The Treasury Department is planning to rate mortgage companies on how they treat customers as part of the Obama administration's $75 billion foreclosure relief effort.
The new report will include measurements of how each company is handling borrowers and is expected by July, Treasury Secretary Timothy Geithner told Senate lawmakers on Thursday.
More than 100 companies participate in the program, which is designed to help up to 4 million borrowers avoid foreclosure.
Speaking in unusually strong language, Geithner said many companies "are not responding to the needs of responsible and increasingly desperate homeowners."
If they don't comply with the program's rules, he said, "We will withhold incentives or demand their repayment."
The program is designed to lower borrowers' monthly payments by reducing mortgage rates to as low as 2 percent for five years and extending loan terms to as long as 40 years. Mortgage companies get taxpayer incentives to reduce borrowers' monthly payments. Homeowners have to complete at least three months of payments to qualify for permanent loan modifications.
About 231,000 homeowners have completed this process so far. That's about 20 percent of the 1.2 million borrowers who started the program over the past year.
Many experts say that's inadequate. "Families are tragically being foreclosed on when foreclosure was preventable," said Richard Neiman, New York's top banking regulator and a member of the independent Congressional Oversight Panel. The panel was set up to oversee the government's financial bailout programs.
And the number of dropouts is rising. About 155,000 homeowners didn't complete the initial trial phase. Another 2,900 fell out even after their loans were modified. Many more are still in limbo.
Source: Copyright © 2010 The Associated Press, Alan Zibel, AP real estate writer. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
Friday, April 30, 2010
End of tax credit unlikely to deter most buyers
The homebuyer tax credit expires for anyone without a signed contract today at midnight; but a survey conducted by Prudential Real Estate and Relocation Services Inc. finds that it might not slow the real estate market to an appreciable extent. The survey of 1,000 Americans between the ages of 25-64 with at least $35,000 in household income was conducted April 15-20, 2010.
More than 90 percent of consumers believe the homebuyer tax credits helped both first-time homebuyers and the U.S. housing market overall. Among consumers actually shopping for homes, 65 percent believe that the end of the tax credits will have little or no effect on their interest in purchasing a home.
While consumers remain unsure about the direction of the housing market, the survey reveals that they are optimistic, and 46 percent expect real estate prices in their area to increase over the next year. Just 12 percent expect price declines. Over the next five years, 79 percent expect real estate prices to increase, with 20 percent expecting prices to increase substantially.
"The survey underscores the key role the federal homebuyer tax credits played in stimulating residential real estate market activity and the U.S. economy," says James Mallozzi, chairman and chief executive officer of Prudential Real Estate and Relocation Services, Inc. "It also shows that most consumers believe the market has hit bottom and are more optimistic about the future."
Survey respondents cite rising mortgage interest rates and unemployment as the most important factors affecting their decision to purchase a home, along with more stringent lending criteria and fewer mortgage-backed securities purchased by the Federal Reserve. The expiration of the tax credits placed lowest on their list of concerns.
Among those who recently purchased a home, 61 percent cited low mortgage interest rates as "very important" to their decisions – an amount greater than either the tax credit or even cheaper prices. The 66 percent expecting interest rates to rise underscores potential headwinds for the market.
"The tax credits clearly helped stimulate the market when consumer confidence was low and housing inventory was high," says Earl Lee, president, Prudential Real Estate and Relocation Services, Inc. "While the tax credit expiration is a concern for many, the bigger issues now are the availability and cost of financing, as well as if they will have a job."
Despite the significant downturn in the real estate market, the perception that owning a home is a good investment remains intact. Among current renters, 75 percent still believe owning their home is a better long-term choice for their needs than renting. The majority of consumers also believe that homeownership is a better investment than individual stocks or bonds (75 percent), mutual funds (72 percent), or savings accounts (74 percent).
"The real estate market is precariously balanced. Consumers are clearly motivated to take advantage of the opportunities the current low interest rates and prices afford," Lee notes. "While the market is picking up in terms of sales and confidence, and the majority still believe that owning a home is a good investment, the outlook for the market remains highly dependent upon the direction of the economy overall."
The Prudential Real Estate Outlook Survey was conducted online. The margin of error is +/- 3 percent. A more detailed breakdown of the data is available, as well as supporting charts and visuals, at www.news.prudential.com.
Source: © 2010 Florida Realtors®
More than 90 percent of consumers believe the homebuyer tax credits helped both first-time homebuyers and the U.S. housing market overall. Among consumers actually shopping for homes, 65 percent believe that the end of the tax credits will have little or no effect on their interest in purchasing a home.
While consumers remain unsure about the direction of the housing market, the survey reveals that they are optimistic, and 46 percent expect real estate prices in their area to increase over the next year. Just 12 percent expect price declines. Over the next five years, 79 percent expect real estate prices to increase, with 20 percent expecting prices to increase substantially.
"The survey underscores the key role the federal homebuyer tax credits played in stimulating residential real estate market activity and the U.S. economy," says James Mallozzi, chairman and chief executive officer of Prudential Real Estate and Relocation Services, Inc. "It also shows that most consumers believe the market has hit bottom and are more optimistic about the future."
Survey respondents cite rising mortgage interest rates and unemployment as the most important factors affecting their decision to purchase a home, along with more stringent lending criteria and fewer mortgage-backed securities purchased by the Federal Reserve. The expiration of the tax credits placed lowest on their list of concerns.
Among those who recently purchased a home, 61 percent cited low mortgage interest rates as "very important" to their decisions – an amount greater than either the tax credit or even cheaper prices. The 66 percent expecting interest rates to rise underscores potential headwinds for the market.
"The tax credits clearly helped stimulate the market when consumer confidence was low and housing inventory was high," says Earl Lee, president, Prudential Real Estate and Relocation Services, Inc. "While the tax credit expiration is a concern for many, the bigger issues now are the availability and cost of financing, as well as if they will have a job."
Despite the significant downturn in the real estate market, the perception that owning a home is a good investment remains intact. Among current renters, 75 percent still believe owning their home is a better long-term choice for their needs than renting. The majority of consumers also believe that homeownership is a better investment than individual stocks or bonds (75 percent), mutual funds (72 percent), or savings accounts (74 percent).
"The real estate market is precariously balanced. Consumers are clearly motivated to take advantage of the opportunities the current low interest rates and prices afford," Lee notes. "While the market is picking up in terms of sales and confidence, and the majority still believe that owning a home is a good investment, the outlook for the market remains highly dependent upon the direction of the economy overall."
The Prudential Real Estate Outlook Survey was conducted online. The margin of error is +/- 3 percent. A more detailed breakdown of the data is available, as well as supporting charts and visuals, at www.news.prudential.com.
Source: © 2010 Florida Realtors®
Thursday, April 29, 2010
Counties still offer affordable mortgages
Buyers may not always get the best mortgage deal if they don't ask the right questions. While a number of lenders participate in local affordable housing programs, they might not automatically offer their lowest mortgage rate/lowest downpayment option to a buyer.
The programs vary by county and have different rules for approval. But in some counties – Indian River, Martin, Okeechobee and St. Lucie counties, for example – a client does not have to be a first-time buyer to qualify for a 4.79 percent mortgage rate and up to $8,000 in downpayment assistance amortized for twenty years at 0 percent. In those counties, a family with at least three members qualifies if the household income is less than about $82,000.
A total of 24 counties – many in the Panhandle – participate in the same plan, though the details vary by county. Most individual programs apply only to first-time homebuyers, for example, and have different maximum household incomes, though none are less than $67,000 per household. The program currently has $12 million in funding
"Realtors ask me, 'Why have I never heard of this program?'" says C.J. Pipkins, Escambia County HFA Housing Program Director. "Many times, the lending agent doesn't realize the program exists. While it's not difficult to find a lender that participates in the program, many times they don't offer it to the buyer if the buyer doesn't specifically request it." HFA stands for Housing Finance Authority.
Lenders also have a financial incentive not to immediately offer qualified buyers government-backed mortgage programs: In most cases, the lender makes less money on the loan. Participating lenders vary by county and program, but the 24-county program includes big names like Bank of America and Wells Fargo.
"We have 20 participating lenders in our program," says Pipkins. "When a potential homebuyer contacts one of these lenders, he should request a loan officer that has been trained in the program and been given an access code to register loans."
Since counties and cities have unique mortgage requirements, homebuyers many times must hunt for an affordable mortgage. Pipkins suggests that buyers outside her 24-county area start by contacting their local Housing Finance Authority. They should also conduct an Internet website search.
For more information on the 24 counties served by the Escambia County Housing Finance Authority and the applicable rules for loans, visit their website at: http://www.escambiahfa.com.
Source: © 2010 Florida Realtors®
The programs vary by county and have different rules for approval. But in some counties – Indian River, Martin, Okeechobee and St. Lucie counties, for example – a client does not have to be a first-time buyer to qualify for a 4.79 percent mortgage rate and up to $8,000 in downpayment assistance amortized for twenty years at 0 percent. In those counties, a family with at least three members qualifies if the household income is less than about $82,000.
A total of 24 counties – many in the Panhandle – participate in the same plan, though the details vary by county. Most individual programs apply only to first-time homebuyers, for example, and have different maximum household incomes, though none are less than $67,000 per household. The program currently has $12 million in funding
"Realtors ask me, 'Why have I never heard of this program?'" says C.J. Pipkins, Escambia County HFA Housing Program Director. "Many times, the lending agent doesn't realize the program exists. While it's not difficult to find a lender that participates in the program, many times they don't offer it to the buyer if the buyer doesn't specifically request it." HFA stands for Housing Finance Authority.
Lenders also have a financial incentive not to immediately offer qualified buyers government-backed mortgage programs: In most cases, the lender makes less money on the loan. Participating lenders vary by county and program, but the 24-county program includes big names like Bank of America and Wells Fargo.
"We have 20 participating lenders in our program," says Pipkins. "When a potential homebuyer contacts one of these lenders, he should request a loan officer that has been trained in the program and been given an access code to register loans."
Since counties and cities have unique mortgage requirements, homebuyers many times must hunt for an affordable mortgage. Pipkins suggests that buyers outside her 24-county area start by contacting their local Housing Finance Authority. They should also conduct an Internet website search.
For more information on the 24 counties served by the Escambia County Housing Finance Authority and the applicable rules for loans, visit their website at: http://www.escambiahfa.com.
Source: © 2010 Florida Realtors®
Tax credit doesn’t expire yet for military
Members of the military, foreign service and intelligence communities may have an additional year to buy a home and claim the homebuyer tax credit – up to $8,000 – that expires for most Americans on April 30.
To qualify for the extended tax credit deadline, service members must have served on official extended duty outside of the United States for 90 days or more at any time between Jan. 1, 2009, and April 30, 2010. If so, they have until April 30, 2011, to sign a sales contract, and until June 30, 2011, to settle and close on the home. The rule includes both the $8,000 first-time and $6,500 repeat homebuyer tax credit.
Under the law, "qualified service members" includes those serving in the uniformed services of the United States military, a member of the Foreign Service of the United States or an employee of the intelligence community.
The rule that requires buyers to repay the credit if they move out of their home within three years has also been waived for qualified service members if they must sell their home after receiving government orders for extended duty service.
Source: © 2010 Florida Realtors®
To qualify for the extended tax credit deadline, service members must have served on official extended duty outside of the United States for 90 days or more at any time between Jan. 1, 2009, and April 30, 2010. If so, they have until April 30, 2011, to sign a sales contract, and until June 30, 2011, to settle and close on the home. The rule includes both the $8,000 first-time and $6,500 repeat homebuyer tax credit.
Under the law, "qualified service members" includes those serving in the uniformed services of the United States military, a member of the Foreign Service of the United States or an employee of the intelligence community.
The rule that requires buyers to repay the credit if they move out of their home within three years has also been waived for qualified service members if they must sell their home after receiving government orders for extended duty service.
Source: © 2010 Florida Realtors®
Tax credit doesn’t expire yet for military
Members of the military, foreign service and intelligence communities may have an additional year to buy a home and claim the homebuyer tax credit – up to $8,000 – that expires for most Americans on April 30.
To qualify for the extended tax credit deadline, service members must have served on official extended duty outside of the United States for 90 days or more at any time between Jan. 1, 2009, and April 30, 2010. If so, they have until April 30, 2011, to sign a sales contract, and until June 30, 2011, to settle and close on the home. The rule includes both the $8,000 first-time and $6,500 repeat homebuyer tax credit.
Under the law, "qualified service members" includes those serving in the uniformed services of the United States military, a member of the Foreign Service of the United States or an employee of the intelligence community.
The rule that requires buyers to repay the credit if they move out of their home within three years has also been waived for qualified service members if they must sell their home after receiving government orders for extended duty service.
Source: © 2010 Florida Realtors®
To qualify for the extended tax credit deadline, service members must have served on official extended duty outside of the United States for 90 days or more at any time between Jan. 1, 2009, and April 30, 2010. If so, they have until April 30, 2011, to sign a sales contract, and until June 30, 2011, to settle and close on the home. The rule includes both the $8,000 first-time and $6,500 repeat homebuyer tax credit.
Under the law, "qualified service members" includes those serving in the uniformed services of the United States military, a member of the Foreign Service of the United States or an employee of the intelligence community.
The rule that requires buyers to repay the credit if they move out of their home within three years has also been waived for qualified service members if they must sell their home after receiving government orders for extended duty service.
Source: © 2010 Florida Realtors®
Tuesday, April 27, 2010
Florida again top state for mortgage fraud
Florida once again was rated the top state for mortgage fraud, according to a report released Monday by the LexisNexis Mortgage Asset Research Institute.
Florida also held the annual report's top spot in 2006 and 2007, but was replaced in 2008 by Rhode Island. New York was in second place behind Florida in 2009, followed by California.
The Miami-Fort Lauderdale region ranked fourth among the metropolitan areas studied, institute researchers found, accounting for 4 percent of all mortgage fraud reported nationwide. The New York-New Jersey-Long Island area was first, followed by Los Angeles-Riverside and the tri-state Chicago-Gary-Kenosha region.
The report looked at incidents of alleged fraud and misrepresentation reported by lenders, agencies and insurers to the Mortgage Industry Data Exchange, or MIDEX. Researchers also analyzed 67,190 suspicious mortgage activity reports submitted last year to the U.S. Treasury Department's financial crimes division.
The LexisNexis rankings come through a formula that balances reported fraud incidents with the number of loans originated for properties in that state. Florida had almost three times the number of fraud or misrepresentation reports as what would be considered normal for the number of loans.
Analysts were particularly concerned about skyrocketing incidents of appraisal fraud nationwide, with Florida having the highest rates of this activity in the country. The most common practice was inflating, fabricating or incorrectly reporting comparables, seen in 36 percent of loans nationwide flagged for fraud.
Darius Bozorgi, CEO of Veros Real Estate Solutions, which assisted in compiling the report, blamed the poor housing market. "Florida is the No. 1 state for depreciating home prices. So it's really no surprise that Florida is the No. 1 state for fraud," he said.
This year may remain grim for Florida. The VeroFORECAST report, which projects market trends over the next 12 to 18 months, recently listed the five anticipated weakest markets nationwide. All were in Florida, although none in South Florida, with the Daytona Beach area the first with a projected 10 percent drop in values.
On a brighter note, Florida and New York showed dramatic declines in mortgage application fraud from 2008 to 2009, although it remained the most common form of mortgage malfeasance.
Mortgage incident reports nationwide went up 7 percent from 2008 to 2009, the report found. The institute and Veros called on government and the mortgage industry to be increasingly vigilant, as fraudulent brokers and loan originators are using more sophisticated methods.
"Fraudsters are taking advantage of desperate consumers and confused consumers," said Denise James, LexisNexis Risk Solutions' director of Real Estate Solutions who co-wrote the report.
Florida has tightened regulations for the mortgage industry over the past two years and stepped up enforcement.
Consumers never should pay upfront for loan modifications or foreclosure rescue work, as its now illegal. And as of Jan. 1, anyone who does modifications needs to be licensed as a mortgage broker with the Florida Office of Financial Regulation.
To check a broker's license or make a complaint in regard to mortgage services, call 800-848-3792 or go to http://www.flofr.com
The Florida Attorney General's Office also has ongoing cases against foreclosure rescue operations. Call 866-966-7226 or go to http://www.myfloridalegal.com.
Soruce: Copyright © 2010 Sun Sentinel, Fort Lauderdale, Fla., Diane Lade. Distributed by McClatchy-Tribune Information Services.
Florida also held the annual report's top spot in 2006 and 2007, but was replaced in 2008 by Rhode Island. New York was in second place behind Florida in 2009, followed by California.
The Miami-Fort Lauderdale region ranked fourth among the metropolitan areas studied, institute researchers found, accounting for 4 percent of all mortgage fraud reported nationwide. The New York-New Jersey-Long Island area was first, followed by Los Angeles-Riverside and the tri-state Chicago-Gary-Kenosha region.
The report looked at incidents of alleged fraud and misrepresentation reported by lenders, agencies and insurers to the Mortgage Industry Data Exchange, or MIDEX. Researchers also analyzed 67,190 suspicious mortgage activity reports submitted last year to the U.S. Treasury Department's financial crimes division.
The LexisNexis rankings come through a formula that balances reported fraud incidents with the number of loans originated for properties in that state. Florida had almost three times the number of fraud or misrepresentation reports as what would be considered normal for the number of loans.
Analysts were particularly concerned about skyrocketing incidents of appraisal fraud nationwide, with Florida having the highest rates of this activity in the country. The most common practice was inflating, fabricating or incorrectly reporting comparables, seen in 36 percent of loans nationwide flagged for fraud.
Darius Bozorgi, CEO of Veros Real Estate Solutions, which assisted in compiling the report, blamed the poor housing market. "Florida is the No. 1 state for depreciating home prices. So it's really no surprise that Florida is the No. 1 state for fraud," he said.
This year may remain grim for Florida. The VeroFORECAST report, which projects market trends over the next 12 to 18 months, recently listed the five anticipated weakest markets nationwide. All were in Florida, although none in South Florida, with the Daytona Beach area the first with a projected 10 percent drop in values.
On a brighter note, Florida and New York showed dramatic declines in mortgage application fraud from 2008 to 2009, although it remained the most common form of mortgage malfeasance.
Mortgage incident reports nationwide went up 7 percent from 2008 to 2009, the report found. The institute and Veros called on government and the mortgage industry to be increasingly vigilant, as fraudulent brokers and loan originators are using more sophisticated methods.
"Fraudsters are taking advantage of desperate consumers and confused consumers," said Denise James, LexisNexis Risk Solutions' director of Real Estate Solutions who co-wrote the report.
Florida has tightened regulations for the mortgage industry over the past two years and stepped up enforcement.
Consumers never should pay upfront for loan modifications or foreclosure rescue work, as its now illegal. And as of Jan. 1, anyone who does modifications needs to be licensed as a mortgage broker with the Florida Office of Financial Regulation.
