Would you buy a used loan from these guys?

Rachel Beck, the national business columnist for The Associated Press, writes about PennyMac, a business previously mentioned on this blog, and its proposed public offering.

"Countrywide Financial placed itself at the epicenter of the housing crisis by making far too many risky loans to homeowners who ultimately couldn't afford them. Those missteps cost CEO Angelo Mozilo his job when the lender was taken over by Bank of America a year ago at a fire sale price."

"Mozilo is now spending most of his time dealing with the dozens of lawsuits naming him as a defendant, but his one-time No. 2 executive and a team of Countrywide alumni are still in the game — shopping around a new business called PennyMac that buys up distressed mortgages and modifies borrowers' loans."

"So, the same people who helped create the housing mess are now trying to make money cleaning it up. As off-putting as that sounds, there's a certain logic to it."

Beck details the history of PennyMac's founder and just how the business is structured to maximize profits. Will investors bite? "PennyMac's leadership could help fix the economy, or stuff they own pockets. Let's hope capitalism doesn't rule."

Of course, the full story is yet to be written. But you can read Rachel Beck's coverage here.

(We are proud to add that Rachel Beck is the daughter of one our firm's clients.)

Vested Title Inc.
648 Newark Avenue, P.O. Box 6453, Jersey City, NJ 07306
Tel 201-656-9220 - Fax 201-656-4506
E-mail vti@vested.com - www.vested.com

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College grads and their loans

While not real estate oriented, many of our readers have college-age students or have just graduated college. The AP is reporting on college grads and their loans.

“Graduating into a barren job market is stressful enough. When massive student loans await, the rite of passage can be downright terrifying.”

The AP provides some tips for college new grads confronting their loans.

Step 1: Know what you owe. “Although the interest rate on federal loans tends to be favorable, it kicks into gear as soon as the loan is taken out. That means you've got four years of interest on top of your loans by the time you graduate.”

Step 2: Pick a plan, but not just any plan. Picking a short term repayment plan is smartest. “If you can't keep up with the payment schedule you picked, you can always switch plans. You're allowed at least one change a year with federal loans.”

Step 3: Consider postponing payment. Payment can be deferred on federal loans under “select circumstances.” On private loans, deferment terms are set by the lender.

Step 4: See if you should consolidate. “A consolidation loan lets you combine loans to make a single monthly payment. You also get a fixed interest rate for the life of the new loan.” The drawback—“consolidation usually extends repayment, meaning the overall cost of the loan will be higher.”

Step 5: Avoid default. Defaults do turn up on your credit report and they could impact other credit applications. “The good news is that defaults on student loans can be rehabilitated and erased from your credit report. With federal loans, that requires nine full payments during a span of 10 months. Private lenders might not offer rehabilitation programs.”

For the full article, read The Asbury Park Press, Know Your Loan Options. We hope you find it helpful.

Vested Title Inc.
648 Newark Avenue, P.O. Box 6453, Jersey City, NJ 07306
Tel 201-656-9220 - Fax 201-656-4506
E-mail vti@vested.com - www.vested.com

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Defaults after mortgage modification worse than expected?

The Wall Street Journal addresses mortgage modifications and earlier predictions about high redefault rates. In fact, according to WSJ, "some redefault rates may reach 75%."

A central tenet of Washington economic policy for the past three years has been that the key to ending the recession is stopping mortgage foreclosures, whatever the cost. Well, another new study shows that mortgage-servicing companies are having a terrible time of it, not least because the mortgages are continuing to sour at a rate nearly as fast as they can be modified.

Yesterday's Journal reports that Fitch Ratings looked at mortgages bundled into securities between 2005 and 2007 and managed by some 30 mortgage companies. Fitch found that a conservative projection was that between 65% and 75% of modified subprime loans will fall delinquent by 60 days or more within 12 months of having been modified to keep the borrowers in their homes. This is an even worse result than previous reports by federal regulators. Even loans whose principal was reduced by as much as 20% were still redefaulting in a range of 30% to 40% after 12 months.

