Archive for August, 2009

Top Subprime Players To Receive Tax Dollars to Fix Foreclosure Mess

According to DSNews recently:

Almost two dozen firms that fed off the subprime lending frenzy that devastated the banking system are set to receive billions in taxpayer dollars through a federal government program designed to stem foreclosures, according to a nonprofit, investigative public policy group in D.C.

Based on analysis of public records, the Center for Public Integrity says 21 of the top 25 participants in the Home Affordable Modification Program (HAMP) were “heavily involved” in the subprime lending and servicing industry.

“As foreclosures continue to increase, the Obama administration is planning to spend up to $50 billion in federal bailout funds to help as many as four million homeowners stay current on their mortgages,” said Bill Buzenberg, Center for Public Integrity executive director. “Much of this money is going directly to the same financial institutions that helped create the subprime mortgage mess in the first place.”

The center’s list of subprime lenders participating in HAMP are slated to receive more than $21 billion in taxpayer funded incentives. According to a recent study by the Center for Public Integrity, many of these subprime lenders were among the top originators of high-interest loans, which accounted for nearly $1 trillion during the peak of the subprime market.

The list of HAMP recipients reads like a who’s who of major subprime lenders and loan servicers, the center says, including financial institutions that have already

received hundreds of billions of dollars from the federal government’s primary bank bailout program.

Leading the pack is the once-subprime Goliath Countrywide, now owned by Bank of America. Bank of America, through its ownership of Countrywide, has been slated to receive up to $5.1 billion in incentive payments for the loans it modifies, to be paid out to the servicer, its borrowers, and mortgage investors for successful workouts. Including subsidiaries that came over from its purchase of Merrill Lynch, Bank of America’s incentive numbers go up to $6.9 billion.

Next on the list, with up to $2.7 billion in incentives allocated, is JPMorgan Chase, which ranked No. 12 on the center’s subprime lender list. Including subsidiary EMC Mortgage Corp., JPMorgan, its investors, and borrowers, could collect as much as $3.4 billion. Wells Fargo, which ranked No. 8 on the center’s subprime list, is slated to get as much as $3.1 billion, including payments to its Wachovia subsidiaries.

Under HAMP, servicers receive an upfront $1,000 incentive payment for each eligible modification performed, plus $1,000 each year for three years if the borrower stays in the program. The borrower may receive a $1,000 payment to be applied toward the principal for five years.

As of mid-August, 44 entities had qualified to collect a maximum of $21.5 billion in incentives, the Treasury Department has reported.

Among the top program participants, the Center for Public Integrity says at least two firms have settled charges of illegal collection practices brought by federal regulators — EMC Mortgage and Select Portfolio Servicing — and another, Ocwen Financial, was placed under federal supervision before voluntarily surrendering its bank charter.

There’s also a subprime subsidiary of top-bailout recipient American International Group Inc. (AIG), as well as and two former subsidiaries of Merrill Lynch & Co. and one former subsidiary of Lehman Brothers, investment banks that helped underwrite the subprime boom, the center reports.

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Preforeclosure specialist designation adds to knowledge of todays real estate questions…

today’s real estate market is a never-before-seen landscape –  foreclosures dominate the market with most Sacramento area neighborhoods seeing over 75% of available homes for sale being distressed sales.

Foreclosure does more then hurt your credit, it will affect your ability to buy a home in the future.  So even if you are somehow able to get your credit score above the minimum of 620 for conventional financing;you cannon buy a home for 7 years if you have a foreclosure on you record.

There are many programs out there to help struggling homeowners who are falling behind on their mortgage payments. 

Loan modification, litigation, Shortsale… During these tough economic times, everyday hardworking people are having to make difficult decisions.

In order to make sure that you and your family are protected from foreclosure you need a Realtor who has been properly trained to specialize in Pre-Foreclosure alternatives.

I have taken over 100 hours of training in the preforeclosure, loan modification, short sale, loss mitigation areas… contact me today if I can help you answer any questions…

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Introducing Obamas’s New Central Banker: Another Term For Bernanke

President Barack Obama said this morning (Tuesday) that he is nominating Ben S. Bernanke for a second term as chairman of the U.S. Federal Reserve. 

Bernanke

It is nice to see that politics and party lines are taking second seat to consistency, direction and focus.

According to the New York Times, citing senior White House officials, Obama credits the Republican, originally chosen by George W. Bush as Alan Greenspan’s successor, as “bold and brilliant in his attempts to combat the financial crisis.”

Bernanke is favored among economists and financial analysts to continue to head of the central bank– They say his academic background – a long-time economics professor of renounced schools as like  Princeton – and his extensive study of the 1930s era, made him well-prepared to deal with the current crisis and take the actions necessary to avert disorderly panic.

 

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Federal Judge Tosses Countrywide’s Bid for Safe Harbor from Mortgage Investors

From DSNews last week:

 

A legal battle between now-defunct Countrywide Financial and some of its mortgage investors took a new turn Wednesday, when a federal judge in New York rejected the lender’s argument that recently passed “safe harbor” legislation protected it from investors’ lawsuits.