To check a broker's license or make a complaint in regard to mortgage services, call 800-848-3792 or go to http://www.flofr.com
The Florida Attorney General's Office also has ongoing cases against foreclosure rescue operations. Call 866-966-7226 or go to http://www.myfloridalegal.com.
Soruce: Copyright © 2010 Sun Sentinel, Fort Lauderdale, Fla., Diane Lade. Distributed by McClatchy-Tribune Information Services.
Jumbo market inching back to health
The jumbo mortgage market is taking small steps toward normalcy.
In the first few months of 2010, Wells Fargo, Bank of America, and U.S. Bank have become more aggressive in originating jumbo mortgages, says A.W. Pickel, president of LeaderOne Financial, a mortgage lender in Overland Park, Kan. "If you underwrite carefully and cautiously, a jumbo loan is a very good moneymaker for a bank," he says.
Last week, Redwood Trust Inc. announced plans to sell mortgage-backed securities based on high-quality jumbo loans, one of the first private firms to do so since 2008.
If the program is successful, it could lead to more investors taking the leap and a loosening of the jumbo market, says Michael Fratantoni, vice president of research and economics for the Mortgage Bankers Association.
Source: MarketWatch, Amy Hoak (04/26/2010)
Source: INFORMATION, INC. Bethesda, MD
In the first few months of 2010, Wells Fargo, Bank of America, and U.S. Bank have become more aggressive in originating jumbo mortgages, says A.W. Pickel, president of LeaderOne Financial, a mortgage lender in Overland Park, Kan. "If you underwrite carefully and cautiously, a jumbo loan is a very good moneymaker for a bank," he says.
Last week, Redwood Trust Inc. announced plans to sell mortgage-backed securities based on high-quality jumbo loans, one of the first private firms to do so since 2008.
If the program is successful, it could lead to more investors taking the leap and a loosening of the jumbo market, says Michael Fratantoni, vice president of research and economics for the Mortgage Bankers Association.
Source: MarketWatch, Amy Hoak (04/26/2010)
Source: INFORMATION, INC. Bethesda, MD
Monday, April 26, 2010
GFE: New paperwork meant to protect buyers creates new headaches
As the real estate industry makes the transition to a revised Good Faith Estimate (GFE) launched by the Department of Housing and Urban Development (HUD) earlier this year, feedback from lenders and consumers suggests that the new process may be confusing and impractical.
Closings have been dragged out as brokers and title insurers strive to understand the longer, more detailed document and explain it to home buyers; and some lenders have been forced to create their own forms in an effort to explain what is reflected in the GFE.
The GFE changes are well-intentioned, aiming to provide new transparency on costs to buyers, who have long complained of hidden fees; better allow comparison shopping between lenders; prevent kickbacks and referral fees; and make lenders more accountable for mistakes or misrepresentations.
But, says Pava Leyrer of Heritage National Mortgage in Grandville, Mich., "borrowers are looking at this form and saying, 'This doesn't make any sense for us, why can't we have something that's more simple?'"
Among the areas causing confusion are previously itemized costs that are now are lumped together; the inclusion of some seller-paid costs, like title insurance fees, that inflate the estimate by thousands over what the borrower would actually pay at settlement; and the absence of a total monthly payment estimate on the GFE, which borrowers must now calculate on their own by referring to other documents.
Source: Boston Globe (04/23/10) Sainz, Adrian
Source: INFORMATION, INC. Bethesda, MD
Closings have been dragged out as brokers and title insurers strive to understand the longer, more detailed document and explain it to home buyers; and some lenders have been forced to create their own forms in an effort to explain what is reflected in the GFE.
The GFE changes are well-intentioned, aiming to provide new transparency on costs to buyers, who have long complained of hidden fees; better allow comparison shopping between lenders; prevent kickbacks and referral fees; and make lenders more accountable for mistakes or misrepresentations.
But, says Pava Leyrer of Heritage National Mortgage in Grandville, Mich., "borrowers are looking at this form and saying, 'This doesn't make any sense for us, why can't we have something that's more simple?'"
Among the areas causing confusion are previously itemized costs that are now are lumped together; the inclusion of some seller-paid costs, like title insurance fees, that inflate the estimate by thousands over what the borrower would actually pay at settlement; and the absence of a total monthly payment estimate on the GFE, which borrowers must now calculate on their own by referring to other documents.
Source: Boston Globe (04/23/10) Sainz, Adrian
Source: INFORMATION, INC. Bethesda, MD
Buying your first home in 5 steps
As a Realtor, Lacy Williams gives presentations to first-time home buyers about what to expect when buying a home.
She often finds she must start at the beginning, helping novice buyers decide whether it makes more financial sense to rent or buy. Then she gets down to the nuts and bolts: how to get a loan, pick a Realtor and look for a home.
"I tell people there are no stupid questions. Ask anything you don't understand," says Williams, with Joyner Fine Properties in Richmond, Va. "One of the biggest mistakes they make is they go to an open house and wind up buying from the listing agent. The listing agent represents the seller. They need a Realtor who represents them."
With the spring buying season in full swing, first-time home buyers are driving much of the current sales activity – lured in part by low prices, interest rates around 5 percent, and a federal tax credit of up to $8,000 for those who can sign a contract by April 30 and close by June 30.
But it can be a confusing process, even for veteran buyers. Here are five tasks that Realtors, brokers and other housing experts say first-time home buyers should know how to do before getting into the market:
Get financials in order. Buyers should check their credit score, taxes, 401(k)s and other aspects of their financial situation to determine the maximum they're comfortable affording for their monthly mortgage, utilities, maintenance, taxes and insurance.
"If your credit score is a mess, clean it up before applying for a mortgage," says Ed Mermelstein, a New York-based real estate lawyer and developer. "A bad credit score may not just affect your rates, but may prevent you from getting a mortgage."
Buyers should also get preapproved by a broker or lender – that means they get an agreement by a bank to lend the buyer up to a specific amount for a home, and it tells sellers that financing is already lined up.
That's different than a letter of prequalification, which states that a buyer's financial information and credit look good. A prequalification does not guarantee a loan. Some websites, such as myhome.bankofamerica.com and trulia.com/guides/home_buying, aim to help buyers getting into the market.
Find a Realtor and start looking. To find a good Realtor, talk to friends, neighbors and co-workers. Referrals can be the best way to select someone. Make sure your choice has experience with the neighborhood and is a good negotiator.
The wrong agent can lead to frustrations. Marc Kruskol, 52, closed on his new home in January after going through about five Realtors.
"I don't have patience for Realtors who are lazy or don't do their job," says Kruskol, who bought a five-bedroom home in Palmdale, Calif., with a pool and three-car garage for $200,000. He got a 30-year, fixed-rate mortgage with a 4.99 percent interest rate.
Diann Patton, a consumer real estate specialist with Coldwell Banker Real Estate, suggests interviewing Realtors for the job. "This person is going to become your best friend for the next 30, 60, 120 days," she says.
Before buyers start looking, Patton suggests they make a pro-and-con list of things they must have in a house and prioritize what's most important. Think about lifestyle needs such as location and proximity to shopping and churches.
"Try not to treat your home like you're living in the stock market," she says. "It's a lifestyle, not about flipping. Don't try to time the market. We never know if it's going to go up or down."
Investigate the reputations of builders, condos. Buyers who are purchasing a new home should check out the reputation of the builder by getting information from the Better Business Bureau.
And, when buying a condo, first-time buyers should check out the financial health of the condo or homeowner association. In the past, this was rarely a problem because, for the most part, owners paid their monthly maintenance assessments and the associations were well-funded, says Robert White, managing director of KW Property Management and Consulting, a property-management firm in Miami.
But now some have cut services, and some are going without insurance, and dues-paying owners are subsidizing those who aren't paying.
"When they buy into a homeowner or condo association, the association may be having financial difficulties," White says. "A first-time owner could buy into the association, and the association could budget more expenses to the units that are paying, subsidizing the units that aren't paying. Ask the management company for a copy of the financial statements."
Make an offer and apply for a mortgage. There are myriad tips on making that final offer. While every local market is different, most economists say buyers are generally in the driver's seat today. Fifty-three percent of homeowners believe a seller's market is still two or more years away, according to a survey of 2,003 adults between March 30 and April 2 by American Express.
This market is very local. Homes in Chicago are getting multiple offers and going for more than 10 percent over the asking price, for example, while those in Fort Lauderdale are selling for 20 percent less than list price, according to ZipRealty.
Have enough cash for a down payment, which can be a minimum of 10 percent, and extra funds for closing costs, including appraisal costs and move-in deposit. Make sure any new additions or construction to an existing home have been properly filed with the city and approved. Be aware that appraisers will likely under-appraise than over-appraise, Mermelstein says.
"Definitely do an inspection. A lot of homes are sold 'as is' now, but you can get a credit (from the seller) if there is something big," says Cindy Royall Libonati, in Woodland Hills, Calif., a Realtor with Ewing & Associates Sotheby's International Realty.
To help determine an offering price, check closing costs of comparable homes on websites such as Propertyshark.com and Zillow.com.
Prepare for closing. At closing, first-time buyers get the keys to their new home. But there's a lot to prepare first. They'll have to get certified funds to cover closing costs and down payments (a settlement statement provided a day or two before closing will tell the buyer how much is needed). Homeowners insurance policies must be secured prior to closing as well. A closing cost estimate is provided after the application for the home loan spelling out what funds will be needed at closing.
Many Realtors suggest buyers have a financing contingency that will let them out of their contract without penalty if they don't get their loan. Buyers should also have a contingency that the home appraises for at least the selling price.
"First-time homeowners don't know you have to have a cashier's check, not a check," says Pat Lashinsky, CEO of ZipRealty, adding that they can be surprised by all the costs. "They can be like 'Whoa, what's all this' if they're not expecting it."
Source: © Copyright 2010 USA TODAY, a division of Gannett Co. Inc., Stephanie Armour.
She often finds she must start at the beginning, helping novice buyers decide whether it makes more financial sense to rent or buy. Then she gets down to the nuts and bolts: how to get a loan, pick a Realtor and look for a home.
"I tell people there are no stupid questions. Ask anything you don't understand," says Williams, with Joyner Fine Properties in Richmond, Va. "One of the biggest mistakes they make is they go to an open house and wind up buying from the listing agent. The listing agent represents the seller. They need a Realtor who represents them."
With the spring buying season in full swing, first-time home buyers are driving much of the current sales activity – lured in part by low prices, interest rates around 5 percent, and a federal tax credit of up to $8,000 for those who can sign a contract by April 30 and close by June 30.
But it can be a confusing process, even for veteran buyers. Here are five tasks that Realtors, brokers and other housing experts say first-time home buyers should know how to do before getting into the market:
Get financials in order. Buyers should check their credit score, taxes, 401(k)s and other aspects of their financial situation to determine the maximum they're comfortable affording for their monthly mortgage, utilities, maintenance, taxes and insurance.
"If your credit score is a mess, clean it up before applying for a mortgage," says Ed Mermelstein, a New York-based real estate lawyer and developer. "A bad credit score may not just affect your rates, but may prevent you from getting a mortgage."
Buyers should also get preapproved by a broker or lender – that means they get an agreement by a bank to lend the buyer up to a specific amount for a home, and it tells sellers that financing is already lined up.
That's different than a letter of prequalification, which states that a buyer's financial information and credit look good. A prequalification does not guarantee a loan. Some websites, such as myhome.bankofamerica.com and trulia.com/guides/home_buying, aim to help buyers getting into the market.
Find a Realtor and start looking. To find a good Realtor, talk to friends, neighbors and co-workers. Referrals can be the best way to select someone. Make sure your choice has experience with the neighborhood and is a good negotiator.
The wrong agent can lead to frustrations. Marc Kruskol, 52, closed on his new home in January after going through about five Realtors.
"I don't have patience for Realtors who are lazy or don't do their job," says Kruskol, who bought a five-bedroom home in Palmdale, Calif., with a pool and three-car garage for $200,000. He got a 30-year, fixed-rate mortgage with a 4.99 percent interest rate.
Diann Patton, a consumer real estate specialist with Coldwell Banker Real Estate, suggests interviewing Realtors for the job. "This person is going to become your best friend for the next 30, 60, 120 days," she says.
Before buyers start looking, Patton suggests they make a pro-and-con list of things they must have in a house and prioritize what's most important. Think about lifestyle needs such as location and proximity to shopping and churches.
"Try not to treat your home like you're living in the stock market," she says. "It's a lifestyle, not about flipping. Don't try to time the market. We never know if it's going to go up or down."
Investigate the reputations of builders, condos. Buyers who are purchasing a new home should check out the reputation of the builder by getting information from the Better Business Bureau.
And, when buying a condo, first-time buyers should check out the financial health of the condo or homeowner association. In the past, this was rarely a problem because, for the most part, owners paid their monthly maintenance assessments and the associations were well-funded, says Robert White, managing director of KW Property Management and Consulting, a property-management firm in Miami.
But now some have cut services, and some are going without insurance, and dues-paying owners are subsidizing those who aren't paying.
"When they buy into a homeowner or condo association, the association may be having financial difficulties," White says. "A first-time owner could buy into the association, and the association could budget more expenses to the units that are paying, subsidizing the units that aren't paying. Ask the management company for a copy of the financial statements."
Make an offer and apply for a mortgage. There are myriad tips on making that final offer. While every local market is different, most economists say buyers are generally in the driver's seat today. Fifty-three percent of homeowners believe a seller's market is still two or more years away, according to a survey of 2,003 adults between March 30 and April 2 by American Express.
This market is very local. Homes in Chicago are getting multiple offers and going for more than 10 percent over the asking price, for example, while those in Fort Lauderdale are selling for 20 percent less than list price, according to ZipRealty.
Have enough cash for a down payment, which can be a minimum of 10 percent, and extra funds for closing costs, including appraisal costs and move-in deposit. Make sure any new additions or construction to an existing home have been properly filed with the city and approved. Be aware that appraisers will likely under-appraise than over-appraise, Mermelstein says.
"Definitely do an inspection. A lot of homes are sold 'as is' now, but you can get a credit (from the seller) if there is something big," says Cindy Royall Libonati, in Woodland Hills, Calif., a Realtor with Ewing & Associates Sotheby's International Realty.
To help determine an offering price, check closing costs of comparable homes on websites such as Propertyshark.com and Zillow.com.
Prepare for closing. At closing, first-time buyers get the keys to their new home. But there's a lot to prepare first. They'll have to get certified funds to cover closing costs and down payments (a settlement statement provided a day or two before closing will tell the buyer how much is needed). Homeowners insurance policies must be secured prior to closing as well. A closing cost estimate is provided after the application for the home loan spelling out what funds will be needed at closing.
Many Realtors suggest buyers have a financing contingency that will let them out of their contract without penalty if they don't get their loan. Buyers should also have a contingency that the home appraises for at least the selling price.
"First-time homeowners don't know you have to have a cashier's check, not a check," says Pat Lashinsky, CEO of ZipRealty, adding that they can be surprised by all the costs. "They can be like 'Whoa, what's all this' if they're not expecting it."
Source: © Copyright 2010 USA TODAY, a division of Gannett Co. Inc., Stephanie Armour.
Fannie sweetens offer to avoid foreclosure
Struggling borrowers who give up their homes through a "deed in lieu of foreclosure" or a short sale will be able to obtain a new Fannie Mae loan in two years. Currently, these owners must wait at least four years.
The new policy, which takes effect in July, is designed to make foreclosure alternatives more attractive. The policy applies only to Fannie Mae's willingness to approve a mortgage, however. Homeowners' credit scores will still take a hit following a short sale or deed in lieu of foreclosure.
To qualify for a mortgage after the two year wait, Fannie Mae says borrowers must make a 20 percent downpayment; but those who lost a job or have other extenuating circumstances will be able to make a 10 percent downpayment.
Freddie Mac – which, with Fannie Mae, insures over half the mortgages in the U.S. – currently makes homeowners wait four years after a short sale or deed in lieu of foreclosure before it will back a new mortgage. Owners who go through a foreclosure wait five years. For both Fannie Mae and Freddie Mac, the waits can be shorter in some cases if borrowers show extenuating circumstances.
Source: Wall Street Journal (04/26/10) P. A2; Timiraos, Nick
Source: INFORMATION, INC. Bethesda, MD
The new policy, which takes effect in July, is designed to make foreclosure alternatives more attractive. The policy applies only to Fannie Mae's willingness to approve a mortgage, however. Homeowners' credit scores will still take a hit following a short sale or deed in lieu of foreclosure.
To qualify for a mortgage after the two year wait, Fannie Mae says borrowers must make a 20 percent downpayment; but those who lost a job or have other extenuating circumstances will be able to make a 10 percent downpayment.
Freddie Mac – which, with Fannie Mae, insures over half the mortgages in the U.S. – currently makes homeowners wait four years after a short sale or deed in lieu of foreclosure before it will back a new mortgage. Owners who go through a foreclosure wait five years. For both Fannie Mae and Freddie Mac, the waits can be shorter in some cases if borrowers show extenuating circumstances.
Source: Wall Street Journal (04/26/10) P. A2; Timiraos, Nick
Source: INFORMATION, INC. Bethesda, MD
5 costly mistakes first-time buyers make
Buying a first home can be a daunting experience. Here are five common and costly mistakes that novice homebuyers make:
1. Ignoring the cost of a low credit score. Lower-score borrowers pay thousands of dollars in increased interest rates over the life of the loan.
2. Shopping for other things before closing. Lenders continue to check credit scores right up until the time of closing. Too much shopping could cause the lender to take back the loan.
3. Scrimping on an inspection. Expensive repairs can be financially devastating.
4. Buying without contingencies. Buyers should give themselves an out if the inspection turns up problems or if the bank raises their interest rate.
5. No money for insurance. Insurance can be surprisingly pricey. Buyers who don't budget for it face a nasty surprise.
Source: CNNMoney.com, Les Christie (04/19/2010)
Source: INFORMATION, INC. Bethesda, MD
1. Ignoring the cost of a low credit score. Lower-score borrowers pay thousands of dollars in increased interest rates over the life of the loan.
2. Shopping for other things before closing. Lenders continue to check credit scores right up until the time of closing. Too much shopping could cause the lender to take back the loan.
3. Scrimping on an inspection. Expensive repairs can be financially devastating.
4. Buying without contingencies. Buyers should give themselves an out if the inspection turns up problems or if the bank raises their interest rate.
5. No money for insurance. Insurance can be surprisingly pricey. Buyers who don't budget for it face a nasty surprise.
Source: CNNMoney.com, Les Christie (04/19/2010)
Source: INFORMATION, INC. Bethesda, MD
How do delinquencies impair credit scores?
Fair Isaac, which developed FICO scores, used a comparison between two people to explain how mortgage delinquencies affect credit scores.
Fair Isaac derived these numbers from a theoretical calculation based on hypothetical borrowers – one with an initial score of 680 and one with an initial score of 780. FICO scores range from 300 to 850.
The hypothetical person behind the 680 score had six credit accounts, while the person with the 780 score had 10. The consumer with the 780 score had no missed payments other than the mortgage; the 680 example had two late payments before they failed to pay the mortgage.
