Dodd-Frank: Trump says roll-back, consumers map fight back

Kevin McCoy and Roger Yu , USA TODAY Published 7:02 a.m. ET June 14, 2017 |

Newly announced Trump administration plans to weaken or eliminate many financial-industry regulations enacted after the 2008 financial crisis mark the opening shot in what consumer groups predict will be a long Washington siege.

On Tuesday, the day after the Department of the Treasury issued the most detailed blueprint yet of proposed changes to the Dodd-Frank Wall Street Reform and Consumer Protection Act, banking and other financial groups celebrated Trump’s backing of changes they’ve sought for years. The list ranged from restructuring and weakening the Consumer Financial Protection Bureau to reexamining Wall Street trading and mortgage rules.

“The Treasury Department’s report is an important first step in recognizing how a duplicative and onerous regulatory environment harms banks, the economy, and, more importantly, consumers,” said Richard Hunt, the CEO of the Consumer Bankers Association, a trade association for retail banks.

Consumer advocates argue that the proposals represent an unwarranted weakening of rules that reined in banks and Wall Street after their excesses contributed to the nation’s worst economic crisis in generations. But major changes won’t come soon, if at all, because eliminating federal laws or Washington agency rules can take years, the advocates say.

“The prospects for preventing the rollback of many of these rules are actually quite good in terms of delay, and probably not bad in terms of preventing,” said Dennis Kelleher, the president and CEO of Better Markets, a Washington, D.C.-based nonprofit group that promotes the U.S. public’s interests in financial markets. “Enacting the administration’s regulatory agenda can be as difficult as enacting its legislative agenda if there is effective opposition.”

File photo taken in 2015 shows Richard Cordray, director of the Consumer Financial Protection Bureau, at a hearing in Denver, Colorado.(Photo: Brennan Linsley, AP)

Lobbying will likely spread across multiple fronts. But perhaps nowhere are the disagreements hotter than over the Consumer Financial Protection Bureau. Echoing complaints from Congressional Republicans, the Treasury report said the CFPB’s leadership — a lone director only loosely accountable to the president and wielding authority to enforce 18 federal financial laws — has made the agency “unaccountable to the American people.”

In response, the Treasury report recommended:

Authorizing the president to remove the CFPB’s director at will, rather than only when he or she is found to have done something improper.

Considering an alternative leadership structure of an “independent, multi-member commission or board.”

Changing the agency’s funding procedure to require oversight by the U.S. Office of Management and Budget, as well as congressional review.

Switching enforcement actions to federal courts, rather than administrative proceedings handled internally at the agency.

Eliminating public access to underlying data in the agency’s consumer complaint database by restricting that material to federal and state agencies.

Stripping the agency’s supervisory authority over banking and other areas covered by other regulators.

Paul Merski, a Community Bankers of America vice president, applauded yet another proposal, one that would exempt banks with assets of $10 billion or less from complying with CFPB rules that remove some risk features from mortgage loans. That list includes an “interest-only” repayment period, balloon payments required at the end of some mortgages, loan terms longer than 30 years, and excessive upfront fees charged to consumers.

“The main reason for community bank relief is so that they can support growth and jobs,” Merski said.

The CFPB maintained an official silence on the Treasury proposals. Instead, the regulator announced that its director, Richard Cordray, would hold a Thursday public event in Raleigh, N.C. to discuss student loan servicing issues, an area of continuing concern for students who say some loan servicers have not helped the get into income-based repayment plans.

However, Alys Cohen, a staff attorney for the National Consumer Law Center, said the proposals would “kick the legs out from under the CFPB,” which reported it had provided nearly $12 billion in relief and assistance to more than 29 million consumers from its 2011 opening through the end of February 2017.

A random sampling of consumers referred by advocacy groups readily agreed.

In Minnesota, John Lukach said he filed a complaint with the CFPB after Navient, the servicer for his nearly $60,000 in private student loans, did not respond to his requests for more affordable repayment options that would cut his monthly bill. Within two days, a Navient representative contacted him to discuss available alternatives, “something that probably wouldn’t have happened” without the CFPB, Lukach said.

In Arkansas, Myra Brewer, 71, said a debt collector called her and tried to force her to repay a roughly $3,000 credit card debt the company said was owed by her late daughter. She refused, even as the company called multiple times a day for weeks, Brewer said. Ultimately, she obtained the name of the bank that had put the purported loan out for collection and then filed a complaint with the CFPB. “That got action,” she said.

In Florida, a mortgage loan originator Pamela Marron noticed that many former homeowners who’d been caught in a wave of financial crisis short sales — selling their houses for less than the mortgage total — had trouble reentering the housing market. The reason, she determined, was that the nation’s three major credit reporting agencies coded the short sales as foreclosures. That meant the consumers could not qualify for conventional, federal government-backed mortgages for seven years.

After Marron filed complaints with the CFPB, banks re-coded the consumers’ mortgage applications and started processing them. “The CFPB people were very helpful because they understood the data we were looking at,” she said.

Armed with similar consumer experiences, advocacy groups are already discussing efforts to block Washington’s efforts to weaken the CFPB.

Kelleher, the Better Markets CEO, likened the efforts to the recent consumer drive that stopped the administration from derailing an Obama-era rule that now requires financial advisers to put consumers’ interests above their own. The regulation went into partial effect last week, but enforcement isn’t set to start until January.

“Big parts of that coalition will also work against deregulation” elsewhere in the financial industry, Kelleher said.

Follow USA TODAY reporter Kevin McCoy on Twitter: @kmccoynyc

______________________________________________________________________________________________

In USA Today. Help that CFPB provided for short sale code problem noted. CFPB “Submit a Complaint” worked when other fixes did not. Directions: http://housingcrisisstories.com/submit-a-complaint-cfpb/

https://www.usatoday.com/story/money/2017/06/14/dodd-frank-trump-says-roll-back-consumers-map-fight-back/102814996/

© 2017 USA TODAY, a division of Gannett Satellite Information Network, LLC.

Dodd-Frank: Trump says roll-back, consumers map fight back

Call to weaken post-crisis financial safeguards could face long battle


Underwater homes on the decline nationwide – but that’s not the whole story

HomeNews

by Ryan Smith, 08 May 2017

There were nearly 5.5 million seriously underwater properties in the US during the first quarter, according to new data from ATTOM Data Solutions. That’s an increase from Q4 of 2016 but still down by more than 1.2 million from the first quarter of last year.

Seriously underwater properties – property where the loan amount was at least 25% higher than the estimated market value – accounted for 9.7% of all US properties with a mortgage in the first quarter, according to ATTOM.

But those numbers don’t tell the whole story, according to Darren Blomquist, senior vice president at ATTOM. While negative equity is on a mostly downward trend nationwide, there are still swathes of the country where underwater property is almost the norm.

“While negative equity continued to trend steadily downward in the first quarter, it remains stubbornly high in often-overlooked pockets of the housing market,” Blomquist said. “For example, we continue to see one in five properties seriously underwater in several Rust Belt cities, along with Las Vegas and central Florida. Additionally, close to one third of homes valued below $100,000 are still seriously underwater.”

And those underwater properties can pull down surrounding home values, Blomquist said.

“Several of the cities with the biggest quarterly increases in underwater properties saw a corresponding increase in share of distressed sales in the first quarter, creating a drag on overall home values…” Blomquist said.

Baltimore, Md. Saw the biggest quarterly increase in underwater homes, up 26,974. It was followed by Philadelphia (up 8,919), McAllen, Texas (up 7,746), Cleveland, Ohio (up 7,631), and St. Louis, Mo. (up 6,844). All of those markets still had fewer underwater properties in the first quarter than during the same period in 2016, ATTOM said.

reprinted from Mortgage Professional America: http://www.mpamag.com/news/underwater-homes-on-the-decline-nationwide–but-thats-not-the-whole-story-66996.aspx

 


Pre-purchase help coming from HUD approved housing counselors to assist clients who still have credit issues with a past short sale or modification

By Pamela Marron | National Mortgage Professional Magazine | May 2017

HUD approved housing counselors are being trained to provide assistance for clients who continue to have problems with short sale and modification credit that appears as a foreclosure. The goal is to correct problems prior to a new purchase.

A collaborative initiative has begun that connects loan originators who have clients with a past short sale or a modification with HUD approved housing counselors who can make sure that common credit issues are resolved before clients sign a home purchase agreement. The goal is to provide correction to a continued problem of foreclosure credit code that incorrectly shows up on short sale and modification credit and often results in a loan denial and loss of contract. Worse yet, a foreclosure coding delays a new conventional mortgage for seven years rather than the four year wait required after a short sale. And recently, it has been found that modification credit is being affected with the same foreclosure code.

