Archive for June, 2009

Loan Modification: Be Carefull! Don’t Pay Until You Close!

I talk to people almost daily all across the Sacramento area who have paid for a loan Modification with absolutely nothing to show for the money they spent.

It seems that everywhere in California; especially where foreclosure filings are rampant like the Central Valley, Sacramento, Stockton, Modesto areas Loan Modification scams are rampant.

Many will promise to give your money back if they are not successful, but then want to renegtiate with you when you ask for a refund.

A Sacbee Story explains:

It goes something like this: A homeowner falls behind on his mortgage and soon thereafter receives a letter from a company promising to help him get a modification of his mortgage. Over time, the homeowner ends up paying hefty fees of $3,000 to the company, and waits, having been instructed not to contact his lender and thinking his mortgage problems are being resolved.

The “loss mitigation” company, it turns out, was never there to help. Instead, it is the same company that previously peddled subprime loans and simply found a new way to prey on people in need.

This scenario is all too common. Countless homeowners have been defrauded by this type of scheme since the start of the foreclosure crisis. Mortgage counselors at 40 agencies in California, representing thousands of distressed homeowners across the state, report fee-for-service scams are a rising problem among their clients, according to a recent survey by the California Reinvestment Coalition.

President Barack Obama‘s foreclosure prevention plan is striving to bring help to millions of distressed homeowners and moving their mortgages through the loan modification process. Instead of joining the president’s goal of helping communities, these companies are engaged in a manipulative marketing ploy, dangling the prospect of relief in front of desperate borrowers.

The average fee these companies charge borrowers is $3,000 and some go as high as $9,500. All or most of these fees are charged up front, before any services have been rendered. And some companies even have the audacity to charge monthly fees.

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California’s Latest Foreclosure Moratorium Will Barely Be felt

With another highly publicized moratorium starting here in California on June 15th; many buyers, sellers, and real estate professionals have wondered how big the impact will be on the housing inventory here in the Sacramenot area.

It seems the impact has already been felt and dealt with.

Lenders and loan services that already have a comprehensive loan modification program in place are exempt from the law. So most banks, lenders and servicing companies, even if they did not have one in place originally, have put one in place since the law was written in February when The California Foreclosure Prevention Act was included in legislation was passed that approved the state budget. The moratorium started on June 15. 

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Sac International Airport’s Bond Rating Dropped by Second Credit Reporting Company

Sacramento-area’s biggest construction project has hit a bit of financial turbulence, The two largest credit-rating companies recently downgraded  bond ratings of Sacramento International Airport. The downgrades were done in anticipation of a $500 million airport bond sale this week.

Standard Poor’s Rating Service downgraded revenue bonds for Sacramento International Airport, from “stable” to “negative” late Wednesday. The credit-rating company issued an “A+” rating for the county’s $213 million airport system revenue bond, and an “A” rating for its $278 million airport system subordinate and passenger facility charge revenue refunding bonds. Both have a negative outlook.

“The ratings actions reflect our view of the fundamentally strong economic characteristics of the service area, despite weakness reflecting the general economic recession; a decline in passenger traffic and financial margins; and continued strong liquidity events,” according to a Standard Poor’s report.

Moody’s Investors Service downgraded the airport’s bond ratings, just as it plans to sell $500 million in bonds this week. Moody’s dropped the airport’s senior bond rating from A1 to A2, citing a sharp drop in passengers this year, as well as the recession and higher costs for airlines.


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Foreclosures: Fast road to more problems or a way to stabilize the housing market?

I picked this up on the LA Times  blog this morning…

Why not let foreclosures run their course so the home market can reset to a sustainable level — a sentiment often expressed on L.A. Land comment boards — was among questions asked of Shaun Donovan, secretary of the Housing and Urban Development Department, Thursday at the National Assn. of Real Estate Editors conference in Washington. His keynote address came on the heels of President Obama’s announcement of major changes in rules governing financial institutions.

Donovan “Foreclosures were a part of the problem,” Donovan said, “rather than a path to a solution.”

Taking no action and allowing more foreclosures to occur “wasn’t going to lead to a bottom but to a much more substantial decline,” he said.

