The Michigan Loan Officer Registration Act (LORA) deadline of January 1st, 2009 proved unobtainable, so an extension has been granted.
December 27, 2008 -- BLOOMFIELD, MI – So much for being on the ball. Michigan just turned the Aesop Fable of The Ant & the Grasshopper upside down by announcing a LORA deadline extension on December 8th.
Aesop’s Fable told the story of a lazy grasshopper playing all summer long and making fun of an ant hard at work storing food for the winter. When winter comes, the starving grasshopper begs the ant for some food.
If you were a Michigan loan originator (Ant) that took the original LORA legislation seriously and signed up for the required testing ASAP, you just got the rug pulled out from under you. All those LO’s that procrastinated (Grasshoppers), or didn’t even know about the new legislation, get to laugh at you now for stressing out, studying and taking the test at 8am on a Sunday morning.
For those scratching their heads as to what I’m writing about, the Michigan legislature passed a bill, called the Loan Officer Registration Act (LORA), that Governor Granholm signed into law April 3, 2008. LORA requires Michigan loan originators to register with the Office of Financial Services (OFIR), requires taking a 24 hour class or having 4.5 years of experience, passing a test, annual continuing education, background check and fingerprinting.
The original deadline for all this was January 1, 2009.
A disagreement arose though, with the Michigan State Police concerning interpretation of the fingerprinting and background check requirements. This resulted in the extension announced December 8th pushing the deadline back to April 1, 2009.
The only good thing about the extension was that the legislature took the opportunity to stiffen the requirements a bit more. The FBI will also now be involved in the background check and fingerprinting.
I’ve written before that LORA is way over due. Too many crooks and incompetents got in the mortgage business for the fast cash and took advantage of unsuspecting homeowners, helping to contribute to the current housing crisis. The industry needs a housecleaning! When similar legislation was enacted in Indiana & Ohio, over 30% of the mortgage originators “disappeared”. More need to go. Just this past week, I met a guy who has his own mortgage brokerage and he didn’t even know about LORA. How scary is it, that he could be doing mortgages and not know about state requirements concerning his livelihood?
Overall, the extension is really a shame. All the bad eggs we want out of the business get more time to do more damage. Is it just a coincidence that the new deadline coincides with April Fools Day?
Show your support for higher standards in the mortgage industry by only doing business with those that have already passed the required LORA test. Don’t settle for a verbal verification of this. After taking the test, we all immediately get a printout with our picture on it that tells us if we passed or failed.
Saturday, December 27, 2008
Monday, December 22, 2008
To Refinance, or not to Refinance?
Mortgage rates have dropped, but many homeowners are saying, “So, what”.
December 22, 2008 -- BLOOMFIELD, MI – the Federal Reserve dropped the overnight rate to a record low of 0.25% on Tuesday, December 16th. More importantly, they announced a plan to buy mortgage-backed securities in quantity. This sent mortgage rates to their lowest levels in 50 years.
Mortgage lenders around the country rejoiced, expecting another refinance boom just in time for Christmas. Stories spread about the millions of dollars of loans locked and there was even talk of lenders hiring again.
Homeowners though, don’t seem to care.
In addition to blast emailing everyone in my database with what I thought was great news, I personally called over 70 clients that had a rate and loan amount where it could make sense for them to refinance. Surprisingly, I seemed to be the only one excited about this opportunity. Most clients didn’t seem to be interested for various reasons – too busy getting ready for Christmas, savings not enough, too much paperwork to deal with, and the best one, “I think rates will go lower”. Several of my associates in the industry I talked to got the same feedback.
I’ve been thinking about these responses for a couple days, wondering why there hasn’t been more interest in refinancing. In years past, a drop in rates like this would’ve had my phone ringing nonstop. With the large number of lenders out of business and the corresponding dramatic drop in loan originators, one would think the “survivors” would be swamped.
Me thinks homeowners are a lot more cautious these days, which is a good thing. They’re not willing to just refinance for the sake of refinancing or to convert home equity into dollars to spend. Too many have been burned by mortgage crooks or overspent and are worried about losing their homes.
There’s also the fact that a significant percentage of homeowners with mortgages are upside in their homes.
As I’ve written about in the past, it’s estimated almost 25% of homeowners nationwide are upside down in their homes. Nevada leads the nation at almost 53%. Here in Michigan, the number is almost 47%. FHA & VA loans already offer the option of refinancing without needing an appraisal. On December 10th, word leaked out that the government was considering making the same option available for conforming mortgages.
If that comes to pass, I wonder if it would make a difference with homeowners and increase their interest in refinancing?
Then there’s also the issue of interest rates. There are an abundance of news stories from Wall Street & Washington D.C. about how low interest rates may go. One homeowner referred to me stated he wanted to wait to refinance and time the market so he could get the lowest rate. I wonder how that strategy has worked for him in the stock market?
Don’t be greedy. Besides the odds being against you in trying to time the market, there are several other possibilities that could work against you: your home value could fall below that needed to refinance or enough to require PMI, mortgage rules could change again for the negative, you could lose your job, your credit could get damaged or your neighbor’s foreclosure could drop your home’s value.
Contact me to discuss refinancing. If you’ve dealt with me in the past, you know I take pride in only refinancing when it makes financial sense. Also, please refer your family and friends to me that have financing questions or are looking to buy.
Have a great & safe Holiday Season.
December 22, 2008 -- BLOOMFIELD, MI – the Federal Reserve dropped the overnight rate to a record low of 0.25% on Tuesday, December 16th. More importantly, they announced a plan to buy mortgage-backed securities in quantity. This sent mortgage rates to their lowest levels in 50 years.
Mortgage lenders around the country rejoiced, expecting another refinance boom just in time for Christmas. Stories spread about the millions of dollars of loans locked and there was even talk of lenders hiring again.
Homeowners though, don’t seem to care.
In addition to blast emailing everyone in my database with what I thought was great news, I personally called over 70 clients that had a rate and loan amount where it could make sense for them to refinance. Surprisingly, I seemed to be the only one excited about this opportunity. Most clients didn’t seem to be interested for various reasons – too busy getting ready for Christmas, savings not enough, too much paperwork to deal with, and the best one, “I think rates will go lower”. Several of my associates in the industry I talked to got the same feedback.
