billion in mortgage and home equity loans, largely as a result of a boom in refinancing as rates fall to record lows. Bank of America was the only top-five lender in the fourth quarter that maintained its volume of jumbo loans, which are too large for government backing and which private investors have largely shied away from.
Wall Street Jounal 04-29-2009
Wednesday, April 29, 2009
Miami a Renters Paradise? from Christopher Shearer
Christopher Shearer
By Dawn Wotapka
Here’s a sunny take on the bevy of empty condos cluttering up downtown Miami: The area may become a renter paradise.
Investors and second-home buyers account for a stunning 60% of the nearly 13,000 new condo units sold in downtown Miami since 2003, according a report by real estate consulting firm Condo Vultures LLC. It could become the largest concentration of tenants in the Southeast–if not the country, the firm says.
“There is an enormous number of unwanted condo units. The oversupply in downtown Miami is absolutely massive,” says Brad Hunter, chief economist/national director of consulting for Metrostudy, a housing market research firm. “It’s bearish for the market’s health, that’s for sure.”
Things will likely get worse as developers try to unload another 10,000 new, unclosed units into one of the nation’s worst housing markets, adds Peter Zalewski, a Condo Vultures principal who is also a real estate broker. Many residents are under contracts inked during better days, but with prices plummeting, foreclosures soaring and loans hard to come by, contracted buyers are afraid or unable to close.
As the market continues to sour, expect investors–especially bulk buyers eyeing a bargain–to snap up the units, Mr. Zalewski says.
If this happens–and many industry watchers think it will–the percentage of primary owners living in the area could dip below 35%, delivering the market another blow. The ratio of primary owners to investors and second-home buyers is key for buyers seeking financing. Jittery lenders, stung by losses to investors, have tightened their requirements for condo lending, viewing more owner-occupants as safer.
But there’s a silver lining for all those renters. “They’re going to have the opportunity to live in a brand-new luxury building for a very, very low rent considering the quality,” says Mr. Hunter. “This is unprecedented.”
Wall Street Journal 04/29/2009
By Dawn Wotapka
Here’s a sunny take on the bevy of empty condos cluttering up downtown Miami: The area may become a renter paradise.
Investors and second-home buyers account for a stunning 60% of the nearly 13,000 new condo units sold in downtown Miami since 2003, according a report by real estate consulting firm Condo Vultures LLC. It could become the largest concentration of tenants in the Southeast–if not the country, the firm says.
“There is an enormous number of unwanted condo units. The oversupply in downtown Miami is absolutely massive,” says Brad Hunter, chief economist/national director of consulting for Metrostudy, a housing market research firm. “It’s bearish for the market’s health, that’s for sure.”
Things will likely get worse as developers try to unload another 10,000 new, unclosed units into one of the nation’s worst housing markets, adds Peter Zalewski, a Condo Vultures principal who is also a real estate broker. Many residents are under contracts inked during better days, but with prices plummeting, foreclosures soaring and loans hard to come by, contracted buyers are afraid or unable to close.
As the market continues to sour, expect investors–especially bulk buyers eyeing a bargain–to snap up the units, Mr. Zalewski says.
If this happens–and many industry watchers think it will–the percentage of primary owners living in the area could dip below 35%, delivering the market another blow. The ratio of primary owners to investors and second-home buyers is key for buyers seeking financing. Jittery lenders, stung by losses to investors, have tightened their requirements for condo lending, viewing more owner-occupants as safer.
But there’s a silver lining for all those renters. “They’re going to have the opportunity to live in a brand-new luxury building for a very, very low rent considering the quality,” says Mr. Hunter. “This is unprecedented.”
Wall Street Journal 04/29/2009
Tuesday, April 28, 2009
Homeowners Meet your New stumbling Block to Selling your home HVCC from Christopher Shearer
In an effort not to beat a dead horse this will be short, sweet (?) and to the point.
The head of the FHFA, James B. Lockhart, also the former Director of OFHEO, initiated the Home Valuation Code of Conduct to (paraphrased) "help curtail fraud between loan officers and appraisers".