 

Over 1 million past short-sellers are now beyond the four year time frame and are eligible to purchase a home again. Another 950,000 will become eligible over the next three years. For those with modifications, no wait timeframe is required and over 1 million have been put in place from March 2009 to March 2017.

 

Correcting continued credit issues ahead of signing a contract for eligible past short-sellers is the focus of a small group of loan originators and housing counselors who are preparing this initiative. “Too many times, past short-sellers are told within the processing time and during a live contract that their short sale shows up as a foreclosure, and that they need to go get it fixed and come back.” states loan originator Pam Marron. “A service is needed for affected clients to get this credit issue permanently resolved ahead of time so that these clients are mortgage – ready.”

 

Fannie Mae developed a workaround in August 2014 but not all lenders know about it. There is no workaround in Freddie Mac. And though both Fannie Mae and Freddie Mac note there may be exceptions when inaccurate credit exists, lenders are reluctant to address this.

 

Marron cites that additional credit issues commonly grow out of the inaccurate foreclosure code for most of these clients when they either attempt to remedy the problem themselves or go to credit repair companies. A “dispute”, the most common fix, temporarily masks the short sale credit and appears to work when credit scores go up. However, when the consumer applies for a mortgage, either the underwriter, Fannie Mae or Freddie Mac automated system findings require that the dispute be taken off. The result is that credit scores plummet, a conventional mortgage denial is received and a delay to fix often occurs and can be a serious problem if a contract deadline is looming. If the consumer is in a contract, the quickest remedy is a Rapid Rescore that must be paid for by the lender. Often, the resulting credit scores are lower and the consequence is a higher interest rate.

 

A second problem is a more recent “date reported” when the short sale credit is reopened in order to get it corrected. The more recent date reported often falls within the four year wait timeframe causing the Fannie Mae and Freddie Mac automated systems to issue a denial due to the wait timeframe not being met.

 

Marron thinks this service coming from third party HUD approved housing counselors is a perfect fit. “Loan originators are driven by contract deadlines. Housing counselors are not.”

 

Solutions for correcting the credit issues discussed are already available but assisting those who have had a past short sale or modification is the best way to find more ways for correction. Ms. Marron and Jim McMahan, a loan originator in Georgia, will begin taking calls for consumers with a past short sale or a modification this month. The National Foundation for Credit Counseling (NFCC.org) will start this effort and utilize HUD approved housing counselors to work with affected consumers to ensure the credit issues of a past short sale will not hamper their ability to get a new conventional mortgage.

 

There will be a fee for the one on one counseling and a credit towards closing costs on a home purchase can be provided. Contact Pam Marron at 727-375-8986 or email pam.m.marron@gmail.com or Jim McMahan at 404-808-0945 or email jim@mcmahanmortgage.com.

 

Stay tuned.


Morning Briefing: HELOC owners face sharp payment increases in 2017

by Steve Randall

Challenging times are ahead for thousands of homeowners with HELOCs as their lines of credit reset with higher monthly payments while some may struggle to refinance.

Analysis by Black Knight Financial shows that 1.5 million HELOCs will see interest-only draw periods end this year with just under $100 billion in outstanding unpaid principal balances; an average of $62,500 per HELOC.

The data reveals that average borrowers whose lines of credit reset will face an additional cost of $250 per month, more than double the current average payment.

“In 2017, 19 percent of active HELOCs are facing reset,” said Ben Graboske, Black Knight Data & Analytics EVP. “This is the largest share of active HELOCs facing reset of any single year on record, although the approximate 1.5 million borrowers slated to see their HELOC payments increase this year is about 100,000 fewer borrowers than in 2016.”

Graboske explained that the lines resetting this year and early in 2018 are the last of the pre-crisis-era HELOCs that the industry has been focusing on since early 2014.

A third of those with HELOCs resetting this year will find refinancing challenging as they have less than 20 per cent equity in their homes. A fifth have less than 10 per cent and 1 in 10 are underwater.

While that is a concern, it reveals a large improvement from 2016 when 45 per cent of HELOC owners were below 20 per cent and a fifth were underwater.

For most borrowers though, recent conditions have enabled them to avoid the addition monthly cost of a reset.

“One thing that’s working in the 2007 vintage HELOCs’ favor has been the equity and interest rate environment of the last year. Rising home prices and low interest rates throughout 2016 have allowed borrowers to be much more proactive than in years past in terms of paying off or refinancing their lines to avoid increased monthly payments,” Graboske explained.

*originally published on Mortgage Professional America’s website.


Drill Down on Short Sale and Modification Credit

By Pam Marron | National Mortgage Professional Magazine | April 2017

Recently, a joint effort of the mortgage and the housing counseling industries to remedy continued credit problems of past short sellers who continue to receive a foreclosure credit code on their past short sale credit was investigated. While reviewing data, it was learned that this same credit code problem also affects consumers who have had a modification. The foreclosure code problem seems to be present when mortgage lates go past 120 days, a trait present in many short sales and modifications. But we were stunned when the foreclosure credit code also showed up on a consumer who had excessive mortgage lates… but no short sale, foreclosure or modification.

To prove the data found, nine cases including short sales, a modification, a Deed in Lieu and one where none of these existed were set up in the same format. A tri-merged credit report was pulled for each and a visual of the problem credit trade line was provided as well as a snapshot of the individual bureau repositories of Experian, TransUnion and Equifax.

Fannie Mae

All cases were run through the Fannie Mae Desktop Originator (DO) automated underwriting system (AUS) with the tri-merged credit report. A visual of the findings for an approval or declination and what the blended tri-merged credit in Fannie Mae looks like was provided.

The Fannie Mae workaround was used for loans that received a Desktop Originator Refer with Caution and it worked… even on the modification.

There is no workaround for Freddie Mac.

Freddie Mac

For Freddie Mac, cases were run through the Loan Prospector Advisor (LPA) first with the lender tri-merged credit report. Then, the case was run again using the credit in-file option allowed internally through Freddie Mac’s LPA. A snapshot of Freddie Mac’s tri-merged credit and the separate credit in-files was included.

Here is what was found in Freddie Mac:

  • There is no variation for foreclosure verbiage. Either “13. Recent foreclosure/signif derog appears on credit report” appears in findings, or it does not.

Other remarks are often included:

  • “64. Crdt rpt w/recent mtg delinq or review mtg credit history”
  • “YW. The Borrower has had a foreclosure within the last seven years. The mortgage file must also contain evidence of the completion of the foreclosure.”

Number of consumers at risk

Thanks to RealtyTrac (now ATTOM Data Solutions), it was learned that there were 1,978,754 short sales and deeds in lieu completed from 1/1/2010 through 12/31/2016.

The wait timeframe after a short sale or deed-in-lieu is 4 years, rather than the 7 year wait timeframe after a foreclosure.

Thus, as of Dec. 31, 2016, 1,032,211 of those with a past short sale or deed-in-lieu are past the 4 year wait timeframe and are now eligible to re-enter the housing market. Any of these clients and additionally those who had a modification or who had mortgage lates past 120 days will most likely encounter a new mortgage denial for a Fannie Mae or Freddie Mac conventional mortgage.

We haven’t even looked at the number of modifications affected yet.

How Problem Continues

A conventional mortgage denial occurs when the automated underwriting system reads credit code of a past short sale as a foreclosure. When the lender calls Freddie Mac or Fannie Mae, support tells the lender that the information is coming from one or more of the bureaus (TransUnion, Experian or Equifax). Ultimately, the consumer is told they must get the credit fixed with the bureau(s) where the foreclosure code is coming from, though Fannie Mae has a workaround for this problem.

The borrower tries to get this fixed by placing a “dispute” on the account. The “dispute” hides the actual credit from Fannie Mae and Freddie Mac automated systems and must be lifted from the credit when the consumer applies for a new mortgage. When the dispute is lifted, the problem credit comes back and most often credit scores plummet. This results in a higher rate for the consumer and the lender must pay for a Rapid Rescore, the quickest way for consumers to get a credit score change. This is a big problem when found during a contract with a deadline. Lenders that end up paying for the Rapid Rescore often do not want to assist consumers where this problem is anticipated due to the cost the lender must incur.

Another problem is the “Date Reported”, or a more recent change to an account than the initial occurrence date. The more recent date often exempts a past short seller from a new conventional mortgage when it falls within the minimum required wait timeframe. This date cannot be changed per credit reporting agencies.

Stay tuned.


National Real Estate Post is Off the Mark – Here are the Facts!