Programs underway to help homeowners who are not yet in arrears refinance their loans or to modify the loans of borrowers who are in default are just part of the government’s plans to stabilize the housing market. Also in the works as part of the president’s overhaul plans are simpler loan terms, requiring originators to keep a 5% stake in their mortgages and increased efforts to stop fraud, he said.

The HUD secretary acknowledged government efforts have their limits.

“Clearly some families are in homes they can’t afford,” Donovan said. “We can’t stop every foreclosure.”

OK, L.A. Land you heard the man. Opinions?

–Lauren Beale, reporting from Washington

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We Save Homes To Acquire Mod Tech Co.

From DSNews today

Carrie Bay | 06.24.09

California-based We Save Homes, Inc. (WSHI), previously known as Global West Resources Inc., has signed a letter of intent to acquire the privately-held software technology company Homesaver and its platform, which assists homeowners with mortgage modification procedures.

Andrew Kardish, WSHI’s chairman, said, “We are pleased to announce the pending acquisition and integration of WeSaveHomes Homesaver software. We feel as though it is light years ahead of the way loan modifications are currently being accomplished and addresses all the objectives established by the Obama administration. The Homesaver software is truly the mechanism that has been missing from the equation thus far, and we believe there will be a marked difference for homeowners and banks alike as this automation is rolled out.”

WSHI says it is actively meeting with federal and state lawmakers, the Treasury, the Federal Reserve, and the banking industry to establish “one uniform, equal platform through an automated software technology platform, insuring complete transparency and oversight” in the loan modification process.

Kardish said that in meeting with government officials and lenders, WSHI has found “most everyone agrees that there has not been uniformity and standardization in processes.” He added that the Homesaver solution is the first tool to provide both banks and borrowers with the kind of standardization the government says is missing.

WSHI plans to make its internal Document Management System (DMS) available to all homeowners in a “do-it-yourself” (DYI) Web-based consumer platform. The company says its software-based portal offers lenders the kind of automation required to handle today’s overwhelming volume of defaults, loan modifications, and short sales. The portal also provides regulatory agencies with the ability of remote oversight and facilitates price discovery.

In addition, WSHI provides counseling and advocacy services for homeowners who want professional representation, and the company has created a bilingual network of resources that facilitate the loan modification process for Spanish-speaking homeowners.

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Mortgage Bankers Association Lowers Originations Forecast

Washington, DC (June 22, 2009) – The Mortgage Bankers Association today lowered its forecast of mortgage originations in 2009 to $2.03 trillion, a drop of over $700 billion from its March forecast. $84 billion of the drop is due to lower purchase originations and the rest is due to lower rate/term refinancings and very low volumes in the Fannie Mae and Freddie Mac Home Affordable Refinance Program (HARP). MBA is now forecasting $737 billion in purchase originations and $1,297 billion in refinance originations.

In announcing the drop in the forecast, MBA’s Chief Economist Jay Brinkmann issued the following statement:

“In March we boosted our forecast of mortgage originations by over $800 billion following the drop in interest rates associated with the Federal Reserve’s announcement on the Treasury bond and mortgage-backed securities (MBS) purchases programs as well as the implementation of HARP. We warned at the time that with the billions in Treasury securities that would be issued to finance record budget deficits and with the Fed expected to purchase only a portion of those Treasury securities, how long rates stayed low would depend on whether other investors stayed in the market. If other investors shied away from Treasuries due to expectations of future inflation and the declining value of the dollar, the effect on rates would be more short-lived and our mortgage originations forecast would prove too optimistic. That has proven to be the case.

“While the Fed has been successful in reducing the spread between conforming mortgage and Treasury rates through its purchase of agency MBS, it has not been successful in maintaining lower Treasury yields. Since March, the Federal Reserve purchases have equaled approximately 85% of new MBS issuance for Fannie Mae, Freddie Mac and Ginnie Mae combined. In contrast, Federal Reserve purchases of long-term Treasuries equaled about 50% on new issuance during that same three month period. Given the high issuance volume of Treasuries in June, the Fed is likely approaching its self-imposed ceiling of $300 billion and may be reluctant to increase its current commitment to purchase long-term Treasuries for two reasons. First, Fed officials have made public statements about their outlook for an improving economy. Second, the Fed may have decided that its purchases may not be efficacious in maintaining lower long-term Treasury rates and may not be worth the risks entailed in building up a large Fed balance sheet that will need to be reduced at some future point.