I’ve been thinking about these responses for a couple days, wondering why there hasn’t been more interest in refinancing. In years past, a drop in rates like this would’ve had my phone ringing nonstop. With the large number of lenders out of business and the corresponding dramatic drop in loan originators, one would think the “survivors” would be swamped.
Me thinks homeowners are a lot more cautious these days, which is a good thing. They’re not willing to just refinance for the sake of refinancing or to convert home equity into dollars to spend. Too many have been burned by mortgage crooks or overspent and are worried about losing their homes.
There’s also the fact that a significant percentage of homeowners with mortgages are upside in their homes.
As I’ve written about in the past, it’s estimated almost 25% of homeowners nationwide are upside down in their homes. Nevada leads the nation at almost 53%. Here in Michigan, the number is almost 47%. FHA & VA loans already offer the option of refinancing without needing an appraisal. On December 10th, word leaked out that the government was considering making the same option available for conforming mortgages.
If that comes to pass, I wonder if it would make a difference with homeowners and increase their interest in refinancing?
Then there’s also the issue of interest rates. There are an abundance of news stories from Wall Street & Washington D.C. about how low interest rates may go. One homeowner referred to me stated he wanted to wait to refinance and time the market so he could get the lowest rate. I wonder how that strategy has worked for him in the stock market?
Don’t be greedy. Besides the odds being against you in trying to time the market, there are several other possibilities that could work against you: your home value could fall below that needed to refinance or enough to require PMI, mortgage rules could change again for the negative, you could lose your job, your credit could get damaged or your neighbor’s foreclosure could drop your home’s value.
Contact me to discuss refinancing. If you’ve dealt with me in the past, you know I take pride in only refinancing when it makes financial sense. Also, please refer your family and friends to me that have financing questions or are looking to buy.
Have a great & safe Holiday Season.
Saturday, December 13, 2008
The Great American Housing Challenge
What can be done to stop foreclosures and the resulting drop in housing values?
December 13, 2008 -- BLOOMFIELD, MI – Mortgage rates dipped this past week to 40 year lows and although many homeowners would like to refinance and lower their mortgage payments, a significant portion cannot due to being upside down in their homes.
Nationally, as of October, almost 25% of financed properties have less than 5% equity in them or are upside down. Nevada leads the nation at almost 53%, followed by Michigan at almost 47%. Refinancing to lower mortgage payments will be difficult for many homeowners as they would have to bring money to the closing that they probably don’t have.
The government’s efforts in creating programs to help homeowners, have so far failed to significantly slow the deluge of foreclosures.
FHA Secure, designed to help homeowners refinance out of subprime ARM’s, has reported questionable result numbers according to the New York Times. In fact, the definition of the program was changed to pump up the program’s numbers.
FHA’s Hope for Homeowners has also generated dismal results. A 47 page list of participating lenders, updated by HUD December 12th, doesn’t have any of the top ten lenders in the country on it. These lenders account of almost 70% of the mortgage market, if they’re not on the list, consider the program a failure.
On November 11th, the government announced an initiative for lenders to modify mortgages held by FNMA & FHLMC. An $800 per loan incentive was even offered. This program was so well received by lenders that there’s now talk about tying the receipt of federal bailout funds to participation in the initiative.
So, what would be a better solution to help keep people in their homes and seriously slow foreclosures? It’s all about affordable monthly payments. So, how about doing away with appraisals altogether on refinance transactions that don’t pull any cash out of a property and lower the homeowner’s mortgage payment?
Through ownership of FNMA/FHLMC/FHA/VA the government already effectively owns over half the residential mortgages in the U.S. As such, we’ve got nothing to lose by ignoring appraised values. We can only gain by lowering monthly payments to make it more affordable for homeowners to stay in their homes and avoid foreclosure.
This solution also avoids the issues of trying to force lenders into doing loan modifications and the investor lawsuits associated with those same modifications.
Anyone have a better idea?
December 13, 2008 -- BLOOMFIELD, MI – Mortgage rates dipped this past week to 40 year lows and although many homeowners would like to refinance and lower their mortgage payments, a significant portion cannot due to being upside down in their homes.
Nationally, as of October, almost 25% of financed properties have less than 5% equity in them or are upside down. Nevada leads the nation at almost 53%, followed by Michigan at almost 47%. Refinancing to lower mortgage payments will be difficult for many homeowners as they would have to bring money to the closing that they probably don’t have.
The government’s efforts in creating programs to help homeowners, have so far failed to significantly slow the deluge of foreclosures.
FHA Secure, designed to help homeowners refinance out of subprime ARM’s, has reported questionable result numbers according to the New York Times. In fact, the definition of the program was changed to pump up the program’s numbers.
FHA’s Hope for Homeowners has also generated dismal results. A 47 page list of participating lenders, updated by HUD December 12th, doesn’t have any of the top ten lenders in the country on it. These lenders account of almost 70% of the mortgage market, if they’re not on the list, consider the program a failure.
On November 11th, the government announced an initiative for lenders to modify mortgages held by FNMA & FHLMC. An $800 per loan incentive was even offered. This program was so well received by lenders that there’s now talk about tying the receipt of federal bailout funds to participation in the initiative.
So, what would be a better solution to help keep people in their homes and seriously slow foreclosures? It’s all about affordable monthly payments. So, how about doing away with appraisals altogether on refinance transactions that don’t pull any cash out of a property and lower the homeowner’s mortgage payment?
Through ownership of FNMA/FHLMC/FHA/VA the government already effectively owns over half the residential mortgages in the U.S. As such, we’ve got nothing to lose by ignoring appraised values. We can only gain by lowering monthly payments to make it more affordable for homeowners to stay in their homes and avoid foreclosure.
This solution also avoids the issues of trying to force lenders into doing loan modifications and the investor lawsuits associated with those same modifications.
Anyone have a better idea?
Saturday, December 6, 2008
Santa, all I want for Christmas is a 4.5% Mortgage Rate
Homeowners get excited about a Holiday rumor.
Even IF it somehow stuffs our stockings, will it just be a lump of coal?
December 6, 2008 -- BLOOMFIELD, MI – On Wednesday, December 3rd, beleaguered homeowners thought Santa really did exist and they were getting an early Christmas present. A rumor hit the media that the government was going to lower mortgage rates to 4.5% to help people stay in their homes and slow foreclosures. CNN picked up the rumor CNN Article.