3/15/17

Dear National Real Estate Post;

With all due respect, you are totally off the mark in today’s video: http://thenationalrealestatepost.com/treasury-giving-away-50k-to-lower-your-mortgage/?utm_source=feedburner&utm_medium=email&tm_campaign=Feed%3A+TheNationalRealEstatePost+%28The+National+Real+Estate+Post%29

 

The I-Refi program in Illinois is one of three principal reduction programs throughout the United States. Florida https://www.principalreductionflhhf.org/<https://l.facebook.com/l.php?u=https%3A%2F%2Fwww.principalreductionflhhf.org%2F&h=ATO1fWZjNP8A32GMRnUmkN6naeG4Dz4BmkIbMUe5hdCx36xXo6DxrBc4BJzxt0bxbJpKEzhXkzGW7c6xnQA2pP7Zl2uG-IMYvA7oSGS_1F6HbAeNr1Dfqpl2BcLU7NyNBQs> and California https://www.treasury.gov/…/Changes-to-California%E2%80…<https://l.facebook.com/l.php?u=https%3A%2F%2Fwww.treasury.gov%2Fconnect%2Fblog%2FPages%2FChanges-to-California%25E2%2580%2599s-Principal-Reduction-Program-Attract-More-Mortgage-Servicers.aspx&h=ATMSD1J7t67l3Fj34SmuLQZ-V2HZYFvMjiXFcqgGvNBr6GqdmiiN-UhlqFmbwq4pumGNn7bXbvlGLPZs3ubEZctb_Aj4Rped9Hnn8EGX-Zcsc5vQK80Cn1IGuQmLlOziY6Y> have this program as well. There is income criteria developed not too much different than MSA income used for Home Ready, Home Possible and USDA standards for targeted areas, and an appraisal must provide proof of minimum negative equity.

 

HOW does I-REFI program help?

The key here is that over 5.4 MILLION homeowners who still have negative equity, are trying to stay put in their home and are current on their mortgage have NO REFINANCE OPTION. If you have a negative equity NON-Fannie Mae or NON-Freddie Mac conventional first mortgage, or a negative equity second mortgage or HELOC, THERE IS NO REFINANCE OPTION AVAILABLE! The only option for better payments for these negative equity loans is a modification from the lender that requires proof of hardship and mortgage delinquency first!

 

How Many Homeowners are STILL Underwater As of December 2016, there are still 5.4 million homeowners seriously underwater where combined first and second mortgage exceeds 125% per RealtyTrac, (now ATTOM Data Solutions) See chart below and article:http://www.realtytrac.com/…/2016-home-equity-and…/<http://l.facebook.com/l.php?u=http%3A%2F%2Fwww.realtytrac.com%2Fnews%2Fhome-prices-and-sales%2F2016-home-equity-and-underwater-report%2F&h=ATOc2jybWm5plCAanfVNAU490qOjH__LpF5_FqNbyRbudoXeGZM2ovtMsoPvXQ4So4A9sr6cQV9yLlU0tqIGyaT8ksz-Sq1mNYb4Q66x-zRIJdiKSNVM8mMFUnP0e27vuvQ>.

 

PLEASE stop assuming those with negative equity homes are deadbeats that can’t afford to make their payments. Most of the 5.4 million homeowners who are still underwater struggle while waiting for equity to return, and are paying higher interest rates from 8 to 10 years ago. Many of them have resetting interest only first and second mortgages that cannot be refinanced and these underwater homeowners pay higher payments simply because there is no option for a refinance. And a great number of them are elderly who took out funds from their home to help children years ago.

 

The Principal Reduction Program (with strict criteria) allows those who have managed to stay current to receive up to a $50,000 reduction that puts them into an acceptable LTV to be able to refinance and stay in their home. The goal here is to keep those in negative equity areas in their homes rather than experience another wave of short sales and foreclosures. These Hardest Hit Funds are not new. The Hardest Hit Funds of 7.6 billion allocated in 2010 were provided to 18 states who suffered the most during the housing crisis. These funds were tailored by each state to meet the needs of struggling homeowners.

 

As of December 2016, Florida is at the top of the list with 807,607 STILL negative equity properties with a combined loan to value over 125%. California is 2nd and Illinois is 3rd.

  Q4 2016Q4 2016
StateTotal Seriously Underwater (LTV 125+)% of Seriously Underwater
1Florida807,60714.30%
2California489,4676.00%
3Illinois444,25716.60%
4Ohio395,01016.30%
5Michigan230,76814.10%
6Texas228,9355.40%
7New Jersey221,36811.90%
8Pennsylvania217,9579.80%
9Arizona202,45410.90%
10Georgia188,96711.70%
11Maryland171,39911.10%
12New York171,1287.60%
13North Carolina153,3408.90%
14Nevada151,87719.50%
15Missouri141,48914.60%
16Tennessee132,8029.40%
17Connecticut99,69110.90%
18Washington89,7705.10%
19South Carolina83,1669.60%
20Virginia78,0206.10%
21Massachusetts70,5344.60%
22Wisconsin68,2468.80%
23Colorado63,3524.70%
24Indiana50,18412.10%
25Oklahoma48,7458.80%
26Louisiana43,68314.50%
27Oregon38,3094.30%
28Minnesota35,7134.70%
29Alabama33,7739.00%
30Delaware28,75913.10%
31Arkansas26,83411.30%
32Iowa23,3628.10%
33Rhode Island21,7038.40%
34Kentucky19,7827.10%
35Nebraska18,8397.00%
36Maine17,2207.30%
37New Hampshire16,9776.20%
38New Mexico16,4756.80%
39Hawaii15,7385.70%
40Utah15,2134.80%
41District of Columbia11,3348.70%
42Idaho8,2604.90%
43West Virginia4,0169.60%
44Montana2,5194.60%
45Mississippi1,4874.70%
46North Dakota1,3184.20%
47Wyoming1,3045.00%
48Vermont1,0263.40%
49Alaska8842.90%
50Kansas5045.60%
United States5,405,5658.60%

Also, here is the link to the Illinois I-REFI program to check out program criteria: https://www.ihda.org/…/uploads/2016/03/7-12-16_I-Refi.pdf<https://l.facebook.com/l.php?u=https%3A%2F%2Fwww.ihda.org%2Fwp-content%2Fuploads%2F2016%2F03%2F7-12-16_I-Refi.pdf&h=ATOhEN8qHEO6vJWuVPUDfDv88soW83Xuy9ADCEQdkLu08FRINTLO-4euGIrh-nBCe1kGHiKsedwW7ulaWBPd3oFHoFQ6VBNVUSw0ctfSfIccocHFR7XUvQMZvr47prm-JzM>


HUD Housing Counseling Federal Advisory Committee (HCFAC) to host panel entitled “Challenges in Credit Reporting Post-Crisis: An Opportunity for Housing Counselors”

As a member of the HCFAC committee which is comprised of three representatives each from the mortgage, real estate and housing counseling industries as well as three consumer advocates, I am learning more about a great resource – HUD approved counseling agencies. Panels were planned for March 14 at HUD to show different ways that HUD approved housing counselors can assist not only consumers, but also mortgage and real estate professionals. (The meeting was cancelled due to a major snowstorm and will be held at a later date.)

For years, we have grappled with a credit problem where past short-sellers who attempt to get approved for a conventional Fannie Mae or Freddie Mac mortgage are turned down because their short sale is credit coded as a foreclosure. This problem is commonly found during the mortgage process of a live contract where a deadline must be met. Often, options to get this corrected quickly are expensive or result in the borrower resorting to an FHA mortgage or a non-QM portfolio loan at a higher interest rate.

When this problem was discussed with colleagues in the housing counseling industry, it became evident that this is where a solution to this problem for all parties might be. Why? Loan originators are trained to meet contract dates and get data needed to ensure an approval. Housing counselors are trained to analyze and prepare clients for homeownership.

The credit code problem specific to short sales is not a singular issue. It starts with the realization that the short sale code is showing up as a foreclosure – something not visible until it is seen in both Fannie Mae and Freddie Mac automated underwriting systems. This doesn’t mean Fannie Mae and Freddie Mac are to blame for this problem – it’s just where it is first seen.

Unfortunately, for many affected past short-sellers they learn of this problem on their first attempt to get a new conventional mortgage when they are eligible again four years after the short sale. But too often, lenders don’t run these clients through the automated underwriting system upfront which would allow the lender to know there’s a problem right away. And consumers don’t always let the lender know they had a past short sale.

Note to all loan originators: ask your clients if they had a short sale up front! If they did, run them through your automated system immediately!

Calls for help often come in when the loan is in crisis. Lenders are instructed on how to do the Fannie Mae Desktop workaround, but if the lender is primarily a Freddie Mac lender, there is no workaround. And because of slight differences in the popular Fannie Mae Home Ready program and the Freddie Mac Home Possible loan, calls for help are increasing for how to fix this problem in Freddie Mac.

