A Change in Approach Could Ease Housing Crisis

The United States is on track to experience a record number of foreclosures this year and could break another record in 2011, says columnist Ezra Klein, who lists four ideas housing industry experts are weighing as they attempt to jump-start a struggling market.

One is to revamp the Home Affordable Modification Program (HAMP) to empower housing counselors to modify mortgages using a standard formula, rather than leaving this task to the banks.

Second, banks could be given an incentive to participate in HAMP by empowering bankruptcy judges to modify the principal on mortgages.

Third, experts say that making mediation programs a mandatory requirement will give banks an opportunity to meet with every distressed home owner, look through the papers, consider the nuances of the situation, and make a good-faith effort to work out an arrangement.

And fourth, right-to-rent programs could be expanded for foreclosed home owners — like the one operated by Fannie Mae, which lets home owners rent their homes at fair-market value for five years.

Source: Washington Post, Ezra Klein (10/15/10) 

© Copyright 2010 Information Inc.
 

Federal Housing Rescue Plan Launches

The Obama Administration’s program to rescue distressed home owners got off the ground this week. The program was announced on Feb. 18, but it took several weeks to put the bureaucracy in place.

Six of the nation’s largest banks signed up to participate, the Treasury Department announced Wednesday. They are JPMorgan Chase, Wells Fargo, Citigroup, GMAC Mortgage, Saxon Mortgage Services, and Select Portfolio Servicing.

Treasury says it is allocating $50 billion to the program. The Department of Housing and Urban Development will provide the rest.

The plan calls for loan servicers to reduce interest rates so a family’s monthly mortgage obligation is no more than 38 percent of its pre-tax income. Loan servicers also can reduce loan balances. After the loans are modified, the government then provides enough money to reduce payments to 31 percent of income.
Participating servicers get $1,000 a year for each modification and another $1,000 a year for three years if the borrower remains current. Servicers get an extra $500 if they do the modifications before the borrower falls behind in his payments—and the borrower gets $1,500. Also, homeowners get $1,000 a year for five years if they remain current on their payments. The money must be used to reduce their principal balances.

Source: CNN, Tami Luhby (04/16/2009)

Georgia Dream, NSP

I know I said this before…but really, NOW is a good time to buy. Take a look at what my mortgage specialist sent me:

“DCA Allows up to $14,000 for down payment or repairs on foreclosed properties under Neighborhood Stabilization Program

The Department of Community Affairs, better known as DCA, has come out with a new program to help sell foreclosures and benefit owner- occupant purchasers whether or not they are first time homeowners.

Tagged the Neighborhood Stabilization Program (NSP), DCA will provide $14,000 to be used for down payment assistance or repairs as long as the property is purchased at 85% or less of the market value as determined by an appraisal that is required prior to contract.

Borrowers must qualify for FHA or VA loan guidelines and fall within fairly generous  income limitations (cannot exceed 120% of Area Median Income) based on the number of family members and must attend a required counseling course.  For example, a family of 2 purchasing in a metro Atlanta county, could earn up to $68,350 and a family of 4 can earn up to $85,450.

The $14,000 DAP would be an interest free second mortgage “loan” that would not have to be repaid as long as the customer lives in the house for at least 5 years.  Otherwise, it would have to be repaid on a pro-rata basis of 20% of the DAP amount per year when the house is sold.

DCA will fund the NSP loan as per the Georgia Dream Seller Guide, Chapter 2, Section 212.  For more information, visit their website at: http://www.dca.state.ga.us/housing/homeownership/programs/GeorgiaDream.asp

This and That

FHA cash out refis: I had a question last week about the new changes that are taking place with FHA in regards to refinancing.  FHA previously allowed up to 95% LTV for cash out refinances but is going back to 85% LTV effective April 1st.

Investment Property:  Be prepared to put 25% down for purchases.

New Appraisal Procedures: In an effort to take some of the alleged “loan officer influence” out of the appraisal process, most lenders are going to a system May 1st that will require lenders to rotate conventional appraisal orders and not allow loan officers to discuss cases directly with appraisers.  The rule may not apply to FHA loans, but some lenders may apply it to all appraisals just to be safe.   

Underwriting Turnaround: If I were you, I would be asking your loan officer if they have underwriters and closers on location.  I am hearing stories that brokered loans can take as long as 3 weeks to underwrite.  Refinances are the culprit.

Making Home Affordable: The U.S. Treasury Department went live on March 19th with its Making Home Affordable program, which aims to help homeowners refinance or modify their mortgages. The toll free no. for this service is 888-995-4673.  The website is http://www. Makinghomeaffordable.gov.

Loan  Modifications: Dick Runstadler, who represents US Housing Assist, disagrees with one of the things I mentioned last week about qualifying for loan modifications.  The company I talked to, Integrated Loan Services, told me that they typically require borrowers to have verifiable income to qualify for a loan modification.  Dick says that USHA has closed many loan modifications for unemployed people.  For more information about USHA, contact Dick at 678-455-0072.

Name Change:  Opteum Mortgage, Metro Cities Mortgage, F&T Mortgage and several former Indy Mac retail branches will soon operate under one parent company: Prospect Mortgage.  Opteum is scheduled to change its name to Prospect on April 1st.  Prospect Mortgage will thus operate a network of mortgage offices in all 50 states.  So I wanted to let you know that I will be getting new business cards soon.  You will have to wait and see what they say.

And finally, to the agent that expressed resentment to the “political comments” and inferences I made in last week’s column  in regards to the AIG bonuses, I would like to apologize.  The goal in my newsletter each week is to educate, inform and entertain.  So from hence forth and without hesitation, upon request, I will gladly refund anybody’s subscription fee.

Until next week.”

Best regards,

Sam Thompson
Loan Officer and columnist
email: Sthompson@opteum.com <mailto:Sthompson@opteum.com>
web:  http://www.opteum.com/sthompson <http://www.opteum.com/sthompson>

Bankers Still Resisting Bankruptcy Cram downs

Banks are facing the inevitability of bankruptcy modification of mortgages.Banks have fought the notion of what is called a cramdown, saying that giving bankruptcy judges the ability to modify first mortgages will drive up borrowing costs for everyone.Supporters of cramdowns point out that modifications are no more costly than bankruptcies.To get the support of Citigroup, the only major bank that has spoken out in favor of bankruptcy modification, supporters of the proposal agreed to limit the cramdowns to existing mortgages. Banking industry lobbyists want to further limit the cramdowns to subprime loans taken out between 2002 and 2007. “To the extent that anything is ultimately passed, we would certainly want to limit that damage,” says Steve O’Connor, head lobbyist for the Mortgage Bankers Association.

 

 

 

 

Source: Business Week, Theo Francis