How will it hurt the home owner/buyer? Two immediate impacts:
1. It currently costs about $350 for a Fannie Mae appraisal including the new MC1004 form which is a new $50 requirement. (Costs are estimates and I am not an appraiser but these are the average prices in the Atlanta area - check with your own appraiser) but Appraisal Management Companies (AMCs) charge as much as $450 or more for the same service and pay the appraiser as little as $175 - so let me ask you this, Mr. Lockhardt, would you do your same job for 1/2 the amount you have been being paid under duress and do it well?
2. Process time. Even though the AMCs may tell you there will be no delays our experience demonstrates appraisal turn times go from about 3 days to as much as 2 weeks. Why should anyone hurry if they are working for half price (the appraisers), getting paid for work they are not providing (the AMCs) and nobody has to answer directly to the borrower?
You see right now the frustrated borrowers and real estate agents have one point of contact - the loan officer - who has absolutely no control over the situation. Underwriting times are already backed up for as much as 30 days after the package has been received. Add 2 weeks of waiting for an appraisal and you're looking at as much as 6 weeks for a closing.
Another kick in the teeth to customers is the loss of free "pencil searches". For many years we (loan officers) have been able to order pencil searches on prospective properties or refinances. There has never been a cost to the borrower and we have used this to save home owners and buyers from ordering an appraisal on a deal that was in no way going to work. Forget about that - now they'll just have to wait until the appraisal comes back. So at $450 and two weeks waiting that neat little financing addendum the Georgia Association of Realtors added to their contract last year just became a joke.
If I were a buyer, agent, seller, home owner, appraiser or loan officer I would be livid about what this ridiculous requirement is doing to the American home buyer/owner/seller. Forget your commission - this is bad for your clients.
Senator contact lookup http://www.opencongress.org/person/senators
Representative contact lookup http://www.opencongress.org/person/representatives
Contact your Representative and Senator TODAY:
I am writing to you to register my opposition to the Home Valuation Code of Conduct which is mandatory on May 1, 2009 for all Fannie Mae and Freddie Mac Loans. Further I implore you to demand the reversal of this regulation. I oppose this regulation by the Federal Housing Finance Agency on the basis of the facts that:
1.Appraisal costs will immediately increase as much as 35% (from $350 to $450)
2.Appraisal turn times will increase as much as 400% (from 3 days to 12 days) increasing the time to close a simple, straight forward FNMA or FHLMC home purchase loan to as much as 45 days or longer.
3.Loss of service communication such as "Pencil Searches" or free pre-evaluation cost estimates will be lost
4.The appraisers will be paid approximately 50% of their current fee to do exactly the same work (they will be paid $175 by the Appraisal Management Companies for the same appraisal services for which they are now receiving $350)
5.The playing field is not leveled - either force every loan officer to use the same HVCC methods including those who are employed by Federally Chartered banks and lenders or eliminate the regulation
My professional experience in the real estate industry permits me to fully comprehend the impact and the opportunity for abuse of this new FHFA ruling. Please demand the reversal of this decision and an investigation into how this rule has been implemented without your approval. The only entity set to benefit from this change is the Appraisal Management Company industry. Home owners, home buyers and home sellers will be the losers as will the nation through a further slowing of the economy as driven by home sales, new home sales and home refinances.
Sincerely,
The head of the FHFA, James B. Lockhart, also the former Director of OFHEO, initiated the Home Valuation Code of Conduct to (paraphrased) "help curtail fraud between loan officers and appraisers".
How will it hurt the home owner/buyer? Two immediate impacts:
1. It currently costs about $350 for a Fannie Mae appraisal including the new MC1004 form which is a new $50 requirement. (Costs are estimates and I am not an appraiser but these are the average prices in the Atlanta area - check with your own appraiser) but Appraisal Management Companies (AMCs) charge as much as $450 or more for the same service and pay the appraiser as little as $175 - so let me ask you this, Mr. Lockhardt, would you do your same job for 1/2 the amount you have been being paid under duress and do it well?
2. Process time. Even though the AMCs may tell you there will be no delays our experience demonstrates appraisal turn times go from about 3 days to as much as 2 weeks. Why should anyone hurry if they are working for half price (the appraisers), getting paid for work they are not providing (the AMCs) and nobody has to answer directly to the borrower?
You see right now the frustrated borrowers and real estate agents have one point of contact - the loan officer - who has absolutely no control over the situation. Underwriting times are already backed up for as much as 30 days after the package has been received. Add 2 weeks of waiting for an appraisal and you're looking at as much as 6 weeks for a closing.