“The March increase in refinance originations was driven by two factors. The first factor was the drop in interest rates. The subsequent increase in interest rates, however, began to choke off the refinance wave in May, much earlier than anticipated in the March forecast. The second factor was the large volume of loans expected from HARP. While generally accepted estimates were that around 1.5 to 2 million borrowers might avail themselves of this program, with many more potentially eligible, to date only about 13,000 loans have been completed according to press reports. While the number of loans completed under this program is likely to increase, it is difficult to craft a scenario under which origination volumes would come anywhere close to reaching the numbers originally envisioned for the program, particularly under our higher rate environment.

“MBA had estimated that purchase mortgage originations in 2009 would be $821 billion. We have now lowered this to $737 billion for several reasons. First, while home sales have been higher than expected, home prices have fallen more than expected leading to smaller loans. Second, the large share of distressed sales or homes purchased by investors has resulted in the share of all cash home purchases being higher than normal. Therefore, even with higher projected home sales for all of 2009, the projected lower average home price and higher cash share have combined to lower projected volume of purchase originations.

“MBA now projects that total existing home sales for 2009 will be 4.8 million units, a drop of 1.2 percent from 2008. MBA projects new home sales will be 352,000 units, a decline of about 27 percent from 2008. Median home prices for new and existing homes will likely continue to fall, dropping by about ten percent from 2008 levels, but leveling off in 2010 as the economy improves.

“There are several schools of thought about where long-term interest rates are headed. One school holds that continued anemic growth and high unemployment will combine to hold down inflation and the demand for debt. The increase in government debt has been partially offset by declines in other forms of debt, especially mortgage and other consumer debt. The result will be long-term interest rates at approximately current levels through the end of 2010. Another school of thought holds that the large increases in federal debt will put tremendous pressure on domestic and international investors to absorb this debt, and that the large increases in the money supply and declines in the dollar could trigger inflation, all leading to higher rates. The MBA forecast is for increasing rates through the end of the year and through 2010. Adding to the pressure for higher long-term Treasury yields is the notion that, at some point, the Fed has to withdraw the substantial liquidity it has injected into the financial markets to keep a lid on expected inflation. On the other hand, a resumption of a flight to quality, induced by political unrests around the globe or a renewed financial crisis, could cause long-term Treasury yields to reverse their course.”


The Mortgage Bankers Association (MBA) is the national association representing the real estate finance industry, an industry that employs more than 280,000 people in virtually every community in the country. Headquartered in Washington, D.C., the association works to ensure the continued strength of the nation’s residential and commercial real estate markets; to expand homeownership and extend access to affordable housing to all Americans. MBA promotes fair and ethical lending practices and fosters professional excellence among real estate finance employees through a wide range of educational programs and a variety of publications. Its membership of over 2,400 companies includes all elements of real estate finance: mortgage companies, mortgage brokers, commercial banks, thrifts, Wall Street conduits, life insurance companies and others in the mortgage lending field. For additional information, visit MBA’s Web site:

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Sacramento Area’s Median Price Is On The Move…

With most of the real estate market here in Sacramento county being bank owned and short sales; first time buyers and investors are making up more than 70 percent of sales.

Since early 2008, most of the sales here in the Capital region have been some type of distressed sales; most of these have been in the lower price ranges and are being purchased by buyers who don’t have to sell another property in order to purchase. 

Last month, Sacramento County’s median priced existing homes actually rose 9.4 percent. From around $160,000 in March and April to $175,000 in May. These are homes that actually changed hands.  Compared to the median price of homes active on the market; which is $235,000 a difference of nearly 35 percent.

The median sales price is hugely affected by the fact that there are so few homes selling in the over 50k market.  In May, 1829 homes sold for less than $550,000 and only 40 homes sold for more than $550,000! That is a remarkable difference. Yet when I look at active homes for sale; there are 135 under 500k on the market today and 35 over 500k.  Clearly, the foreclosures and distressed sales in the lower end are where all the action is right now.

