FHA program falls short on "short refis"

FHA program falls short on "short refis"

We have written in the past about the Federal government's attempts to help homeowners who find that their home is worth less than the amount of mortgage liens.

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For your next commercial real estate transaction, house purchase, mortgage refinance, reverse mortgage, or home equity loan, contact us. We can help. Located in Fairfield, NJ, we are the title insurance agent that does it all for you.

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Per The New York Times, there is "scant interest" in one of these programs- the F.H.A. Short Refi Program.

The Federal Housing Administration’s Refinance of Borrowers in Negative Equity Positions program, more commonly known as the F.H.A. Short Refi, enables borrowers who owe more than their homes are worth to refinance into an F.H.A. loan with a lower monthly payment.

Unfortunately, the Times reports that only a

only about 4,600 F.H.A. loans have been originated under the program, a far cry from the 500,000 to 1.5 million borrowers the Department of Housing and Urban Development estimated could be helped when it announced the program in 2010.

Why did this program fail?  For two reasons- first, the program is optional, and, second, the nations largest sources of mortgage money, Fannie Mae and Freddie Mac, refuse to participate in the program.

You see, in order for this program to work, the lender must waive thousands of dollars in loan principal.  And who wants to do that.  Some have suggested that TARP money be used to buy down the loan balances but that will require regulatory changes for that to happen.

In the meantime, homeowners are still behind the 8 ball.

To read more, see the full column here.

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Stephen M. Flatow, Esq.

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What is a short sale?

A short sale occurs when a property is worth less than the amount of the mortgage debts.  But there’s a price to be paid.  As this story from NYT.com points out:

“Borrowers who owe more than their homes are worth can sometimes get out from under by negotiating a short sale with their lender. But short-sellers are branded as higher-risk borrowers, so new loans won’t come quickly or easily.”

“Fannie Mae requires a waiting period of at least four years for short-sellers who can only put down 10 percent on their next home. The waiting period is shortened to two years for borrowers who can come up with 20 percent.”

“Fannie does allow the four-year period to be cut in half for borrowers who can document that their loan default was a result of “extenuating circumstances.” The agency defines these circumstances as one-time events that were beyond a borrower’s control, such as job loss, medical bills, or a financial hit from divorce. Borrowers must also be able to show that they had no reasonable option other than to default.”

We are always on our toes when presented with a short sale.  Is the sale an arm’s length transaction?  Has all financial information about the sale been properly presented to the lender?  Have the final closing numbers been approved by the short lender?

We have the expertise to get you through a short sale.  Call us.

The full article can be read here.

For your next commercial real estate transaction, house purchase, mortgage refinance, reverse mortgage, or home equity loan, contact us. We can help. Located in Fairfield, NJ, we are the title insurance agent that does it all for you.

For your next title order or

if you have questions about what you see here, contact

Stephen M. Flatow, Esq.

Vested Land Services LLC

165 Passaic Avenue, Suite 101

Fairfield, NJ 07004

Tel 973-808-6130 - Fax 973-227-0645

E-mail sflatow AT vested.com

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Mortgage loan requirements getting tighter

From Realty Times,

The number of homes purchased with a home loan has been dropping steadily since May, according to RealtyTrac. Instead, cash is king for many reasons. As mortgage rates began creeping up, some homebuyers started opting to purchase with all cash. And that trend may continue as new loan requirements become more strict. [Emphasis added.]

However, new guidelines are going into effect when the QM, Qualified Mortgage, rules are activated. For instance,

One of the guidelines’ requirements is that borrowers must have a maximum debt-to-income ratio of 43 percent. Debt-to-income ratios have already been in place but the new rules won't allow for any compensating circumstances. That means that not even a significant downpayment or a large cash reserve will be allowed to offset a higher debt ratio.

The incentive to follow these guidelines is huge for the lender. If the mortgages don't meet the QM guidelines, the lender will be required to hold the loan as opposed to selling it to Fannie Mae and Freddie Mac.

 If you want to learn more, read New Loan Requirements For Getting A Mortgage

For your next commercial real estate transaction, house purchase, mortgage refinance, reverse mortgage, or home equity loan, contact us. We can help. Located in Fairfield, NJ, we are the title insurance agent that does it all for you.

For your next title order or

if you have questions about what you see here, contact

Stephen M. Flatow, Esq.

Vested Land Services LLC

165 Passaic Avenue, Suite 101

Fairfield, NJ 07004

Tel 973-808-6130 - Fax 973-227-0645

E-mail sflatow AT vested.com

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Paying for Foreclosure Delays

As the New York Times reports, everything comes with a price.  That includes new mortgage loans.  The price is higher fees because of the high foreclosure rate. 

The Federal Housing Finance Agency announced last month that, because the stress in housing markets has eased, it was eliminating the across-the-board adverse-market fee instituted in 2008 to help cover the costs of high rates of delinquencies. The fee, applicable to all mortgages bought by Fannie Mae or Freddie Mac, is 25 basis points, or 0.25 percent of the mortgage loan amount.