After a mortgage payment problem, the two scores would look like this:
After a 30-day delinquency, the 680 score drops to somewhere between 620 and 640; the 780 score declines to 670 to 690.
After a 90-day delinquency, the 680 score falls somewhere between 595 and 610; the 780 score goes to 645 to 665.
After a foreclosure, short sale or deed-in-lieu, the 680 goes somewhere between 575 and 595 and 780 drops to 620 to 640.
After a bankruptcy, the 680 drops somewhere between 530 and 550; the 780 declines to 540 to 560.
Source: CNN, Les Christie (04/22/2010)
Source: INFORMATION, INC. Bethesda, MD
Fair Isaac derived these numbers from a theoretical calculation based on hypothetical borrowers – one with an initial score of 680 and one with an initial score of 780. FICO scores range from 300 to 850.
The hypothetical person behind the 680 score had six credit accounts, while the person with the 780 score had 10. The consumer with the 780 score had no missed payments other than the mortgage; the 680 example had two late payments before they failed to pay the mortgage.
After a mortgage payment problem, the two scores would look like this:
After a 30-day delinquency, the 680 score drops to somewhere between 620 and 640; the 780 score declines to 670 to 690.
After a 90-day delinquency, the 680 score falls somewhere between 595 and 610; the 780 score goes to 645 to 665.
After a foreclosure, short sale or deed-in-lieu, the 680 goes somewhere between 575 and 595 and 780 drops to 620 to 640.
After a bankruptcy, the 680 drops somewhere between 530 and 550; the 780 declines to 540 to 560.
Source: CNN, Les Christie (04/22/2010)
Source: INFORMATION, INC. Bethesda, MD
Homebuyer tax credit has less effect than last fall
With a tax credit for first-time and repeat home buyers expiring next week, a report Thursday suggests the stimulus hasn't been as effective as a similar credit that dramatically increased home sales late last year.
Existing-home sales rose 6.8 percent to a seasonally adjusted annual rate of 5.35 million units in March from 5.01 million in February, according to the National Association of Realtors. That was also about 16 percent higher than in March 2009.
Last fall, home sales peaked at a 6.5 million annual rate, according to Moody's Economy.com. This spring, they're expected to peak at a 5.7 million annual rate in May.
"This credit appears to be a shadow of the November credit," says Mark Zandi, chief economist of Moody's Economy.com.
The national median existing-home price was $170,700 in March, up 0.4 percent from March 2009.
Distressed homes, typically sold at a 15 percent discount, accounted for 35 percent of sales last month – unchanged from February, the National Association of Realtors reported.
"It doesn't look, at least, that there's been the kind of boom we had last time," says Joel Naroff at Naroff Economic Advisors. "But we have to give it one more month. We have to see April."
Total housing inventory at the end of March rose 1.5 percent to 3.58 million existing homes available for sale, which represents an eight-month supply at the current sales pace, down from an 8.5-month supply in February.
The tax credit, which requires a binding contract be signed by April 30 and a deal that closes by June 30, wasn't the only factor behind March's gains. Better weather than in February is believed to have helped, too.
In addition, the Federal Housing Administration announced that it is increasing its mortgage insurance premium from 1.75 percent to 2.25 percent of mortgages it guarantees. This premium increase, which took effect in early April, was behind a recent five-week surge in mortgage applications, says Brian Bethune at IHS Global Insight.
"I don't think (the tax credit) has had any impact at all," Bethune says. "You do see it boosting sales a little bit. Maybe it's had a quarter of the effect that the other one did."
The current tax credit provides up to $8,000 for first-time homebuyers and up to $6,500 for move-up buyers. An earlier tax credit of $8,000 for first-time buyers expired Dec. 1.
"The biggest benefit is to first-time buyers, and a lot have already taken advantage of it, so we have a smaller potential pool in this go-round," Zandi says.
Source: Copyright © 2010 USA TODAY, a division of Gannett Co. Inc.
Existing-home sales rose 6.8 percent to a seasonally adjusted annual rate of 5.35 million units in March from 5.01 million in February, according to the National Association of Realtors. That was also about 16 percent higher than in March 2009.
Last fall, home sales peaked at a 6.5 million annual rate, according to Moody's Economy.com. This spring, they're expected to peak at a 5.7 million annual rate in May.
"This credit appears to be a shadow of the November credit," says Mark Zandi, chief economist of Moody's Economy.com.
The national median existing-home price was $170,700 in March, up 0.4 percent from March 2009.
Distressed homes, typically sold at a 15 percent discount, accounted for 35 percent of sales last month – unchanged from February, the National Association of Realtors reported.
"It doesn't look, at least, that there's been the kind of boom we had last time," says Joel Naroff at Naroff Economic Advisors. "But we have to give it one more month. We have to see April."
Total housing inventory at the end of March rose 1.5 percent to 3.58 million existing homes available for sale, which represents an eight-month supply at the current sales pace, down from an 8.5-month supply in February.
The tax credit, which requires a binding contract be signed by April 30 and a deal that closes by June 30, wasn't the only factor behind March's gains. Better weather than in February is believed to have helped, too.
In addition, the Federal Housing Administration announced that it is increasing its mortgage insurance premium from 1.75 percent to 2.25 percent of mortgages it guarantees. This premium increase, which took effect in early April, was behind a recent five-week surge in mortgage applications, says Brian Bethune at IHS Global Insight.
"I don't think (the tax credit) has had any impact at all," Bethune says. "You do see it boosting sales a little bit. Maybe it's had a quarter of the effect that the other one did."
The current tax credit provides up to $8,000 for first-time homebuyers and up to $6,500 for move-up buyers. An earlier tax credit of $8,000 for first-time buyers expired Dec. 1.
"The biggest benefit is to first-time buyers, and a lot have already taken advantage of it, so we have a smaller potential pool in this go-round," Zandi says.
Source: Copyright © 2010 USA TODAY, a division of Gannett Co. Inc.
Thursday, April 22, 2010
Set the stage: How to sell your home fast
Hiring a decorating and marketing specialist to help sell a house might sound like a frivolous cost to homeowners desperate to salvage every dollar in a fallen market.
Hiring someone to decorate your home will always sound frivolous to certain homeowners. But it really can be too much to take for anyone looking to sell a home in an already depressed market.
A quality house at a fair price will sell itself, they figure. Paying a professional stager to rearrange or bring in new furniture, paint the walls neutral colors and hang different pictures surely couldn’t be worth a four-figure fee, the thinking goes.
Or could it?
Real estate professionals insist staging makes a big difference in how quickly a home sells, which can mean a higher sale price, and cite their own figures that show it.
Patrick McLaughlin had such a poor impression of a vacant house he visited at an open house on Long Island that he told his broker friend it would never sell – it felt cold and uninviting. Then he went back after a professional had staged it and ended up buying it.
“They had art work, furniture, sofas, rugs. It added a great deal of warmth to the property,” says McLaughlin, himself a broker in Sag Harbor, N.Y.
More sellers have been turning to staging to make their properties stand out in a market packed with competing houses.
Margaret Gehr, who stages homes in the Chicago suburbs through her business Re-Arrange It Interiors, and her staff staged a home for The Associated Press’ Homeownership Week series. She discussed the growing practice in an interview:
Q: What exactly is home staging?
A: It’s the act of preparing and showcasing a home for sale. Preparing involves cleaning, decluttering, updating and repairing, while showcasing is the process of arranging furniture, accessories, art and light. The real estate agent, the homeowner and the stager work together as a team and decide what needs to be done to present the home on the marketplace.
Staging is all marketing – that’s all it is. It’s a tool that’s no different than what someone might use to sell a box of cereal.
Q: Shouldn’t home shoppers be able to look at an unstaged house and visualize themselves there?
A: They should. But statistics from the National Association of Realtors® show that only 10 percent of buyers can see past what is in front of them. It’s just natural for people to react to color, react to ‘stuff.’
I work with clients all the time who swear that they do not need to stage their home. But I find that they still bought the best looking home available. It might have been on a busy street or in an imperfect location, but the house was beautiful – they loved the house. Their emotions took over because the house was set up properly.
Q: Why is staging considered more important now?
A: It’s crucial in this market because there are just so many options for buyers to choose from. You need to be different; you need to add extra value to your home. Buyers are very move-in ready, so they can keep on moving right on down the line if they don’t like what they see. It used to be that if you were buying a home you might look at four or five homes before you made your decision. Now an average buyer might look at 35, 50 homes.
Q: How much does a consultation cost?
A: A comprehensive home staging consultation starts at $150 and goes up to about $350 nationwide. That consists of a walk through the property that will provide a homeowner with a to-do list – a detailed list of visual repairs, what they can do from fence to curb to get the most money and sell the fastest. We identify what should stay and what should go.
Q: What about the costs of staging itself?
A: For an occupied home, working with what the homeowners own in an average-sized house, it would start at about $750 and average maybe $1,000 to $1,500. With enhancement packages, where we supplement with furniture and trade some pieces out, that would start at about $1,500 and go up to about $2,500.
To fully furnish a vacant home would start at $2,500 and the average home would probably cost $3,000 to $4,000.
Q: What’s the difference between staging and decorating a home?
A: The biggest difference is that decorating is an extension of the things we love – our colors, our style, all our personality – whereas in staging we return the focus back to the property. We’re highlighting the features of the home; we’re complementing the architecture of the home. We want the potential buyer to come in and notice the beautiful windows or the fireplaces, not necessarily whatever color or style of furniture or pictures or things like that might be in the home.
Q: Do you stage every room?
A: No. It isn’t really necessary. We usually just stage the rooms where the buying decisions are made, and typically that’s on the first floor. We go for a model home sort of look. So, a lot of lifestyle elements to help buyers see what it’s like to live in the house.
Q: Home staging is relatively new. What’s it like as a profession?
A: Staging has been going on forever; they just didn’t always have a name for it. It used to be done through the real estate agents, but that’s not their expertise. HGTV has brought it into the mainstream since the ‘90s.
You can make a good living staging. It takes time to build your clientele. And it takes a lot of behind-the-scenes work, a lot of inventory, purchasing, manual labor – lifting, moving, hauling, schlepping stuff around. The actual staging is the easy part.
On the Net:
More information about staging at www.realestatestagingassociation
Re-arrange It Interiors at www.re-arrangeit.com
Source: Copyright © 2010 The Associated Press, Dave Carpenter, AP personal finance writer.
Hiring someone to decorate your home will always sound frivolous to certain homeowners. But it really can be too much to take for anyone looking to sell a home in an already depressed market.
A quality house at a fair price will sell itself, they figure. Paying a professional stager to rearrange or bring in new furniture, paint the walls neutral colors and hang different pictures surely couldn’t be worth a four-figure fee, the thinking goes.
Or could it?
Real estate professionals insist staging makes a big difference in how quickly a home sells, which can mean a higher sale price, and cite their own figures that show it.
Patrick McLaughlin had such a poor impression of a vacant house he visited at an open house on Long Island that he told his broker friend it would never sell – it felt cold and uninviting. Then he went back after a professional had staged it and ended up buying it.
“They had art work, furniture, sofas, rugs. It added a great deal of warmth to the property,” says McLaughlin, himself a broker in Sag Harbor, N.Y.
More sellers have been turning to staging to make their properties stand out in a market packed with competing houses.
Margaret Gehr, who stages homes in the Chicago suburbs through her business Re-Arrange It Interiors, and her staff staged a home for The Associated Press’ Homeownership Week series. She discussed the growing practice in an interview:
Q: What exactly is home staging?
A: It’s the act of preparing and showcasing a home for sale. Preparing involves cleaning, decluttering, updating and repairing, while showcasing is the process of arranging furniture, accessories, art and light. The real estate agent, the homeowner and the stager work together as a team and decide what needs to be done to present the home on the marketplace.
Staging is all marketing – that’s all it is. It’s a tool that’s no different than what someone might use to sell a box of cereal.
Q: Shouldn’t home shoppers be able to look at an unstaged house and visualize themselves there?
A: They should. But statistics from the National Association of Realtors® show that only 10 percent of buyers can see past what is in front of them. It’s just natural for people to react to color, react to ‘stuff.’
I work with clients all the time who swear that they do not need to stage their home. But I find that they still bought the best looking home available. It might have been on a busy street or in an imperfect location, but the house was beautiful – they loved the house. Their emotions took over because the house was set up properly.
Q: Why is staging considered more important now?
A: It’s crucial in this market because there are just so many options for buyers to choose from. You need to be different; you need to add extra value to your home. Buyers are very move-in ready, so they can keep on moving right on down the line if they don’t like what they see. It used to be that if you were buying a home you might look at four or five homes before you made your decision. Now an average buyer might look at 35, 50 homes.
Q: How much does a consultation cost?
A: A comprehensive home staging consultation starts at $150 and goes up to about $350 nationwide. That consists of a walk through the property that will provide a homeowner with a to-do list – a detailed list of visual repairs, what they can do from fence to curb to get the most money and sell the fastest. We identify what should stay and what should go.
Q: What about the costs of staging itself?
A: For an occupied home, working with what the homeowners own in an average-sized house, it would start at about $750 and average maybe $1,000 to $1,500. With enhancement packages, where we supplement with furniture and trade some pieces out, that would start at about $1,500 and go up to about $2,500.
To fully furnish a vacant home would start at $2,500 and the average home would probably cost $3,000 to $4,000.
Q: What’s the difference between staging and decorating a home?
A: The biggest difference is that decorating is an extension of the things we love – our colors, our style, all our personality – whereas in staging we return the focus back to the property. We’re highlighting the features of the home; we’re complementing the architecture of the home. We want the potential buyer to come in and notice the beautiful windows or the fireplaces, not necessarily whatever color or style of furniture or pictures or things like that might be in the home.
Q: Do you stage every room?
A: No. It isn’t really necessary. We usually just stage the rooms where the buying decisions are made, and typically that’s on the first floor. We go for a model home sort of look. So, a lot of lifestyle elements to help buyers see what it’s like to live in the house.
Q: Home staging is relatively new. What’s it like as a profession?
A: Staging has been going on forever; they just didn’t always have a name for it. It used to be done through the real estate agents, but that’s not their expertise. HGTV has brought it into the mainstream since the ‘90s.
You can make a good living staging. It takes time to build your clientele. And it takes a lot of behind-the-scenes work, a lot of inventory, purchasing, manual labor – lifting, moving, hauling, schlepping stuff around. The actual staging is the easy part.
On the Net:
More information about staging at www.realestatestagingassociation
Re-arrange It Interiors at www.re-arrangeit.com
Source: Copyright © 2010 The Associated Press, Dave Carpenter, AP personal finance writer.
AIA urges flood insurance extension without wind coverage
The American Insurance Association (AIA) recently issued a letter to members of the U.S. House Financial Service Committee, which will hold a hearing on the long-term extension of the National Flood Insurance Program (NFIP) on April 22.
AIA President and CEO Leigh Ann Pusey urged lawmakers to pass a long-term extension of the flood program, but discouraged the passage of The Homeowners Defense Act (HR 2555) and the Multiple Peril Insurance Act (HR 1264).
The letter, which addressed Committee Chair Barney Frank (D-Mass.) and Ranking Member Spencer Bachus (R-Ala.), said, “The recent lapses in the NFIP due to the use of short-term extensions has caused disruptions to homeowners, businesses and hindered real estate closings nationwide,” and reauthorizing the program for the long term will bring stability to the market. “[The proposed bill] improves the program and promotes its fiscal soundness and we urge its expedient consideration,” Pusey urged.
Meanwhile, the letter explained that the Homeowners Defense Act, which aims to ensure availability and affordability of property insurance for catastrophes, could actually lead to further private insurance market displacement.
“Although state property insurance programs are meant to serve as markets of last resort, in reality, they displace private market insurance and reinsurance. Moreover, they encourage a state to warehouse its catastrophic risk within the state, rather than spread risk through global reinsurance markets,” Pusey said.
The legislation fails to ensure that state programs charge risk-based premiums, maintain adequate reserves, manage finances acceptably, and establish a private market reinsurance program, according to AIA.
As for the Multiple Peril Insurance Act, which would add wind damage coverage to NFIP, Pusey said, “[A] GAO study done on this proposal warned of the operational challenges and potential exposure of the federal government to a huge and potentially under-funded liability for hurricane wind damage.”
AIA suggests, “The Congressional focus should be on returning the NFIP to financial soundness, not adding a coverage that is now available in every state through either the traditional private market or state residual markets. [Both catastrophe bills] do nothing to expand true property insurance underwriting capacity. Rather, they encourage warehousing risk while expanding federal taxpayer exposure.”
Source: National Underwriter (Property & Casualty - Risk & Benefits Management Edition) (04/20/10)
Soruce: © Copyright 2010 INFORMATION, INC. Bethesda, MD
AIA President and CEO Leigh Ann Pusey urged lawmakers to pass a long-term extension of the flood program, but discouraged the passage of The Homeowners Defense Act (HR 2555) and the Multiple Peril Insurance Act (HR 1264).
The letter, which addressed Committee Chair Barney Frank (D-Mass.) and Ranking Member Spencer Bachus (R-Ala.), said, “The recent lapses in the NFIP due to the use of short-term extensions has caused disruptions to homeowners, businesses and hindered real estate closings nationwide,” and reauthorizing the program for the long term will bring stability to the market. “[The proposed bill] improves the program and promotes its fiscal soundness and we urge its expedient consideration,” Pusey urged.
Meanwhile, the letter explained that the Homeowners Defense Act, which aims to ensure availability and affordability of property insurance for catastrophes, could actually lead to further private insurance market displacement.
“Although state property insurance programs are meant to serve as markets of last resort, in reality, they displace private market insurance and reinsurance. Moreover, they encourage a state to warehouse its catastrophic risk within the state, rather than spread risk through global reinsurance markets,” Pusey said.
The legislation fails to ensure that state programs charge risk-based premiums, maintain adequate reserves, manage finances acceptably, and establish a private market reinsurance program, according to AIA.
As for the Multiple Peril Insurance Act, which would add wind damage coverage to NFIP, Pusey said, “[A] GAO study done on this proposal warned of the operational challenges and potential exposure of the federal government to a huge and potentially under-funded liability for hurricane wind damage.”
AIA suggests, “The Congressional focus should be on returning the NFIP to financial soundness, not adding a coverage that is now available in every state through either the traditional private market or state residual markets. [Both catastrophe bills] do nothing to expand true property insurance underwriting capacity. Rather, they encourage warehousing risk while expanding federal taxpayer exposure.”
Source: National Underwriter (Property & Casualty - Risk & Benefits Management Edition) (04/20/10)
Soruce: © Copyright 2010 INFORMATION, INC. Bethesda, MD
Lenders unload mortgages to collection agencies
Lenders are selling second mortgages and home-equity lines in default to collection agencies that have the right to collect this money potentially for decades.
“It’s a big business, and investors are coming out of the woodwork,” says Sylvia Alayon, a vice president for Consumer Mortgage Audit Center, which analyzes mortgage documents for lenders, advocacy groups, and attorneys.