If past short-sellers know of the problematic credit code issue, they or a credit repair company attempt to get it corrected. The most common fix is to dispute the account. However, the dispute does nothing but hide the credit, offering a temporary fix that appears to work when credit scores increase. However, when the affected consumer applies for a new mortgage the dispute must be taken off of the credit. The previous credit code problem returns, credit scores plummet and if the consumer is in a contract, there is only one quick way to remedy the problem and that is with a Rapid Rescore. Per FCRA regulations, the lender must pay for the Rapid Rescore.

Another problem that occurs is that because of the dispute, the “date reported” becomes more recent then the short sale closing date because of the new investigation. This date can’t be changed per credit reporting agencies and the automated systems can deny a past short seller if this date is within the four year wait limit.

No lenders in the U.S. will do a manual underwrite to circumvent the problem, though both Fannie Mae and Freddie Mac have written criteria that allows for a manual underwrite.

Last week, it was found that the same credit code problem appears to also affect those who had a modification and are over 120 days delinquent.

It is a hunch that going over 120 days delinquent may be the key because an approval of a new loan was received for a consumer who was less than 120 days late on their mortgage prior to the short sale. Nonetheless, we are close to getting this resolved…. And the housing counseling industry will be involved in assisting in a permanent correction of this problem.


How Loan Professionals can Correct a known Short Sale credit coded as a Foreclosure

Loan originators are unaware that there are two solutions that can work when short sale credit is erroneously coded as a foreclosure and results in an automated denial. One solution is a workaround in Fannie Mae. (There is no workaround for Freddie Mac.) The second solution is to “Submit a Complaint” on the Consumer Financial Protection Bureau (CFPB) website.

Fannie Mae workaround

https://www.fanniemae.com/content/release_notes/du-do-release-notes-08162014.pdf

Loan professionals need to know specific directions on how to use the Fannie Mae DO/DU automated underwriting system (AUS) workaround when a Refer/Caution is received and the denial is due to a short sale coded as a foreclosure.

Loan originators, upon receiving Refer/Caution:

  • Within (1)Fannie Mae DO or DU automated underwriting system, go into (2)Edit Loan: then (3)Full 1003 and then (4)Declarations, then (5)c. In dropdown box, change to (6)Yes.
  •  Click on (7)Explanation button at bottom right.  For(9), either:

On (8) Declarations Explanation page:

  •  If strictly trying to correct a FORECLOSURE code noted on findings for a short sale, enter on line c.: Confirmed CR FC Incorrect
  • If “Extenuating Circumstances” and are trying to get DU/Fannie Mae approval at 2 years after short sale, enter on line c.: Confirmed CR FC EC

Submit a COMPLAINT at the Consumer Financial Protection Bureau (CFPB)

When you find out that your short sale was coded as a foreclosure, one option to correct this is to Submit a Complaint to the CFPB. Let the Consumer Financial Protection Bureau know that your short sale is being coded as a foreclosure on the Fannie Mae or Freddie Mac automated underwriting system.

Take these steps:

  • Before you finish, attach short sale approval letter(s) from your lender and your closing statement (HUD-1) showing the loan closed with you as the seller, not the lender as the seller.
  • You will receive an answer back from the CFPB within 15 days so keep an eye out for their email.

 

Next month: How Housing Counseling Agencies can help your clients prepare for home ownership….


The Hidden Costs of Buying a Home

Wednesday, 14 Dec 2016 | 8:30 AM ET

Buying a home can end up costing an owner many times the sticker price in goods, services and fees, so home ownership might not make sense for everyone. Click on the video image below to see this quick video from CNBC.


Federal Housing Administration to reduce annual insurance premiums, saving homeowners avg $500 this year

FHA to lower annual insurance premiums

FHA to lower annual insurance premiums  

U.S. Housing and Urban Development Secretary Julián Castro said on Monday the Federal Housing Administration will reduce the annual premiums most borrowers will pay by a quarter of a percent.

The FHA is reducing its annual mortgage insurance premium by 25 basis points for most new mortgages with a closing or disbursement date on or after Jan. 27. The new rates are projected to save new FHA-insured homeowners an average of $500 this year, Castro said.

The secretary said consumers are facing higher credit costs as mortgage interest rates increase.

 “After four straight years of growth and with sufficient reserves on hand to meet future claims, it’s time for FHA to pass along some modest savings to working families,” said Castro.”This is a fiscally responsible measure to price our mortgage insurance in a way that protects our insurance fund while preserving the dream of homeownership for credit-qualified borrowers.”

The new rates come as the FHA enters a fourth straight year of improved economic health, the administration said. The FHA gained $44 billion in value since 2012.

“We’ve carefully weighed the risks associated with lower premiums with our historic mission to provide safe and sustainable mortgage financing to responsible homebuyers. Homeownership is the way most middle class Americans build wealth and achieve financial security for themselves and their families,” Ed Golding, principal deputy assistant secretary for HUD’s Office of Housing, said in the report.


Loan Originators: Be aware of “disputes” on credit reports and automated underwriting findings. Also on short sales, check “Date Reported”.

 Do it before a contract is signed.

By Pam Marron, Jan 9, 2017 for National Mortgage Professional Magazine

Frustrated consumers looking for solutions to correct erroneous information on their credit report often turn to credit repair companies or their mortgage lender for help. A dispute is the 1st method tried but this “fix” is temporary. A requirement to delete the dispute and rerun the automated submission is usually brought to the attention of loan originators who are unaware of the existence of the dispute or where to find it… often weeks before a closing date.

When an account is put into a dispute, that credit is temporarily hidden from Fannie Mae, Freddie Mac and USDA automated underwriting systems (AUS), allowing a false AUS approval. But direction from AUS findings or a mortgage underwriter alerts us that the dispute needs to be deleted from the credit report and that the AUS must be run again. If the credit in dispute is adverse credit, the credit score goes down when the dispute is lifted and an AUS approval commonly changes to a “Refer” or “Caution”, or a loan denial.

Deleting a dispute is not a one step solution. The borrower can do the “fix” if they have 45 to 60 days to do so. But often, due to impending contract deadlines, the only option is a Rapid Rescore which can delete the dispute within 2 to 5 days. However, this is a costly remedy. Further, under FCRA guidelines, the borrower cannot pay for this Rapid Rescore cost and the loan originator or lender must pay.

There are four things a loan originator can do upfront.

  1. Disputes: check the entire credit report whether a mortgage, credit card or loan, for any dispute verbiage. Common dispute statements:
    1. DISPUTE RESOLVED – CONSUMER DISAGREES (disputes the dispute!)
    2. CONSUMER DISPUTES THIS ACCOUNT INFORMATION
    3. ACCOUNT INFORMATION DISPUTED BY CONSUMER

Go into each of the three repositories (Experian, Equifax, Trans Union) on the borrower’s credit and check which ones have dispute verbiage. These are the disputes that must be deleted. Zero balance accounts normally do not apply, but check with your lender.

If you have at least 45 days, retrieve the generic dispute form from your credit reporting agency and have your borrower follow explicit direction from your credit reporting agency on how the dispute can be deleted.

If you don’t have this time, retrieve the Rapid Rescore form from your lender and find out what is needed to delete the dispute.

  1. Run automated Fannie Mae Desktop Originator(DO)/Underwriter(DU) or Freddie Mac Loan Prospector Advisor(LPA) and USDA Government Underwriting System (GUS) upfront. Usually dispute messages are within the findings stating “there appears to be a dispute on the credit report” and direction appears for what needs to be done.
  1. Submit a Complaint to the CFPB for Short Sale Credit Code Correction

What has worked is to “Submit a Complaint” for a mortgage at the Consumer Financial Protection Bureau (CFPB) website: http://www.consumerfinance.gov/complaint/. (Visual instruction and what to attach is located at  http://housingcrisisstories.com/submit-a-complaint-cfpb/.) This is not a dispute but a request for correction to the credit.

Why this is different:

Short sale credit is often coded as a foreclosure when the late payments (still) required to get a short sale approved exceeds 120 days. Often, past short sellers have already had an experience where it was learned that their short sale was coded as a foreclosure. Many have gone to a credit repair company or have attempted a correction themselves to get the erroneous credit code changed. A placed dispute temporarily hides the credit but does not correct the code.