Yet, fee remains in effect in New Jersey and New York.

At the end of the day, the fee is supposed to soften the cost of foreclosures (to lenders) by creating more revenue when the loan is booked.  The report, linked below doesn't really offer any solutions to the problem.

The New York Times report is found at Paying for Foreclosure Delays - NYTimes.com and the The Federal Housing Finance Agency is here.

For your next commercial real estate transaction, house purchase, mortgage refinance, reverse mortgage, or home equity loan, contact us. We can help. Located in Fairfield, NJ, we are the title insurance agent that does it all for you.

For your next title order or

if you have questions about what you see here, contact

Stephen M. Flatow, Esq.

Vested Land Services LLC

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Fairfield, NJ 07004

Tel 973-808-6130 - Fax 973-227-0645

E-mail sflatow AT vested.com

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JPMorgan paying $5.1 billion to Fannie, Freddie over mortgages - Oct. 25, 2013

OK, I'm not too sure I understand, but it goes like this-
bank buys failing lender to protect country against fallout from the 2008 implosion, lender had made bad loans, purchaser is responsible for said loans going bad, really bad.

That is the scenario as I understand it and JPMorgan Chase* is paying the price to Fannie Mae and Freddie Mac which bought those loans.  True, the loans were badly written but what was JPMorgan Chase to do?

Will someone please explain this to me as if I was a six-year old?  Read the full report from CNN.

JPMorgan paying $5.1 billion

For your next commercial real estate transaction, house purchase, mortgage refinance, reverse mortgage, or home equity loan, contact us. We can help. Located in Fairfield, NJ, we are the title insurance agent that does it all for you.

For your next title order or

if you have questions about what you see here, contact

Stephen M. Flatow, Esq.

Vested Land Services LLC

165 Passaic Avenue, Suite 101

Fairfield, NJ 07004

Tel 973-808-6130 - Fax 973-227-0645

E-mail sflatow AT vested.com

 

 

*Disclosure - I hold a small investment in JPMorgan Chase (but I'd be taking the same position if the article was about Bank of America.

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Fannie Mae and Freddie Mac, about to close down shop?

CNBC covers the Fannie Mae/Freddie Mac story.

On a Monday morning five years ago this week, thousands of employees at mortgage giants Fannie Mae and Freddie Mac went to work to find a new boss: The federal government.

Crushed under the weight of thousands of defaulted mortgages and bleeding cash, Fannie Mae and Freddie Mac were put into government conservatorship.

Now, a short five years later, the two are making billions of dollars in profit—profit that goes straight to the U.S. Treasury. Against this backdrop, lawmakers are setting the stage for an epic debate on the future of U.S. housing finance, a future that will likely mean the end of Fannie Mae and Freddie Mac.

That's why the debate over government involvement in the mortgage market is so fierce. Lawmakers are eager to protect taxpayers, but they also need to keep home finance afloat. How do you "wind down" two entities that now back two thirds of the U.S. mortgage market? And how do members of Congress reconcile that goal with the fact that the two are now huge cash cows?

What is the role of government in the mortgage industry?  Post-bailout, should the government take its profits and move on? If the government closes Fannie and Freddie down, who will buy mortgages on the secondary market?

Too many questions?  Read and watch the full CNBC report.

For your next commercial real estate transaction, house purchase, mortgage refinance, reverse mortgage, or home equity loan, contact us. We can help. Located in Fairfield, NJ, we are the title insurance agent that does it all for you.

For your next title order or

if you have questions about what you see here, contact

Stephen M. Flatow, Esq.

Vested Land Services LLC

165 Passaic Avenue, Suite 101

Fairfield, NJ 07004

Tel 973-808-6130 - Fax 973-227-0645

E-mail sflatow AT vested.com

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Life Without Fannie Mae and Freddie Mac from the New York Times

Where would prospective homeowners and borrowers be without Fannie Mae or Freddie Mac?  That question may become a reality if some have their way and abolish both agencies.

Talk of doing away with Fannie Mae and Freddie Mac is still just that — talk. But as Congress considers whether and how to get rid of these agencies, consumers ought to be aware of how a substantial reduction in the government’s role in housing finance could affect their ability to borrow in the future.

“What’s at stake here is access to mortgages at an affordable price,” said Julia Gordon, the director of housing finance and policy at the Center for American Progress in Washington.

A rise in rates would clearly be on the horizon.

Of course, the Times cannot avoid blaming Fannie and Freddie for the mortgage melt-down of a few years ago.  What the Times studiously avoids saying in its reporting is that Fannie and Freddie opened the money flood gates at the insistence of the Clinton White House and HUD secretary Cuomo.

Read the full article.