Real estate professionals will be doing their short-sale clients a big favor if they urge them to get professional advice before they sign agreements, Alayon says.
A new government short-sale program aims to prevent banks from reselling this debt. Sellers covered under the program will receive notice that secondary lien holders have received part of the proceeds of the sale “in exchange for release and full satisfaction of their liens.”
Source McClatchy/Tribune News, Jim Wasserman (04/19/2010)
© Copyright 2010 INFORMATION, INC. Bethesda, MD
“It’s a big business, and investors are coming out of the woodwork,” says Sylvia Alayon, a vice president for Consumer Mortgage Audit Center, which analyzes mortgage documents for lenders, advocacy groups, and attorneys.
Real estate professionals will be doing their short-sale clients a big favor if they urge them to get professional advice before they sign agreements, Alayon says.
A new government short-sale program aims to prevent banks from reselling this debt. Sellers covered under the program will receive notice that secondary lien holders have received part of the proceeds of the sale “in exchange for release and full satisfaction of their liens.”
Source McClatchy/Tribune News, Jim Wasserman (04/19/2010)
© Copyright 2010 INFORMATION, INC. Bethesda, MD
Help arrives for second mortgages
The Obama administration’s initiative to help homeowners obtain modifications of second mortgages is getting off the ground.
Just this month, Bank of America became the first major lender in the program to send letters offering modifications to home-equity loan customers struggling with their loans.
Citigroup, JPMorgan Chase and Wells Fargo joined the program in March, when updated guidelines were issued by the government.
Those banks hold about half of the USA’s second liens.
The program, originally introduced in August, is aimed at overcoming an impediment to permanent modifications of first mortgages.
Holders of first mortgages have been reluctant to take losses unless the holder of the second-lien mortgage does, too. More borrowers are staying current on their second mortgages, however, which has made those lenders less inclined to take losses.
“This is a huge concern for consumers,” says Marietta Rodriguez, national director for homeownership and lending at national non-profit NeighborWorks America. “You have two financial institutions trying to get a payment out of you. How do you respond?”
The government’s second-mortgage program, called 2MP, offers incentives to borrowers, mortgage servicers and investors to modify second mortgages. How it works:
• When a borrower’s first loan is modified under the federal program, known as the Home Affordable Modification Program (HAMP), and the servicer of the second loan is also a participant in HAMP, that servicer must offer to modify the borrower’s second lien.
• Servicers can stretch the term of the second loan to 40 years.
• Second-lien lenders must defer the payment of the same proportion of principal that was deferred or forgiven on the first loan.
The second loans also must have originated on or before Jan. 1, 2009, to be eligible for a modification.
Modifying a mortgage with a second lien can be more difficult because of the additional parties involved.
A second lien may be held by another servicer or investor, and getting all parties to agree on interest rate reductions or other steps to ease borrowers’ monthly payments can be time-consuming or difficult. The government program aims to make the process easier.
The number of homeowners who will get assistance is limited.
While the program is expected to reach up to 1.5 million homeowners who are struggling to afford their mortgage payments, there are an estimated 19 million residential junior liens, with an average balance of $57,000 as of January, according to First American CoreLogic.
Up to 50 percent of at-risk mortgages have second liens, according to the Treasury Department.
Even with the incentives the government is offering mortgage lenders to modify second mortgages, they could still prove to be an obstacle as pressure grows to reduce borrowers’ loan principal.
“First-lien holders become more reluctant to do principal reduction because of the second” lien, says Jack Schakett, loss mitigation strategies executive at Bank of America. “Everyone is calling for doing more principal reduction. Second liens will be a problem.”
Copyright © 2010 USA TODAY, a division of Gannett Co. Inc., Stephanie Armour.
Just this month, Bank of America became the first major lender in the program to send letters offering modifications to home-equity loan customers struggling with their loans.
Citigroup, JPMorgan Chase and Wells Fargo joined the program in March, when updated guidelines were issued by the government.
Those banks hold about half of the USA’s second liens.
The program, originally introduced in August, is aimed at overcoming an impediment to permanent modifications of first mortgages.
Holders of first mortgages have been reluctant to take losses unless the holder of the second-lien mortgage does, too. More borrowers are staying current on their second mortgages, however, which has made those lenders less inclined to take losses.
“This is a huge concern for consumers,” says Marietta Rodriguez, national director for homeownership and lending at national non-profit NeighborWorks America. “You have two financial institutions trying to get a payment out of you. How do you respond?”
The government’s second-mortgage program, called 2MP, offers incentives to borrowers, mortgage servicers and investors to modify second mortgages. How it works:
• When a borrower’s first loan is modified under the federal program, known as the Home Affordable Modification Program (HAMP), and the servicer of the second loan is also a participant in HAMP, that servicer must offer to modify the borrower’s second lien.
• Servicers can stretch the term of the second loan to 40 years.
• Second-lien lenders must defer the payment of the same proportion of principal that was deferred or forgiven on the first loan.
The second loans also must have originated on or before Jan. 1, 2009, to be eligible for a modification.
Modifying a mortgage with a second lien can be more difficult because of the additional parties involved.
A second lien may be held by another servicer or investor, and getting all parties to agree on interest rate reductions or other steps to ease borrowers’ monthly payments can be time-consuming or difficult. The government program aims to make the process easier.
The number of homeowners who will get assistance is limited.
While the program is expected to reach up to 1.5 million homeowners who are struggling to afford their mortgage payments, there are an estimated 19 million residential junior liens, with an average balance of $57,000 as of January, according to First American CoreLogic.
Up to 50 percent of at-risk mortgages have second liens, according to the Treasury Department.
Even with the incentives the government is offering mortgage lenders to modify second mortgages, they could still prove to be an obstacle as pressure grows to reduce borrowers’ loan principal.
“First-lien holders become more reluctant to do principal reduction because of the second” lien, says Jack Schakett, loss mitigation strategies executive at Bank of America. “Everyone is calling for doing more principal reduction. Second liens will be a problem.”
Copyright © 2010 USA TODAY, a division of Gannett Co. Inc., Stephanie Armour.
Wednesday, April 21, 2010
Federal flood program set to expire at start of hurricane season
Congress recently extended the National Flood Insurance Program (NFIP) through May 31, which means it now expires the day before hurricane season begins.
Homeowners who need flood insurance should obtain it while they can, since active policies remain active during any program hiatus. Homeowners who need flood insurance to go to closing should make sure they have a way to get coverage prior to the next deadline. In some cases, they can take over the seller’s flood insurance policy, assuming the seller has coverage and he’s willing to approve the transition.
NFIP coverage recently lapsed between March 29 and April 15 as lawmakers debated other legislative issues tied to the NFIP extension, such as unemployment and COBRA health benefits. That probably won’t happen again on May 31, but most experts didn’t expect it to happen on March 29 either.
Standard homeowners’ insurance does not cover flooding, but NFIP covers flooding from heavy rains, melting snow, and coastal storm surge. The policy pays up to $250,000 for a house and $100,000 for contents. However, policies take effect after 30 days. The one-month delay keeps owners from quickly taking out a flood insurance policy if, say, a hurricane is bearing down on their home.
“Congress should realize we are in a critical situation in the housing market. And not closing on a loan for [a lack of] flood insurance is not helping the market,” says Jim Pair, president of the National Association of Mortgage Brokers.
Meanwhile, pending legislation in Congress would extend NFIP for five years and increase coverage to $335,000 for a house and $135,000 for contents.
Source: Baltimore Sun (04/19/10) Ambrose, Eileen
Source: © Copyright 2010 INFORMATION, INC. Bethesda, MD
Homeowners who need flood insurance should obtain it while they can, since active policies remain active during any program hiatus. Homeowners who need flood insurance to go to closing should make sure they have a way to get coverage prior to the next deadline. In some cases, they can take over the seller’s flood insurance policy, assuming the seller has coverage and he’s willing to approve the transition.
NFIP coverage recently lapsed between March 29 and April 15 as lawmakers debated other legislative issues tied to the NFIP extension, such as unemployment and COBRA health benefits. That probably won’t happen again on May 31, but most experts didn’t expect it to happen on March 29 either.
Standard homeowners’ insurance does not cover flooding, but NFIP covers flooding from heavy rains, melting snow, and coastal storm surge. The policy pays up to $250,000 for a house and $100,000 for contents. However, policies take effect after 30 days. The one-month delay keeps owners from quickly taking out a flood insurance policy if, say, a hurricane is bearing down on their home.
“Congress should realize we are in a critical situation in the housing market. And not closing on a loan for [a lack of] flood insurance is not helping the market,” says Jim Pair, president of the National Association of Mortgage Brokers.
Meanwhile, pending legislation in Congress would extend NFIP for five years and increase coverage to $335,000 for a house and $135,000 for contents.
Source: Baltimore Sun (04/19/10) Ambrose, Eileen
Source: © Copyright 2010 INFORMATION, INC. Bethesda, MD
Mortgage aid program said more vulnerable to scams
Recent changes to the Obama administration’s mortgage assistance program may make it more vulnerable to fraud, a government watchdog says.
The changes, announced last month, are intended to make it easier for struggling homeowners to avoid foreclosure. But the administration hasn’t done enough to warn the public about fraud and hasn’t included sufficient safeguards to prevent abuse, the special inspector general for the Troubled Asset Relief Program, or TARP, said.
“Criminals feed on borrower confusion, and frequent changes to the programs provide opportunities for experienced criminal elements to prey on desperate homeowners,” inspector general Neil Barofsky wrote in a quarterly report issued Tuesday.
Last month, the Treasury Department revised the $75 billion mortgage assistance program it first rolled out last year. It is intended to prevent 3 million to 4 million home foreclosures by encouraging mortgage lenders to lower monthly payments.
So far only about 170,000 homeowners have qualified for mortgage modifications and critics charge the effort isn’t making much headway. In a report last month, Barofsky’s office said that a lack of planning and shifting rules on who qualifies has slowed the program’s progress.
In response to the criticisms, the administration made several changes. Mortgage lenders will receive incentive payments if they reduce the amount borrowers owe. That would help homeowners with mortgages larger than their homes are worth – a situation known as being “underwater.”
In addition, unemployed homeowners can get their mortgage payments cut to 31 percent of their income for three to six months.
In his report, Barofsky called the changes “a potentially important step forward for homeowner relief.”
But, while the changes were announced “with great fanfare, little was done at the time to warn borrowers” about potential fraud, the report said.
The administration’s existing program has already spawned fraudulent schemes, the report said, such as one in which borrowers are tricked by “thieves” into paying upfront for modifications that never materialize.
Under the changes announced last month, Treasury isn’t requiring appraisals to determine a home’s value in cases where mortgage principle is reduced, the report said. That could make it easier for mortgage lenders to fraudulently qualify for incentive payments.
Treasury should instead follow the Federal Housing Administration’s guidelines, which require the use of an FHA-approved appraiser, the report recommended.
“No program of this type and scale can be considered well-designed without robust protections of taxpayer funds against the predation of criminals,” the report said.
In response, Treasury Department officials told the inspector general they will soon initiate a public service campaign warning against fraud. Treasury officials didn’t respond to the recommendation that the FHA’s guidelines should be followed.
Source: Copyright © 2010 The Associated Press, Christopher S. Rugaber, AP economics writer. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
The changes, announced last month, are intended to make it easier for struggling homeowners to avoid foreclosure. But the administration hasn’t done enough to warn the public about fraud and hasn’t included sufficient safeguards to prevent abuse, the special inspector general for the Troubled Asset Relief Program, or TARP, said.
“Criminals feed on borrower confusion, and frequent changes to the programs provide opportunities for experienced criminal elements to prey on desperate homeowners,” inspector general Neil Barofsky wrote in a quarterly report issued Tuesday.
Last month, the Treasury Department revised the $75 billion mortgage assistance program it first rolled out last year. It is intended to prevent 3 million to 4 million home foreclosures by encouraging mortgage lenders to lower monthly payments.
So far only about 170,000 homeowners have qualified for mortgage modifications and critics charge the effort isn’t making much headway. In a report last month, Barofsky’s office said that a lack of planning and shifting rules on who qualifies has slowed the program’s progress.
In response to the criticisms, the administration made several changes. Mortgage lenders will receive incentive payments if they reduce the amount borrowers owe. That would help homeowners with mortgages larger than their homes are worth – a situation known as being “underwater.”
In addition, unemployed homeowners can get their mortgage payments cut to 31 percent of their income for three to six months.
In his report, Barofsky called the changes “a potentially important step forward for homeowner relief.”
But, while the changes were announced “with great fanfare, little was done at the time to warn borrowers” about potential fraud, the report said.
The administration’s existing program has already spawned fraudulent schemes, the report said, such as one in which borrowers are tricked by “thieves” into paying upfront for modifications that never materialize.
Under the changes announced last month, Treasury isn’t requiring appraisals to determine a home’s value in cases where mortgage principle is reduced, the report said. That could make it easier for mortgage lenders to fraudulently qualify for incentive payments.
Treasury should instead follow the Federal Housing Administration’s guidelines, which require the use of an FHA-approved appraiser, the report recommended.
“No program of this type and scale can be considered well-designed without robust protections of taxpayer funds against the predation of criminals,” the report said.
In response, Treasury Department officials told the inspector general they will soon initiate a public service campaign warning against fraud. Treasury officials didn’t respond to the recommendation that the FHA’s guidelines should be followed.
Source: Copyright © 2010 The Associated Press, Christopher S. Rugaber, AP economics writer. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
Foreclosure bill rouses rally
Lawyers and consumer advocates plan a rally in Tallahassee on Wednesday to protest a controversial bill that would speed up foreclosures in Florida.
The legislative bill would allow lenders to foreclose on homeowners without approval from a judge in as little as 90 days. It appears to have stalled, but the group said it wants to send a message to legislators.
“Do not take away valuable consumer protections,” the lawyers say in a written announcement. “We want to work together to solve the current crisis.”
One of the lawyers organizing the event is Matthew Weidner of St. Petersburg. He says hundreds, possibly thousands, will attend.
“People feel insecure about their futures and finances,” Weidner said. “This is an issue that touches everyone.”
House Bill 1523 would allow lenders to skip legal proceedings unless the borrower requests the foreclosure go through the courts.
Florida law requires a lender to file a foreclosure lawsuit and have the foreclosure granted by a judge. There are nearly 500,000 pending foreclosure cases in Florida, among the worst in the nation. Because of the backlog, foreclosures can take months or years.
Critics say the bill significantly shortens the foreclosure process, making it more difficult for troubled borrowers to save their houses. They say the bill would not help the backlog of foreclosures because it applies only to new cases.
Supporters say it would help judges and be good for neighbors weary of long-vacant houses in their community.
There are 30 states that have a nonjudicial foreclosure process, allowing some lenders to foreclose on properties in as little as a month.
Anthony DiMarco, executive vice president for governmental affairs for the Florida Bankers Association, said lenders hope the bill will pass.
“We’re disappointed that it may not pass this session,” DiMarco said. “But we understand that we’re making a major change to the law. What we’re proposing won’t solve everything, but we can’t get the real estate market back on track until we deal with these foreclosures.”
Source: Copyright © 2010 Tampa Tribune, Fla., Shannon Behnken. Distributed by McClatchy-Tribune Information Services.
The legislative bill would allow lenders to foreclose on homeowners without approval from a judge in as little as 90 days. It appears to have stalled, but the group said it wants to send a message to legislators.
“Do not take away valuable consumer protections,” the lawyers say in a written announcement. “We want to work together to solve the current crisis.”
One of the lawyers organizing the event is Matthew Weidner of St. Petersburg. He says hundreds, possibly thousands, will attend.
“People feel insecure about their futures and finances,” Weidner said. “This is an issue that touches everyone.”
House Bill 1523 would allow lenders to skip legal proceedings unless the borrower requests the foreclosure go through the courts.
Florida law requires a lender to file a foreclosure lawsuit and have the foreclosure granted by a judge. There are nearly 500,000 pending foreclosure cases in Florida, among the worst in the nation. Because of the backlog, foreclosures can take months or years.
Critics say the bill significantly shortens the foreclosure process, making it more difficult for troubled borrowers to save their houses. They say the bill would not help the backlog of foreclosures because it applies only to new cases.
Supporters say it would help judges and be good for neighbors weary of long-vacant houses in their community.
There are 30 states that have a nonjudicial foreclosure process, allowing some lenders to foreclose on properties in as little as a month.
Anthony DiMarco, executive vice president for governmental affairs for the Florida Bankers Association, said lenders hope the bill will pass.
“We’re disappointed that it may not pass this session,” DiMarco said. “But we understand that we’re making a major change to the law. What we’re proposing won’t solve everything, but we can’t get the real estate market back on track until we deal with these foreclosures.”
Source: Copyright © 2010 Tampa Tribune, Fla., Shannon Behnken. Distributed by McClatchy-Tribune Information Services.
Monday, April 19, 2010
New mortgage plan still has holes, White House concedes
The White House Version 2.0 mortgage-relief plan announced on Friday is a recognition that the moribund housing sector poses a grave threat to the nation’s economic recovery. By the administration’s own admission, however, the effort may save at best only a third of the homes facing foreclosure in coming years.
The new measures, funded through $50 billion already set aside for mortgage relief, seek to provide three-to-six-months of temporary help for newly unemployed homeowners in making mortgage payments.
They also ease the refinancing of mortgages now valued well above the current home price – so-called underwater mortgages – and give incentives to issuers of piggyback mortgages to get out of the way and allow a mortgage modification to happen.
The effort to have banks forgive principal gives greater incentive for homeowners in foreclosure-troubled states such as California, Florida, Arizona and Nevada to stay in their homes rather than hand the keys back to the bank, which would swell the glut of vacant or bank-owned homes on the market – and further depress home prices.
The White House was careful not to raise expectations too high, noting that up to 12 million foreclosures still could occur during the next three years. The new program seeks to help at most 4 million of those homeowners.
One in four homeowners is thought to be underwater, or owe more on a mortgage than the home’s underlying value, according to researcher First American CoreLogic, a number that threatens to swamp refinance efforts.
Friday’s proposals follow a steadily growing drumbeat of criticism about administration efforts to prod lenders and investors in housing securities to modify distressed mortgages aggressively. After a year of effort, fewer than 200,000 permanent modifications have taken place.
“We’re trying to adjust to changing circumstances over time,” Assistant Treasury Secretary Herbert Allison explained during the White House rollout of the upgraded mortgage relief program.
Advocacy groups have criticized the administration’s prior effort as too timid. Elizabeth Warren, a Harvard University professor who heads the special Congressional Oversight Panel that oversees the expenditure of taxpayer bailout money, for months has warned that the Home Affordable Mortgage Program wasn’t even keeping up with the pace of new foreclosure notices.
Lawmakers too have been pressuring the Obama administration to give more aid to unemployed homeowners, especially those with good payment histories.
