The Next Fannie Mae

From the Wall Street Journal:

Much to their dismay, Americans learned last year that they “owned” Fannie Mae and Freddie Mac. Well, meet their cousin, Ginnie Mae or the Government National Mortgage Association, which will soon join them as a trillion-dollar packager of subprime mortgages. Taxpayers own Ginnie too.

Ginnie Mae, has seen this spectacular growth due to the swelling of FHA insured loans. Today, "nearly nine of every 10 new mortgages in America now carry a federal taxpayer guarantee."

Herein lies the problem. The FHA’s standard insurance program today is notoriously lax. It backs low downpayment loans, to buyers who often have below-average to poor credit ratings, and with almost no oversight to protect against fraud. Sound familiar? This is called subprime lending—the same financial roulette that busted Fannie, Freddie and large mortgage houses like Countrywide Financial.

While HUD's Inspector General is sounding alarm bells about new trends in FHA lending that could lead to the need for a Congressional appropriation to cover a short fall in reserves, folks at the top are turning a deaf ear.

Read the full editorial, here.

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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
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NY Times- Fees deter loan modification effort

The New York Times reports on the impact that servicing fees have on a lender's willingness to modify a mortgage or otherwise assist a homeowner facing foreclosure.

Although the White House is calling on lenders to assist borrowers,

"industry insiders and legal experts say the limited capacity of mortgage companies is not the primary factor impeding the government’s $75 billion program to prevent foreclosures. Instead, it is that many mortgage companies are reluctant to give strapped homeowners a break because the companies collect lucrative fees on delinquent loans."

What's going on?

Legal experts say the opportunities for additional revenue in delinquency are considerable, confronting mortgage companies with a conflict between their own financial interest in collecting fees and their responsibility to recoup money for investors who own most mortgages.

“The rules by which servicers are reimbursed for expenses may provide a perverse incentive to foreclose rather than modify,” concluded a recent paper published by the Federal Reserve Bank of Boston.

It's not a pleasant self- portrait that the mortgage industry is painting. But it goes hand in hand with the comments we get from potential borrowers that they can't modify their loans or get a new mortgage to replace the old when market values have declined. No one ever accused the mortgage industry of being altruistic, but good business sometimes requires that you protect your customer base, too.

One thing seems to be clear-- until home values begin to rise and people go back to work, we're go to see more mortgage defaults.

Read the full article Lucrative Fees May Deter Efforts to Alter Loans

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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NY Times- Subprime brokers resurface as fixers

We've previously commented on the presence of folks in the mortgage market who bore some responsibility for the current mortgage crisis. (See Where's there a buck to be made and Would you buy a used loan from these guys?)

Now the Times reports,

From the ninth floor of a downtown office building on Wilshire Boulevard, Jack Soussana delivered staggering numbers of mortgages to homeowners during the real estate boom, amassing a fortune.

By Mr. Soussana’s own account, his customers fared less happily. He specialized in the exotic mortgages that have proved most prone to sliding into foreclosure, leaving many now scrambling to save their homes.

Yet the dangers assailing Mr. Soussana’s clients have yielded fresh business for him: Late last year, he and his team — ensconced in the same office where they used to broker mortgages — began working for a loan modification company. For fees reaching $3,495, with most of the money collected upfront, they promised to negotiate with lenders to lower payments on the now-delinquent mortgages they and their counterparts had sprinkled liberally across Southern California.

Where does it end? That's the same question being raised by actions of the Federal Trade Commission as it brings charges against Mr. Soussana's company, FedMod.

The suit, filed in California federal court, asserts that FedMod frequently exaggerated its rates of success, advised clients to stop making their mortgage payments, did little or nothing to modify loans and failed to promptly refund fees. The suit seeks an end to FedMod’s practices, and compensation for customers.

Other companies are being targeted by the FTC. Read more in Subprime Brokers Resurface as Dubious Loan Fixers.

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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Getting tax advice

Attorney Julian Block writing in Realty Times--

Internal Revenue Code changes have averaged one--per--day over the past eight years ---- with 500 revisions in 2008 alone. Who's counting? Nina Olson, the National Taxpayer Advocate, announced the statistics in her annual report to Congress. An independent organization within the IRS, the Taxpayer Advocate Service helps taxpayers resolve complaints with the agency when problems cannot
be resolved through normal channels.

Mr. Block asks and answers the question, "Will Advocate Olson's reports convince our lawmakers to draw back from their drawing board? Not during these troubled times. Expect them to enact even more alterations to an already confusing code in the immediate future."

Individuals turn to tax professionals, CPAs, and Enrolled Agents, "who are neither attorneys nor CPAs, but who are former IRS employees or have passed rigorous tax examinations administered by the IRS." But there are alternatives, such as inexpensive adult education courses.

Block warns, "But people who need financial advice should be wary of free lunch seminars that are actually showcases for hucksters. Seminar sponsors usually promote their programs as educational events, with free meals thrown in. But the seminars generally feature hard -- sell pitches for substandard investments designed to enrich the sponsors -- many may be Uncle Bernie wannabes -- and impoverish investors, especially unwitting seniors."

Read the full article, Calling for Tax Advice the Inexpensive Way

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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More Monmouth County, NJ residents need flood insurance

Coastal residents of Monmouth County, New Jersey are facing a deadline for the purchase of homeowner's flood insurance.

The Asbury Press is reporting, "On Sept. 25, the Federal Emergency Management Administration's revised flood zone maps for 12 coastal Monmouth County municipalities become permanent."

Flood insurance has long been a staple of life at the Jersey Shore but the revised maps, based on laser technology, expand the "areas that have a 1 percent annual chance of severe flooding."

The impact on Monmouth County residents is substantial.

FEMA'S revised maps have expanded the Bayshore's municipal flood zone areas, adding an estimated 4,300 property owners to the Raritan Bay-Bayshore zone. The new maps, released March 2008, add 1,820 homes in Middletown; 1,810 homes in Keansburg; 640 homes in Hazlet; and 15 homes in Union Beach.

Most homeowners, as a condition of their federally insured mortgage, now will need flood insurance.

Combined, the added policies will cost coastal Monmouth residents hundreds of thousands of dollars.

One planning expert said such mandatory flood insurance will bring, aside from premium payments, other secondary economic costs. "It certainly will result in higher monthly housing costs," said James W. Hughes, Dean of the Edward J. Bloustein School of Public Planning & Policy, Rutgers University. "Even if the(operating) price stays the same, you've got an additional monthly insurance premium that you have to pay."

Not all the news is bad.

Bayshore residents can reduce their initial flood insurance cost, said FEMA executives, by purchasing a "preferred risk policy" before the maps take effect. PRPs are only issued for homes not currently in the flood hazard area.

Property owners are then locked into the policy rated by an insurance agent using a low risk zone upon renewal. The PRP rate remains in effect until the policy's first renewal date.

Flood insurance has long been required for federally related mortgage loans--just about all mortgages written in the United States--since the inception of flood insurance. It's a necessary evil, saving homeowners from many tens of thousands of dollars in out of pocket losses when floods strike.

Read the Asbury Park Press stories, FEMA maps expand zones and Time to buy insurance is now. For more about the go to http://www.floodsmart.gov/floodsmart/

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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