For your next commercial real estate transaction, house purchase, mortgage refinance, reverse mortgage, or home equity loan, contact us. We can help. Located in Fairfield, NJ, we are the title insurance agent that does it all for you.

For your next title order or

if you have questions about what you see here, contact

Stephen M. Flatow, Esq.

Vested Land Services LLC

165 Passaic Avenue, Suite 101

Fairfield, NJ 07004

Tel 973-808-6130 - Fax 973-227-0645

E-mail sflatow AT vested.com

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Adjustable rate mortgages in the news

Adjustable rate mortgages, ARMs for short, are back in the news at the New  York Times.  The Times loves to tout ARMs as risky, but it’s never quite clear who is bearing the risk—the borrower or the investor.

Because adjustable-rate loans carry more risk, rates on them are lower than those on fixed-rate loans. After an initial period of fixed interest, rates may rise — though such loans also come with a lifetime cap that limits ups and downs.

The “risk” to the borrower is, of course, that rates may rise.  But the pain of that risk is the built-in caps on increase in most ARM loans.  For instance, the commonly used 1 year Fannie Mae note provides for a cap on each adjustment AND a maximum interest rate over the life of the loan.  These provisions are designed to avoid the so-called “interest rate shock” that elected politicians love to speak about.

In any event, is an ARM good for you?  Speak to a qualified mortgage loan officer to find out.  And, importantly, compare the numbers.

Here’s the full article:

The New York Times

August 29, 2013

Risks Aside, ARMs Gain Ground

By Marcelle Sussman Fischler

With mortgage rates inching up and homeowners often refinancing before the end of their loan terms, adjustable-rate mortgages are becoming more enticing to more borrowers.

In July, for example, 6.5 percent of mortgage applications nationwide were for adjustable-rate loans, while a year ago, the percentage was 4.2, according to the Mortgage Bankers Association, which expects demand to continue. “We expect ARMs to increase,” said Matthew J. Robinson, a spokesman.

Because adjustable-rate loans carry more risk, rates on them are lower than those on fixed-rate loans. After an initial period of fixed interest, rates may rise — though such loans also come with a lifetime cap that limits ups and downs.

For some borrowers, the initial savings may be worth the risk. By taking an adjustable-rate mortgage with a 5/1 term (with the rate fixed for the first five years) at 3.21 percent rather than a fixed 30-year jumbo mortgage at 4.69 percent, someone borrowing $750,000 could save $637.68 a month off the $3,885.28 payment, enough to “lease a nice car or more,” Keith Gumbinger, the vice president of the financial publisher HSH.com, said in an e-mail.

After 60 months, the borrower would have paid $54,565.92 less in interest, or $114,181.61 rather than $168,747.53. Kept in a piggy bank, it would be “enough to put your kid through at least one year of a good college,” Mr. Gumbinger added.

The potential hitch is that borrower may need to refinance or sell the home before the fixed portion of the loan ends — or possibly “be exposed to significantly higher interest rates and monthly payments,” Mr. Gumbinger said, “which could wipe out the savings pretty quickly, not to mention causing you budgetary duress.”

According to Freddie Mac’s Primary Mortgage Market Survey, for the week ended Aug. 29, a 30-year fixed-rate mortgage averaged 4.51 percent, while a five-year Treasury-indexed hybrid adjustable-rate mortgage averaged 3.24 percent.

John Aita, a retail sales supervisor for Wells Fargo Home Mortgage in Melville, N.Y., says fewer borrowers these days seem likely to get stuck with a higher rate when the fixed portion of the ARM expires. “People never keep the loans that long anymore,” he said, citing six years as the average. “Either they refinance or they move.”

For first-time buyers who plan to move up to larger quarters as their families grow, or for young professionals whose income will rise in a few years, adjustable-rate mortgages are “a fantastic deal,” Mr. Aita said.

“If you are planning to use the house as a steppingstone and not going to stay 30 years,” he said, “take the adjustable.”

Those planning to downsize after their children go off to college can also benefit.

Six months ago, Beth Zucker, a single mother from Bucks County, Pa., whose twins are 13, refinanced from a 7/1 ARM to a 10/1 interest-only ARM at 3 percent.

She’s not worried about where interest rates will be when the rate adjusts in a decade. “When my twins go off to college,” said Ms. Zucker, who is a financial adviser, “I’m going to sell the house and downsize.”

The most common adjustable-rate mortgages are designated 3/1, 5/1, and 7/1, according to freddiemac.com.

A 3/1 ARM has a fixed interest rate for the first three years. After that, the rate can change annually. A similar rule applies for a 5/1 and 7/1 ARM. If the rates increase, monthly payments increase. And if rates dip, payments may not decrease, depending upon the initial interest rate. Typically, an adjustment “cap” limits how much the interest rate can jump or fall at each adjustment period.