“While clearly there are some people in trouble on their mortgages who bear some of the responsibility for their plight, this is not true of the unemployed who are fully deserving of this help,” said Rep. Barney Frank, D-Mass., the chairman of the House Financial Services Committee.
The new program captured headlines Thursday night when word leaked of help to unemployed homeowners. Once the details came out Friday, however, it delivered less than expected.
Lenders and loan servicers who participate in the government’s program are required to offer temporary relief, but it’ll be help for a limited universe. First, borrowers must seek this help, must be collecting unemployment insurance and must be fewer than 90 days late on their mortgage payments.
That appears to exclude many of the record 6.1 million Americans who have been jobless for 27 weeks or longer.
“It’s the first real step they’ve made on helping the unemployed, but it is not enough,” said Michael Calhoun, the president of the Center for Responsible Lending, an advocacy group based in Durham, N.C.
Citing only “modest steps,” Calhoun said the administration is navigating a political environment where taxpayers are sick of bailouts of any sort.
“The administration has been pretty sensitive to criticism that they’re helping borrowers too much. I think that’s reflected in this modest plan,” he said.
Republicans weren’t shy about labeling the effort another bailout.
Sen. Orrin Hatch, R-Utah, said in a statement that the new efforts were unfair to people “who work hard, pay their bills on time and raise good families. They feel like they are being penalized for being responsible, and that’s not right.”
Some of the most important changes in the reworked Obama plan are technical.
A program to refinance underwater mortgages has been on the books for several years, but had virtually no bank participation. That’s because there were few lenders willing to refinance or reissue such mortgages and risk consequences to their own creditworthiness if these loans went into default because of the sour economy.
The new Obama plan, however, will grant an important exception from such credit hits if a lender extinguishes an old mortgage, forgives principal and places the new loan into a Federal Housing Administration program.
Another barrier to modification has been second mortgages, especially in states where housing prices soared. Issuers of these second mortgages had little incentive to extinguish their claim and help the borrower and issuer of the primary mortgage modify mortgages.
Under the revamped effort, the government will double payments to second-lien holders that agree to extinguish their claims. Before, they got 10 cents on the dollar for doing so; now they’ll get 20 cents on the dollar. It doesn’t sound like much, but if the mortgage goes into foreclosure, they get nothing.
There’s also a danger that Friday’s plan could foster unrealistic expectations.
“Borrowers are calling today from the announcement, and it could be fall before you see some of this executable,” cautioned Faith Schwartz, who runs Hope Now, a trade association that represents lenders and loan servicers. “The good news is there are a few more tools.”
Much of what was announced Friday followed intense discussions with the mortgage finance community. Sean Dobson, the chief executive of Amherst Securities, was part of that discussion, and he praised the administration’s willingness to listen.
“It’s a fatal wound to the economy if they don’t do something about it. … Nothing yet has been done,” Dobson said, suggesting a negative loop where the housing crisis hits the economy, which creates more job losses, which add more homes to the foreclosure rolls. “This is the first step we’ve seen to interrupt that feedback loop.”
ON THE WEB:
Administration plan: http://tinyurl.com/ybpkq26
Administration’s FAQ: http://tinyurl.com/y89s382
FHA Refinance FAQ: http://tinyurl.com/ycobzcd
Source: © 2010 McClatchy-Tribune Information Services, Kevin G. Hall. Distributed by McClatchy-Tribune News Service.
The new measures, funded through $50 billion already set aside for mortgage relief, seek to provide three-to-six-months of temporary help for newly unemployed homeowners in making mortgage payments.
They also ease the refinancing of mortgages now valued well above the current home price – so-called underwater mortgages – and give incentives to issuers of piggyback mortgages to get out of the way and allow a mortgage modification to happen.
The effort to have banks forgive principal gives greater incentive for homeowners in foreclosure-troubled states such as California, Florida, Arizona and Nevada to stay in their homes rather than hand the keys back to the bank, which would swell the glut of vacant or bank-owned homes on the market – and further depress home prices.
The White House was careful not to raise expectations too high, noting that up to 12 million foreclosures still could occur during the next three years. The new program seeks to help at most 4 million of those homeowners.
One in four homeowners is thought to be underwater, or owe more on a mortgage than the home’s underlying value, according to researcher First American CoreLogic, a number that threatens to swamp refinance efforts.
Friday’s proposals follow a steadily growing drumbeat of criticism about administration efforts to prod lenders and investors in housing securities to modify distressed mortgages aggressively. After a year of effort, fewer than 200,000 permanent modifications have taken place.
“We’re trying to adjust to changing circumstances over time,” Assistant Treasury Secretary Herbert Allison explained during the White House rollout of the upgraded mortgage relief program.
Advocacy groups have criticized the administration’s prior effort as too timid. Elizabeth Warren, a Harvard University professor who heads the special Congressional Oversight Panel that oversees the expenditure of taxpayer bailout money, for months has warned that the Home Affordable Mortgage Program wasn’t even keeping up with the pace of new foreclosure notices.
Lawmakers too have been pressuring the Obama administration to give more aid to unemployed homeowners, especially those with good payment histories.
“While clearly there are some people in trouble on their mortgages who bear some of the responsibility for their plight, this is not true of the unemployed who are fully deserving of this help,” said Rep. Barney Frank, D-Mass., the chairman of the House Financial Services Committee.
The new program captured headlines Thursday night when word leaked of help to unemployed homeowners. Once the details came out Friday, however, it delivered less than expected.
Lenders and loan servicers who participate in the government’s program are required to offer temporary relief, but it’ll be help for a limited universe. First, borrowers must seek this help, must be collecting unemployment insurance and must be fewer than 90 days late on their mortgage payments.
That appears to exclude many of the record 6.1 million Americans who have been jobless for 27 weeks or longer.
“It’s the first real step they’ve made on helping the unemployed, but it is not enough,” said Michael Calhoun, the president of the Center for Responsible Lending, an advocacy group based in Durham, N.C.
Citing only “modest steps,” Calhoun said the administration is navigating a political environment where taxpayers are sick of bailouts of any sort.
“The administration has been pretty sensitive to criticism that they’re helping borrowers too much. I think that’s reflected in this modest plan,” he said.
Republicans weren’t shy about labeling the effort another bailout.
Sen. Orrin Hatch, R-Utah, said in a statement that the new efforts were unfair to people “who work hard, pay their bills on time and raise good families. They feel like they are being penalized for being responsible, and that’s not right.”
Some of the most important changes in the reworked Obama plan are technical.
A program to refinance underwater mortgages has been on the books for several years, but had virtually no bank participation. That’s because there were few lenders willing to refinance or reissue such mortgages and risk consequences to their own creditworthiness if these loans went into default because of the sour economy.
The new Obama plan, however, will grant an important exception from such credit hits if a lender extinguishes an old mortgage, forgives principal and places the new loan into a Federal Housing Administration program.
Another barrier to modification has been second mortgages, especially in states where housing prices soared. Issuers of these second mortgages had little incentive to extinguish their claim and help the borrower and issuer of the primary mortgage modify mortgages.
Under the revamped effort, the government will double payments to second-lien holders that agree to extinguish their claims. Before, they got 10 cents on the dollar for doing so; now they’ll get 20 cents on the dollar. It doesn’t sound like much, but if the mortgage goes into foreclosure, they get nothing.
There’s also a danger that Friday’s plan could foster unrealistic expectations.
“Borrowers are calling today from the announcement, and it could be fall before you see some of this executable,” cautioned Faith Schwartz, who runs Hope Now, a trade association that represents lenders and loan servicers. “The good news is there are a few more tools.”
Much of what was announced Friday followed intense discussions with the mortgage finance community. Sean Dobson, the chief executive of Amherst Securities, was part of that discussion, and he praised the administration’s willingness to listen.
“It’s a fatal wound to the economy if they don’t do something about it. … Nothing yet has been done,” Dobson said, suggesting a negative loop where the housing crisis hits the economy, which creates more job losses, which add more homes to the foreclosure rolls. “This is the first step we’ve seen to interrupt that feedback loop.”
ON THE WEB:
Administration plan: http://tinyurl.com/ybpkq26
Administration’s FAQ: http://tinyurl.com/y89s382
FHA Refinance FAQ: http://tinyurl.com/ycobzcd
Source: © 2010 McClatchy-Tribune Information Services, Kevin G. Hall. Distributed by McClatchy-Tribune News Service.
Friday, April 16, 2010
Congress extends flood insurance to May 31
Congress approved an extension of the National Flood Insurance Program (NFIP) yesterday and President Obama signed it into law within the hour. The change, part of a larger bill that covered unemployment, extends the flood insurance program to May 31, 2010; and coverage is retroactive to March 28 when the current program ran out.
The extension is a patch for the program, and current bills in Congress would solidify the flood program and extend coverage beyond a few months. H.R. 4213, if passed, would extend flood insurance coverage through Dec. 31, 2010.
“In theory, the NFIP will now return to normal operations and, since the extension is also retroactive, any new policy applications or renewals that were signed and submitted during the hiatus will be effective from the date of application (or in the case of waiting periods, the waiting period will start from the date of application),” say officials of the Independent Insurance Agents and Brokers of America.
The flood insurance extension was part of a larger bill that extends unemployment insurance benefits to June 2.
Source: National Underwriter, Arthur D. Postal, April 16, 2010
Source: © 2010 Florida Realtors®
The extension is a patch for the program, and current bills in Congress would solidify the flood program and extend coverage beyond a few months. H.R. 4213, if passed, would extend flood insurance coverage through Dec. 31, 2010.
“In theory, the NFIP will now return to normal operations and, since the extension is also retroactive, any new policy applications or renewals that were signed and submitted during the hiatus will be effective from the date of application (or in the case of waiting periods, the waiting period will start from the date of application),” say officials of the Independent Insurance Agents and Brokers of America.
The flood insurance extension was part of a larger bill that extends unemployment insurance benefits to June 2.
Source: National Underwriter, Arthur D. Postal, April 16, 2010
Source: © 2010 Florida Realtors®
Bills introduced to extend ‘zero down’ home loans
A pair of U.S. House legislators are rallying support on behalf of the U.S. Department of Agriculture’s (USDA) Single-Family Housing Guaranteed Loan Program, one of only a few remaining residential finance options that do not require a downpayment.
Rep. Shelley Moore Capito (R-W.Va.) and Rep. Paul Kanjorski (D-Pa.) have filed separate bills that would generate new funding for the mortgage program – which is on track to deplete its appropriation for the fiscal year in the approaching weeks – by increasing fees on the loans.
The lawmakers hope to move the measures through committee and to the House floor with due urgency, since the busy spring selling season for real estate is already underway. Standing behind them are industry interests such as the National Association of Realtors® and the National Association of Home Builders.
While some experts see nothing-down financing initiatives as risky, the USDA reported a foreclosure rate of 1.72 percent last fiscal year compared to the FHA’s 3.32 percent.
Supporters laud the USDA program as critical for many low- and middle-income borrowers who purchase modest properties in the exurbs, as well as for first-time homebuyers.
Source: Wall Street Journal (04/14/10)
Source: © Copyright 2010 INFORMATION, INC.
Rep. Shelley Moore Capito (R-W.Va.) and Rep. Paul Kanjorski (D-Pa.) have filed separate bills that would generate new funding for the mortgage program – which is on track to deplete its appropriation for the fiscal year in the approaching weeks – by increasing fees on the loans.
The lawmakers hope to move the measures through committee and to the House floor with due urgency, since the busy spring selling season for real estate is already underway. Standing behind them are industry interests such as the National Association of Realtors® and the National Association of Home Builders.
While some experts see nothing-down financing initiatives as risky, the USDA reported a foreclosure rate of 1.72 percent last fiscal year compared to the FHA’s 3.32 percent.
Supporters laud the USDA program as critical for many low- and middle-income borrowers who purchase modest properties in the exurbs, as well as for first-time homebuyers.
Source: Wall Street Journal (04/14/10)
Source: © Copyright 2010 INFORMATION, INC.
First-time homebuyers change lifestyle to afford ownership
Prior to purchase, a vast majority of first-time homebuyers (88 percent) believe that they have accounted for all expenses related to owning a home.
Seemingly contradicting that notion, among those who had purchased a home in the past 12 months, just over half indicate that the expenses were more than they had calculated, causing a change in lifestyle.
The information comes from the BBVA Compass First Time Home Buyers Online Survey, which polled American consumers about the thoughts, emotions and hurdles related to owning and enjoying a first home.
Key first-time homebuyer findings include:
• Nearly one third have anxiety over the affordability of owning a home.
• 7 in 10 indicate that the first-time homebuyer’s tax credit has not truly factored into the timing of when they decide to purchase a home.
• 92 percent of respondents indicate that having additional time before their first payment due date would be helpful.
Regarding first-time homebuyers who have purchased a home in the previous 12 months, key findings included:
• 51 percent indicated that the monthly expense of owning a home was more than they calculated.
• Although 7 in 10 respondents said that the unexpected expenditures leveled out over time, another 87 percent said that they changed their lifestyle as a result of the additional expenses.
• Nearly one third indicated that they paid for these unexpected expenditures with a mixture of cash and credit, perhaps indicating a lack of liquid funds.
Both segments of first-time homebuyers were also overwhelmingly in favor of mortgages that allow breathing room between closing and the due date of the first payment. With this financial cushion, the First Time Home Buyer indicated that they would be in a better position to pay off credit cards and other bills, as well as make some of those unexpected purchases (household items and improvements) that come along with owning a home.
Research firm Qualtrics conducted the online survey of 300 first-time homebuyers between Feb. 21, 2010 and Feb. 25, 2010.
Source: © 2010 Florida Realtors®
Seemingly contradicting that notion, among those who had purchased a home in the past 12 months, just over half indicate that the expenses were more than they had calculated, causing a change in lifestyle.
The information comes from the BBVA Compass First Time Home Buyers Online Survey, which polled American consumers about the thoughts, emotions and hurdles related to owning and enjoying a first home.
Key first-time homebuyer findings include:
• Nearly one third have anxiety over the affordability of owning a home.
• 7 in 10 indicate that the first-time homebuyer’s tax credit has not truly factored into the timing of when they decide to purchase a home.
• 92 percent of respondents indicate that having additional time before their first payment due date would be helpful.
Regarding first-time homebuyers who have purchased a home in the previous 12 months, key findings included:
• 51 percent indicated that the monthly expense of owning a home was more than they calculated.
• Although 7 in 10 respondents said that the unexpected expenditures leveled out over time, another 87 percent said that they changed their lifestyle as a result of the additional expenses.
• Nearly one third indicated that they paid for these unexpected expenditures with a mixture of cash and credit, perhaps indicating a lack of liquid funds.
Both segments of first-time homebuyers were also overwhelmingly in favor of mortgages that allow breathing room between closing and the due date of the first payment. With this financial cushion, the First Time Home Buyer indicated that they would be in a better position to pay off credit cards and other bills, as well as make some of those unexpected purchases (household items and improvements) that come along with owning a home.
Research firm Qualtrics conducted the online survey of 300 first-time homebuyers between Feb. 21, 2010 and Feb. 25, 2010.
Source: © 2010 Florida Realtors®
Crowds likely at ‘Save the Dream’
A record number of desperate borrowers have registered for a traveling mortgage relief marathon that “sounds too good to be true.”
The Neighborhood Assistance Corporation of America’s Save the Dream Tour opens 9 a.m. Thursday at the Miami Beach Convention Center, offering thousands of struggling homeowners a chance to modify their loans – at no cost.
The event, which offers free counseling and face-to-face contact with lender representative, runs 24 hours a day. Doors close at 8 p.m. on April 19.
Bruce Marks, CEO of the Boston-based nonprofit, said Wednesday morning that a company record 15,000 had already registered for Thursday’s event.
“We’ve had a huge response,” he said, even though the tour made a stop in West Palm Beach just last February.
Darren Duarte, spokesman for NACA, said the overwhelming number of people who showed up for help in Palm Beach County led the tour, which makes stops around the county, back to South Florida.
“During the last day the crowd was extremely large and we got to see a lot of people but there were a lot of people we didn’t get a chance to see,” Duarte said about the February event. “So we saw there is still a need here and a demand here.”
More than 24,000 applied for mortgage relief at the Palm Beach County event, leading to nearly 11,000 modifications, Duarte said.
Greg Calley said he was among those who benefited. The American Airlines mechanic said he was poised to short-sell his Jupiter townhome after a year of trying unsuccessfully to work with Chase to modify his loan, which he struggled to pay.
Then he heard about Save the Dream.
“I thought it was too good to be true,” he said, echoing a common skepticism about whether the nonprofit really can help mortgage holders receive a free, same-day loan modification.
But Calley said that by the time he left the Palm Beach event, his monthly payment was $1,000 cheaper and his interest rate reduced by 4.5 percentage points.
The tour’s arrival in South Florida comes on the heels of a month that set a new South Florida record for property repossessions in March, with 3,707 in Broward, Miami-Dade and Palm Beach counties, according to a report by real estate consulting firm CondoVultures Realty.
Those who attend the workshop are encouraged to register and are urged to bring pay stubs, tax forms and other financial documents.
More info: http://www.naca.com
Source: Copyright © 2010 The Miami Herald, Distributed by McClatchy-Tribune Information Services.
The Neighborhood Assistance Corporation of America’s Save the Dream Tour opens 9 a.m. Thursday at the Miami Beach Convention Center, offering thousands of struggling homeowners a chance to modify their loans – at no cost.
The event, which offers free counseling and face-to-face contact with lender representative, runs 24 hours a day. Doors close at 8 p.m. on April 19.
Bruce Marks, CEO of the Boston-based nonprofit, said Wednesday morning that a company record 15,000 had already registered for Thursday’s event.
“We’ve had a huge response,” he said, even though the tour made a stop in West Palm Beach just last February.
Darren Duarte, spokesman for NACA, said the overwhelming number of people who showed up for help in Palm Beach County led the tour, which makes stops around the county, back to South Florida.
“During the last day the crowd was extremely large and we got to see a lot of people but there were a lot of people we didn’t get a chance to see,” Duarte said about the February event. “So we saw there is still a need here and a demand here.”
More than 24,000 applied for mortgage relief at the Palm Beach County event, leading to nearly 11,000 modifications, Duarte said.
Greg Calley said he was among those who benefited. The American Airlines mechanic said he was poised to short-sell his Jupiter townhome after a year of trying unsuccessfully to work with Chase to modify his loan, which he struggled to pay.
Then he heard about Save the Dream.
“I thought it was too good to be true,” he said, echoing a common skepticism about whether the nonprofit really can help mortgage holders receive a free, same-day loan modification.
But Calley said that by the time he left the Palm Beach event, his monthly payment was $1,000 cheaper and his interest rate reduced by 4.5 percentage points.
The tour’s arrival in South Florida comes on the heels of a month that set a new South Florida record for property repossessions in March, with 3,707 in Broward, Miami-Dade and Palm Beach counties, according to a report by real estate consulting firm CondoVultures Realty.
Those who attend the workshop are encouraged to register and are urged to bring pay stubs, tax forms and other financial documents.