On Thursday, emailed stories were flying around the internet and phones at lenders started ringing off the hook. The Wall Street Journal picked up the story WSJ Article.
By Friday, TIME Magazine had the story on their internet site TIME Article. The rumor had evolved into only applying to mortgages used to purchase a home.
The serious coverage and how fast the rumor spread, shows that a solution to the housing crisis is near the top of everyone’s Christmas Wish List this year.
How much relief would such a rate drop give a homebuyer? As the graph here show, a 1% rate drop on a $200k mortgage would save $122/month. A 2% drop would double that amount.
Experts are all over the board on how many more homes would sell if this rate was available, if the increase in sales would be enough to prop up home values and slow foreclosures.
Of more immediate concern is how likely the rumor is to become reality? To do so, the government could just set FNMA/FHLMC rates at 4.5%, something they can do now that they own the two. These would lead to issues though, of either the government owning individual mortgage or having to sell the mortgages on Wall Street at a loss. The government’s other option would be to buy all the mortgage-backed securities it can to drive market yields, and hence rates, down.
Either way, the government ends up subsidizing or owning mortgages. Can you say, “Socialism”? How about, “Communism”?
What should a homebuyer or homeowner do? Well rates dropped last week and although they’ve given some of that drop back this week, they are lower than they’ve been all year. The dip last week was short-lived, but another may be coming. Borrowers need to get a mortgage application in NOW to be ready to lock at a moment’s notice!
If Santa does stuff our stockings with a 4.5% rate, borrowers can always refinance again.
Even IF it somehow stuffs our stockings, will it just be a lump of coal?
December 6, 2008 -- BLOOMFIELD, MI – On Wednesday, December 3rd, beleaguered homeowners thought Santa really did exist and they were getting an early Christmas present. A rumor hit the media that the government was going to lower mortgage rates to 4.5% to help people stay in their homes and slow foreclosures. CNN picked up the rumor CNN Article.
On Thursday, emailed stories were flying around the internet and phones at lenders started ringing off the hook. The Wall Street Journal picked up the story WSJ Article.
By Friday, TIME Magazine had the story on their internet site TIME Article. The rumor had evolved into only applying to mortgages used to purchase a home.
The serious coverage and how fast the rumor spread, shows that a solution to the housing crisis is near the top of everyone’s Christmas Wish List this year.
How much relief would such a rate drop give a homebuyer? As the graph here show, a 1% rate drop on a $200k mortgage would save $122/month. A 2% drop would double that amount.
Experts are all over the board on how many more homes would sell if this rate was available, if the increase in sales would be enough to prop up home values and slow foreclosures.
Of more immediate concern is how likely the rumor is to become reality? To do so, the government could just set FNMA/FHLMC rates at 4.5%, something they can do now that they own the two. These would lead to issues though, of either the government owning individual mortgage or having to sell the mortgages on Wall Street at a loss. The government’s other option would be to buy all the mortgage-backed securities it can to drive market yields, and hence rates, down.
Either way, the government ends up subsidizing or owning mortgages. Can you say, “Socialism”? How about, “Communism”?
What should a homebuyer or homeowner do? Well rates dropped last week and although they’ve given some of that drop back this week, they are lower than they’ve been all year. The dip last week was short-lived, but another may be coming. Borrowers need to get a mortgage application in NOW to be ready to lock at a moment’s notice!
If Santa does stuff our stockings with a 4.5% rate, borrowers can always refinance again.
Sunday, November 23, 2008
The Lifespan of Loan Modifications
Like a Mayfly (or fishfly), loan modifications won’t be around long,
but they may leave a nasty “smell” just like the refinance boom has.
November 23, 2008 -- BLOOMFIELD, MI – If you live near a freshwater lake or river, chances are you’re familiar with mayflies. These small flying insects hatch by the millions in late spring or early summer, swarming over everything, especially light sources. Having no mouth or digestive system, they frantically mate to reproduce before dying, smelling all the while like dead fish. The only good thing about them is their short lifespan – some species live for an hour, most not more than a day.
Loan modifications have a lot in common with these creatures.
This past spring and early summer news coverage of loan modifications swarmed in frequency and the public became very aware of the term and concept. Recently, the activity of loan modifications has also swarmed as lenders have fallen over themselves announcing how many hundreds of thousands of loan modifications they’re targeting to do.
Swarms of bankers, mortgage originators, attorneys and others have been drawn to loan modifications like a mayfly to a streetlight. The opportunity to make a quick buck with loan modifications is eerily similar to the fast money that attracted many to the mortgage refinance boom, just a few years ago.
A lack of regulation and almost nonexistent entry requirements allowed many incompetents and crooks into the mortgage industry. They greedily refinanced homeowners into bad situations, took their money and quickly disappeared - leaving behind the rotten stench of the current foreclosure mess.
The bad news is the growing industry of loan modifications has little, if any, regulation. Many desperate homeowners will be duped out of money they can’t afford to lose by greedy opportunists, way over-promising and delivering nothing.
The good news is that just like a swarm of mayflies, the industry’s days are already numbered. FNMA hastened the end with their announcement to standardize loan mods and offering lenders an $800 incentive to do them. Once the list of qualifying homeowners is worked through and real estate values stabilize, loan mods will be a thing of the past.
but they may leave a nasty “smell” just like the refinance boom has.
November 23, 2008 -- BLOOMFIELD, MI – If you live near a freshwater lake or river, chances are you’re familiar with mayflies. These small flying insects hatch by the millions in late spring or early summer, swarming over everything, especially light sources. Having no mouth or digestive system, they frantically mate to reproduce before dying, smelling all the while like dead fish. The only good thing about them is their short lifespan – some species live for an hour, most not more than a day.
Loan modifications have a lot in common with these creatures.
This past spring and early summer news coverage of loan modifications swarmed in frequency and the public became very aware of the term and concept. Recently, the activity of loan modifications has also swarmed as lenders have fallen over themselves announcing how many hundreds of thousands of loan modifications they’re targeting to do.