For your next commercial real estate transaction, house purchase, mortgage refinance, reverse mortgage, or home equity loan, contact us. We can help. Located in Fairfield, NJ, we are the title insurance agent that does it all for you.

For your next title order or

if you have questions about what you see here, contact

Stephen M. Flatow, Esq.

Vested Land Services LLC

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Fairfield, NJ 07004

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Mortgage loan modifications made easy? Federal agency says "yes."

For your next commercial real estate transaction, house purchase, mortgage refinance, reverse mortgage, or home equity loan, contact us. We can help. Located in Fairfield, NJ, we are the title insurance agent that does it all for you.

We've commented in the past about loan modifications for the sake of loan modifications.  In other words, if a borrower is struggling to pay you at 6%, wouldn't it make sense to bring the loan down to a more manageable interest rate in line with the rest of the country?  It looks like the Federal government agrees.

Homeowners who have fallen behind on their mortgage payments should check their mail carefully in coming weeks. Lenders will be offering loan modifications without even being asked.

Under a new Streamlined Modification Initiative announced by the Federal Housing Finance Agency, mortgage servicers must now offer borrowers who are 3 to 24 months delinquent a plan to help avoid foreclosure.

So what's the catch?

Borrowers must make three monthly payments on time before the modification becomes permanent. The program applies to loans owned or guaranteed by Fannie Mae or Freddie Mac. The start date was to be July 1, but an agency spokesman said Fannie and Freddie had already begun the program. It expires Dec. 31, 2015.

Read the full story from the New York Times.

For your next title order or

if you have questions about what you see here, contact

Stephen M. Flatow, Esq.

Vested Land Services LLC

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Getting a mortgage will be a bit harder

Realty Times reports: "Fannie Mae Tightens Underwriting Rules for Condo, Refinance Loans, Borderline Borrowers" by Shashank Shekhar.

Fannie Mae is putting the squeeze on underwriting guidelines this fall, making it tougher for some condo, borderline and refinancing borrowers to land a home loan.

Effective Oct. 20, 2012, the stricter rules are designed to reduce Fannie Mae's ever growing exposure to risk. They will also force more borrowers to shop around.

Here are some highlights:

Condominium Loan Documentation – Right now with less than 10 percent down, condo buyers need to complete a two-page condo questionnaire about the homeowner association's financials and provide additional documents including a reserve study, by-laws and a copy of the master insurance policy.

The documents are readily available from the homeowners association, but with Fannie Mae lenders pouring over more documents, there's a greater chance more loans could be denied for failing to meet Fannie Mae's condo loan underwriting criteria.

End of Discretionary Approvals – Discretionary approvals, also called "Expanded Approvals (EAs)" will end for all Fannie Mae refinances, except Fannie Mae's Refi Plus Program loans, also called HARP (Home Affordable Refinance Program) loans.

Self-Employed Borrowers – Fannie Mae will require self-employed borrowers seek a loan to provide two consecutive years of federal tax returns, instead of the current one year tax return requirement for some returns.

Because of the new two-year average approach, one bad year out of two could sink a self-employed homeowner's application even if the most recent year would have qualified him or her under the old rules.

Maximum LTV Reduction for Adjustable Rate Mortgages (ARM) – The current LTV allowed for ARM home purchases and refinances, 97 percent, will be reduced to 90 percent.

You can read the full article here.

For your next title order or

if you have questions about what you see here, contact

Stephen M. Flatow, Esq.

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Tel 973-808-6130 - Fax 973-227-0645

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Little known fee to raise interest rates

Loan fees are about to rise, and you won't even know it.  The fee in question is a guarantee fee collected by Fannie Mae and Freddie Mac that is part of the interest rate you pay.  It's not set forth on the settlement statement because it does not have to be disclosed.

According to the New York Times,

INSIDE the interest rate quoted on your home lies a small hidden fee that has been charged by government-sponsored entities like Fannie Mae and Freddie Mac for more than three decades. It’s an add-on rate known as the guarantee fee.

Everyone has to make a living, including Fannie Mae and Freddie Mac, don't you think?  But just think of the fees collected over the years that seem to have been squandered in the so-called "sub-prime crisis."  In any event, it means a small rise in interest rates is coming in the days ahead.

Read the full story here.

For your next title order or

if you have questions about what you see here, contact

Stephen M. Flatow, Esq.

Vested Title Inc.

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Fairfield, NJ 07004

Tel 973-808-6130 - Fax 201-656-4506

E-mail vti@vested.com - www.vested.com

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Foreclosed? How long before the new mortgage?

The New York Times writes about “The Post-Foreclosure Wait.” The good news is that, “mortgage troubles won’t necessarily shut you out of the housing market forever.”

As the economy and real estate market continue to struggle, millions of Americans have lost their homes through foreclosure, short sale (when a property is sold for less than is owed) or a deed in lieu of foreclosure (when the bank takes ownership without foreclosure).