It will be interesting to see what happens with our median price as more of the big homes enter the market as distressed sales, and fewer lower priced homes enter the foreclosure process.  Most of the resets in the sub-prime area have already occurred; the graph above shows the timing of the resets of both Sub-Prime vs. Alt-A and option ARM resets, and shows that we are actually in a “lul” right now, with the second wave just beginning….

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Obama’s Consumer Financial Protection Agency

New Regulator will govern all aspects of the mortgage lending process.

From DSNews last week:

President Obama’s broad proposal for financial regulatory reform calls for the creation of a new regulatory body, the Consumer Financial Protection Agency. The federal supervisor would have far-reaching oversight and enforcement authorities over the entire residential mortgage financing industry.

The new agency would govern all aspects of the mortgage lending process. According to a fact sheet issued by the administration, the Consumer Financial Protection Agency will require lenders to offer borrowers “plain vanilla” home loan products with simple terms and straightforward pricing. All homebuyers will be provided with a single, integrated federal mortgage disclosure to adequately present risks and benefits of mortgage products.

The regulator would ensure mortgage brokers offer borrowers the best available mortgage loans, that they can clearly afford. Practices such as yield spread premiums would be banned. The administrations says these types of payments are “unfair” and “encourage mortgage brokers to push consumers into higher priced loans than they qualify for.” Prepayment penalties, which can lock borrowers into bad loans, would also be prohibited.

The new agency would also be responsible for ensuring companies who bundle mortgages and sell them to investors as securitizations retain five percent of the credit risk to prevent lenders from offloading unsustainable mortgages to the secondary market.

The Consumer Financial Protection Agency would have the authority to write rules across bank, non-bank, and independent firms to promote a level playing field and higher industry-wide standards. The agency’s regulations would apply nationwide to all lenders, and would serve as a floor, not a ceiling with respect to state laws, meaning individual states’ legislatures could enforce their own tougher mortgage lending rules.

The administration said the need for the Consumer Financial Protection Agency became apparent after widespread abuses in subprime mortgage lending contributed significantly to the current financial crisis. The financial crisis, in turn, revealed inadequacies in consumer and investor protections across the entire mortgage lending industry, officials said.

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Foreclosures Rising In California and Sacramento County

Despite lenders in California and specifically the Sacramento area, voluntarily postponing most foreclosure sales; (73%, to be exact), data shows a month over month increase in foreclosed homes for the last several months. issued its monthly California Foreclosure Report a few days ago and it shows that statewide, foreclosure sales jumped 31.9 percent in May, following a 35 percent increase the prior month. NOT’s, or Notices of trustee sales, which set the auction date and time, also rose a whopping 42 percent from last month, indicating that Trustee Sales are probably going to continue to rise in the foreseeable future.

So in California in May; reported 17,871 foreclosed homes taken to auction in California last month. In Sacramento County, in April; there were 742 and the County saw a sizeable increase to 1,041 for May.

Almost all foreclosures put up for sale continue to be taken back by the lender. According to ForeclosureRadar, California statewide saw 87.9 percent, or 15,599 sales, went back to the lender in May.

Of all foreclosures scheduled, ForeclosureRadar says 40% or so are being postponed or reschedules at the banks request, and another 33 percent are being postponed based on the mutual agreement of lender and borrower (Loan Modification or Forbearance Agreement).

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Californias Latest Foreclosure Moratoriaum Now In Effect

A new Moratorium; The California Foreclosure Prevention Act officially went into effect on Monday, and will be one more 90 day foreclosure moratorium.

The Moratorium only applies to first mortgages recorded between January 1, 2003 and January 1, 2008. Servicer and lenders who already have a mortgage modification program in place that include principal deferral, interest rate reductions for five years or more, or extended loan terms are exempt though; so the effects of the new statewide moratorium may be nil.

So the new law gives lenders and servicers a choice, either enact a loan modification program that meets state requirements, or live with an additional 90 day delay in processing foreclosures.

Most large institutions have already got some kind of program in place, though, so they will probably just tweak their systems and procedures and keep on…

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