Swarms of bankers, mortgage originators, attorneys and others have been drawn to loan modifications like a mayfly to a streetlight. The opportunity to make a quick buck with loan modifications is eerily similar to the fast money that attracted many to the mortgage refinance boom, just a few years ago.
A lack of regulation and almost nonexistent entry requirements allowed many incompetents and crooks into the mortgage industry. They greedily refinanced homeowners into bad situations, took their money and quickly disappeared - leaving behind the rotten stench of the current foreclosure mess.
The bad news is the growing industry of loan modifications has little, if any, regulation. Many desperate homeowners will be duped out of money they can’t afford to lose by greedy opportunists, way over-promising and delivering nothing.
The good news is that just like a swarm of mayflies, the industry’s days are already numbered. FNMA hastened the end with their announcement to standardize loan mods and offering lenders an $800 incentive to do them. Once the list of qualifying homeowners is worked through and real estate values stabilize, loan mods will be a thing of the past.
Monday, November 17, 2008
Federal Agency Announces Mortgage Modification Plan
Will the plan do enough to stop foreclosures or just temporarily slow them down?
November 17, 2008 -- BLOOMFIELD, MI – At 2pm on Tuesday November 11th, Veterans Day, James Lockhart of the Federal Housing Finance Agency held a press conference. He and several government officials announced FNMA & FHLMC would pursue, “a simplified, streamlined loan modification program to get struggling homeowners into mortgages that they can afford.”
He pointed out that FNMA/FHLMC combined control 31 million mortgages or about 58% of the nation’s total, but only account for 20% of delinquencies. He called on private label mortgage servicers and investor to adopt the FHFA program as the industry standard as they account for roughly 60% of the serious delinquencies.
The program, rolling out December 15th, targets borrowers 90 days or more behind on the mortgage for their primary residence, who haven’t filed for bankruptcy protection. Housing payments will be reduced to 38% of monthly gross income through a combination of lowering interest rates, lengthening loan terms and “deferring payment on part of the principal.”
Servicers will receive an $800 incentive to restructure FNMA/FHLMC mortgages.
Will this be enough to miraculously stop foreclosures and save everyone’s home? That’s impossible and not the goal.
To qualify, homeowners need to show enough income to make a reasonable payment. Homeowners without a job aren’t likely to qualify. With recession spurred unemployment increasing, many will still lose their homes to foreclosure as they won’t be able to make any consistent payment amount.
Notice the announcement doesn’t in any way imply forgiving part of the loan balance. “Deferring payment on part of the principal” only implies “Interest Only” payments, a disappointment for the millions of homeowners upside down in their homes.
Why the requirement of being 90 days behind to qualify? Doesn’t that encourage homeowners to stop making payments to be eligible? Well, most of the “servicers” referred to that’ll be handling the modifications are actually banks, the same banks posting billions in losses and cutting employees as a result. So, the system doesn’t have the resources to help everyone, just the worst off.
The real focus of the program is to stop the “death spiral” of foreclosures causing home prices to drop, causing more foreclosures, causing prices to drop further and on and on until we’re in another depression. If pulled off correctly, it may just succeed.
November 17, 2008 -- BLOOMFIELD, MI – At 2pm on Tuesday November 11th, Veterans Day, James Lockhart of the Federal Housing Finance Agency held a press conference. He and several government officials announced FNMA & FHLMC would pursue, “a simplified, streamlined loan modification program to get struggling homeowners into mortgages that they can afford.”
He pointed out that FNMA/FHLMC combined control 31 million mortgages or about 58% of the nation’s total, but only account for 20% of delinquencies. He called on private label mortgage servicers and investor to adopt the FHFA program as the industry standard as they account for roughly 60% of the serious delinquencies.
The program, rolling out December 15th, targets borrowers 90 days or more behind on the mortgage for their primary residence, who haven’t filed for bankruptcy protection. Housing payments will be reduced to 38% of monthly gross income through a combination of lowering interest rates, lengthening loan terms and “deferring payment on part of the principal.”
Servicers will receive an $800 incentive to restructure FNMA/FHLMC mortgages.
Will this be enough to miraculously stop foreclosures and save everyone’s home? That’s impossible and not the goal.
To qualify, homeowners need to show enough income to make a reasonable payment. Homeowners without a job aren’t likely to qualify. With recession spurred unemployment increasing, many will still lose their homes to foreclosure as they won’t be able to make any consistent payment amount.
Notice the announcement doesn’t in any way imply forgiving part of the loan balance. “Deferring payment on part of the principal” only implies “Interest Only” payments, a disappointment for the millions of homeowners upside down in their homes.
Why the requirement of being 90 days behind to qualify? Doesn’t that encourage homeowners to stop making payments to be eligible? Well, most of the “servicers” referred to that’ll be handling the modifications are actually banks, the same banks posting billions in losses and cutting employees as a result. So, the system doesn’t have the resources to help everyone, just the worst off.
The real focus of the program is to stop the “death spiral” of foreclosures causing home prices to drop, causing more foreclosures, causing prices to drop further and on and on until we’re in another depression. If pulled off correctly, it may just succeed.
Wednesday, November 12, 2008
Michigan State Legislature works on Home Foreclosure Prevention Act
Are they trying to force lenders to do loan mods?
November 12, 2008 -- BLOOMFIELD, MI
Elections are over and the Michigan legislative "lame duck" session begins in earnest in Lansing.
The House legislature is expected to start working on establishing the Home Foreclosure Prevention Act, which would establish a state database on mortgage foreclosures and allow a state commissioner to mediate foreclosure matters.
Lawmakers are off today, for Veterans' Day, but will be in session Wednesday and Thursday. Then the Legislature will be on a two-week break before returning to work in December.
A bill concerning foreclosures, HB 6615, is before the House Banking and Financial Services Committee for a hearing on Wednesday. The bill would affect foreclosures on primary residences secured by a subprime loan.
You can read an outline of the bill below, but my take on it is that the legislature is trying to force lenders to consider more loan modifications by extending the time before starting foreclosure or by requiring mediation to do so. I think it’s a great start in the right direction, especially given the bailout money the Feds have committed to the banking industry.
More of the bailout money needs to trickle down to homeowners instead of winding up as bonuses in the pockets of those that ran the banks and got us all into this mess.