  1. Check “Date Reported” on credit report. Make sure the date is the same as the short sale closing date on the HUD-1 closing statement. If the borrower has previously contacted the short sale lender upon learning that their short sale was coded as a foreclosure, that new date which may also include a dispute of the account becomes the “Date Reported”, or a more recent date then the short sale closing date. If the new “Date Reported” is within four years, the wait timeframe required for a new conventional Fannie Mae or Freddie Mac mortgage, this will result in a loan denial in both Fannie Mae and Freddie Mac AUS’s. If this occurs, you will need to find a conventional lender that will do a manual underwrite.

Hunting for solutions on this now. “The valuable role that housing counselors can play in helping consumers with credit” coming soon. Stay tuned.


When Unpopular Policy Works

Our current administration inherited a financial crisis that this country has not experienced anything close to since the Great Depression. When the collapse occurred, it was visible by the number of unoccupied homes, and many of us knew of friends, relatives and colleagues who were affected. Initially, problems were blamed on the unscrupulous mortgage broker industry until it was learned that the banking industry had an equal amount of blame.

Almost every loan originator I know was negatively impacted by the housing crisis. They were either losing their homes or their income and in many cases, both. All of us saw the housing bubble, but complacency set in after it continued for years, not months. When the crash happened, it was fast and mammoth. It had to be dealt with and the depth of problems that housing faced during the last eight years was unprecedented. Drastic measures were necessary to be put in place immediately to stop the bleeding.

Many say that measures put in place went too far and stalled the progress of the housing market and ultimately added more cost to the entire mortgage process. Others say it could have been much worse if these safeguards were not in place, and that the inconveniences placed upon our industry need to be adapted to. But a few changes occurred that have provided end results that could be argued as good.

The Role of AMC’s and Home Prices

Many of us have concerns when we see housing prices increase quicker than normal trends again. How do we safeguard against alarmingly fast increases in home value that was the norm prior to the crash? The answer appears to be the Appraisal Management Companies, or AMC’s where all (or at least) Qualified Mortgage (QM) appraisals must go through. Appraisals are now done by third-party appraisal management companies (AMC) who lenders and realtors have no communication with until after the appraisal is completed. Even though the process can be frustrating, the value can’t be blamed on the buyers’ lender. A dispute in value can be done but it is with the appraiser through the AMC rather than the lender.

Qualified Mortgages (QM)

Due to requirements put in place by the Consumer Financial Protection Bureau (CFPB), almost all secondary market sellable mortgage products no longer have prepayment penalties, negative amortization, balloons and interest only options. Prior to the housing crash, these negative options were mostly explained to consumers as “rare to happen”, but ultimately became a main reason so many homeowners were negatively affected by the housing crash.

Consequently, a new industry of non-QM mortgage products is out there. Though a rare few have limited “skin in the game”, most of these products require 20% equity to do the deal.

I know that many in my industry have opposite views of the above. And, yes, policies can be streamlined. Frustrating to all of us is that dealing with housing issues seem to come to a standstill 6 to 12 months before every election cycle, seeming to be a topic that no political candidate wants to touch.

Please don’t say the past housing crash won’t happen again with policy changes in the new administration. Instead, those of us in the mortgage and real estate industries need to ensure that this doesn’t happen again by looking at what policies have and have not worked. More effort needs to be placed in finetuning policy that does work.


Mortgage and Real Estate industries blamed each other for the crisis.

Plea for Smart Analysis of What Works and What Doesn’t from the Mortgage and Real Estate Industries

by Pamela Marron

8 years ago, our current administration inherited a financial crisis that this country has not experienced anything close to since the Great Depression. When it occurred, it was visibly seen in the collapse of the housing market. Initially, problems were blamed on an unscrupulous mortgage broker industry until it was learned that the banking industry had an equal amount of blame.

Almost every loan originator I know was negatively impacted by the housing crisis. They were either losing their homes or their income and in many cases, both. All of us saw this coming but complacency set in after years, not months, of the housing market going up. Conversation slowly dissipated as the housing market heated up and more jumped in. But, when the crash happened, it was fast and mammoth.

Many of us are taking notice of similar signs again as we see housing values increase quicker than normal market appreciation. Flippers have become the norm and are challenged when appraised values don’t meet increased asking prices of homes. This time it can’t be blamed on the lending company. Even though the process can be frustrating, appraisals are now done by third-party appraisal management companies (AMC) who lenders and realtors have no communication with until after the appraisal is completed. Ultimately, this policy seems to have tempered an explosion of skyrocketing home values, requiring consistent data to go to an arms-length third party arbitrator who can change value when warranted.

Additionally, due to the qualified mortgage (QM) requirements put in place by the Consumer Financial Protection Bureau (CFPB), almost all sellable mortgage products no longer have prepayment penalties, negative amortization, balloons and interest only options. Prior to the housing crash, these negative options were mostly explained to consumers as “rare to happen” but ultimately became a main problem for so many homeowners who were negatively affected.

There’s still great anger at the current administration for policies put in place meant to protect the consumers and the housing market. Many say those measures went too far and stalled the progress of the housing market and ultimately added more cost to the entire mortgage process. Others say it could have been much worse if these safeguards were not put in place, and that the inconveniences placed upon our industry needs to be adapted to. Yes, policies can be streamlined. Yes, we have had to deal with unintended consequences not realized often until policy is in place. But the depth of problems that the housing industry faced during the last eight years was unprecedented. Drastic measures were necessary immediately to stop the bleeding.

I know that many in both mortgage and real estate industries have opposite views of the above. What is real is that over the last eight years, more people than ever realized had hardships never-before experienced that resulted in a downward spiral in their lives, and for their children, extended family and ultimately entire communities. To add to frustration, dealing with housing issues seemed to come to a standstill months before general elections, a topic that no political candidate wanted to touch.

Please don’t tell me this won’t happen again with this new administration. Instead, those of us in the mortgage and real estate industries need to make the time to speak to each other’s industries about what worked and what didn’t and to connect with agencies that can help when needed. Good practices need to be expanded on and policy that provides equal benefit to the mortgage industry and consumers must prevail. WE need to be the first stewards of our industries, and without prodding.

Pamela M. Marron, Florida Licensed Mortgage Broker NMLS#246438


mortgage crisis

When Frustration Hurts the Cause

By Pam Marron | November 2016 | for National Mortgage Professional Magazine

On May 19th, 2016, I was appointed to the 1st Housing Counseling Federal Advisory Committee (HCFAC) under HUD. This committee, consisting of 12 members from the mortgage, real estate, housing counseling industries as well as consumers, was formed by HUD to find better ways for HUD counseling to assist consumers with sustainable home ownership. Our first meeting was in Washington, D.C. this week.

While in Washington, a visit to the U.S. Treasury was made to talk about a government 2nd mortgage idea that might allow a refinance for 3.2 million negative equity homeowners who have conventional 1st mortgages not covered by Fannie Mae or Freddie Mac and for negative equity 2nd mortgages and home equity lines of credit (HELOC). The idea could provide a refinance where none exists for those who are current on their mortgage and struggle to stay put in negative equity homes. Many negative equity homeowners have resetting interest only loans and most are just looking for some relief to a lower, fully amortized interest rate that allows equity to build while values return.

At the HCFAC meeting, representatives of top housing agencies that assist homeowners assembled on panels in front of us throughout the day. It was tough to contain disappointment after learning that pre-foreclosure housing counseling funds were gone from the 2017 budget. The aftermath of the housing recession was brought up in multiple conversations and I felt compelled to bring up that we can’t forget the 6.7 million homeowners who still have negative equity in their homes. I was determined to make sure that these people who were in top agencies would know “it wasn’t over yet”. The cringe on the face of a panelist after letting him know that most lenders still required negative equity homeowners to go delinquent before help is provided signaled that this probably wasn’t the first time he had heard this.

Being the bearer of bad news wasn’t what I intended to relay, especially when the direction was shifting to helping consumers purchase homes again.

But, then it turned. One of the panelists was with the National Foundation for Credit Counseling (NFCC). He talked about credit, acknowledging where we had come from and that there was still work to do.

It was then that my greatest frustration was realized:  the lack of attention to damaging current loss mitigation policy that knowingly harms credit built over a lifetime…. credit that is the benchmark of the mortgage and real estate industry and the driver of our economy.

Most homeowners trying to stay in negative equity homes refuse to go delinquent on their mortgage just to get a modification, often their only option available. Five years of trying to expose current policy of most lenders that requires mortgage delinquency first before help is offered is still unbelievable to many. Policy that destroys credit of those already in trouble, that has long term negative consequences and that is affecting a growing number of elderly homeowners can be changed. Allowing for a solution that promotes keeping credit intact with sustainable refinancing can allow responsible homeowners with negative equity to stay put in homes while values return.

Realization occurred that the best agencies who can help were in this room, and that the day before the Treasury had given good news on the forefront and provided valuable information and more contacts that might be able to help. I realized that something very valuable that will come out of getting this HCFAC committee of twelve from four different sectors of housing together. It is also clear that our task will not be easy.