Another kick in the teeth to customers is the loss of free "pencil searches". For many years we (loan officers) have been able to order pencil searches on prospective properties or refinances. There has never been a cost to the borrower and we have used this to save home owners and buyers from ordering an appraisal on a deal that was in no way going to work. Forget about that - now they'll just have to wait until the appraisal comes back. So at $450 and two weeks waiting that neat little financing addendum the Georgia Association of Realtors added to their contract last year just became a joke.
If I were a buyer, agent, seller, home owner, appraiser or loan officer I would be livid about what this ridiculous requirement is doing to the American home buyer/owner/seller. Forget your commission - this is bad for your clients.
Senator contact lookup http://www.opencongress.org/person/senators
Representative contact lookup http://www.opencongress.org/person/representatives
Contact your Representative and Senator TODAY:
I am writing to you to register my opposition to the Home Valuation Code of Conduct which is mandatory on May 1, 2009 for all Fannie Mae and Freddie Mac Loans. Further I implore you to demand the reversal of this regulation. I oppose this regulation by the Federal Housing Finance Agency on the basis of the facts that:
1.Appraisal costs will immediately increase as much as 35% (from $350 to $450)
2.Appraisal turn times will increase as much as 400% (from 3 days to 12 days) increasing the time to close a simple, straight forward FNMA or FHLMC home purchase loan to as much as 45 days or longer.
3.Loss of service communication such as "Pencil Searches" or free pre-evaluation cost estimates will be lost
4.The appraisers will be paid approximately 50% of their current fee to do exactly the same work (they will be paid $175 by the Appraisal Management Companies for the same appraisal services for which they are now receiving $350)
5.The playing field is not leveled - either force every loan officer to use the same HVCC methods including those who are employed by Federally Chartered banks and lenders or eliminate the regulation
My professional experience in the real estate industry permits me to fully comprehend the impact and the opportunity for abuse of this new FHFA ruling. Please demand the reversal of this decision and an investigation into how this rule has been implemented without your approval. The only entity set to benefit from this change is the Appraisal Management Company industry. Home owners, home buyers and home sellers will be the losers as will the nation through a further slowing of the economy as driven by home sales, new home sales and home refinances.
Sincerely,
Does Anyone See Anything Wrong with UAW Taking Over Auto Industry? from Christopher Shearer
Christopher Shearer
Does anyone see anything wrong with the unions causing the car companies to be unprofitable, then when they are failing taking them over? Once the Union is the owner of the company, wouldnt that be a conflict of interest with thier union members? Would they be representing themselves as owner of the company or thier members that pay dues and have given the union's their power?
Isnt it beacuse of the high wages and consessions that the US unions demand the reason that the companies are NOT profitable. Then they are getting 55% ownership in the company for working Easter and not getting overtime until the worker has actually worked 40 hours? Does anyone see anything wrong with this picture?
Like to share an article from today's Wall Street Journal
By ALEX P. KELLOGG and KRIS MAHER
The United Auto Workers union would eventually own 55% of the stock in a restructured Chrysler LLC under the deal reached by the union and the auto maker, according to a summary of the agreement that was reviewed by the Wall Street Journal.
Fiat SpA "eventually" will own 35%, and the U.S. government and Chrysler's secured lenders together will end up owning 10% of the company once it is reorganized, that summary said.
The summary was distributed Monday evening at a gathering of union leaders in Sterling Heights, Mich. The deal was first disclosed Sunday night. The UAW aims for Chrysler workers to vote Wednesday on the proposed agreement, which requires changes to the union's current Chrysler contract.
According to the summary, Chrysler will also issue a $4.59 billion note to the health-care trust fund that the union will manage for retired workers. The agreement said Chrysler will pay $300 million in cash into the trust fund in 2010 and 2011, and increasing amounts up to $823 million in the years 2019 to 2023.
The trust fund will own a "significant" amount of Chrysler stock and will be allowed to appoint a representative to Chrysler's board, the summary said.
"While we realize the proposed sacrifices for UAW members are painful, we fought to maintain our wages, our health care and our jobs," UAW President Ron Gettelfinger wrote in a letter with the summary. The UAW summary also said the accord would provide the union with regular updates from the company on its long-term strategy and product plans.