Even if you think you never want to own a home again, clean credit is important. Bad credit can make it more expensive to rent. In some fields, especially financial services, it can make it difficult to find or keep a job.

What affects recovery speed?

In a short sale where the balance is forgiven and no deficiency is recorded in public records, recovery can be quick.

A foreclosure or bankruptcy can weigh you down for years.

As long as 7 years.

But if someone has gone through foreclosure and still has a mountain of debt and not enough income, bankruptcy is worth considering, said Tracy Becker, the founder of North Shore Advisory, a credit-restoration company based in Tarrytown, N.Y. Sure, it will be another hard blow to your credit rating — but your credit most likely is already “wrecked,” at least for now, she said.

OK, so you have pushed the plunger,

And what about a future mortgage? Fannie Mae, Freddie Mac and the Federal Housing Administration set guidelines for how long a borrower must wait after a “significant derogatory event.”

There are plenty of asterisks and conditions. But to generalize, the wait is longest after a foreclosure. Extenuating circumstances like a job loss, illness or divorce reduce the wait.

With such circumstances, Fannie and Freddie specify a two-year wait after a short sale, deed in lieu, or discharge or dismissal of bankruptcy, and three years after foreclosure. Without extenuating circumstances, waits can extend to four years after bankruptcy and seven years after foreclosure.

Read the full report.

For your next title order or

if you have questions about what you see here, contact

Stephen M. Flatow, Esq.

Vested Title Inc.

165 Passaic Avenue, Suite 101

Fairfield, NJ 07004

Tel 973-808-6130 - Fax 201-656-4506

E-mail vti@vested.com - www.vested.com

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Looking to refi? Avoid these 5 blunders

From Bankrate.com’s Michele Lerner, “5 refi blunders to avoid”

“When interest rates are low, plenty of homeowners rush to refinance before evaluating the true consequences of their actions. A mortgage refinance can benefit some homeowners, particularly if they intend to stay in their home for the long term or if they can significantly reduce their interest rate. Sometimes, though, a mortgage refinance can be the wrong move.”

1. Not comparing the real rate.

Compare the true cost of the new loan with the APR of your current loan. If you are saving less than one-half point, don’t waste your time or money. Remember that Fannie Mae and Freddie Mac have added fees to loans where there’s little equity in the property.

“Borrowers who have little or no equity may qualify for a refinance under the government's Home Affordable Refinance Program, or HARP, available to those with a current mortgage owned or guaranteed by Fannie Mae or Freddie Mac.”

2. Choosing the wrong loan

What’s the purpose of the refinance? Afraid about losing your job, then lower your overall payment. If you want to be debt-free by a certain year, pick a loan that meets that objective.

Remember, closing costs can increase your payback.

3. Not shopping around

“While many borrowers compare loan offers from more than one lender, they can also shop for title services and save hundreds or sometimes thousands of dollars on their loan.”

Check at least three lenders. Start with the servicer that has your loan now.

4. Refinancing when you shouldn't

If you don’t plan on staying in your home for several years, refinancing may be a waste of money. Know your break even point where the savings outweigh the costs of refinancing.

5. Not keeping up with borrower responsibilities

Keep up your credit score throughout the refi process. A lender can pull your credit report right before closing. So avoid adding new debt.

Read the full article.

For your next title transaction, contact

Stephen M. Flatow, Vice President and Counsel

Vested Title Inc.

165 Passaic Avenue, Suite 101

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VTI at Vested.com

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F.H.A. promises underwater homeowners some oxygen

The New York Times reports on underwater properties. As we’ve previously written, these underwater properties are not burdened by spring storms but by depressed property values. In other words, the property is now worth less than the homeower’s mortgage.

“STRUGGLING homeowners who owe more on their mortgages than their properties are worth have had few options to restructure their loans, but that may soon be changing for a few of them.

“Six months after the Federal Housing Administration announced an $11 billion refinancing initiative for these “underwater” borrowers, nearly two dozen lenders have agreed to take part in a new loan modification program.“

Unfortunately, Fannie Mae and Freddie Mac will not participate.

“The F.H.A. program — called Short Refi — requires major concessions from lenders, which must agree to write off at least 10 percent of the principal balance, and from investors, who, if they own the mortgage, must also agree to the deal.“

How does a homeowner qualify?

To qualify, homeowners must be current on their monthly mortgage payments and not already have an F.H.A. loan.

Loan to value cannot exceed “97.75 percent of the current value of the property; refinanced loans for homeowners whose properties carry second liens cannot exceed 15 percent of the property value.”

Wells Fargo and Ally Financial, formerly known as G.M.A.C., have created test programs for the new F.H.A. program. Bank of America, Citibank and JPMorgan Chase are not participating in the program because Fannie Mae and Freddie Mac are not.

“HUD estimated that 500,000 to 1.5 million borrowers could be eligible for the program.“

But the program may be short-lived as the House has voted to repeal the program. But good news may be out there.