An outline of the bill’s provisions:
1. Require a foreclosing party to notify the borrower 45 days prior to starting the foreclosure process that they may be eligible for a loan modification or other solutions.
2. The notice must also include:
i. an itemization of all past due amounts
ii. an itemization of any and all charges to bring the loan current.
iii. The earliest date foreclosure proceedings may commence.
iv. A statement that the borrower may have options to avoid foreclosure.
v. The address, phone number and other contact information for the lender or their agent authorized to discuss other solutions.
vi. The name, address & telephone number of HUD or MSHDA approved counselors.
vii. The address and phone number for the consumer complaint area of the Office of Financial and Insurance Regulation.
3. Within 3 days of sending this information to a borrower, the foreclosing party must file this information with the state court administration office.
4. By January 1, 2009, the state court administration office shall design a database to hold this info. This info shall not be available to the public.
5. The commissioner of the program shall solicit solutions other than foreclosure from all sources.
6. If, after review of a foreclosure case, the commissioner decides there is merit to avoid foreclosure, they can either delay the start of foreclosure proceedings by up to 90 days or require the borrower and lender to pursue mediation.
7. After December 14, 2008 lenders are required to file a certification that all the above is true BEFORE commencing to foreclose on a primary residence secured with a subprime mortgage.
8. A subprime mortgage is defined as a mortgage originated after December 31, 2001 and prior to January 1, 2008 with an APR that exceeds the comparable US Treasury yield by 3% for a 1st mortgage or 5% for a 2nd mortgage. A loan will also be considered subprime if it’s APR exceeds the mortgage rates published by the Federal Reserve by 1.75% for a 1st mortgage and 3.75% for a 2nd mortgage.
Read the entire bill at http://www.legislature.mi.gov/documents/2007-2008/billintroduced/House/pdf/2008-HIB-6615.pdf
November 12, 2008 -- BLOOMFIELD, MI
Elections are over and the Michigan legislative "lame duck" session begins in earnest in Lansing.
The House legislature is expected to start working on establishing the Home Foreclosure Prevention Act, which would establish a state database on mortgage foreclosures and allow a state commissioner to mediate foreclosure matters.
Lawmakers are off today, for Veterans' Day, but will be in session Wednesday and Thursday. Then the Legislature will be on a two-week break before returning to work in December.
A bill concerning foreclosures, HB 6615, is before the House Banking and Financial Services Committee for a hearing on Wednesday. The bill would affect foreclosures on primary residences secured by a subprime loan.
You can read an outline of the bill below, but my take on it is that the legislature is trying to force lenders to consider more loan modifications by extending the time before starting foreclosure or by requiring mediation to do so. I think it’s a great start in the right direction, especially given the bailout money the Feds have committed to the banking industry.
More of the bailout money needs to trickle down to homeowners instead of winding up as bonuses in the pockets of those that ran the banks and got us all into this mess.
An outline of the bill’s provisions:
1. Require a foreclosing party to notify the borrower 45 days prior to starting the foreclosure process that they may be eligible for a loan modification or other solutions.
2. The notice must also include:
i. an itemization of all past due amounts
ii. an itemization of any and all charges to bring the loan current.
iii. The earliest date foreclosure proceedings may commence.
iv. A statement that the borrower may have options to avoid foreclosure.
v. The address, phone number and other contact information for the lender or their agent authorized to discuss other solutions.
vi. The name, address & telephone number of HUD or MSHDA approved counselors.
vii. The address and phone number for the consumer complaint area of the Office of Financial and Insurance Regulation.
3. Within 3 days of sending this information to a borrower, the foreclosing party must file this information with the state court administration office.
4. By January 1, 2009, the state court administration office shall design a database to hold this info. This info shall not be available to the public.
5. The commissioner of the program shall solicit solutions other than foreclosure from all sources.
6. If, after review of a foreclosure case, the commissioner decides there is merit to avoid foreclosure, they can either delay the start of foreclosure proceedings by up to 90 days or require the borrower and lender to pursue mediation.
7. After December 14, 2008 lenders are required to file a certification that all the above is true BEFORE commencing to foreclose on a primary residence secured with a subprime mortgage.
8. A subprime mortgage is defined as a mortgage originated after December 31, 2001 and prior to January 1, 2008 with an APR that exceeds the comparable US Treasury yield by 3% for a 1st mortgage or 5% for a 2nd mortgage. A loan will also be considered subprime if it’s APR exceeds the mortgage rates published by the Federal Reserve by 1.75% for a 1st mortgage and 3.75% for a 2nd mortgage.
Read the entire bill at http://www.legislature.mi.gov/documents/2007-2008/billintroduced/House/pdf/2008-HIB-6615.pdf
Saturday, November 8, 2008
Why all the Doom & Gloom about Michigan?
More and more people are talking about leaving Michigan for better opportunities. But, where's the grass really greener?
November 8, 2008 -- BLOOMFIELD, MI – With the Presidential election over and Americans’ focus turning back to the economy, the news isn’t good concerning the domestic auto industry.
Rising unemployment, falling consumer confidence & lower spending are causing a severe drop in domestic auto sales. The automakers have responded with more plant closures, employee layoffs & buyouts.
The most recent report from the U.S. Department of Labor shows that Michigan has the 2nd highest unemployment rate in the country. Michigan also led the nation with 28,300 jobs lost in the period from September to October of this year.
It’s no surprise that as a result of all the automaker job cuts, the 3rd quarter statistics from RealtyTrac have Michigan ranked 7th in the nation in foreclosures. Michigan also comes in at 2nd of all states in terms of financed homes with negative equity. 38.6% of Michigan homes are worth less than the mortgages on them.
So, we should all pack up and leave Michigan right? Perhaps head for those sunny locales where everything has to be better?
Well, let's look at the stats for those popular destinations California, Arizona, Nevada and Florida to see.
California and Nevada rank 5th and 6th respectively in unemployment. The top four states in foreclosures are Nevada, California, Arizona and Florida. The Case-Shiller Index shows those same four states suffering from the worst drops in home values. Finally, Nevada is number one in the percentage of financed homes being upside down, with Florida, Arizona and California being 3rd, 4th, and 5th.
So much for the, “go west” advice for greener pastures!
I'm not leaving Michigan as it's not significantly better anywhere else. I will try to make a difference here by thinking positively and choosing to focus on the postive rater than the negative.