More info: http://www.naca.com
Source: Copyright © 2010 The Miami Herald, Distributed by McClatchy-Tribune Information Services.
Foreclosure filings rise in spite of aid program’s efforts
Home foreclosures are accelerating – and many more people are losing their homes – more than a year after the government launched a program to aid financially distressed borrowers.
Foreclosure filings in March totaled 367,056, jumping nearly 19 percent from February and up almost 8 percent from March 2009, according to RealtyTrac.
It was the highest monthly total since January 2005, when RealtyTrac began issuing its reports.
Lenders repossessed nearly 260,000 properties in the first quarter – a record for any quarter, and a 35 percent increase from a year earlier, RealtyTrac said.
“We’re at the highest record levels ever,” says Rick Sharga at RealtyTrac. “We’re now seeing the banks financially address the logjams of homes in the foreclosure process that were delayed. And they’re addressing the first waves of homes that weren’t eligible for the modification process or fell out of the program.”
More than a year after the Obama administration launched its foreclosure prevention program, about 230,000 homeowners have gotten permanent modifications with lower monthly mortgage payments, according to a report Wednesday by the Treasury Department.
That represents 6 percent of the 3.39 million eligible homeowners who are 60 or more days delinquent on their mortgage. An additional 108,000 permanent modifications have been offered to homeowners and were still pending as of the end of March.
More than 1.4 million homeowners received offers for trial modifications, which typically last for three months. If a homeowner remains current on payments during that time, the modifications will generally become permanent.
“(The effort) is improving, but I’ve always thought this is a Band-Aid program,” says Dean Baker, co-director of the Center for Economic and Policy Research. “We’re helping people stay in their homes, but they bought homes that cost so much, they may be paying more than renting. And in three to four years from now, they will still be underwater.”
Meanwhile, the Obama administration’s efforts to prevent foreclosures continues to come under sharp criticism.
The Home Affordable Modification Program (HAMP) is lagging well behind the pace of the crisis, and most homeowners in financial trouble will never receive help, according to a report this week by a congressional oversight panel.
For every borrower who avoided foreclosure through the federal program last year, another 10 families lost their homes, that report said.
Lenders who are participating in the HAMP program say it doesn’t capture the full picture, since many modifications are being done for homeowners under programs run by servicers other than HAMP.
Wells Fargo says it has done more than 520,000 modifications this year for homeowners, about 145,000 of them HAMP modifications, which require applicants to meet certain criteria.
Borrowers must have a monthly housing-expense-to-income ratio that exceeds 31 percent of their gross monthly income, for example.
“The industry is doing a lot of work outside of HAMP,” says Mike Heid, Wells Fargo Home Mortgage co-president.
Bank of America has 26 percent of eligible homeowners who are 60 days or more delinquent in either trial and permanent modifications as of March; 32,900 are in permanent modifications, up more than 12,000 from February.
Source: © Copyright 2010 USA TODAY, a division of Gannett Co. Inc., Stephanie Armour.
Foreclosure filings in March totaled 367,056, jumping nearly 19 percent from February and up almost 8 percent from March 2009, according to RealtyTrac.
It was the highest monthly total since January 2005, when RealtyTrac began issuing its reports.
Lenders repossessed nearly 260,000 properties in the first quarter – a record for any quarter, and a 35 percent increase from a year earlier, RealtyTrac said.
“We’re at the highest record levels ever,” says Rick Sharga at RealtyTrac. “We’re now seeing the banks financially address the logjams of homes in the foreclosure process that were delayed. And they’re addressing the first waves of homes that weren’t eligible for the modification process or fell out of the program.”
More than a year after the Obama administration launched its foreclosure prevention program, about 230,000 homeowners have gotten permanent modifications with lower monthly mortgage payments, according to a report Wednesday by the Treasury Department.
That represents 6 percent of the 3.39 million eligible homeowners who are 60 or more days delinquent on their mortgage. An additional 108,000 permanent modifications have been offered to homeowners and were still pending as of the end of March.
More than 1.4 million homeowners received offers for trial modifications, which typically last for three months. If a homeowner remains current on payments during that time, the modifications will generally become permanent.
“(The effort) is improving, but I’ve always thought this is a Band-Aid program,” says Dean Baker, co-director of the Center for Economic and Policy Research. “We’re helping people stay in their homes, but they bought homes that cost so much, they may be paying more than renting. And in three to four years from now, they will still be underwater.”
Meanwhile, the Obama administration’s efforts to prevent foreclosures continues to come under sharp criticism.
The Home Affordable Modification Program (HAMP) is lagging well behind the pace of the crisis, and most homeowners in financial trouble will never receive help, according to a report this week by a congressional oversight panel.
For every borrower who avoided foreclosure through the federal program last year, another 10 families lost their homes, that report said.
Lenders who are participating in the HAMP program say it doesn’t capture the full picture, since many modifications are being done for homeowners under programs run by servicers other than HAMP.
Wells Fargo says it has done more than 520,000 modifications this year for homeowners, about 145,000 of them HAMP modifications, which require applicants to meet certain criteria.
Borrowers must have a monthly housing-expense-to-income ratio that exceeds 31 percent of their gross monthly income, for example.
“The industry is doing a lot of work outside of HAMP,” says Mike Heid, Wells Fargo Home Mortgage co-president.
Bank of America has 26 percent of eligible homeowners who are 60 days or more delinquent in either trial and permanent modifications as of March; 32,900 are in permanent modifications, up more than 12,000 from February.
Source: © Copyright 2010 USA TODAY, a division of Gannett Co. Inc., Stephanie Armour.
Wednesday, April 14, 2010
Senate inches toward extending flood insurance
The U.S. Senate voted 60-to-34 in favor of limiting debate to 30 hours for legislation extending the National Flood Insurance Program (NFIP) through April 30, which could mean that lawmakers will vote on the measure by April 15.
NFIP expired on March 28, leaving homeowners and insurers in limbo.
However, some lawmakers, like U.S. Sen. Tom Coburn, (R-Okla.), oppose the extension bill, which covers other topics, because it does not include offsets for new spending. Other provisions of the Continuing Extension Act of 2010 (H.R. 4851) include an expansion of unemployment benefits.
Another piece of legislation, H.R. 4213, would extend the NFIP through Dec. 31; but it’s also caught up in debate in the Senate and House because it includes tax extenders not offset by revenue-generating provisions or spending cuts.
Moreover, the U.S. House Financial Services Committee has scheduled an April 21 hearing on NFIP and its extension, which should be followed up by action on legislation to reform the program and ensure its extension for five years.
Insurance groups and other organizations have urged Congress to reauthorize NFIP, noting in a recent letter, “Failure to reauthorize the NFIP expeditiously when Congress returns will severely harm real estate markets, putting consumers at risk of uninsured losses and potentially putting additional tax money at risk to cover relief efforts.”
Source: National Underwriter (Property & Casualty - Risk & Benefits Management Edition) (04/13/10) Postal, Arthur D.
© Copyright 2010 INFORMATION, INC.
NFIP expired on March 28, leaving homeowners and insurers in limbo.
However, some lawmakers, like U.S. Sen. Tom Coburn, (R-Okla.), oppose the extension bill, which covers other topics, because it does not include offsets for new spending. Other provisions of the Continuing Extension Act of 2010 (H.R. 4851) include an expansion of unemployment benefits.
Another piece of legislation, H.R. 4213, would extend the NFIP through Dec. 31; but it’s also caught up in debate in the Senate and House because it includes tax extenders not offset by revenue-generating provisions or spending cuts.
Moreover, the U.S. House Financial Services Committee has scheduled an April 21 hearing on NFIP and its extension, which should be followed up by action on legislation to reform the program and ensure its extension for five years.
Insurance groups and other organizations have urged Congress to reauthorize NFIP, noting in a recent letter, “Failure to reauthorize the NFIP expeditiously when Congress returns will severely harm real estate markets, putting consumers at risk of uninsured losses and potentially putting additional tax money at risk to cover relief efforts.”
Source: National Underwriter (Property & Casualty - Risk & Benefits Management Edition) (04/13/10) Postal, Arthur D.
© Copyright 2010 INFORMATION, INC.
More keep up with mortgage payments
The share of homeowners behind on their mortgages fell in the first quarter, the first drop in four years and a possible sign that the foreclosure crisis has peaked.
The portion of mortgages that were delinquent 30 days or more fell to 6.57 percent in the first quarter from 6.60 percent in the last three months of 2009, according to Equifax and Moody’s Economy.com.
That’s a drop of about 16,630 delinquent loans and, though modest, it is the first decline in the delinquency rate since early 2006.
“It will take years to work through all the troubled mortgage loans in the foreclosure pipeline, but this is the first indication that the number of loans entering the pipeline is declining,” says Mark Zandi, chief economist for Moody’s Economy.com. “It portends a peaking of the foreclosure crisis.”
Delinquencies in almost all categories – 30-, 90- and 120-day delinquencies on single-family properties – declined.
Reasons for the improvement in the foreclosure rate:
• Tougher lending standards since the housing bubble burst have kept riskier borrowers from getting mortgages.
• Mortgage modifications have helped tens of thousands of troubled homeowners stave off delinquencies.
• A more stable job market is preventing new mortgage delinquencies. The unemployment rate held steady at 9.7 percent in March, and non-farm jobs increased by 162,000.
“I wouldn’t be surprised if we’re at the peak,” says Joel Naroff of Naroff Economic Advisors.
But the foreclosure problem won’t disappear quickly. In the past two years, more than 5 million homes have received foreclosure notices, and more than 3 million are expected to get them this year, according to RealtyTrac.
One issue is strategic defaults by borrowers who walk away from their mortgages – even though they can afford to pay – because they owe more than their homes are worth.
Millions of homes have negative equity and perhaps 20 percent to 25 percent of recent defaults have been strategic, according to a new Moody’s Economy.com analysis. More strategic defaults could increase the pace of home foreclosures and hamper new borrowers’ attempts to get mortgages, it says.
“There is still a foreclosure problem that is going to cause people to lose their homes, but in terms of new delinquencies starting, those are probably at their peak,” Zandi says.
Copyright © 2010 USA TODAY
The portion of mortgages that were delinquent 30 days or more fell to 6.57 percent in the first quarter from 6.60 percent in the last three months of 2009, according to Equifax and Moody’s Economy.com.
That’s a drop of about 16,630 delinquent loans and, though modest, it is the first decline in the delinquency rate since early 2006.
“It will take years to work through all the troubled mortgage loans in the foreclosure pipeline, but this is the first indication that the number of loans entering the pipeline is declining,” says Mark Zandi, chief economist for Moody’s Economy.com. “It portends a peaking of the foreclosure crisis.”
Delinquencies in almost all categories – 30-, 90- and 120-day delinquencies on single-family properties – declined.
Reasons for the improvement in the foreclosure rate:
• Tougher lending standards since the housing bubble burst have kept riskier borrowers from getting mortgages.
• Mortgage modifications have helped tens of thousands of troubled homeowners stave off delinquencies.
• A more stable job market is preventing new mortgage delinquencies. The unemployment rate held steady at 9.7 percent in March, and non-farm jobs increased by 162,000.
“I wouldn’t be surprised if we’re at the peak,” says Joel Naroff of Naroff Economic Advisors.
But the foreclosure problem won’t disappear quickly. In the past two years, more than 5 million homes have received foreclosure notices, and more than 3 million are expected to get them this year, according to RealtyTrac.
One issue is strategic defaults by borrowers who walk away from their mortgages – even though they can afford to pay – because they owe more than their homes are worth.
Millions of homes have negative equity and perhaps 20 percent to 25 percent of recent defaults have been strategic, according to a new Moody’s Economy.com analysis. More strategic defaults could increase the pace of home foreclosures and hamper new borrowers’ attempts to get mortgages, it says.
“There is still a foreclosure problem that is going to cause people to lose their homes, but in terms of new delinquencies starting, those are probably at their peak,” Zandi says.
Copyright © 2010 USA TODAY
Banking execs skeptical on mortgage reductions
Top banking industry executives are skeptical about helping troubled borrowers by forgiving a portion of their debt.
The executives told lawmakers on Tuesday they are reducing the amount that troubled borrowers owe on their home loans only in limited cases. That’s because consumers who are paying their mortgages on time are likely to see such reductions as unfair, they said.
Such programs “could raise issues of fairness,” said Sanjiv Das, Citigroup’s top mortgage executive, who appeared in front of the House Financial Services committee with top executives from Bank of America, Wells Fargo & Co. and JPMorgan Chase.
David Lowman, chief executive of Chase’s mortgage business, told lawmakers that large-scale mortgage principal reduction “could be harmful to consumers, investors and future mortgage market conditions.”
Chase estimates that reducing home loan balances so that no homeowners would owe more than the value of their homes would cost up to $900 billion, with $150 billion of that borne by the government.
Many homeowners aren’t satisfied. After the hearing was over, dozens of activists from the Boston-based Neighborhood Assistance Corp. of America chased Lowman through the marble-floored hallways of the Rayburn House Office Building, pressing him to do more to help troubled homeowners.
He did not respond to their requests for a meeting and eventually left the building with the assistance of police.
Homeowners complained that the bank has been difficult to deal with. Charandra Smith of Prince George’s County, Md., said in an interview that her home she bought in 2007 is now worth about $300,000 – a decline of $170,000 from her purchase price. Chase, she said, has been unwilling to help.
“I’m not asking (Lowman) to do anything extraordinary. I want my home, I intend to stay in my home, but make it reasonable,” she said. “If I sell my home, I lose everything.”
A Chase spokesman declined to comment on the activist group.
The four mortgage companies represented at the hearing are the largest in the country and have come under fire for not doing enough to help borrowers as part of the Obama administration’s $75 billion mortgage relief program, which has failed to make a big dent in the problem.
Through March, more than 230,000 homeowners had completed loan modifications. That’s about 21 percent of the 1.1 million borrowers who began the program over the past year, the Treasury Department said late Tuesday.
Last month, the administration expanded the program, launching a plan to reduce the amount some troubled borrowers owe on their home loans and give jobless homeowners a temporary break. But the details of those programs are expected to take months to work out.
President Barack Obama’s housing secretary, Shaun Donovan, said in a speech to a group of mortgage bankers Tuesday afternoon that the administration did not foresee how much effort it would take for the mortgage industry to launch the program.
Many mortgage companies, he said, “were too slow to make the investments in systems and staff needed” to put the program in place. But he noted that many families are getting relief.
Republicans, however, say the Obama administration should abandon the effort and focus on creating jobs.
“The market needs to find its own footing free of government intervention and manipulation so we can revive our economy and get on with a full housing market recovery,” said Rep. Spencer Bachus of Alabama, the committee’s senior Republican.
At the House hearing, Bank of America executives took a more enthusiastic stance toward mortgage forgiveness than its competitors. Last month, the Charlotte, N.C.-based banking giant said it would forgive a portion of the mortgage balances for distressed homeowners with the most problematic loans.
The Obama administration’s new plan, however, is expected to be modest in its impact. Moody’s Analytics forecasts that the new programs will help about 350,000 homeowners avoid foreclosure this year. But 1.9 million homeowners are still expected to lose their homes.
While awaiting further details on the plan, borrowers should continue with loan modifications, said Jack Schakett, Bank of America’s credit loss mitigation strategies executive. He said BofA will re-evaluate borrowers for the new assistance plan once it becomes available.
“What we don’t want to do is to have customers sitting around trying to stall, hoping for that better offer,” he said in an interview.
The four big banks at Tuesday’s hearing are also the main holders of second mortgages such as home equity loans. During the housing boom, business boomed for so-called “piggyback” mortgages – second loans that allowed consumers to make a little or no down payment.
These loans may be worth little or nothing, but banks are reluctant to release their claims or reduce the value of those loans on their books.
Complicating matters, many borrowers are choosing to pay their second mortgages ahead of their primary ones. So banks have little incentive to modify those loans as long as homeowners are still paying on time.
The Treasury Department has launched a program to modify second mortgages. That program was delayed for months but the four big banks signed on after pressure from the Obama administration and lawmakers.
Copyright © 2010 The Associated Press, Alan Zibel, AP real estate writer. All rights reserved.
The executives told lawmakers on Tuesday they are reducing the amount that troubled borrowers owe on their home loans only in limited cases. That’s because consumers who are paying their mortgages on time are likely to see such reductions as unfair, they said.
Such programs “could raise issues of fairness,” said Sanjiv Das, Citigroup’s top mortgage executive, who appeared in front of the House Financial Services committee with top executives from Bank of America, Wells Fargo & Co. and JPMorgan Chase.
David Lowman, chief executive of Chase’s mortgage business, told lawmakers that large-scale mortgage principal reduction “could be harmful to consumers, investors and future mortgage market conditions.”
Chase estimates that reducing home loan balances so that no homeowners would owe more than the value of their homes would cost up to $900 billion, with $150 billion of that borne by the government.
Many homeowners aren’t satisfied. After the hearing was over, dozens of activists from the Boston-based Neighborhood Assistance Corp. of America chased Lowman through the marble-floored hallways of the Rayburn House Office Building, pressing him to do more to help troubled homeowners.
He did not respond to their requests for a meeting and eventually left the building with the assistance of police.
Homeowners complained that the bank has been difficult to deal with. Charandra Smith of Prince George’s County, Md., said in an interview that her home she bought in 2007 is now worth about $300,000 – a decline of $170,000 from her purchase price. Chase, she said, has been unwilling to help.
“I’m not asking (Lowman) to do anything extraordinary. I want my home, I intend to stay in my home, but make it reasonable,” she said. “If I sell my home, I lose everything.”
A Chase spokesman declined to comment on the activist group.
The four mortgage companies represented at the hearing are the largest in the country and have come under fire for not doing enough to help borrowers as part of the Obama administration’s $75 billion mortgage relief program, which has failed to make a big dent in the problem.
Through March, more than 230,000 homeowners had completed loan modifications. That’s about 21 percent of the 1.1 million borrowers who began the program over the past year, the Treasury Department said late Tuesday.
Last month, the administration expanded the program, launching a plan to reduce the amount some troubled borrowers owe on their home loans and give jobless homeowners a temporary break. But the details of those programs are expected to take months to work out.
President Barack Obama’s housing secretary, Shaun Donovan, said in a speech to a group of mortgage bankers Tuesday afternoon that the administration did not foresee how much effort it would take for the mortgage industry to launch the program.
Many mortgage companies, he said, “were too slow to make the investments in systems and staff needed” to put the program in place. But he noted that many families are getting relief.
Republicans, however, say the Obama administration should abandon the effort and focus on creating jobs.
“The market needs to find its own footing free of government intervention and manipulation so we can revive our economy and get on with a full housing market recovery,” said Rep. Spencer Bachus of Alabama, the committee’s senior Republican.
At the House hearing, Bank of America executives took a more enthusiastic stance toward mortgage forgiveness than its competitors. Last month, the Charlotte, N.C.-based banking giant said it would forgive a portion of the mortgage balances for distressed homeowners with the most problematic loans.