Federal District Court Judge Richard J. Holwell did not directly rule on the merits of the case made by Countrywide, which was absorbed by Bank of America after staggering losses and allegations of predatory lending at the onset of the mortgage crisis. But Holwell said the lender and its investors would have to take their fight to the state courts.

“I view this as an opening salvo and a demonstration that investors do have contractual rights, even when it is politically unpopular,” William A. Frey, one of the investors suing Countrywide, told the New York Times Wednesday.

Other investors in mortgage securities, from hedge funders to pension managers, are monitoring the case, which could help decide whether or not the investors would have to eat losses resulting from a lender’s or servicer’s modifications of troubled loans in their pools. “This is ultimately going to be one of many legal battles over who should pay the hundreds of billions of dollars in losses on mortgages.”

Faced with charges of malicious lending practices, Countrywide last December entered into an agreement with 11 states to modify thousands of its mortgages, to the tune of $8.4 billion in aid to borrowers.

But Countrywide only owned 12 percent of those loans, said Owen L. Cyrulnik, an attorney representing investors who held the majority of the mortgages.

Those investors filed a class action against Countrywide, alleging that it reneged on its pooling-and-servicing agreements, which they say obligated the lender to buy back any troubled loans they modified.

But Countrywide responded in court that Congress’ Helping Families Save Their Homes Act of 2009 provided automatic protection from investors’ claims – known as safe harbor – for lenders and servicers of the mortgages.

Holwell ruled that Countrywide’s investors had a right to cry foul and attempt to assert their rights in state courts. But he also said the burden would be on investors to prove that Countrywide’s pooling-and-servicing agreements would require it to buy back the modified loans from investors.

The case could have a significant impact on the U.S. economic recovery. If Countrywide wins, future reductions of loan principals or interest rates for distressed borrowers could come at the cost of investors, which might deter future investments and lending. If the investors win, Countrywide – and other lenders – could find themselves holding millions more in toxic loan assets, further destabilizing the banking industry.

Cyrulnik, however, said an eventual win for investors would be good for the free market, because it would affirm the basic responsibilities each party holds in any transaction.

“Servicer safe harbor does not trump state contract law,” he said.

 

 

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The Prime Problem

Just recently I have been reading and writing a lot about the fact that the big prime loans, written to borrowers with verified and mostly higher incomes, (document-able) and great credit scores are now the new wave of foreclosure starts.

So now, prime adjustable rate and even thirty year fixed, conventional,”Cream-Puff” loans are troubled.  These were written to very qualified, mostly well educated borrowers, most with dual incomes.. and are now blowing up.

Last Monday, I read and blogged about the  Mortgage Bankers Association’s scary report on mortgage delinquencies and foreclosures. It showed lots of info on how prime mortgages are now replacing subprime mortgages as the problem. I found a Wall Street Journal  article about this today, which includes this great chart:

prime problem wsj.gif

Remember, these loans were written to people who really did have a high enough income and credit score to qualify for the loan— not ‘stated’ income but documented income. So some of these not only picked a better loan product than the adjustable rate timebombs, but they all really did  have enough income to comfortably pay for the home.

So why don’t banks aggressively pursue loan modifications with these prime borrowers? Well, remember the political cry of a few years back? “It’s the economy, stupid”.

So heres what the problem is– a great point in the WSJ story:

But modification programs may not be able to help the growing number of borrowers who are falling behind on their payments because they are losing their jobs. Most loan-modification programs have been designed to help borrowers with loans that reset to higher payments or with high debt-to-income ratios.

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Prime Fixed-Rate Loans Account Now For 1 in 3 Foreclosure Starts

Prices are being pressured in the high end becouse of prime defaults here in sacramento

It used to be that two income families with two well educated, high paid breadwinners were nearly ‘exempt’ from the economic difficulties many are facing in the worst economic slump since the depression. Not any more.

Especially here in the Sacramento area, these are the new people in trouble as 11.6 percent unemployment and 14 percent wage cuts across state government jobs take a toll.

With the recession nationwide throwing thousands of people out of work daily, more than 13% of American homeowners with a home mortgage have fallen behind on their payments or are in foreclosure.

Thursday, the Mortgage Bankers Association spotlighted the trend nationally, saying “prime fixed-rate loans account now for one in three foreclosure starts.”

“This is further confirmation of what we’ve seen in the past year, one that’s increasingly driven by fundamental issues in the economy,” MBA Chief Economist Jay Brinkmann told reporters during a conference call. Brinkmann has long said that early-recession layoffs hit renters first, many in construction. Then it hit manufacturing-dependent homeowners. Now, it’s moved up the food chain to the professions with good educations and prime-rate “safe” loans.

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Delinquency Rate on U.S. Mortgage Loans Hit an All-Time High…

Notice of Default Filings and Delinquency Notices Increase to Unprecedented Levels

Even though the pace of growth has slowed, home loan delinquencies hit an all-time high for the second quarter of 2009.