November 8, 2008 -- BLOOMFIELD, MI – With the Presidential election over and Americans’ focus turning back to the economy, the news isn’t good concerning the domestic auto industry.
Rising unemployment, falling consumer confidence & lower spending are causing a severe drop in domestic auto sales. The automakers have responded with more plant closures, employee layoffs & buyouts.
The most recent report from the U.S. Department of Labor shows that Michigan has the 2nd highest unemployment rate in the country. Michigan also led the nation with 28,300 jobs lost in the period from September to October of this year.
It’s no surprise that as a result of all the automaker job cuts, the 3rd quarter statistics from RealtyTrac have Michigan ranked 7th in the nation in foreclosures. Michigan also comes in at 2nd of all states in terms of financed homes with negative equity. 38.6% of Michigan homes are worth less than the mortgages on them.
So, we should all pack up and leave Michigan right? Perhaps head for those sunny locales where everything has to be better?
Well, let's look at the stats for those popular destinations California, Arizona, Nevada and Florida to see.
California and Nevada rank 5th and 6th respectively in unemployment. The top four states in foreclosures are Nevada, California, Arizona and Florida. The Case-Shiller Index shows those same four states suffering from the worst drops in home values. Finally, Nevada is number one in the percentage of financed homes being upside down, with Florida, Arizona and California being 3rd, 4th, and 5th.
So much for the, “go west” advice for greener pastures!
I'm not leaving Michigan as it's not significantly better anywhere else. I will try to make a difference here by thinking positively and choosing to focus on the postive rater than the negative.
Monday, November 3, 2008
Is there any Mortgage Relief for the Average Homeowner?
Is there any Mortgage Relief for the Average Homeowner?
There’s lots of buzz about HUD’s Help 4 Homeowners program and Loan Modifications. Average homeowners want to know if there's help for them!
November 3, 2008
By: Drew Sygit
CMPS, CMLO, CALO, MBA
BLOOMFIELD, MI – The media headlines have a new update or wrinkle about the Federal Bailout of banks daily. Stories abound also about new programs and initiatives to stem the tide of foreclosures sweeping the country. All this talk of aid for banks and for distressed homeowners has the average homeowner wondering and hoping there’s something in all of this for them.
The latest figures show that roughly 90% of homeowners are paying their mortgage on time and are not a financial risk for foreclosure. So, why are these homeowners worried and looking for some type of aid? It could be that recent estimates have nearly 20% of this nation’s homeowners being “upside down” in their homes – owing more on their mortgages than the homes are worth. Another 5% of homeowners barely have any equity in their homes and values are predicted to drop another 10% in the coming year. That’ll leave 25% of homeowners nationwide upside down and perhaps reconsidering what the American dream of homeownership means to them.
From a pure financial perspective, it makes no sense to keep throwing good money after bad on an asset declining in value. Especially when you can buy that same asset, next door at a steep discount. Homeowners everywhere, from the well-off to those cutting corners to make their mortgage payments, are wondering why should they keep making their payments.
They also have questions about fairness. Why is so much being done to help delinquent homeowners, many of whom made foolish decisions buying more than they could afford and taking out toxic mortgages to do so, while nothing’s being done to help those that made wiser decisions?
Our office receives several calls a day from homeowners who are not delinquent on their mortgages, but are upside in their homes and looking for some type of relief. Most want to know if anything can be done to reduce the amount of their mortgages in light of the falling values of their homes. Sadly, there are no easy answers for them.
Every program and relief effort announced so far is targeted at helping distressed homeowners avoid foreclosure. Loan modifications are reserved for those facing a viable hardship and even then, a reduction of mortgage balance is not very likely. Lenders understand that to keep people in homes they just have to make the payments affordable. On the other hand, homeowners have to show the ability to make the negotiated lower payment, otherwise the lender will just continue to foreclose.
Hud’s new Hope 4 Homeowner program not only requires a homeowner to be delinquent to qualify, but also requires the servicer/lender of the mortgage to take a loss on the mortgage amount that exceeds 90% of a property’s current value. Lenders are not falling over themselves to do this.
So, why should the 90% of homeowners that are not delinquent continue to make their mortgage payments and not walk away from their upside down homes? Besides the arguments that they have to live somewhere and a foreclosure trashes your credit record, we can find viable answers in analogies.
How fair is our tax code that shifts more of the tax burden to those that do well and gives some of that back as welfare to the poor? Why are so many leaving their money in the stock market, which has dropped as much as many home values, willing to take a long-term view there? Beyond those examples we have the fact that something has to be done to break the vicious cycle we’re now in – foreclosures cause nearby property values to drop, resulting in more foreclosures, which drives values down further, etc…
# # #
Drew Sygit is President of The Lending Edge and holds mortgage industry designations CMPS, CMLO, CALO and has an MBA. He’s spoken for HUD, has written numerous articles and is a mortgage industry advocate for loan originator licensing and consumer education. He can be reached at 248-356-3739 & dsygit@TheLendingEdge.com. His blog: http://drewsmortgagenews.blogspot.com/
There’s lots of buzz about HUD’s Help 4 Homeowners program and Loan Modifications. Average homeowners want to know if there's help for them!
November 3, 2008
By: Drew Sygit
CMPS, CMLO, CALO, MBA
BLOOMFIELD, MI – The media headlines have a new update or wrinkle about the Federal Bailout of banks daily. Stories abound also about new programs and initiatives to stem the tide of foreclosures sweeping the country. All this talk of aid for banks and for distressed homeowners has the average homeowner wondering and hoping there’s something in all of this for them.
The latest figures show that roughly 90% of homeowners are paying their mortgage on time and are not a financial risk for foreclosure. So, why are these homeowners worried and looking for some type of aid? It could be that recent estimates have nearly 20% of this nation’s homeowners being “upside down” in their homes – owing more on their mortgages than the homes are worth. Another 5% of homeowners barely have any equity in their homes and values are predicted to drop another 10% in the coming year. That’ll leave 25% of homeowners nationwide upside down and perhaps reconsidering what the American dream of homeownership means to them.
From a pure financial perspective, it makes no sense to keep throwing good money after bad on an asset declining in value. Especially when you can buy that same asset, next door at a steep discount. Homeowners everywhere, from the well-off to those cutting corners to make their mortgage payments, are wondering why should they keep making their payments.