The reasons for the high redefault rate aren't surprising. Many of the borrowers never could afford these homes in the first place, yet the political pressure has been strong to modify loans even for these borrowers. As home prices continue to fall in some markets, borrowers remain underwater and many of them simply walk away from the home and thus redefault.

This study has to come as a blow to the Federal Deposit Insurance Corporation, which has invested a great deal of political capital in the modification thesis. It also means that to the extent that public money has guaranteed any of these loan modifications, the taxpayer will be an even bigger loser. Banks don't like to foreclose on borrowers, so the best public policy was always voluntary renegotiation. As for the housing market, the quickest way to begin a recovery is to more quickly let prices find a bottom. On the evidence so far, the mortgage modification fervor has been a giant political exercise with little impact on housing prices.

Vested Title Inc.
648 Newark Avenue, P.O. Box 6453, Jersey City, NJ 07306
Tel 201-656-9220 - Fax 201-656-4506
E-mail vti@vested.com - www.vested.com

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Attorney Advertising

The courts in New Jersey have been debating for some time now the role that advertising plays in the practice of law. What an attorney can say in an ad, where it can, and can you be called a "superlawyer" are questions for the courts to decide.

In the meantime, Esquire Magazine has looked at "Five Lawyer Ads That Make Any Supreme Court Candidate Look Brilliant." The ads are taken from YouTube and are worth a look, even if your only purpose is to get a chuckle.

Vested Title Inc.
648 Newark Avenue, P.O. Box 6453, Jersey City, NJ 07306
Tel 201-656-9220 - Fax 201-656-4506
E-mail vti@vested.com - www.vested.com

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The Big Surprise- Coping with business bankruptcy

Bankrate.com discusses the impact of business bankruptcy on the average Joe.

"How's this for a nightmare scenario? You go to pick up your dry cleaning on the morning of a job interview only to find the lights out and the doors locked. A small sign on the door reads: "Closed for good."

"Recent high-profile bankruptcies by Circuit City and Linens 'n Things have woken Americans up to an unpleasant reality: Businesses go out of business, and they often create big problems for their customers in the process."

There's no easy answer as to what to do "if a business shuts down when it has your stuff or owes you money, goods or services."

If you have property that's in the possession of a closed-down business -- clothing at a dry cleaner or a car at an auto shop -- the first thing to do is try to contact the usiness and retrieve your property.

Extended warranties, gift cards and certificates, and advance payments are another frequent casualty of busted businesses.

Read the full article, Coping with a business bankruptcy, by Claes Bell at Bankrate.com

Vested Title Inc.
648 Newark Avenue, P.O. Box 6453, Jersey City, NJ 07306
Tel 201-656-9220 - Fax 201-656-4506
E-mail vti@vested.com - www.vested.com

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The New York Times takes on MERS

In an attack piece on MERS, short for Mortgage Electronic Registration Systems, The New York Times talks of "the murky realm of MERS," and how a "legal maneuver that has saved banks more than $1 billion over the last decade but made life maddeningly difficult for some troubled homeowners."

Looking for a scapegoat for America's real estate ills, MERS is a good candidate.

"Created by lenders seeking to save millions of dollars on paperwork and public recording fees every time a loan changes hands, MERS is a confidential computer registry for trading mortgage loans."

Of course it's "confidential," who wants outsiders looking at their mortgage documents?

"But with the collapse of the housing market, the name of MERS has been popping up on foreclosure notices and on court dockets across the country, raising many questions about the way this controversial but legal process obscures the tortuous paths of mortgage ownership."

And shades of Abu Ghraib, "controversial" and "tortuous?"

Here's where the Times reporting gets silly:

"In Brooklyn, an elderly homeowner pursuing fraud claims had to go to court to learn the identity of the bank holding his mortgage note, which was concealed in the MERS system."