“One mortgage expert, John DiIorio, the owner of 1st Alliance Lending, said that big banks were taking part behind the scenes, by referring homeowners to third-party lenders that could restructure their mortgages. He added that 1st Alliance had “several hundred F.H.A. Short Refi” loans in the pipeline.“

“But he said lenders and investors had agreed to reduce principal for only half of the loans he had worked on.”

Underwater loans have been the bane of homeowners throughout New Jersey. Maybe this program will give them some relief.

Read the full article More Loan-Modification Options for the ‘Underwater’.

For your next title order or

if you have questions about what you see here, contact

Stephen M. Flatow, Esq.

Vested Title Inc.

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Fairfield, NJ 07004

Tel 973-808-6130 - Fax 201-656-4506

E-mail vti@vested.com - www.vested.com

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The next generation: Imagining Life without Fannie and Freddie

From the New York Times’ Gretchen Morgenson.

KUDOS to Treasury and the Department of Housing and Urban Development for some straight talk about the nation’s broken mortgage system.

A report to Congress from those departments, published on Friday, provided some long-awaited analysis by the Obama administration about what went wrong in housing finance — and how to fix it.

 The report, entitled “Reforming America’s Housing Finance Market,” zeros in on the perverse incentives created by the nation’s mortgage complex during the years leading up to the panic of 2008. The Treasury’s recommendation that we wind down Fannie Mae and Freddie Mac and let the private mortgage market step in is spot on.

So what’s next?

Still, it is not clear that such moves, sensible though they are, will be enough to prevent taxpayers from having to bail out institutions that back mortgages in the future. That is because the debate over how to put the Treasury’s ideas into effect will soon become a brawl. Powerful participants are already working overtime to keep taxpayers on the hook.

The opponents to reform: the Mortgage Bankers Association, the Financial Services Roundtable and the Center for American Progress. They are urging the creation of a new federally-related entity.

Taxpayers surely do not want to create new government-sponsored enterprises that may later fail. So why not work toward a system where the government is solely the home lender of last resort? That way, the private market could operate in good times; the government would step in only if the market froze up.

Friday’s report seems to be leading in this direction. But it supplies no road map to a government system that provides a catastrophic insurance program only for those times when the private market is not working.

There is much to hash out if we are to build an effective housing finance system in America. Being truthful about what went wrong in the past, the report paves the way for a meaningful discussion. But we must also be sure that the solutions do not bring us back to where we began. That is where the real fight will be fought.

Read the full article.   What do you think?

For your next title order or

if you have questions about what you see here, contact

Stephen M. Flatow, Esq.

Vested Title Inc.

165 Passaic Avenue, Suite 101

Fairfield, NJ 07004

Tel 973-808-6130 - Fax 201-656-4506

E-mail vti@vested.com - www.vested.com

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Guidelines for condos could slow market

While it may seem simple to buy a condominium unit, government guidelines are actually making it harder to get mortgage financing reports the New York Times.

Stricter guidelines that govern which buildings are approved for conventional mortgages — rolled out by three government agencies in stages since December 2008 — are locking out thousands of buildings nationwide. States like Florida and Arizona are especially hard hit; mortgage brokers say that some buildings in the New York area have also been affected.

The guidelines and approvals come from Fannie Mae, the buyer of home mortgages; Freddie Mac, its smaller competitor; and the Federal Housing Administration, which insures loans. The rules were meant to help strengthen their balance sheets as they faced a surge of loan defaults in the condo market.

Condominium associations are being called upon more frequently to open their books to Fannie Mae, Freddie Mac and the FHA.

For instance:

Condo associations are required to set aside 10 percent of their budgets for maintenance and “reserves”; and new developments are ineligible for Fannie-backed financing unless 70 percent of their units have sold or are under contract (the threshold used to be 51 percent). Freddie Mac adopted similar guidelines last year.

Waivers are available but none are sure things. Fannie Mae does have a website that lists approvals as does FHA.

Read the full report, Stricter Lending Guidelines for Condos

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Stephen M. Flatow, Esq.

Vested Title Inc.

165 Passaic Avenue, Suite 101

Fairfield, NJ 07004

Tel 973-808-6130 - Fax 201-656-4506

E-mail vti@vested.com - www.vested.com

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Foreclosure mess ignores one thing-the borrowers

From the New York Times’ Gretchen Morgenson’s column,

“LAWYERS representing delinquent homeowners have been shouting for years about documentation problems in residential mortgages. Now that their complaints have gained traction with investors, attorneys general and some state court officials, the question of consequences looms large.

“Is the banks’ sloppy paperwork a matter of simple technicalities that are relatively easy to cure, as the banks contend? Or are there more far-reaching consequences for banks and the institutions that bought mortgage-backed securities during the mania?

“Oddly enough, the answer to both questions may be yes.”