They also have questions about fairness. Why is so much being done to help delinquent homeowners, many of whom made foolish decisions buying more than they could afford and taking out toxic mortgages to do so, while nothing’s being done to help those that made wiser decisions?
Our office receives several calls a day from homeowners who are not delinquent on their mortgages, but are upside in their homes and looking for some type of relief. Most want to know if anything can be done to reduce the amount of their mortgages in light of the falling values of their homes. Sadly, there are no easy answers for them.
Every program and relief effort announced so far is targeted at helping distressed homeowners avoid foreclosure. Loan modifications are reserved for those facing a viable hardship and even then, a reduction of mortgage balance is not very likely. Lenders understand that to keep people in homes they just have to make the payments affordable. On the other hand, homeowners have to show the ability to make the negotiated lower payment, otherwise the lender will just continue to foreclose.
Hud’s new Hope 4 Homeowner program not only requires a homeowner to be delinquent to qualify, but also requires the servicer/lender of the mortgage to take a loss on the mortgage amount that exceeds 90% of a property’s current value. Lenders are not falling over themselves to do this.
So, why should the 90% of homeowners that are not delinquent continue to make their mortgage payments and not walk away from their upside down homes? Besides the arguments that they have to live somewhere and a foreclosure trashes your credit record, we can find viable answers in analogies.
How fair is our tax code that shifts more of the tax burden to those that do well and gives some of that back as welfare to the poor? Why are so many leaving their money in the stock market, which has dropped as much as many home values, willing to take a long-term view there? Beyond those examples we have the fact that something has to be done to break the vicious cycle we’re now in – foreclosures cause nearby property values to drop, resulting in more foreclosures, which drives values down further, etc…
# # #
Drew Sygit is President of The Lending Edge and holds mortgage industry designations CMPS, CMLO, CALO and has an MBA. He’s spoken for HUD, has written numerous articles and is a mortgage industry advocate for loan originator licensing and consumer education. He can be reached at 248-356-3739 & dsygit@TheLendingEdge.com. His blog: http://drewsmortgagenews.blogspot.com/
Tuesday, October 28, 2008
FDIC pushes for more Loan Modifications
FDIC pushes for more Loan Modifications
Is this what the housing market needs to stabilize home prices?
October 28, 2008
By: Drew Sygit
CMPS, CMLO, CALO, MBA
BLOOMFIELD, MI – Sheila Blair, the Chairwoman of the FDIC, is trying to blaze her own trail out of the worse foreclosure crisis since the Great Depression. Her solution, systematically and aggressively modify mortgages instead of foreclosing on properties.
The federal takeover of IndyMac Bank gave her the opportunity to try out her theories. So far, only 3500 mortgages have been modified, but she says over 15,000 letters soliciting modifications have been sent out.
What she has succeeded in doing is getting everyone’s attention and “rocking the boat”. At a conference for the mortgage industry over a year ago, Blair was pushing lenders to be more aggressive with modifications. She was ignored then, but now is leading by example and building momentum. Last week President Bush was urged by Barney Frank, D.-Mass., chairman of the House Financial Services Committee, to appoint Blair to head an industry wide effort to avoid foreclosures with modifications.
If Blair succeeds in making her plan a standard for the industry, it could put a floor under falling housing prices by slowing the flood of low-priced foreclosures hitting the market. Lowering the supply of homes is key to stabilizing home prices and getting buyers off the sidelines. As long as home values continue to fall, buyers have a perfect excuse not to buy – why buy something you can wait to get for less?
Much ado had been made about HUD’s new “Hope for Homeowners Program”, but the program requires lenders to forgive any mortgage debt that exceeds 90% of a home’s current value. Lenders didn’t endorse the program when HUD announced it and yawned at its introduction on October 1st. Desperate homeowners have lit up lenders’ phones calling about the program, but no lender is actively participating in the program yet. Rumors are floating around that many lenders are instead holding out for the federal government to buy or insure troubled mortgages, which would negate the motivation to partake in the program.
In the midst of all the cries of the federal bailout reeking of socialism, capitalism is thriving as evidenced by the relatively overnight appearance of a loan modification industry. Googling “loan modifications” leads to 170,000 results, with all kinds of companies and offers. It’s the “wild, wild west” as there’s little to no regulation of the industry. RESPA and other regulations don’t apply as no new loan is being originated. While there are many well intentioned companies and individuals, the desperation of millions of homeowners is sure to draw many thieves looking for a quick score.
If Blair of the FDIC is going to push for more loan modifications, she would be wise to also push for some laws to protect homeowners. Otherwise, they’ll be another mess to clean up.
# # #
Drew Sygit is President of The Lending Edge and holds mortgage industry designations CMPS, CMLO, CALO and has an MBA. He’s spoken for HUD, has written numerous articles and is a mortgage industry advocate for loan originator licensing and consumer education. He can be reached at 248-356-3739 & dsygit@TheLendingEdge.com.
Is this what the housing market needs to stabilize home prices?
October 28, 2008
By: Drew Sygit
CMPS, CMLO, CALO, MBA
BLOOMFIELD, MI – Sheila Blair, the Chairwoman of the FDIC, is trying to blaze her own trail out of the worse foreclosure crisis since the Great Depression. Her solution, systematically and aggressively modify mortgages instead of foreclosing on properties.
The federal takeover of IndyMac Bank gave her the opportunity to try out her theories. So far, only 3500 mortgages have been modified, but she says over 15,000 letters soliciting modifications have been sent out.
What she has succeeded in doing is getting everyone’s attention and “rocking the boat”. At a conference for the mortgage industry over a year ago, Blair was pushing lenders to be more aggressive with modifications. She was ignored then, but now is leading by example and building momentum. Last week President Bush was urged by Barney Frank, D.-Mass., chairman of the House Financial Services Committee, to appoint Blair to head an industry wide effort to avoid foreclosures with modifications.
If Blair succeeds in making her plan a standard for the industry, it could put a floor under falling housing prices by slowing the flood of low-priced foreclosures hitting the market. Lowering the supply of homes is key to stabilizing home prices and getting buyers off the sidelines. As long as home values continue to fall, buyers have a perfect excuse not to buy – why buy something you can wait to get for less?