In a separate agreement that paves the way for Chrysler to meet the U.S. Treasury Dept.'s deadline for a viability plan, Daimler AG said it agreed Monday to give up its remaining 19.9% stake in Chrysler LLC and pay as much as $600 million into the auto maker's pension fund.
That deal would end the relationship between Daimler and Chrysler except for supplier and customer relations. Daimler's 19.9% stake will be turned over to Chrysler's parent, Cerberus Capital Management LP.
The move allows Cerberus and Chrysler to intensify negotiations on a merger deal with Fiat. Chrysler needs the Fiat merger as well as cost concessions from its debt holders and the United Auto Workers to receive more U.S. aid and avoid bankruptcy. Chrysler and Cerberus also agreed to waive claims arising from Daimler's August 2007 sale of Chrysler to Cerberus.
Among the cost-cutting measures that the UAW leaders have accepted are a suspension of cost-of-living-adjustments and new limits on overtime pay. Workers will only be paid for overtime after they have worked at least 40 hours in a week. Chrysler workers will also lose their Easter Monday holiday in 2010 and 2011, according to the union summary.
Fiat has agreed to produce at least one small car in a Chrysler plant in the U.S., and to allow Chrysler to use a 3.0-liter diesel engine and a 1.4-liter gasoline engine in its vehicles. Fiat's investment, which the summary said Chrysler estimates is worth $8 billion, will "create 4,000 new UAW jobs in the U.S."
To ensure all Chrysler stakeholders are equally sacrificing to help the company recover, Chrysler will provide the UAW with quarterly updates and contributions by "executives, CEOs, dealers, suppliers and other constituents," the summary said.
The latest concessions would bring the UAW contract at Chrysler closer to the pay and benefits earned by workers at nonunion auto factories operated by rivals Honda Motor Co. and Toyota Motor Corp.
"This is the eclipse of the UAW. It's going to be a shadow of what it once was, I'm afraid," predicted Gary Chaison, a professor of labor relations at Clark University in Worcester, Mass., who was interviewed prior to the disclosure of all details.
The accord is likely to provide outlines for labor deals at General Motors Co. and possibly Ford Motor Co., said labor experts, dealing the union a broader setback. In addition to cuts in wages and benefits, the loss of working members and their dues due to factory closings, will shrink the union's clout and give it less money for organizing and political operations. On Monday, GM said it would eliminate 21,000 hourly-wage jobs.
"This will make it more difficult to do the things that the union is known for: organizing, political action, bargaining and community development," said John Russo of the Center for Working-Class Studies at Youngstown University.
UAW members are expected to ratify the latest round of cuts, believing a weaker contract in hand is better than the auto maker entering bankruptcy-court proceedings, in which a judge could throw out the labor contract altogether. A UAW spokesman said the ratification process is going forward and declined to comment further.
Bankruptcy is still possible at Chrysler if bondholders don't reach at agreement with the company that satisfies conditions laid out by the government. Neither Chrysler nor the U.S. Treasury Dept., which participated in the talks and approved the deal, would comment on the proposed accord.
The latest union concessions come on top of major givebacks on wages, retiree health benefits and job protections over the past few years with the Big Three auto makers. But those cuts proved inadequate in the face of the economic downturn and a steep drop in consumer demand for cars that pushed General Motors and Chrysler to the brink of bankruptcy.
Write to Alex P. Kellogg at alex.kellogg@wsj.com and Kris Maher at kris.maher@wsj.com
Printed in The Wall Street Journal, page A8B
Does anyone see anything wrong with the unions causing the car companies to be unprofitable, then when they are failing taking them over? Once the Union is the owner of the company, wouldnt that be a conflict of interest with thier union members? Would they be representing themselves as owner of the company or thier members that pay dues and have given the union's their power?
Isnt it beacuse of the high wages and consessions that the US unions demand the reason that the companies are NOT profitable. Then they are getting 55% ownership in the company for working Easter and not getting overtime until the worker has actually worked 40 hours? Does anyone see anything wrong with this picture?