There is still more to be done. The Freddie Mac automated system is turning down past short sellers, reading the short sale credit as a foreclosure, even after the four-year wait needed to get a new mortgage. The fact that loan originators must pay for rapid rescores when helping eliminate disputed accounts on credit has prompted delays on mortgage closings and has resulted in a lack of loan originators wanting to help correct this credit. Finally, patience to wait until after this contentious election is over in order to push forward on getting problems resolved has been short.

But, for the first time in years, progress feels attainable. We are going in the right direction. Stay tuned.


Erroneous Foreclosure Code still results in Loan Denial for Past Short Sellers in Freddie Mac Loan Prospector(LP) for Conventional Loans

Loan originator is asking your assistance to share LP conventional mortgage “Caution” files of past short sellers that have passed the 4-year mark.

By Pam Marron   July 28, 2016
In August of 2014, Fannie Mae successfully implemented an automated system workaround that enabled lenders to correct conventional loan Refer/Ineligible findings when past short sale credit shows up as a foreclosure in the Desktop Underwriter or Originator. Freddie Mac’s Loan Prospector automated underwriting system never implemented a correction, and past short sale credit still results in a Loan Prospector “Caution”, or loan denial, for those trying to obtain a new conventional mortgage after a shortsale. The problem does not occur for government FHA and VA loans. Freddie Mac’s Caution findings commonly lists in the reasons for denial under Credit Risk Comments: “13. Recent foreclosure/signif derog appears on credit report”.
A Freddie Mac “Caution” denial requires a manual underwrite to overcome this error.  Lenders that will do a manual underwrite on either Freddie Mac or Fannie Mae conventional loan files are rare to find. The good news is that the credit repository(s) reporting the foreclosure is now able to be found and seen in raw data through credit reporting agencies.
This would not be of such great concern if the mortgage industry was not approaching the rollout of the new “Trended Credit Data” that will work with the Fannie Desktop automated system in Version 10.0 set to be implemented on September 24, 2016.
If there are any glitches in the DU 10.0 format, lenders will likely put their loans through the Freddie Mac Loan Prospector automated underwriting system. Because a work around was never implemented for Freddie Mac, past short sellers eligible for a new mortgage will receive an automated “Caution”, or a denial for a new mortgage.
When the problem of the “Caution” in Freddie Mac’s automated system is brought up, the response from Freddie Mac has been that their system has been corrected and problems are with individual files. This article was written to alert Freddie Mac that as more past short sellers become eligible to purchase a home again, we as lenders are experiencing the problem of the “Caution” denial of new conventional mortgages on all files that are conventional, and more often.
This is what we are finding. All files currently being entered into Loan Prospector for a conventional mortgage purchase where a past short sale exists in credit are receiving a “Caution”, even when the past short sale is past the four-year mark, the wait time required after a short sale for a new Freddie Mac conventional mortgage.
A few lenders have stated they have received an “Accept” for a past short seller on a conventional mortgage, but we have found that only loans submitted for an FHA or VA loan appear to receive an “Accept”. This is believed to be due to the fact that Total Scorecard, an additional credit mechanism found in both Fannie Mae and Freddie Mac, allows the loan to receive an Approve or Accept respectively through both systems but verification of the short sale account must be backed up with documentation proving a short sale rather than a foreclosure. Additionally, it was checked to see if the problem was due to specific credit reporting agencies. Thus far, multiple credit agency reports for the same borrower have resulted in the same denial.
Unfortunately, Freddie Mac Loan Prospector does not designate which account it is classified as a foreclosure. However, the repository(s) that reports the short sale as a foreclosure can be visually found in raw data of the three repositories, Experian, Trans Union and Equifax in the credit report. Lenders who want to specifically see this to distinguish the problem need to make sure they contact their credit reporting agency and ask for the MOP (method of payment) and a horizontal payment history grid to be available on their report. A screen shot of raw data may ultimately be needed if where the foreclosure code exists is not evident on the visual credit report.
Because of the concern that mortgage traffic will increase in Freddie Mac Loan Prospector if a problem arises in Version 10.0 of the Fannie Mae Desktop Underwriter with the introduction of Trended Data Credit, we are proactively and respectfully bringing this known problem of short sale credit that shows up as a foreclosure on conventional loans only again to Freddie Mac’s attention. If you are a loan originator or lender that encounters a “Caution” denial in the Freddie Mac Loan Prospector automated underwriting system for past short sellers trying to obtain a conventional mortgage, please contact Pam Marron at 727-375-8986 or email pam.m.marron@gmail.com.
To best prepare, make sure that you run past short seller files through both Fannie Mae Desktop Underwriter/Originator and Freddie Mac’s Loan Prospector automated underwriting systems upfront. Don’t wait until the final submission to underwriting.
Stay tuned!


What Could Drive Another Mortgage Crisis?

Continued Policy That Damages Credit of Responsible Homeowners and the Apathetic Reason Nothing is Done

By Pam Marron
For National Mortgage Professional Magazine | Sept. 2016 Issue
There is no refinance available for as many as 6.4 million negative equity homeowners who have a conventional first mortgage not backed by government sponsored enterprises (GSE) Fannie Mae or Freddie Mac, or a second mortgage or home equity line of credit (HELOC) that is “underwater”, where more is owed on the mortgage than the home is worth. Many of these mortgages are interest only loans that are now resetting to fully amortized payments with increases seen as high as 400%+. Simply, because these loans have negative equity, there is no refinance available to reduce initial higher interest rates from years ago. The only option for affected homeowners is a modification or a short sale and both require the homeowner to be delinquent on their mortgage first.
These homeowners struggle to “stay put” in negative equity homes awaiting home values to return. If this problem is not taken seriously, the result will be a new wave of short sales that will have a negative impact on the housing industry. It is already happening.
And this time it is affecting the elderly.
Caps placed on the maximum loan-to-value of non-GSE 1st mortgages and the combined loan to value when 2nd mortgages and HELOCs exist are what holds back a refinance for these specific negative equity loans. Compound this with the interest only reset of many of these loans, and the problem is disastrous.
For too long, there has been a lack of attention to a refinance where none exists for negative equity homeowners. Many believe these homeowners “did it to themselves” and massive press about short sellers labeling them as “strategic defaulters” (or those able to make payments but refuse to) was overshadowed by the fact that negative equity homeowners who worked with banks to short sell homes were told by their own lenders that they could not get approved for the short sale until they were delinquent on their mortgage first. This policy continues to this day for most lenders.
But since 2013, reports have proven that 1”ruthless” or “strategic” default during the 2007-09 recession were relatively rare. In a 22015 follow up of this study, job loss and adverse financial shocks in addition to divorce, large medical expenses and other severe income loss attributed greatly to mortgage default. Most importantly in this report… While household-level employment and financial shocks are important drivers of mortgage default, analysis shows that financially distressed households do not default. More than 80% of unemployed households with less than 1 month of mortgage payments in savings are current on their mortgage payments.
Disdain of reasons for why negative equity occurred is often the primary focus of apathetic attention to a refinance solution. Instead, focus should be on a sustainable refinance for those on time with their mortgage payment to assist them to “stay put” longer.
There is no argument of “moral hazard” or “strategic default” for a refinance option that allows responsible homeowners breathing room to stay put. When homeowners are not struggling to make their payments, they keep up homes which increases the value of our communities.
We can continue to think that the negative equity problem has gone away in the United States but it has not.  More calls are coming in from elderly with no chance of increase in their income. Many of them did a refinance or a second mortgage to help other family members but are now stuck themselves. The reason for a refinance should not matter. And we shouldn’t require affected homeowners to be delinquent on their mortgage first causing a destruction of good credit that results in negative unintended consequences for future credit.
Instead, we should be questioning how we can stabilize areas where negative equity still exists.
There are solutions available with existing mortgage programs now. A white paper entitled “Urgent Attention Needed: Two Problems and Solutions That Exist for Responsible Homeowners Who Have Negative Equity in Their Homes” that provides U.S. and Florida data showing how many negative equity homeowners can be helped is at http://housingcrisisstories.com/wp-content/uploads/2016/07/Urgent.pdf.