Much ado had been made about HUD’s new “Hope for Homeowners Program”, but the program requires lenders to forgive any mortgage debt that exceeds 90% of a home’s current value. Lenders didn’t endorse the program when HUD announced it and yawned at its introduction on October 1st. Desperate homeowners have lit up lenders’ phones calling about the program, but no lender is actively participating in the program yet. Rumors are floating around that many lenders are instead holding out for the federal government to buy or insure troubled mortgages, which would negate the motivation to partake in the program.
In the midst of all the cries of the federal bailout reeking of socialism, capitalism is thriving as evidenced by the relatively overnight appearance of a loan modification industry. Googling “loan modifications” leads to 170,000 results, with all kinds of companies and offers. It’s the “wild, wild west” as there’s little to no regulation of the industry. RESPA and other regulations don’t apply as no new loan is being originated. While there are many well intentioned companies and individuals, the desperation of millions of homeowners is sure to draw many thieves looking for a quick score.
If Blair of the FDIC is going to push for more loan modifications, she would be wise to also push for some laws to protect homeowners. Otherwise, they’ll be another mess to clean up.
# # #
Drew Sygit is President of The Lending Edge and holds mortgage industry designations CMPS, CMLO, CALO and has an MBA. He’s spoken for HUD, has written numerous articles and is a mortgage industry advocate for loan originator licensing and consumer education. He can be reached at 248-356-3739 & dsygit@TheLendingEdge.com.
Wednesday, October 22, 2008
HUD's Hope 4 Homeowners Program makes Lenders Yawn
On October 1st the Bush administration proudly announced new legislation aimed at helping homeowners keep their homes and avoid foreclosure. Called the "Hope for Homeowners" program (http://www.hud.gov/news/release.cfm?content=pr08-150.cfm), it has lender and broker phones ringing of the hook!
The problem is, no one that matters is really answering their phone. Seems the Bush administration and HUD forgot to check with the decision makers at the lenders where they want the loans modified.
Just another example of our wonderful politicians operating in a vacuum! As usual, they're more concerned with PR to get re-elected than solutions that'll actually accomplish something. The program is hi-lited on the first page of HUD's website with a pic of an American flag. Very apple pie of them, but this is October and I'm thinking pumpkin pie.
So, what does the program offer as a solution? Well IF a lender will write down the amount the're owed to 90% of a property's current appraised value, then the homeowner can qualify for a new FHA insured fixed-rate mortgage. Well lenders aren't too excited about taking a hit by lowering the principal balance of a loan. They gave this feedback when the program was first announced a couple of months ago, but the politicians passed on the feedback & the opportunity to revise the program to get lenders to buy into it.
We do loan modifications and the LAST thing lenders will approve is a principal reduction. They will offer a lower rate, longer term or even an interest only period before they will agree to lowering the loan balance. We know of several cases where principal has been reduced, but it seems to be confined to subprime loans at this time.
Some other challenges with the program:
- Homeowner can't own any other properties. Not a lot of help for those with cottages they can't sell.
- Lenders with a second mortgage on the property must swallow 100% of what they're owed! I can't see that happening so forgot all the homeowners with second mortgages on their homes. I don't know what the politicians were thinking on this requirement.
- A minimum of 50% of all future appreciation must be shared with the lender. Surprise - this one's actually pretty creative and makes sense. I guarantee though, that many participating homeowners will have short-term memories and be shocked & outraged when they do sell in the future and have this clause sprung on them.
- Last, but not least, the program bans any new 2nd mortgages for the first 5 years of the new loan, except for emergency repairs. How will the affected homeowners roll their credit card debt into their ATM machine, I mean home, so they can keep the U.S. economy humming by charging them up again?
We live in interesting times.
The problem is, no one that matters is really answering their phone. Seems the Bush administration and HUD forgot to check with the decision makers at the lenders where they want the loans modified.
Just another example of our wonderful politicians operating in a vacuum! As usual, they're more concerned with PR to get re-elected than solutions that'll actually accomplish something. The program is hi-lited on the first page of HUD's website with a pic of an American flag. Very apple pie of them, but this is October and I'm thinking pumpkin pie.
So, what does the program offer as a solution? Well IF a lender will write down the amount the're owed to 90% of a property's current appraised value, then the homeowner can qualify for a new FHA insured fixed-rate mortgage. Well lenders aren't too excited about taking a hit by lowering the principal balance of a loan. They gave this feedback when the program was first announced a couple of months ago, but the politicians passed on the feedback & the opportunity to revise the program to get lenders to buy into it.
We do loan modifications and the LAST thing lenders will approve is a principal reduction. They will offer a lower rate, longer term or even an interest only period before they will agree to lowering the loan balance. We know of several cases where principal has been reduced, but it seems to be confined to subprime loans at this time.
Some other challenges with the program:
- Homeowner can't own any other properties. Not a lot of help for those with cottages they can't sell.
- Lenders with a second mortgage on the property must swallow 100% of what they're owed! I can't see that happening so forgot all the homeowners with second mortgages on their homes. I don't know what the politicians were thinking on this requirement.
- A minimum of 50% of all future appreciation must be shared with the lender. Surprise - this one's actually pretty creative and makes sense. I guarantee though, that many participating homeowners will have short-term memories and be shocked & outraged when they do sell in the future and have this clause sprung on them.
- Last, but not least, the program bans any new 2nd mortgages for the first 5 years of the new loan, except for emergency repairs. How will the affected homeowners roll their credit card debt into their ATM machine, I mean home, so they can keep the U.S. economy humming by charging them up again?
We live in interesting times.
# # #
Drew Sygit is President of The Lending Edge and holds mortgage industry designations CMPS, CMLO, CALO and has an MBA. He’s spoken for HUD, has written numerous articles and is a mortgage industry advocate for loan originator licensing and consumer education. He can be reached at 248-356-3739 or dsygit@TheLendingEdge.com.
Drew Sygit is President of The Lending Edge and holds mortgage industry designations CMPS, CMLO, CALO and has an MBA. He’s spoken for HUD, has written numerous articles and is a mortgage industry advocate for loan originator licensing and consumer education. He can be reached at 248-356-3739 or dsygit@TheLendingEdge.com.
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