Like to share an article from today's Wall Street Journal
By ALEX P. KELLOGG and KRIS MAHER
The United Auto Workers union would eventually own 55% of the stock in a restructured Chrysler LLC under the deal reached by the union and the auto maker, according to a summary of the agreement that was reviewed by the Wall Street Journal.
Fiat SpA "eventually" will own 35%, and the U.S. government and Chrysler's secured lenders together will end up owning 10% of the company once it is reorganized, that summary said.
The summary was distributed Monday evening at a gathering of union leaders in Sterling Heights, Mich. The deal was first disclosed Sunday night. The UAW aims for Chrysler workers to vote Wednesday on the proposed agreement, which requires changes to the union's current Chrysler contract.
According to the summary, Chrysler will also issue a $4.59 billion note to the health-care trust fund that the union will manage for retired workers. The agreement said Chrysler will pay $300 million in cash into the trust fund in 2010 and 2011, and increasing amounts up to $823 million in the years 2019 to 2023.
The trust fund will own a "significant" amount of Chrysler stock and will be allowed to appoint a representative to Chrysler's board, the summary said.
"While we realize the proposed sacrifices for UAW members are painful, we fought to maintain our wages, our health care and our jobs," UAW President Ron Gettelfinger wrote in a letter with the summary. The UAW summary also said the accord would provide the union with regular updates from the company on its long-term strategy and product plans.
In a separate agreement that paves the way for Chrysler to meet the U.S. Treasury Dept.'s deadline for a viability plan, Daimler AG said it agreed Monday to give up its remaining 19.9% stake in Chrysler LLC and pay as much as $600 million into the auto maker's pension fund.
That deal would end the relationship between Daimler and Chrysler except for supplier and customer relations. Daimler's 19.9% stake will be turned over to Chrysler's parent, Cerberus Capital Management LP.
The move allows Cerberus and Chrysler to intensify negotiations on a merger deal with Fiat. Chrysler needs the Fiat merger as well as cost concessions from its debt holders and the United Auto Workers to receive more U.S. aid and avoid bankruptcy. Chrysler and Cerberus also agreed to waive claims arising from Daimler's August 2007 sale of Chrysler to Cerberus.
Among the cost-cutting measures that the UAW leaders have accepted are a suspension of cost-of-living-adjustments and new limits on overtime pay. Workers will only be paid for overtime after they have worked at least 40 hours in a week. Chrysler workers will also lose their Easter Monday holiday in 2010 and 2011, according to the union summary.
Fiat has agreed to produce at least one small car in a Chrysler plant in the U.S., and to allow Chrysler to use a 3.0-liter diesel engine and a 1.4-liter gasoline engine in its vehicles. Fiat's investment, which the summary said Chrysler estimates is worth $8 billion, will "create 4,000 new UAW jobs in the U.S."
To ensure all Chrysler stakeholders are equally sacrificing to help the company recover, Chrysler will provide the UAW with quarterly updates and contributions by "executives, CEOs, dealers, suppliers and other constituents," the summary said.
The latest concessions would bring the UAW contract at Chrysler closer to the pay and benefits earned by workers at nonunion auto factories operated by rivals Honda Motor Co. and Toyota Motor Corp.
"This is the eclipse of the UAW. It's going to be a shadow of what it once was, I'm afraid," predicted Gary Chaison, a professor of labor relations at Clark University in Worcester, Mass., who was interviewed prior to the disclosure of all details.
The accord is likely to provide outlines for labor deals at General Motors Co. and possibly Ford Motor Co., said labor experts, dealing the union a broader setback. In addition to cuts in wages and benefits, the loss of working members and their dues due to factory closings, will shrink the union's clout and give it less money for organizing and political operations. On Monday, GM said it would eliminate 21,000 hourly-wage jobs.
"This will make it more difficult to do the things that the union is known for: organizing, political action, bargaining and community development," said John Russo of the Center for Working-Class Studies at Youngstown University.
UAW members are expected to ratify the latest round of cuts, believing a weaker contract in hand is better than the auto maker entering bankruptcy-court proceedings, in which a judge could throw out the labor contract altogether. A UAW spokesman said the ratification process is going forward and declined to comment further.
Bankruptcy is still possible at Chrysler if bondholders don't reach at agreement with the company that satisfies conditions laid out by the government. Neither Chrysler nor the U.S. Treasury Dept., which participated in the talks and approved the deal, would comment on the proposed accord.