Is the American homeowner that ignorant that he does not know to whom his payments are being made? And what difference does it make to the homeowner if his loan is part of a pool put together by Goldman Sachs or any other company? The servicer is the servicer; that's where decisions are made.

Read the full article, Tracking Loans Through a Firm That Holds Millions

Vested Title Inc.
648 Newark Avenue, P.O. Box 6453, Jersey City, NJ 07306
Tel 201-656-9220 - Fax 201-656-4506
E-mail vti@vested.com - www.vested.com

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Piggy Back Seconds Blocking Modifications?

At our catbird seat in Northern New Jersey we have heard of many homeowners who have been frustrated in their refinance attempts by low appraisal values and other wrinkles, such as lender's instructing borrowers to go into default before applying for a modification.

The Obama Administration's attempts at freeing up refinance money just do not seem to be working. For instance, a New Jersey homeowner buys near the top of the market, has been making on-time payments, and is looking for a lower rate. Along comes the government's HARP program and a loan limit of 105% of appraisal value. If you bought a house for $300,000, put down $30,000, and your property is now worth $225,000, the arithmetic is simple--under HARP you qualify for a loan of $236,250.00. That's a far cry from the $270,000 =/- you are trying to refi.

What if you have a piggy back second mortgage from your closing? Kenneth R. Harney's Washington Report: Second Liens and Piggyback Loans discusses the issue.

Second liens and “piggyback” loans have been big impediments to successful
mortgage modifications for thousands of financially-stressed home owners. Now
the Obama administration has a new program to deal with the problem.

Under a plan outlined last week, the Treasury department will soon begin offering cash incentives and subsidies to lenders who lower troubled home owners' monthly payments on second mortgages and credit lines, or simply write them off their books.

How will this work?

• Treasury will enter into agreements with second lien holders to reduce interest rates to just one percent on fully-amortizing seconds and to two percent for interest-only seconds, for the next five years.
• Treasury will pay cooperating lenders $500 for each second lien they modify, plus $250 a year for each year the home owners stay current on payments. Alternatively, lenders may be offered a lump-sum cash payment from the government to cancel the second-lien debt altogether.
• Whenever first mortgage holders cut a borrower's principal balances by a percentage of the loan amount, second lien holders will be required to reduce balances owed by a similar percentage.

Will it work in markets such as New Jersey? Only time will tell. Read the full article here.

For your next title order, think:

Vested Title Inc.
648 Newark Avenue, P.O. Box 6453, Jersey City, NJ 07306
Tel 201-656-9220 - Fax 201-656-4506
E-mail vti@vested.com - www.vested.com

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Second-Home Blues in a time of Recession

Where's the help for second-home owners during these times? Is the government abandoning those who bought vacation properties during the 1990s? These are the questions raised and discussed in "Help for second-home owners" written by Marilyn Kennedy Meila at Bankrate.com.

When we overindulged in real estate earlier this decade, we took generous helpings of seconds.

Now the problem for many with too much debt on their plate is how to deal with the mortgage on a second home.

When buyers purchase a home that's not their primary residence and ask lenders to qualify them based on expected rental receipts, it's counted as an investment property. If, though, borrowers plan to pay the mortgage out of their own pocket and use the property for their own enjoyment, it's a vacation home.

That's an important distinction because there's "some dispute about whether or not the recently announced government effort allows owners of bona fide vacation homes and some types of rental units to seek a refinance."

Meila discusses what she sees as the four options when dealing with a second home. They are:

• Refinancing
• Selling short
• Working out a modification
• Declaring bankruptcy

To read the complete article, go here.

Vested Title Inc.
648 Newark Avenue, P.O. Box 6453, Jersey City, NJ 07306
Tel 201-656-9220 - Fax 201-656-4506
E-mail vti@vested.com - www.vested.com

Entering our 29th year of service!

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