1 Unemployment, Negative Equity, and Strategic Default | August 2013 |Federal Reserve Bank of Atlanta | http://www.urban.org/sites/default/files/gerardi-kerkenhoff-ohanian-willen-strategic-default.pdf 2  Can’t Pay or Won’t Pay? Unemployment, Negative Equity, and Strategic Default | Sept. 21, 2015 | https://www.bostonfed.org/publications/research-department-working-paper/2015/cant-pay-or-wont-payunemployment-negative-equity-and-strategic-default.aspx


Feds Plan to Sue Moody’s Over Pre-2008 Securities Ratings

, as published on National Mortgage Professional.com

Friday, October 21, 2016 – 15:07

Moody’s Corp. has announced that the U.S. Department of Justice (DOJ) is planning to bring a civil complaint that charges the company with violating the Financial Institutions Reform, Recovery and Enforcement Act for its rating of residential mortgage-backed securities and collateralized debt obligations in the period before the 2008 financial crash.

According to a Bloomberg report, Moody’s revealed that it was informed of the DOJ’s plans in a September 29 letter from the department. Moody’s added that an unspecified number of state attorneys general may pursue similar claims, adding that the governmental probes into the case “remains ongoing and may expand to include additional theories.”
The DOJ offered no public comment on the report. Last year, another credit ratings agency, S&P, paid $1.5 billion to settle federal charges accusing it of improper ratings prior to the 2008 crash. S&P added that it accepted the settlement rather than deal with the “delay, uncertainty, inconvenience, and expense” of litigation.

Yellen Raises the Possibility of a “High-Pressure” Economy

from National Mortgage Professional Magazine, Friday, October 14, 2016

Federal Reserve Chairwoman Janet Yellen took a dramatic departure from her usual talking points to wonder aloud if a “high-pressure” economy would be able to erase the lingering economic wreckage created by the 2008 crash.

According to a Reuters report, Yellen used a speech today before an economics conference to outline potential solutions to the continued problems that have prevented a complete recovery from the last recession. Yellen stated whether a fix could be achieved “by temporarily running a ‘high-pressure economy,’ with robust aggregate demand and a tight labor market. One can certainly identify plausible ways in which this might occur. Increased business sales would almost certainly raise the productive capacity of the economy by encouraging additional capital spending, especially if accompanied by reduced uncertainty about future prospects. In addition, a tight labor market might draw in potential workers who would otherwise sit on the sidelines and encourage job-to-job transitions that could also lead to more efficient—and, hence, more productive—job matches. Finally, albeit more speculatively, strong demand could potentially yield significant productivity.”

Yellen did not speculate on what this scenario would mean for the housing market, which has seen home prices rising far ahead of wages. Nor did she address what has become the new guessing game in economic political circles: when will the Fed start to raise interest rates with greater regularity? Instead, her comments pointed to a new toolbox that central bankers would be able to use in the event that the 2008 situation were to happen again.

“If strong economic conditions can partially reverse supply-side damage after it has occurred, then policymakers may want to aim at being more accommodative during recoveries than would be called for under the traditional view that supply is largely independent of demand,” Yellen said, adding that it would “make it even more important for policymakers to act quickly and aggressively in response to a recession, because doing so would help to reduce the depth and persistence of the downturn.”


Even if Refinancing Looks Like a No-Brainer…

from MortgageNewsDaily.com, Sep 28 2016, 12:27PM

Why are so many people holding on to mortgages with high interest rates?  Sentiment? Inertia?

Apparently not.  In the current issue of CoreLogic’s MarketPulse, Principal Economist Molly Boesel drills down into the universe of borrowers who are standing fast with their old loans, even though it looks on paper like a refinance would be a smart move.  She finds that many of these borrowers haven’t refinanced either because they can’t or it really isn’t worth it.

Looking at the mortgages that were outstanding at the end of May, Boesel found that 41 percent of them representing 31 percent of unpaid principal balance (UPB) had mortgage rates greater than 4.38 percent, roughly 100 basis points higher than the current rates at that juncture and a point at which refinancing makes financial sense.  Eighteen percent of all mortgages (representing 17 percent of UPB) have rates between 4.38 and 5.0 percent, and 23 percent have rates over 5 percent.  Why wouldn’t these borrowers refinance?

First she found that a lot of them are currently seriously delinquent on their existing loans. While only about 2 percent of low interest rate mortgages (under 5 percent) are seriously delinquent, 12 percent of those with rates above 7 percent are 90 or more days past due and would be unlikely to qualify for a new mortgage.

 

Even current mortgages with high rates present a difficult credit profile.  Between 30 and 50 percent of loans with rates over 5 percent have at some point had a 30-day delinquency.  The incidence rises with the rate.  Only about 11 percent of those with rates below 5 percent have at some point been 30 days overdue.  Those “ever late” borrowers may not be able to qualify for a low enough rate to make refinancing attractive.

 

 

Boesel also removed mortgages in private-label securities from the list of refinancable borrowers because they would not be eligible for HARP loans that are reserved for refinancing Fannie Mae and Freddie Mac loans.

After taking the currently delinquent, ever delinquent, and private label loans out of the mix she found that the share of loans with interest rates greater than 5 percent had fallen to 13 percent of those outstanding and to 7 percent of UPB.  And that latter number is the final piece of the puzzle.

 

 

Small outstanding balances may not be worth refinancing as the resulting savings would be low. The figure above shows the average UPB of outstanding mortgages that have never been delinquent and are not in private pools by their interest rate.  Those borrowers with rates above 5% have very low UPB; those above 7 percent have average balances of $53,000.

While mortgages rates are near historic loans, Boesel concludes, there may not be many borrowers left who have the incentive or are eligible to refinance.



Wages Lag Home Prices; Affordability Suffers

from Mortgage News Daily, Sep 29 2016, 12:57PM

The lack of housing affordability is rising among the 414 U.S. counties tracked by ATTOM Data Solutions.  ATTOM, the new parent company of RealtyTrac, said on Thursday that 24 percent of those counties were less affordable than their historic averages in the third quarter of 2016, up from 22 percent in the second quarter and 19 percent a year earlier.  It was the highest share for this metric since the third quarter of 2009 when 47 percent of markets had fallen below their historic affordability averages.

ATTOM reports that 101 of the 414 counties had an affordability index below 100 in the third quarter of 2016, meaning that buying a median-priced home in that county was less affordable than the historic average for that county going back to the first quarter of 2005.

ATTOM’s affordability index is based on the percentage of average wages (taken from the U.S. Bureau of Labor Statistics) that is needed to make monthly house payments on a median priced home (as determined from publicly recorded sales deeds.) That payment is composed of principle, interest on a 30-year fixed rate mortgage with a 3 percent downpayment and including property taxes, and insurance.

“The improving affordability trend we noted in our second quarter report reversed course in the third quarter as home price appreciation accelerated in the majority of markets and wage growth slowed in the majority of local markets as well as nationwide, where average weekly wages declined in the first quarter of this year following 13 consecutive quarters with year-over-year increases,” said Daren Blomquist, senior vice president at ATTOM Data Solutions. “This unhealthy combination resulted in worsening affordability in 63 percent of markets despite mortgage rates that are down 45 basis points from a year ago.

 

 

Counties that were less affordable than their historic averages in Q3 included Harris County (Houston), Kings County (Brooklyn); Dallas County; Bexar County (San Antonio); and Alameda County in the San Francisco metro area.

Counties still affordable by historic standards included Los Angeles County, Cook County (Chicago); Maricopa County (Phoenix); Miami-Dade County; and Queens County, New York.

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The Problem with Credit Report Disputes

By Pam Marron

Written for National Mortgage Professional Magazine, September 26, 2016

Many past short-sellers attempting to purchase a home are told that their short sale credit shows up as a foreclosure in the Fannie Mae and Freddie Mac automated underwriting systems. Many of these affected consumers then dispute this credit or employ a credit repair company to do so. Thus, it is not uncommon to see a credit dispute on past short sale credit.

The problem with credit disputes is that they are often a temporary fix. When a credit account is disputed, the creditor is given a 30-day timeframe to respond to the dispute. If the creditor does not respond, the disputed information is taken off the credit. However, the comment “account in dispute” appears on that credit line. Dispute comments make the affected account invisible to both Fannie Mae and Freddie Mac automated underwriting systems (AUS) causing the findings to be inaccurate. This is why underwriters require that dispute comments must be deleted from the credit report before an accurate response can be provided through the Fannie Mae or Freddie Mac automated underwriting systems.

When the dispute is lifted, the past negative credit appears again.

Your borrower can request that the dispute is deleted from their account themselves but the timeframe to get this done start to finish can take up to 50 days. Often, there is a signed purchase contract that is time sensitive. Instead of having the luxury of time, a costly Rapid Rescore must be done to get the dispute comments deleted quickly. And loan originators, YOU must pay for this Rapid Rescore.

It gets worse. On a Rapid Rescore, deleting dispute comments from a negative credit account usually results in a lower credit score.