The latest union concessions come on top of major givebacks on wages, retiree health benefits and job protections over the past few years with the Big Three auto makers. But those cuts proved inadequate in the face of the economic downturn and a steep drop in consumer demand for cars that pushed General Motors and Chrysler to the brink of bankruptcy.
Write to Alex P. Kellogg at alex.kellogg@wsj.com and Kris Maher at kris.maher@wsj.com
Printed in The Wall Street Journal, page A8B
Can You Believe Freddie Macs Ave 4.80% 30yr Fixed Rate Mortgage from Christopher Shearer
Christopher Shearer
Rates on long-term home mortgages are lower than short-term home loans, according to Freddie Mac's weekly survey.
"Interest rates for one-year ARMs exceeded those for 30-year fixed-rate mortgages over the last two weeks; this is the first time this has happened since Freddie Mac began collecting data for ARMs in January 1984," said Frank Nothaft, Freddie Mac chief economist.
The 30-year fixed-rate mortgage averaged 4.80% for the week ended Thursday, down from 4.82% last week and 6.03% a year ago.
Fifteen-year fixed-rate mortgages averaged 4.48%, unchanged from last week's low, and down from 5.62% a year ago.
Five-year Treasury-indexed hybrid adjustable-rate mortgages averaged 4.85%, down from 4.88% last week and 5.68% a year ago. One-year Treasury-indexed ARMs averaged 4.82%, down from 4.91% last week and 5.29% a year ago.
From Wall Street Jounral, April 24, 2009 page C-9
Rates on long-term home mortgages are lower than short-term home loans, according to Freddie Mac's weekly survey.
"Interest rates for one-year ARMs exceeded those for 30-year fixed-rate mortgages over the last two weeks; this is the first time this has happened since Freddie Mac began collecting data for ARMs in January 1984," said Frank Nothaft, Freddie Mac chief economist.
The 30-year fixed-rate mortgage averaged 4.80% for the week ended Thursday, down from 4.82% last week and 6.03% a year ago.
Fifteen-year fixed-rate mortgages averaged 4.48%, unchanged from last week's low, and down from 5.62% a year ago.
Five-year Treasury-indexed hybrid adjustable-rate mortgages averaged 4.85%, down from 4.88% last week and 5.68% a year ago. One-year Treasury-indexed ARMs averaged 4.82%, down from 4.91% last week and 5.29% a year ago.
From Wall Street Jounral, April 24, 2009 page C-9
Obama Administration Announces New Incentives for Loan Modification from Christopher Shearer
Chrisotpher Shearer
By JESSICA HOLZER
WASHINGTON -- The Obama administration on Tuesday will unveil a fresh set of incentives for mortgage servicers to help strapped homeowners, a senior administration official told Dow Jones Newswires.
Under a new program, the government will pay mortgage servicers $500 upfront and $250 a year for three years for successfully modifying a second mortgage, such as home equity loan.
Separately, the administration will unveil a schedule of incentives for holders of second mortgages to extinguish those liens voluntarily, the official said.
The administration will also announce a set of incentives for servicers and lenders participating in the Hope for Homeowners program, which aims to restore homeowners' lost equity by encouraging lenders to write down loan principal.
The announcements, which will come jointly from the Department of Housing and Urban Development and Treasury, are expected updates on the administration's plan to right the housing market. "We are tackling one of the challenges we recognized," the official said.
The issue of second mortgages has been dogging policymakers ever since the onset of the foreclosure crisis. A large share of troubled borrowers also have a second mortgage on their home, which is typically owned by a different investor than the first mortgage. Such borrowers may not be able to afford their monthly payments if only the first mortgage is modified.
The administration's effort on second mortgages is also aimed at soothing the concerns of investors, who have been crying foul over the Obama housing plan's incentives for servicers. They argue the first mortgage shouldn't be modified if the second one is left untouched. They also contend the banks that dominate mortgage servicing are conflicted because they own more than $400 billion of second mortgages. Such banks stand to gain from modifying the first mortgage because the second mortgage is more likely to be repaid once the homeowner is saved from foreclosure.
Some of the largest U.S. banks, including Bank of America, Wells Fargo and J.P. Morgan Chase, have already agreed to sign on to the program, the official said. The rest of the industry will be encouraged to participate.