All through this new crisis, one comment has been missing. The homeowners (and the hundreds, if not thousands, of sham owners) who borrowed money in a rising economy have simply stopped paying their mortgages.

Some defaults are legitimate. People lose jobs, catastrophic illness brings medical bills. But these reasons have always been there. Others plan to lose their home as some sort of leverage to get the lender to reduce the rate of interest, the principal amount or both. Others just want to move away. These so-called “strategic defaults” demonstrate the feckless nature of America’s homeowners.

There’s no doubt in my mind that there are violations of Truth-in-Lending and other consumer protection laws that address wrongs from the time of loan origination. But the lawyers I know wouldn’t know the underpinnings of the Federal “right to cancel” and what a violation of its rules could mean to a homeowner.

The bottom line is that the problem should not be placed solely at the feet of the mortgage servicers, Fannie Mae or Freddie Mac. It started at the very highest reaches of the Clinton administration and continued through the Bush administration. The bottom line is that loans were extended by hook or by crook through the efforts of dishonest mortgage brokers and bankers to people who had no right to buy a home and those loans were bought by Fannie and Freddie.

Problem loans are here, and they’re in foreclosure. Let the market do what it has to do…fall or rise. All lawyers will do is increase the cost and make it harder for deserving borrowers to get the loan they truly qualify for.

That's what I think.

For your next title order or

if you have questions about what you see here, contact

Stephen M. Flatow, Esq.

Vested Title Inc.

165 Passaic Avenue, Suite 101

Fairfield, NJ 07004

Tel 973-808-6130 - Fax 201-656-4506

E-mail vti@vested.com - www.vested.com

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How Underwater Mortgages Can Float the Economy

We have previously written about the plight of homeowners whose homes are now worth less than the mortgage. Some have decided to walk away from property while others are making their mortgage payments. In the face of low mortgage interest rates, refinancing would be a good idea but with LTVs, loan to value ratios, being what they are homeowners cannot refinance.

The Federal government stepped in with a program allowing banks to make loans up to 125% of LTV, but there have been few loans made.

The Sunday New York Times carries an Op-ed on the issue written by Glenn Hubbard and Chris Mayer.

“RECENT calls for another federal stimulus package raise an important question: Before considering costly short-term measures to raise overall consumer demand, have we done enough to ensure that financial markets will work properly and lead us to recovery? For housing — the sector at the center of the crisis — the answer is no. But the good news is that it might be possible to improve the housing market and invigorate the economy in a way that won’t require a costly stimulus package.

“In a normally functioning mortgage market, almost all homeowners would have refinanced their mortgages to take advantage of low rates. Yet today, low interest rates are doing little to stimulate the housing market because of other stresses, including declines in house prices, falling household incomes and banks’ wariness of making loans.

“To change this dynamic, we propose a new program through which the federal government would direct the public and quasi-public entities that guarantee mortgages — Fannie Mae, Freddie Mac, Ginnie Mae, the Department of Veterans Affairs loan-guarantee program and the Federal Housing Administration — to make it far easier and quicker for homeowners to refinance.”

Whoa, haven’t we been down this road? But, they write,

“This program would be simple: the agencies would direct loan servicers — the middlemen who monitor and report loan payments — to send a short application to all eligible borrowers promising to allow them to refinance with minimal paperwork. Servicers would receive a fixed fee for each mortgage they refinanced, which would be rolled into the mortgage to eliminate costs to taxpayers.”

How does this work in dollars and cents?

“Consider a family that bought a home in 2006 for $225,000, taking out a $200,000 fixed-rate mortgage at the prevailing 6 percent interest rate with monthly payments of about $1,200. That home is now worth about $175,000. The family still owes $189,000 and thus cannot refinance because they are underwater.

“But under our proposal, the family would be offered a new mortgage at today’s prevailing rate of 4.3 percent. The family would see a 15 percent decline in their monthly mortgage payment, saving more than $2,000 per year. This would not only help homeowners through the current crisis, but would be the equivalent of a 26-year tax cut of more than 4 percent of income, assuming the family spends around 30 percent of income on housing.”

But prior experience has shown mortgage programs to be a bust. They know it and ask,

“What went wrong? First, the program was not widely publicized relative to the federal government’s efforts to help with more modest loan modifications. Second, the refinancings require substantial upfront costs for borrowers. Third, many borrowers — those with second liens or shaky incomes — were locked out. (About 20 percent of all borrowers with federally backed mortgages have a second lien.) Last, many borrowers do not know the current value of their homes, and are reluctant to pay to get an appraisal only to be turned down for a refinancing.

“THE program we propose addresses these issues. It would have minimal costs, which we would roll into the cost of the mortgage rather than forcing homeowners to make a big upfront payment. For mortgages with second liens, the government could request a blanket approval from all servicers to allow the new mortgages to have priority over existing second ones. It is in the interest of the servicers of second liens to allow such refinancings, because they reduce payments on the first mortgage and thus lower default risk on the second lien.”