The Obama administration’s new plan, however, is expected to be modest in its impact. Moody’s Analytics forecasts that the new programs will help about 350,000 homeowners avoid foreclosure this year. But 1.9 million homeowners are still expected to lose their homes.
While awaiting further details on the plan, borrowers should continue with loan modifications, said Jack Schakett, Bank of America’s credit loss mitigation strategies executive. He said BofA will re-evaluate borrowers for the new assistance plan once it becomes available.
“What we don’t want to do is to have customers sitting around trying to stall, hoping for that better offer,” he said in an interview.
The four big banks at Tuesday’s hearing are also the main holders of second mortgages such as home equity loans. During the housing boom, business boomed for so-called “piggyback” mortgages – second loans that allowed consumers to make a little or no down payment.
These loans may be worth little or nothing, but banks are reluctant to release their claims or reduce the value of those loans on their books.
Complicating matters, many borrowers are choosing to pay their second mortgages ahead of their primary ones. So banks have little incentive to modify those loans as long as homeowners are still paying on time.
The Treasury Department has launched a program to modify second mortgages. That program was delayed for months but the four big banks signed on after pressure from the Obama administration and lawmakers.
Copyright © 2010 The Associated Press, Alan Zibel, AP real estate writer. All rights reserved.
Tuesday, April 13, 2010
Top ex-WaMu executives come before Congress
Former senior executives of mortgage lender Washington Mutual, the biggest U.S. bank in history to fail, are appearing before Congress on Tuesday for the first time since the bank’s September 2008 collapse.
Their testimony follows an 18-month investigation by a Senate panel that found fraud throughout the bank’s lending operations and failure by management to stem the deception despite internal probes.
WaMu’s pay system rewarded loan officers for the volume and speed of the subprime mortgage loans they closed on. Extra bonuses even went to loan officers who overcharged borrowers on their loans or levied stiff penalties for prepayment, according to the report being released by the investigative panel of the Senate Homeland Security and Governmental Affairs Committee.
Testifying at a hearing of the subcommittee Tuesday are former Washington Mutual CEO Kerry Killinger, ex-President and Chief Operating Officer Stephen Rotella, and David Schneider, who was the highest-ranking executive in the bank’s home lending operation. Two former chief risk officers and an internal auditor are also due to appear.
Sen. Carl Levin, D-Mich., the subcommittee chairman, said Monday the panel won’t decide until after the hearings on Tuesday and Friday whether to make a formal referral to the Justice Department for possible criminal prosecution. Justice, the FBI and the Securities and Exchange Commission opened investigations into Washington Mutual soon after its collapse in the fall of 2008 at the height of the financial crisis.
The new report by the Senate investigators said the top WaMu producers, loan officers and sales executives who made high-risk loans or packaged them into securities for sale to Wall Street, were eligible for the bank’s President’s Club, with trips to swank resorts - like Maui in 2005.
Fueled by the housing boom, Seattle-based Washington Mutual’s sales to investors of packaged subprime mortgage securities leapt from $2.5 billion in 2000 to $29 billion in 2006. The 119-year-old thrift, with $307 billion in assets, failed in September 2008. It was sold for $1.9 billion to JPMorgan Chase & Co. in a deal brokered by the Federal Deposit Insurance Corp.
WaMu was one of the biggest makers of so-called “option ARM” mortgages, which allowed borrowers to make payments so low that loan debt actually increased every month.
The Senate subcommittee investigated the Washington Mutual failure for a year and a half. It focused on the thrift as a case study for the financial crisis that brought the recession and the loss of jobs or homes for millions of Americans.
Senior executives of the bank were aware of the prevalence of fraud, the Senate investigators found.
Washington Mutual “was one of the worst,” Levin told reporters Monday. “This was a Main Street bank that got taken in by these Wall Street profits that were offered to it.”
The investors who bought the mortgage securities from Washington Mutual weren’t informed of the fraudulent practices, the Senate investigators found. WaMu “dumped the polluted water” of toxic mortgage securities into the stream of the U.S. financial system, Levin said.
In some cases, sales associates in WaMu offices in California fabricated loan documents, cutting and pasting false names on borrowers’ bank statements. The company’s own probe in 2005, three years before the bank collapsed, found that two top producing offices – in Downey and Montebello, Calif. – had levels of fraud exceeding 58 percent and 83 percent of the loans. Employees violated the bank’s policies on verifying borrowers’ qualifications and reviewing loans.
In an episode in 2007, some of WaMu’s mortgages were viewed as so suspect by American International Group Inc. that it refused to insure them and complained to both California and federal regulators, according to the Senate investigators. AIG, one of the world’s largest insurance companies, itself nearly collapsed in the fall of 2008 and received about $180 billion in bailout aid from the government.
Washington Mutual was repeatedly criticized over the years by its internal auditors and federal regulators for sloppy lending that resulted in high default rates by borrowers, according to the report. Violations were so serious that in 2007, Washington Mutual closed its big affiliate Long Beach Mortgage Co. as a separate entity and took over its subprime lending operations.
In late 2006, Washington Mutual’s primary regulator, the U.S. Office of Thrift Supervision, allowed the bank an additional year to comply with new, stricter guidelines for issuing subprime loans.
According to an internal bank e-mail cited in the report, Washington Mutual would have lost about a third of the volume of its subprime loans if it applied the stricter requirements.
Jennifer Zuccarelli, a spokeswoman for JPMorgan Chase, declined to comment Monday on the subcommittee report.
Copyright © 2010 The Associated Press, Marcy Gordon, AP business writer
Their testimony follows an 18-month investigation by a Senate panel that found fraud throughout the bank’s lending operations and failure by management to stem the deception despite internal probes.
WaMu’s pay system rewarded loan officers for the volume and speed of the subprime mortgage loans they closed on. Extra bonuses even went to loan officers who overcharged borrowers on their loans or levied stiff penalties for prepayment, according to the report being released by the investigative panel of the Senate Homeland Security and Governmental Affairs Committee.
Testifying at a hearing of the subcommittee Tuesday are former Washington Mutual CEO Kerry Killinger, ex-President and Chief Operating Officer Stephen Rotella, and David Schneider, who was the highest-ranking executive in the bank’s home lending operation. Two former chief risk officers and an internal auditor are also due to appear.
Sen. Carl Levin, D-Mich., the subcommittee chairman, said Monday the panel won’t decide until after the hearings on Tuesday and Friday whether to make a formal referral to the Justice Department for possible criminal prosecution. Justice, the FBI and the Securities and Exchange Commission opened investigations into Washington Mutual soon after its collapse in the fall of 2008 at the height of the financial crisis.
The new report by the Senate investigators said the top WaMu producers, loan officers and sales executives who made high-risk loans or packaged them into securities for sale to Wall Street, were eligible for the bank’s President’s Club, with trips to swank resorts - like Maui in 2005.
Fueled by the housing boom, Seattle-based Washington Mutual’s sales to investors of packaged subprime mortgage securities leapt from $2.5 billion in 2000 to $29 billion in 2006. The 119-year-old thrift, with $307 billion in assets, failed in September 2008. It was sold for $1.9 billion to JPMorgan Chase & Co. in a deal brokered by the Federal Deposit Insurance Corp.
WaMu was one of the biggest makers of so-called “option ARM” mortgages, which allowed borrowers to make payments so low that loan debt actually increased every month.
The Senate subcommittee investigated the Washington Mutual failure for a year and a half. It focused on the thrift as a case study for the financial crisis that brought the recession and the loss of jobs or homes for millions of Americans.
Senior executives of the bank were aware of the prevalence of fraud, the Senate investigators found.
Washington Mutual “was one of the worst,” Levin told reporters Monday. “This was a Main Street bank that got taken in by these Wall Street profits that were offered to it.”
The investors who bought the mortgage securities from Washington Mutual weren’t informed of the fraudulent practices, the Senate investigators found. WaMu “dumped the polluted water” of toxic mortgage securities into the stream of the U.S. financial system, Levin said.
In some cases, sales associates in WaMu offices in California fabricated loan documents, cutting and pasting false names on borrowers’ bank statements. The company’s own probe in 2005, three years before the bank collapsed, found that two top producing offices – in Downey and Montebello, Calif. – had levels of fraud exceeding 58 percent and 83 percent of the loans. Employees violated the bank’s policies on verifying borrowers’ qualifications and reviewing loans.
In an episode in 2007, some of WaMu’s mortgages were viewed as so suspect by American International Group Inc. that it refused to insure them and complained to both California and federal regulators, according to the Senate investigators. AIG, one of the world’s largest insurance companies, itself nearly collapsed in the fall of 2008 and received about $180 billion in bailout aid from the government.
Washington Mutual was repeatedly criticized over the years by its internal auditors and federal regulators for sloppy lending that resulted in high default rates by borrowers, according to the report. Violations were so serious that in 2007, Washington Mutual closed its big affiliate Long Beach Mortgage Co. as a separate entity and took over its subprime lending operations.
In late 2006, Washington Mutual’s primary regulator, the U.S. Office of Thrift Supervision, allowed the bank an additional year to comply with new, stricter guidelines for issuing subprime loans.
According to an internal bank e-mail cited in the report, Washington Mutual would have lost about a third of the volume of its subprime loans if it applied the stricter requirements.
Jennifer Zuccarelli, a spokeswoman for JPMorgan Chase, declined to comment Monday on the subcommittee report.
Copyright © 2010 The Associated Press, Marcy Gordon, AP business writer
IRS offers info on tax credits
U.S. taxes can be offset by a number of real estate-related credits and deductions, and the IRS offers information on each.
Karen Russell, real estate industry liaison for Georgia, and in this instance, Florida as well, compiled a list of educational documents for the real estate industry to share with homebuyers and sellers.
“I am sharing the following links regarding credits available to first time homebuyers and long-term homeowners wishing to replace their primary residence,” Russell says. “This information can be printed and placed for easy viewing” by interested buyers and sellers.
Energy Incentives for Individuals: http://www.irs.gov/newsroom/article/0,,id=206875,00.html
Seven Facts about the Non-business Energy Property Credit: http://www.irs.gov/newsroom/article/0,,id=214979,00.html
First-Time Homebuyer Credit: http://www.irs.gov/newsroom/article/0,,id=204671,00.html
Seven Important Facts about Claiming the First-Time Homebuyer Credit: http://www.irs.gov/newsroom/article/0,,id=202222,00.html
Five Tips About the First-Time Homebuyer Credit Documentation Requirements: http://www.irs.gov/newsroom/article/0,,id=219518,00.html
Ten Important Facts about the Extended First-Time Homebuyer Credit: http://www.irs.gov/newsroom/article/0,,id=215827,00.html
© 2010 Florida Realtors®
Karen Russell, real estate industry liaison for Georgia, and in this instance, Florida as well, compiled a list of educational documents for the real estate industry to share with homebuyers and sellers.
“I am sharing the following links regarding credits available to first time homebuyers and long-term homeowners wishing to replace their primary residence,” Russell says. “This information can be printed and placed for easy viewing” by interested buyers and sellers.
Energy Incentives for Individuals: http://www.irs.gov/newsroom/article/0,,id=206875,00.html
Seven Facts about the Non-business Energy Property Credit: http://www.irs.gov/newsroom/article/0,,id=214979,00.html
First-Time Homebuyer Credit: http://www.irs.gov/newsroom/article/0,,id=204671,00.html
Seven Important Facts about Claiming the First-Time Homebuyer Credit: http://www.irs.gov/newsroom/article/0,,id=202222,00.html
Five Tips About the First-Time Homebuyer Credit Documentation Requirements: http://www.irs.gov/newsroom/article/0,,id=219518,00.html
Ten Important Facts about the Extended First-Time Homebuyer Credit: http://www.irs.gov/newsroom/article/0,,id=215827,00.html
© 2010 Florida Realtors®
Monday, April 12, 2010
Fannie Mae a villain or victim in failure?
A former regulator of Fannie Mae blamed “greed, excessive risk-taking and abuse” on the part of the company’s executives for the events that led to the mortgage giant’s failure and bailout.
But Fannie’s former chief executive blamed the struggles on an “impossible” set of choices foisted on the District-based company by its government overseers, the Federal Housing Finance Agency.
It was a familiar question of culprit or casualty on Friday during the third day of hearings by the Financial Crisis Inquiry Commission, which is investigating the causes of the economic calamity of the past two years.
Was Fannie Mae, which backed a huge chunk of the nation’s home loans, a primary instigator of the crisis? Or was it a victim of flawed public policy and a housing downturn that was worse than anybody could have imagined?
Fannie and its rival, Freddie Mac of McLean, were seized by the FHFA in September 2008 and have since received more than $125 billion in aid to stay afloat. The panel’s hearing comes as the Obama administration is preparing to launch a process to decide the companies’ fate.
Questions by the commission’s six Democratic and four Republican members were aimed at revealing whether executives at Fannie and Freddie rushed into buying hundreds of billions of dollars of risky home loans in pursuit of more business, fatter profits and, ultimately, bigger paychecks.
Former Fannie chief executive Daniel H. Mudd accepted responsibility for the company’s struggles and said he was “sorry” that he could not strike a balance that would have allowed the company to survive without government aid.
Fannie and Freddie were odd hybrids created by the government decades ago to foster homeownership but have been owned by private shareholders and run largely like Wall Street investment houses. Treasury Secretary Timothy F. Geithner recently said that the companies’ status as shareholder-owned entities with the implicit backing of taxpayers would end.
“On one hand, without revenue and profits and growth, [Fannie and Freddie] could not attract global capital to the U.S. housing market,” Mudd said. “And on the other hand, without meeting the mission goals for affordable housing and liquidity, [Fannie and Freddie] could not meet the requirements of their congressional charter.”
As the mortgage market deteriorated, Mudd said, Fannie “could not do what a private firm could do.” Fannie “had to stay in the market [and] provide liquidity,” he said.
Robert Levin, former chief business officer, said the company could have done little to forestall its fate. “Fannie Mae was engulfed by an unprecedented decline in home prices and resulting dislocations in the housing markets,” he said.
But the former top regulator of the two companies, Armando Falcon Jr., rejected that view. He said Fannie and Freddie simply wanted to maximize profits, even if it meant entering risky new lines of business, and fought his agency’s efforts to pass tighter regulations that would have curbed the firms’ business practices.
“The companies were not unwitting victims of an economic down cycle or flawed products and services of theirs,” Falcon said. “Their failure was deeply rooted in a culture of arrogance and greed. I should be clear that this was a failure of leadership.”
“The Fannie and Freddie political machine resisted any meaningful regulation using highly improper tactics,” Falcon added. “While all of this political power satisfied the egos of Fannie and Freddie executives, it ultimately served one primary purpose: the speedy accumulation of personal wealth by any means.”
Falcon’s successor, James B. Lockhart III, who made the decision to take over the firms and oversaw their final slide, said the companies were joined by many others in misjudging the market.
The companies’ “management and the models they relied on failed to identify how badly the mortgage market was deteriorating,” he said. “Unfortunately, many others, including bankers, investors, Realtors, brokers, homebuyers and regulators, failed to understand how bad the toxic mix was.”
Lockhart said it was impossible to know whether the failure of the companies could have been averted.
“It was a perfect storm,” he said.
Copyright © 2010 washingtonpost.com
But Fannie’s former chief executive blamed the struggles on an “impossible” set of choices foisted on the District-based company by its government overseers, the Federal Housing Finance Agency.
It was a familiar question of culprit or casualty on Friday during the third day of hearings by the Financial Crisis Inquiry Commission, which is investigating the causes of the economic calamity of the past two years.
Was Fannie Mae, which backed a huge chunk of the nation’s home loans, a primary instigator of the crisis? Or was it a victim of flawed public policy and a housing downturn that was worse than anybody could have imagined?
Fannie and its rival, Freddie Mac of McLean, were seized by the FHFA in September 2008 and have since received more than $125 billion in aid to stay afloat. The panel’s hearing comes as the Obama administration is preparing to launch a process to decide the companies’ fate.
Questions by the commission’s six Democratic and four Republican members were aimed at revealing whether executives at Fannie and Freddie rushed into buying hundreds of billions of dollars of risky home loans in pursuit of more business, fatter profits and, ultimately, bigger paychecks.
Former Fannie chief executive Daniel H. Mudd accepted responsibility for the company’s struggles and said he was “sorry” that he could not strike a balance that would have allowed the company to survive without government aid.
Fannie and Freddie were odd hybrids created by the government decades ago to foster homeownership but have been owned by private shareholders and run largely like Wall Street investment houses. Treasury Secretary Timothy F. Geithner recently said that the companies’ status as shareholder-owned entities with the implicit backing of taxpayers would end.
“On one hand, without revenue and profits and growth, [Fannie and Freddie] could not attract global capital to the U.S. housing market,” Mudd said. “And on the other hand, without meeting the mission goals for affordable housing and liquidity, [Fannie and Freddie] could not meet the requirements of their congressional charter.”
As the mortgage market deteriorated, Mudd said, Fannie “could not do what a private firm could do.” Fannie “had to stay in the market [and] provide liquidity,” he said.
Robert Levin, former chief business officer, said the company could have done little to forestall its fate. “Fannie Mae was engulfed by an unprecedented decline in home prices and resulting dislocations in the housing markets,” he said.
But the former top regulator of the two companies, Armando Falcon Jr., rejected that view. He said Fannie and Freddie simply wanted to maximize profits, even if it meant entering risky new lines of business, and fought his agency’s efforts to pass tighter regulations that would have curbed the firms’ business practices.
“The companies were not unwitting victims of an economic down cycle or flawed products and services of theirs,” Falcon said. “Their failure was deeply rooted in a culture of arrogance and greed. I should be clear that this was a failure of leadership.”
“The Fannie and Freddie political machine resisted any meaningful regulation using highly improper tactics,” Falcon added. “While all of this political power satisfied the egos of Fannie and Freddie executives, it ultimately served one primary purpose: the speedy accumulation of personal wealth by any means.”
Falcon’s successor, James B. Lockhart III, who made the decision to take over the firms and oversaw their final slide, said the companies were joined by many others in misjudging the market.
The companies’ “management and the models they relied on failed to identify how badly the mortgage market was deteriorating,” he said. “Unfortunately, many others, including bankers, investors, Realtors, brokers, homebuyers and regulators, failed to understand how bad the toxic mix was.”
Lockhart said it was impossible to know whether the failure of the companies could have been averted.
“It was a perfect storm,” he said.
Copyright © 2010 washingtonpost.com
Real estate troubles causing jump in rental scams
Troubles in the real estate market are being blamed for helping to fuel what was once a rare type of scam – swindling hopeful tenants out of money by pretending to be a landlord, according to officials.
With a dramatic increase in the number of vacant and foreclosed homes, the number of prospective tenants swindled by scammers posing as landlords has been rising in the past few years, officials said.
It’s not clear how many people have been duped out of their deposits. Although the scam is not new, Christine Minnehan, director of legislative advocacy for the Western Center on Law and Poverty, said, “in the past year, they have risen enormously because of all the vacant properties that are so much easier for this kind of scam to operate in.”