Under the program, servicers must agree to modify all second mortgages where the first mortgage has already been modified. To qualify for payment, servicers must extend the term of the second mortgage and reduce the interest rate to match the first mortgage. Then, the government will share the cost with the servicer of reducing the rate down to 1% for amortizing loans and 2% for interest-only loans.
Borrowers will receive payments of up to $250 per year for as many as five years if they stay current on the loan. The payments will be applied to pay down principal on the first mortgage.
Changes to the Hope for Homeowners program are designed to place it in line with the taxpayer-assisted loan modifications. Launched last fall to help troubled borrowers refinance into more affordable government-backed loans, it has failed to gain traction due to onerous borrower requirements and the nagging problem of second liens.
The administration will announce Tuesday a $2,500 upfront payment to servicers that refinance borrowers into the program. Meanwhile, lenders that originate the new loans will receive $1,000 a year for three years, if the loans stays current.
Legislation to revamp the program is currently pending in Congress. Once those legislative fixes are made, HUD will work on creating a program to extinguish the second liens, the official said.
By JESSICA HOLZER
WASHINGTON -- The Obama administration on Tuesday will unveil a fresh set of incentives for mortgage servicers to help strapped homeowners, a senior administration official told Dow Jones Newswires.
Under a new program, the government will pay mortgage servicers $500 upfront and $250 a year for three years for successfully modifying a second mortgage, such as home equity loan.
Separately, the administration will unveil a schedule of incentives for holders of second mortgages to extinguish those liens voluntarily, the official said.
The administration will also announce a set of incentives for servicers and lenders participating in the Hope for Homeowners program, which aims to restore homeowners' lost equity by encouraging lenders to write down loan principal.
The announcements, which will come jointly from the Department of Housing and Urban Development and Treasury, are expected updates on the administration's plan to right the housing market. "We are tackling one of the challenges we recognized," the official said.
The issue of second mortgages has been dogging policymakers ever since the onset of the foreclosure crisis. A large share of troubled borrowers also have a second mortgage on their home, which is typically owned by a different investor than the first mortgage. Such borrowers may not be able to afford their monthly payments if only the first mortgage is modified.
The administration's effort on second mortgages is also aimed at soothing the concerns of investors, who have been crying foul over the Obama housing plan's incentives for servicers. They argue the first mortgage shouldn't be modified if the second one is left untouched. They also contend the banks that dominate mortgage servicing are conflicted because they own more than $400 billion of second mortgages. Such banks stand to gain from modifying the first mortgage because the second mortgage is more likely to be repaid once the homeowner is saved from foreclosure.
Some of the largest U.S. banks, including Bank of America, Wells Fargo and J.P. Morgan Chase, have already agreed to sign on to the program, the official said. The rest of the industry will be encouraged to participate.
Under the program, servicers must agree to modify all second mortgages where the first mortgage has already been modified. To qualify for payment, servicers must extend the term of the second mortgage and reduce the interest rate to match the first mortgage. Then, the government will share the cost with the servicer of reducing the rate down to 1% for amortizing loans and 2% for interest-only loans.
Borrowers will receive payments of up to $250 per year for as many as five years if they stay current on the loan. The payments will be applied to pay down principal on the first mortgage.
Changes to the Hope for Homeowners program are designed to place it in line with the taxpayer-assisted loan modifications. Launched last fall to help troubled borrowers refinance into more affordable government-backed loans, it has failed to gain traction due to onerous borrower requirements and the nagging problem of second liens.
The administration will announce Tuesday a $2,500 upfront payment to servicers that refinance borrowers into the program. Meanwhile, lenders that originate the new loans will receive $1,000 a year for three years, if the loans stays current.
Legislation to revamp the program is currently pending in Congress. Once those legislative fixes are made, HUD will work on creating a program to extinguish the second liens, the official said.
Saturday, April 25, 2009
Beware of Foreclosure Rescue Scams - Help Is Free! from Christopher Shearer
Christopher Shearer
Beware of Foreclosure Rescue Scams - Help Is Free!
The free government website is: www.makinghomesaffordable.gov
There is never a fee to get assistance or information about Making Home Affordable from your lender or a HUD-approved housing counselor.