According to credit reporting agency TransUnion, the percentage (ratio) of mortgage holders who are 60 days or more behind on their payments increased last quarter for the 10th straight quarter.  For the three months ended June 30, mortgage Delinquencies have now risen to 5.81 percent nationwide.

Some related stories:

Mortgage deliquency rate hits all time high in 2Q

Foreclosure Woes Spread To Areas Once Thought Safe

 

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…”We Can Help You When The Loan Goes Into Default”

Foreclosureradar over 3500 12 30 08

Even after plenty of bad press and negative feedback, banks loan modification, loss mitigation and workout departments are advising customers that only loans that are behind on payments are being seriously reviewed for modification. And even then, only 9% of eligible customers are being approved.

The Obama administration is putting more pressure on lenders and their  servicers, (bill collectors on behalf of investors who own mortgage bonds) in order to get the companies to change policies and make it easier for struggling homeowners to solve the problems of loans coming unlocked in the face of negative equity.

The administration on Aug. 4 unveiled the first of what has been called monthly “name and shame” exercises; they will be publishing data on the loan-modification efforts and their results of about three dozen companies.

The administration says that about 2.7 million U.S. homeowners are at least 60 days behind on their mortgage payments, nearly exactly the population of Kansas. Yet only 9 percent of eligible borrowers nationwide had been offered trial loan modifications through June.

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It’s not just here in Sacramento! Nation-wide; Multiple Offers Are The Norm!

Multiple offers on the best priced homes in move in condition...

If it’s priced right, everybody wants it! It’s not just a Sacramento area phenomenon; all across the country; especially where foreclosures, short sales and bank owned properties are prevalent– homes that are even the slightest bit undervalued, are being swarmed by buyers.

Especially in the price ranges where policemen, firemen, teachers and court reporters can buy, homes priced to sell are being attacked by hungry first time buyers and investors.

Many times these homes have only been on the market for days, even hours… other times they have been on the market and have been ignored, and the seller has finally dropped the price. And then everybody wants it– we’ve seen as many as twenty offers for shortsales or bank owned homes that are priced 5–10% below the competition.

I see it a lot; where the home might sit with no offers, getting showings but no “bites”; but then with a price reduction,of even 3–5% sometimes you can entice offers. Lots of them are from buyers who may have seen the home weeks earlier, and now when everyone wants it; they do to

Homes in great condition that represent a value when compared to recent sales will bring buyers form both categories; investors looking for cash-flow and first time buyers looking for a well maintained home with no problems they can move into without taking time or spending money to make repairs.

 

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The Great Unwinding: Coast to Coast, Banks Starting Big Selloffs of Residential Debts

Toxic Residential Loans at Bargain Prices

Are these the Legacy Asset Sales? I’m not sure if they are or not; but we have recently done  Broker Price Opinions or BPO’s (valuation reports, just like an appraisal but less in-depth) for several asset managers that work for outfits I have never heard of… one we even have a listing from and already have it in contract. 

The new players in the REO game are hedge funds, investor groups, Corporations and Companies who are specializing in the acquisition of distressed and undervalued residential mortgage loans.  They are buying huge blocks of these loans, (most are in some stage of foreclosure), and then either doing workouts, shortsales, or taking them through to REO stage (after the trustee sale).

According toDSNews:

08/14/2009 By: Adam Weinstein

Perhaps it’s “government pressure to clean up balance sheets,” or the thawing out of home sales, the need for capital, or the growing pool of players in the mortgage-backed assets market.

Whatever the motivation, more banks are beginning to unwind their positions in toxic residential loans.

 Earlier this week DS News reported one such deal, by Milwaukee-based Marshall & Isley, to sell a pool of 800 troubled Arizona mortgages to an undisclosed buyer. The sale cleared $297 million of loans from M & I’s ledger.

Now big banks are joining the selloff, too, hoping that a few

better-than average quarters can help them withstand the write-downs. Wells Fargo unloaded an underperforming pool of $600 million in mortgages to a subsidiary of the hedge fund York Capital Management. According to estimates of other bidders, those loans probably sold for 35 to 40 cents on the dollar.

York is one of many hedge funds and private-equity firms that are entering the mortgage market, looking for distressed debt that can be bought for a song and might yield profits as loans continue to be modified. Many firms are raising investment capital for those purchases by making initial public offerings of stock, as DS News recently reported.

Other players in the buyers’ market read like a who’s who of hedges and capital firms: DellaCamera Capital Management; BlackRock and Highfields; Jacobs; Marathon; Starwood and Apollo.

If this trend becomes a full-fledged movement, who will be the real winners? “Borrowers, who have had a tough time modifying their existing loans with large banks,” the New York Times DealBook blog said today.

For the first time since the credit crunch became a full-on crisis, the owners of those borrowers’ debts might be willing to do some workouts with real benefits.

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