Because the victims of what’s being termed “landlord impersonation” have made their deposits in cash, catching the phony landlords is difficult, according to police. Some victims are also reluctant to report they’ve been duped.
“What you have is primarily young, unsuspecting victims who truly believe they’re entering into a legitimate rental agreement,” said Adam Christianson, sheriff of Stanislaus County. “Before you know it, the real (property manager) shows up and says ‘Why are you here?’ Then they’re out on the street, and also out the money for first and last month’s rent and deposit.”
Copyright © 2010 The Associated Press. All rights reserved.
With a dramatic increase in the number of vacant and foreclosed homes, the number of prospective tenants swindled by scammers posing as landlords has been rising in the past few years, officials said.
It’s not clear how many people have been duped out of their deposits. Although the scam is not new, Christine Minnehan, director of legislative advocacy for the Western Center on Law and Poverty, said, “in the past year, they have risen enormously because of all the vacant properties that are so much easier for this kind of scam to operate in.”
Because the victims of what’s being termed “landlord impersonation” have made their deposits in cash, catching the phony landlords is difficult, according to police. Some victims are also reluctant to report they’ve been duped.
“What you have is primarily young, unsuspecting victims who truly believe they’re entering into a legitimate rental agreement,” said Adam Christianson, sheriff of Stanislaus County. “Before you know it, the real (property manager) shows up and says ‘Why are you here?’ Then they’re out on the street, and also out the money for first and last month’s rent and deposit.”
Copyright © 2010 The Associated Press. All rights reserved.
Fed: Low rates likely through 2010
Interest rates are likely to remain low into 2011, Federal Reserve policymakers hinted this week in at least two presentations. These indications came one week after the Fed shut down its program to buy mortgage-backed securities, which had kept rates at or near record lows in recent months.
In a speech Thursday, Fed Governor Daniel Tarullo said, “The relatively modest pace of recovery, the continued high rate of unemployment, subdued inflation trends, and well-anchored inflation expectations together suggest that the need for highly accommodative monetary policies will not diminish soon.”
Likewise, Donald Kohn, Fed vice chairman in a speech in San Francisco, said the Fed would raise rates, “in due course,” but he also noted that low rates “help offset the lingering restraining effects on economic activity and prices.”
So far, rates have risen modestly, but analysts speculate they will likely become much more volatile down the road.
“It’s an uncertain type of market,” says Keith Gumbinger of HSH.com.
Michael Fratantoni, vice president of research and economics for the Mortgage Bankers Association, predicts that the Fed will have created a situation where there are days or weeks of low-rate opportunities, and other days and weeks when rates rise significantly.
Sources: The Wall Street Journal, Nick Timiraos (04/08/2010), and The Wall Street Journal, Jon Hilsenrath (04/09/2010)
© Copyright 2010 INFORMATION, INC. Bethesda, MD
In a speech Thursday, Fed Governor Daniel Tarullo said, “The relatively modest pace of recovery, the continued high rate of unemployment, subdued inflation trends, and well-anchored inflation expectations together suggest that the need for highly accommodative monetary policies will not diminish soon.”
Likewise, Donald Kohn, Fed vice chairman in a speech in San Francisco, said the Fed would raise rates, “in due course,” but he also noted that low rates “help offset the lingering restraining effects on economic activity and prices.”
So far, rates have risen modestly, but analysts speculate they will likely become much more volatile down the road.
“It’s an uncertain type of market,” says Keith Gumbinger of HSH.com.
Michael Fratantoni, vice president of research and economics for the Mortgage Bankers Association, predicts that the Fed will have created a situation where there are days or weeks of low-rate opportunities, and other days and weeks when rates rise significantly.
Sources: The Wall Street Journal, Nick Timiraos (04/08/2010), and The Wall Street Journal, Jon Hilsenrath (04/09/2010)
© Copyright 2010 INFORMATION, INC. Bethesda, MD
Countrywide customers get court settlement
A notification program begins today in the United States, including Puerto Rico and recognized U.S. territories, as ordered by the United States District Court for the Western District of Kentucky. The program applies to people who provided personal information or made mortgage payments to Countrywide about a proposed settlement reached with Countrywide’s affiliate companies – Countrywide Financial Corporation, Countrywide Home Loans, Inc., Countrywide Bank, FSB, Full Spectrum Lending Division, and Bank of America Corporation – in a class action lawsuit about stolen personal and financial information.
The lawsuit claims that a senior financial advisor once employed by Countrywide took confidential information from millions of consumer records and sold it to third parties. The lawsuit further alleges that Countrywide did not adequately protect the confidential personal and financial information of its clients. Countrywide denies that it did anything wrong, and the settlement is not an admission of wrongdoing or an indication that any law was violated.
The lawsuit class includes everyone in the United States who: (1) received a letter from Countrywide anytime from Aug. 2, 2008, to and including Nov. 2, 2008, notifying them that their personal information was involved in an alleged theft committed by a Countrywide employee; or (2) who obtained a mortgage from Countrywide or whose mortgage was serviced by Countrywide prior to July 1, 2008. Countrywide, for this purpose, does not include Bank of America.
Notices informing class members about their legal rights will be mailed and will appear in U.S. newspapers. The court will consider whether to grant final approval to the settlement on July 19, 2010.
Anyone affected by the settlement can submit a claim for benefits, if eligible; or they can ask to be excluded from, or object to, the settlement and its terms. The deadline for exclusions and objections is June 24, 2010. The earliest deadline to claim any of the benefits is Sept. 7, 2010.
A toll-free number,(866) 940-3612, has been established in the case (called In Re: Countrywide Financial Corp. Customer Data Security Breach Litigation, No. 3:08-MD-01998-TBR, MDL 1998), along with a website, http://www.cwdataclaims.com/, where notices, claim forms, and the settlement agreement may be obtained.
Those affected may also write to:
Countrywide Data Settlement
PO Box 2730
Portland, OR 97208
© 2010 Florida Realtors®
The lawsuit claims that a senior financial advisor once employed by Countrywide took confidential information from millions of consumer records and sold it to third parties. The lawsuit further alleges that Countrywide did not adequately protect the confidential personal and financial information of its clients. Countrywide denies that it did anything wrong, and the settlement is not an admission of wrongdoing or an indication that any law was violated.
The lawsuit class includes everyone in the United States who: (1) received a letter from Countrywide anytime from Aug. 2, 2008, to and including Nov. 2, 2008, notifying them that their personal information was involved in an alleged theft committed by a Countrywide employee; or (2) who obtained a mortgage from Countrywide or whose mortgage was serviced by Countrywide prior to July 1, 2008. Countrywide, for this purpose, does not include Bank of America.
Notices informing class members about their legal rights will be mailed and will appear in U.S. newspapers. The court will consider whether to grant final approval to the settlement on July 19, 2010.
Anyone affected by the settlement can submit a claim for benefits, if eligible; or they can ask to be excluded from, or object to, the settlement and its terms. The deadline for exclusions and objections is June 24, 2010. The earliest deadline to claim any of the benefits is Sept. 7, 2010.
A toll-free number,(866) 940-3612, has been established in the case (called In Re: Countrywide Financial Corp. Customer Data Security Breach Litigation, No. 3:08-MD-01998-TBR, MDL 1998), along with a website, http://www.cwdataclaims.com/, where notices, claim forms, and the settlement agreement may be obtained.
Those affected may also write to:
Countrywide Data Settlement
PO Box 2730
Portland, OR 97208
© 2010 Florida Realtors®
HUD to permit e-docs in transactions
The U.S. Department of Housing and Urban Development (HUD) announced that it would allow electronically signed documents in transactions involving home loan guarantees by the Federal Housing Administration (FHA). The National Association of Realtors® (NAR) praised the decision.
In a Mortgagee Letter released last week, HUD announced guidance for accepting electronically signed documents from third parties, that is, sales contracts.
“This is a great step forward in speeding up the real estate transaction and making it easier for buyers, sellers and real estate professionals to complete transactions timely and efficiently, ” says NAR President Vicki Cox Golder. “We applaud FHA’s refreshing attitude towards modernization and making electronic signature capabilities acceptable for its mortgage transactions.”
Second Century Ventures, NAR’s venture capital arm, offers an e-signature tool, DocuSign.
According to Dale Stinton, NAR chief executive officer, the e-signature process is convenient and legally compliant. Rather than driving across town or forcing clients to find a fax machine, real estate professionals can execute agreements with buyers and sellers electronically, eliminating the old process of printing, faxing and waiting for a return fax.
© 2010 Florida Realtors®
In a Mortgagee Letter released last week, HUD announced guidance for accepting electronically signed documents from third parties, that is, sales contracts.
“This is a great step forward in speeding up the real estate transaction and making it easier for buyers, sellers and real estate professionals to complete transactions timely and efficiently, ” says NAR President Vicki Cox Golder. “We applaud FHA’s refreshing attitude towards modernization and making electronic signature capabilities acceptable for its mortgage transactions.”
Second Century Ventures, NAR’s venture capital arm, offers an e-signature tool, DocuSign.
According to Dale Stinton, NAR chief executive officer, the e-signature process is convenient and legally compliant. Rather than driving across town or forcing clients to find a fax machine, real estate professionals can execute agreements with buyers and sellers electronically, eliminating the old process of printing, faxing and waiting for a return fax.
© 2010 Florida Realtors®
Friday, April 9, 2010
Fannie, Freddie and FHA ease condo lending
To help resuscitate Florida’s condo market, Fannie Mae, Freddie Mac and the Federal Housing Administration (FHA) eased their lending rules. Freddie was last, with new guidelines effective April 1.
The FHA made changes first in November 2009. At the time, Peter Zalewski, a condo market analyst and broker with Condo Vultures in Bal Harbour, Fla., called it a “pretty significant move. … This might be an entree for traditional and conventional lenders to return to the marketplace.”
Among other things, FHA increased the number of project units it would finance from 30 percent to 50 percent; required that at least 50 percent of units were owner-occupied; and reduced a presale requirement for new construction to 30 percent.
In January, Fannie Mae eased its condo lending rules, proving Zalewski’s prediction was correct. The government-sponsored enterprise took a hands-on approach by empowering a Florida team to analyze each condo project and approve lending in those it considered to have a lower risk.
Effective April 1, Freddie Mac followed suit. Rather than create teams, however, Freddie Mac stated a list of new rules it would follow as the FHA did, with a prime focus on the buying of a condo in which the seller has a mortgage backed by Freddie Mac.
Those rules include:
• The mortgage file must contain documentation verifying that the existing first lien conventional mortgage on the unit being purchased is owned by Freddie Mac, in whole or in part, or securitized by Freddie Mac.
• The seller’s note date of the existing mortgage for the unit being purchased is on or before Dec. 31, 2009.
• The settlement date for the new mortgage is on or before March 31, 2011.
Freddie Mac issued a Bulletin explaining the changes. To download the Bulletin (PDF format) click here.
© 2010 Florida Realtors®
The FHA made changes first in November 2009. At the time, Peter Zalewski, a condo market analyst and broker with Condo Vultures in Bal Harbour, Fla., called it a “pretty significant move. … This might be an entree for traditional and conventional lenders to return to the marketplace.”
Among other things, FHA increased the number of project units it would finance from 30 percent to 50 percent; required that at least 50 percent of units were owner-occupied; and reduced a presale requirement for new construction to 30 percent.
In January, Fannie Mae eased its condo lending rules, proving Zalewski’s prediction was correct. The government-sponsored enterprise took a hands-on approach by empowering a Florida team to analyze each condo project and approve lending in those it considered to have a lower risk.
Effective April 1, Freddie Mac followed suit. Rather than create teams, however, Freddie Mac stated a list of new rules it would follow as the FHA did, with a prime focus on the buying of a condo in which the seller has a mortgage backed by Freddie Mac.
Those rules include:
• The mortgage file must contain documentation verifying that the existing first lien conventional mortgage on the unit being purchased is owned by Freddie Mac, in whole or in part, or securitized by Freddie Mac.
• The seller’s note date of the existing mortgage for the unit being purchased is on or before Dec. 31, 2009.
• The settlement date for the new mortgage is on or before March 31, 2011.
Freddie Mac issued a Bulletin explaining the changes. To download the Bulletin (PDF format) click here.
© 2010 Florida Realtors®
Wednesday, April 7, 2010
Financial crisis panel turns to risky mortgages
A panel investigating the roots of the financial crisis will press current and former executives of Citigroup Inc. at hearings this week about the bank’s role in spreading trillions of dollars in risky mortgage debt through the banking system.
The hearings are the first by the Financial Crisis Inquiry Commission to focus on a single company. Witnesses include former Citi CEO Chuck Prince and former Chairman Robert Rubin, who was Treasury secretary during the Clinton administration.
The panel also will hear from former Federal Reserve Chairman Alan Greenspan; a former risk officer with failed subprime lender New Century Financial Corp.; and former executives and regulators from government-backed mortgage giant Fannie Mae. The three days of testimony are designed to provide a firsthand accounting of decisions that inflated a mortgage bubble and triggered the financial crisis.
Much of the tension at hearings Wednesday and Thursday will come as the 10 bipartisan commissioners examine Citi’s role in financing, packaging and selling risky mortgage loans.
Citi was a major subprime lender through its subsidiary CitiFinancial. The bank pooled those loans and loans purchased from other mortgage companies and sold the income streams to investors. As borrowers defaulted, Citi absorbed losses on mortgage-related investments it held on and off its books.
Mortgage troubles at Citi, defunct investment bank Bear Stearns and elsewhere exposed cracks in the financial system. In late 2007 and throughout 2008, those fissures grew into a full-fledged credit crisis that crippled the global economy.
Congress created the FCIC last year to examine the causes of that crisis. It is structured like the 9/11 panel that examined intelligence failures preceding the terrorist attacks of Sept. 11, 2001.
Like that panel, the commission has authority to issue subpoenas to compel witnesses to testify or force companies to turn over documents. The commission is charged with examining 22 topics – from executive compensation to tax policy – in a report it must issue Dec. 15.
The hearing comes less than a month after fresh questions arose about political fundraising by commission chairman and former California Treasurer Phil Angelides.
During his 2002 re-election campaign, Angelides solicited donations from a top executive with JPMorgan Chase & Co, according to a report issued March 18 by the Securities and Exchange Commission. JPMorgan is paid by California to underwrite billions of dollars in municipal bonds annually.
The executive later sent a note to other key executives and a bank lobbyist calling Angelides “an important client” and asking them to help raise $10,000, the SEC report says. The executive oversaw the part of the company that includes the municipal bond business.
The report does not address Angelides’ role because the SEC does not have jurisdiction over campaign finance. Instead, the report deals with a rule that bars banks from underwriting bonds for governments within two years after a bank executive donates to an official in that government.
Greenspan’s testimony Wednesday will open the hearings. Critics say his policy at the Fed of keeping interest rates low encouraged lending to borrowers who had little or no chance of repaying.
Wednesday’s remaining two panels will include testimony on subprime lending and risk management at Citigroup. Former risk management executives are expected to say they sounded alarms about the growing danger of Citi’s mortgage lending and finance activities but were ignored by senior management.
Prince and Rubin will testify together Thursday. The panel will then hear from regulators of Citi’s Citibank subsidiary: Comptroller of the Currency John Dugan and former Comptroller of the Currency John Hawke Jr.
Friday’s testimony will focus on the role of Fannie Mae, the mortgage finance company whose rescue has required government commitments totaling $75.2 billion. The panel will hear from two former Fannie Mae executives and two former regulators of Fannie Mae and its sister company Freddie Mac.
The commission staff has received written responses from Wall Street CEOs who appeared at the first hearing in January and has requested documents from some banks.
Copyright © 2010 The Associated Press, Daniel Wagner, AP business writer
The hearings are the first by the Financial Crisis Inquiry Commission to focus on a single company. Witnesses include former Citi CEO Chuck Prince and former Chairman Robert Rubin, who was Treasury secretary during the Clinton administration.
The panel also will hear from former Federal Reserve Chairman Alan Greenspan; a former risk officer with failed subprime lender New Century Financial Corp.; and former executives and regulators from government-backed mortgage giant Fannie Mae. The three days of testimony are designed to provide a firsthand accounting of decisions that inflated a mortgage bubble and triggered the financial crisis.
Much of the tension at hearings Wednesday and Thursday will come as the 10 bipartisan commissioners examine Citi’s role in financing, packaging and selling risky mortgage loans.
Citi was a major subprime lender through its subsidiary CitiFinancial. The bank pooled those loans and loans purchased from other mortgage companies and sold the income streams to investors. As borrowers defaulted, Citi absorbed losses on mortgage-related investments it held on and off its books.
Mortgage troubles at Citi, defunct investment bank Bear Stearns and elsewhere exposed cracks in the financial system. In late 2007 and throughout 2008, those fissures grew into a full-fledged credit crisis that crippled the global economy.
Congress created the FCIC last year to examine the causes of that crisis. It is structured like the 9/11 panel that examined intelligence failures preceding the terrorist attacks of Sept. 11, 2001.
Like that panel, the commission has authority to issue subpoenas to compel witnesses to testify or force companies to turn over documents. The commission is charged with examining 22 topics – from executive compensation to tax policy – in a report it must issue Dec. 15.
The hearing comes less than a month after fresh questions arose about political fundraising by commission chairman and former California Treasurer Phil Angelides.
During his 2002 re-election campaign, Angelides solicited donations from a top executive with JPMorgan Chase & Co, according to a report issued March 18 by the Securities and Exchange Commission. JPMorgan is paid by California to underwrite billions of dollars in municipal bonds annually.
The executive later sent a note to other key executives and a bank lobbyist calling Angelides “an important client” and asking them to help raise $10,000, the SEC report says. The executive oversaw the part of the company that includes the municipal bond business.
The report does not address Angelides’ role because the SEC does not have jurisdiction over campaign finance. Instead, the report deals with a rule that bars banks from underwriting bonds for governments within two years after a bank executive donates to an official in that government.
Greenspan’s testimony Wednesday will open the hearings. Critics say his policy at the Fed of keeping interest rates low encouraged lending to borrowers who had little or no chance of repaying.
Wednesday’s remaining two panels will include testimony on subprime lending and risk management at Citigroup. Former risk management executives are expected to say they sounded alarms about the growing danger of Citi’s mortgage lending and finance activities but were ignored by senior management.
Prince and Rubin will testify together Thursday. The panel will then hear from regulators of Citi’s Citibank subsidiary: Comptroller of the Currency John Dugan and former Comptroller of the Currency John Hawke Jr.
Friday’s testimony will focus on the role of Fannie Mae, the mortgage finance company whose rescue has required government commitments totaling $75.2 billion. The panel will hear from two former Fannie Mae executives and two former regulators of Fannie Mae and its sister company Freddie Mac.
The commission staff has received written responses from Wall Street CEOs who appeared at the first hearing in January and has requested documents from some banks.
Copyright © 2010 The Associated Press, Daniel Wagner, AP business writer
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