Beware of any person or organization that asks you to pay a fee in exchange for housing counseling services or modification of a delinquent loan. Do not pay - walk away!
Beware of anyone who says they can "save" your home if you sign or transfer over the deed to your house. Do not sign over the deed to your property to any organization or individual unless you are working directly with your mortgage company to forgive your debt.
Never submit your mortgage payments to anyone other than your mortgage company without their approval.
The Obama Administration has launched a coordinated effort across federal and state government and the private sector to target mortgage loan modification fraud and foreclosure rescue scams that threaten to hurt American homeowners and prevent them from getting the help they need during these challenging times. Click here for more information.
The Obama Administration has introduced a comprehensive Financial Stability Plan to address the key problems at the heart of the current crisis and get our economy back on track. A critical piece of that effort is Making Home Affordable, a plan to stabilize our housing market and help up to 7 to 9 million Americans reduce their monthly mortgage payments to more affordable levels.
The Home Affordable Refinance Program gives up to 4 to 5 million homeowners with loans owned or guaranteed by Fannie Mae or Freddie Mac an opportunity to refinance into more affordable monthly payments. The Home Affordable Modification Program commits $75 billion to keep up to 3 to 4 million Americans in their homes by preventing avoidable foreclosures.
Our consumer website, www.MakingHomeAffordable.gov, provides homeowners with detailed information about these programs along with self-assessment tools and calculators to empower borrowers with the resources they need to determine whether they might be eligible for a modification or a refinance under the Administration's program. Through this website, borrowers can also connect with free counseling resources to help with outstanding questions; locate homeowner events in their communities; find a handy checklist of key documents and materials to have ready when making that important call to their servicer as well as FAQs from borrowers in similar circumstances; and much more.
We hope that you will find this website informative and useful as we all work together to solve our nation's housing crisis and put our country on the path to a lasting economic recovery.
Helpful Links
FinancialStability.gov
Refinance Eligibility
Modification Eligibility
Find a Counselor
Homeowner Events
Frequently Asked Questions
Beware of Foreclosure Rescue Scams - Help Is Free!
The free government website is: www.makinghomesaffordable.gov
There is never a fee to get assistance or information about Making Home Affordable from your lender or a HUD-approved housing counselor.
Beware of any person or organization that asks you to pay a fee in exchange for housing counseling services or modification of a delinquent loan. Do not pay - walk away!
Beware of anyone who says they can "save" your home if you sign or transfer over the deed to your house. Do not sign over the deed to your property to any organization or individual unless you are working directly with your mortgage company to forgive your debt.
Never submit your mortgage payments to anyone other than your mortgage company without their approval.
The Obama Administration has launched a coordinated effort across federal and state government and the private sector to target mortgage loan modification fraud and foreclosure rescue scams that threaten to hurt American homeowners and prevent them from getting the help they need during these challenging times. Click here for more information.
The Obama Administration has introduced a comprehensive Financial Stability Plan to address the key problems at the heart of the current crisis and get our economy back on track. A critical piece of that effort is Making Home Affordable, a plan to stabilize our housing market and help up to 7 to 9 million Americans reduce their monthly mortgage payments to more affordable levels.
The Home Affordable Refinance Program gives up to 4 to 5 million homeowners with loans owned or guaranteed by Fannie Mae or Freddie Mac an opportunity to refinance into more affordable monthly payments. The Home Affordable Modification Program commits $75 billion to keep up to 3 to 4 million Americans in their homes by preventing avoidable foreclosures.
Our consumer website, www.MakingHomeAffordable.gov, provides homeowners with detailed information about these programs along with self-assessment tools and calculators to empower borrowers with the resources they need to determine whether they might be eligible for a modification or a refinance under the Administration's program. Through this website, borrowers can also connect with free counseling resources to help with outstanding questions; locate homeowner events in their communities; find a handy checklist of key documents and materials to have ready when making that important call to their servicer as well as FAQs from borrowers in similar circumstances; and much more.
We hope that you will find this website informative and useful as we all work together to solve our nation's housing crisis and put our country on the path to a lasting economic recovery.
Helpful Links
FinancialStability.gov
Refinance Eligibility
Modification Eligibility
Find a Counselor
Homeowner Events
Frequently Asked Questions
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