We think the proposal is a good one, what do you think?  Read the full Op-ed.
Glenn Hubbard, the chairman of the Council of Economic Advisers under President George W. Bush and the co-author of “Seeds of Destruction: Why the Path to Economic Ruin Runs Through Washington, and How to Reclaim American Prosperity,” is the dean of the Columbia Business School, where Chris Mayer is a senior vice dean.

For your next title order or

if you have questions about what you see here, contact

Stephen M. Flatow, Esq.

Vested Title Inc.

165 Passaic Avenue, Suite 101

Fairfield, NJ 07004

Tel 973-808-6130 - Fax 201-656-4506

E-mail vti@vested.com - www.vested.com

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From Bankrate.com - 3 ways to mess up a home mortgage closing

Here's some practical advice from Holden Lewis writing on Bankrate.com on how to botch your mortgage closing.

"Want a lender to delay or even cancel your mortgage closing? Then change your "borrower circumstances" between the day you apply for and the day you close a home loan."

"Lenders have gotten stricter in response to the mortgage meltdown. The latest tightening of the screws comes from Fannie Mae. The mortgage titan's Loan Quality Initiative, which went into effect June 1, requires lenders to track "changes in borrower circumstances" between application and closing."

It seems kind of silly to have to point this out to buyers, but there are certain no-no's when it comes to getting that mortgage loan closed on time.

Here are the 3 ways:

No. 1 -- Get a new credit card or auto loan

"Lenders have long admonished mortgage applicants to avoid getting new credit cards and auto loans while home loans are in underwriting. Fannie's Loan Quality Initiative adds urgency to this request."

"So at the eleventh hour, most lenders check credit for new accounts."

No. 2 -- Charge up credit cards

"Charging up credit cards with thousands of dollars' worth of appliances, tools and yard equipment is another surefire way to muck up a closing."

"Mortgage approval is based partly on debt-to-income ratio. The lender looks at the borrower's minimum monthly debt payments and compares them to income. If the ratio of debt payments to income is too high, the borrower could be turned down for a mortgage. Fannie encourages mortgage lenders to recalculate debt-to-income ratios just before closing."

No. 3 --  Change jobs

"Changing jobs is another good way to derail a mortgage before closing. Other potential deal-breakers include staying with a current employer, but switching from a salaried position to one where primary income comes from commissions or bonuses."

Not scared?  Then, read the full article.  Being forewarned is being forearmed!

For your next title order or 

if you have questions about what you see here, contact 

Stephen M. Flatow 

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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Housing Policy's Third Rail

In her column in Sunday’s New York Time, Housing Policy’s Third Rail, Gretchen Morgenson discusses a taboo, Fannie Mae and Freddie Mac.

WHILE Congress toiled on the financial overhaul last spring, precious little was said about Fannie Mae and Freddie Mac, the mortgage finance companies that collapsed spectacularly two years ago.

Indeed, these wards of the state got just two mentions in the 1,500-page law known as Dodd-Frank: first, when it ordered the Treasury to produce a study on ending the taxpayer-owned status of the companies and, second, in a “sense of the Congress” passage stating that efforts to improve the nation’s mortgage credit system “would be incomplete without enactment of meaningful structural reforms” of Fannie and Freddie.

No kidding.

With midterm elections near, though, there will be talk aplenty about dealing with the companies precisely because Dodd-Frank didn’t address them. Unfortunately, if past is prologue, this talk is likely to be more political than practical.

Those in the residential real estate industry know that Fannie and Freddie provided the fuel to the housing boom. Talk about an upset stomach when the bust arrived. The only medicine for these behemoths was a federal rescue.

The Treasury’s study on Fannie, Freddie and housing finance must be delivered to Congress by the end of January 2011. In a speech last week, Timothy F. Geithner, the Treasury secretary, told a New York audience that resolving the companies isn’t “rocket science.”

According to Morgenson,

“attaining genuine remedies for our housing finance system could actually be harder than rocket science. That’s because it would require an honest dialogue about the role the federal government should play in housing. It also requires a candid conversation about whether promoting homeownership through tax policy and other federal efforts remains a good idea, given the economic disaster we’ve just lived through.”

Understanding how Fannie and Freddie did business requires a dialogue. “Alas, honest dialogues on third-rail topics like housing have proved to be a bridge too far for many in Washington.”

Morgenson outlines how the nation’s largest buyers of mortgages did business. Understanding that process, and not repeating it is the key to overcoming the problems the housing market faces.

“Understanding how these companies operated is crucial if we want to avoid repeating the mistakes of our recent past. So, when you hear about Fannie and Freddie reform this fall, remember that we still don’t know the half of it.”

For your next title order or

if you have questions about what you see here, contact

Stephen M. Flatow

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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