If There is Time for Borrower to Handle Deleting Dispute Comments Directly with Creditor and Credit Bureaus

  1. Loan Originators: Check every credit report for dispute comments prior to application. If dispute comments exist, start working to delete these remarks immediately and allow for a closing date that gives enough time.
  2. Make sure your borrower has the name and account number of the disputed account creditor. Have the borrower contact the creditor directly to request deletion of dispute remarks. Depending on the dispute comments, deletion can take 24 hours to 30 days.
  3. Make sure that your borrower states and puts in writing if necessary that no other parties can provide a new dispute notice.
  4. Have your borrower contact the creditor 5 days later to insure the dispute has been taken off and have them retrieve a letter with contact information for verification purposes.
    • This letter can be used to send to the credit bureau to order a *Rapid Rescore, where corrected information is merged into a new credit report at a cost and produced within 2-5 days. The timeframe of getting this correction on a new credit report without using Rapid Rescore is 30-45 days after the creditor initiates the deletion.
  5. Once the creditor has confirmed that the dispute comments have been removed, have your borrower contact the live agent at the Dispute Department for each of the 3 credit bureaus and ask them to remove the dispute comments. Ask each credit bureau if a request to delete a dispute must be requested in writing or if this can be done over the phone. (This can vary depending on the status of the dispute.) If a letter is needed, the borrower will have retrieved this from the creditor.
    • TransUnion: 800-916-8800
    • Experian: 800-493-1058
    • Equifax: 877-322-8228
  6. Pull a new credit report 35 days after the borrower has requested that the dispute comments be deleted by the creditor. If dispute comments still show up, wait another 10 days and repull credit.
  7. When the new credit report with deleted dispute comment comes in, check the credit score, make sure the loan still fits within program guidelines and run through Fannie Mae or Freddie Mac automated underwriting system.

Retrieving the Credit Report with a 2-5 Day *Rapid Rescore Through a Credit Reporting Agency

A new credit report can commonly be updated in 2-5 business days using *Rapid Rescore. You, the loan originator will have to pay for this.

  1. Each credit reporting agency (CRA) has a link to 1) TransUnion, 2) Equifax and 3) Experian for each account on the credit report that allows you to see “which bureau” specifically has the dispute comment noted.
  2. Complete the generic form for your CRA to order the deletion of dispute remarks for only those bureaus that show the dispute through a *Rapid Rescore for each borrower connected to the dispute account and who is on the new mortgage.
  3. When the new credit report is done, follow step 7 above.

FHFA Announces New Streamlined Refinance Offering for High LTV Borrowers: HARP Extended through September 2017

8/25/2016

Washington, D.C. – The Federal Housing Finance Agency (FHFA) today announced that Fannie Mae and Freddie Mac (the Enterprises), at FHFA’s direction, will implement a new refinance offering aimed at borrowers with high loan-to-value (LTV) ratios.  The new refinance offering will provide much-needed liquidity for borrowers who are current on their mortgage but are unable to refinance through traditional programs because their LTV ratio exceeds the Enterprises’ maximum limits.

“Providing a sustainable refinance opportunity for high LTV borrowers who have demonstrated responsibility by remaining current on their mortgage makes financial sense both for borrowers and for the Enterprises,” said FHFA Director Melvin L. Watt.  “This new offering will give borrowers the opportunity to refinance when rates are low, making their mortgages more affordable and thus reducing credit risk exposure for Fannie Mae and Freddie Mac.”

Eligibility

In order to qualify for the new offering, borrowers: (1) must not have missed any mortgage payments in the previous six months; (2) must not have missed more than one payment in the previous 12 months; (3) must have a source of income; and (4) must receive a benefit from the refinance such as a reduction in their monthly mortgage payment.  Full details will be available in the coming months through the Enterprises, but the offering will make use of the lessons learned from the Home Affordable Refinance Program (HARP) and its streamlined approach to refinancing.

Read more


mortgage crisis

What Could Drive Another Mortgage Crisis?

Continued Policy That Damages Credit of Responsible Homeowners and the Apathetic Reason Nothing is Done

By Pam Marron, for National Mortgage Professional Magazine | Sept. 2016 Issue

There is no refinance available for as many as 6.4 million negative equity homeowners who have a conventional first mortgage not backed by government sponsored enterprises (GSE) Fannie Mae or Freddie Mac, or a second mortgage or home equity line of credit (HELOC) that is “underwater”, where more is owed on the mortgage than the home is worth. Many of these mortgages are interest only loans that are now resetting to fully amortized payments with increases seen as high as 400%+. Simply, because these loans have negative equity, there is no refinance available to reduce initial higher interest rates from years ago. The only option for affected homeowners is a modification or a short sale and both require the homeowner to be delinquent on their mortgage first.

These homeowners struggle to “stay put” in negative equity homes awaiting home values to return. If this problem is not taken seriously, the result will be a new wave of short sales that will have a negative impact on the housing industry. It is already happening.

And this time it is affecting the elderly.

Caps placed on the maximum loan-to-value of non-GSE 1st mortgages and the combined loan to value when 2nd mortgages and HELOCs exist are what holds back a refinance for these specific negative equity loans. Compound this with the interest only reset of many of these loans, and the problem is disastrous.

For too long, there has been a lack of attention to a refinance where none exists for negative equity homeowners. Many believe these homeowners “did it to themselves” and massive press about short sellers labeling them as “strategic defaulters” (or those able to make payments but refuse to) was overshadowed by the fact that negative equity homeowners who worked with banks to short sell homes were told by their own lenders that they could not get approved for the short sale until they were delinquent on their mortgage first. This policy continues to this day for most lenders.

But since 2013, reports have proven that [1]”ruthless” or “strategic” default during the 2007-09 recession were relatively rare. In a [2]2015 follow up of this study, job loss and adverse financial shocks in addition to divorce, large medical expenses and other severe income loss attributed greatly to mortgage default. Most importantly in this report… While household-level employment and financial shocks are important drivers of mortgage default, analysis shows that financially distressed households do not default. More than 80% of unemployed households with less than 1 month of mortgage payments in savings are current on their mortgage payments.

Disdain of reasons for why negative equity occurred is often the primary focus of apathetic attention to a refinance solution. Instead, focus should be on a sustainable refinance for those on time with their mortgage payment to assist them to “stay put” longer.

There is no argument of “moral hazard” or “strategic default” for a refinance option that allows responsible homeowners breathing room to stay put. When homeowners are not struggling to make their payments, they keep up homes which increases the value of our communities.

We can continue to think that the negative equity problem has gone away in the United States but it has not.  More calls are coming in from elderly with no chance of increase in their income. Many of them did a refinance or a second mortgage to help other family members but are now stuck themselves. The reason for a refinance should not matter. And we shouldn’t require affected homeowners to be delinquent on their mortgage first causing a destruction of good credit that results in negative unintended consequences for future credit.

Instead, we should be questioning how we can stabilize areas where negative equity still exists.

There are solutions available with existing mortgage programs now. A white paper entitled “Urgent Attention Needed: Two Problems and Solutions That Exist for Responsible Homeowners Who Have Negative Equity in Their Homes” that provides U.S. and Florida data showing how many negative equity homeowners can be helped is at http://housingcrisisstories.com/wp-content/uploads/2016/07/Urgent.pdf.

 

[1] Unemployment, Negative Equity, and Strategic Default | August 2013 |Federal Reserve Bank of Atlanta | http://www.urban.org/sites/default/files/gerardi-kerkenhoff-ohanian-willen-strategic-default.pdf

[2]  Can’t Pay or Won’t Pay? Unemployment, Negative Equity, and Strategic Default | Sept. 21, 2015 | https://www.bostonfed.org/publications/research-department-working-paper/2015/cant-pay-or-wont-pay-unemployment-negative-equity-and-strategic-default.aspx


HARP to Form ‘Bridge’ to New Refi Option in ’17, FHFA Says

By
from National Mortgage News

The Federal Housing Finance Agency said Thursday the Home Affordable Refinancing Program will be extended an additional year, and also announced a new refinancing opportunity specifically for borrowers with high loan-to-value ratios.

FHFA, which regulates Fannie Mae and Freddie Mac, said the two government-sponsored enterprises will roll out the new refinancing program in October 2017. It will be more targeted than HARP, the agency said, and will focus on borrowers whose LTV ratios are higher than the GSEs’ allowable limits. Standard Fannie and Freddie refinancing programs don’t allow refinancing for LTVs above 97%.

“Providing a sustainable refinance opportunity for high LTV borrowers who have demonstrated responsibility by remaining current on their mortgage makes financial sense both for borrowers and for the enterprises,” said FHFA director Mel Watt in a press release.

But the agency added that extending HARP through Sept. 30, 2017 will provide a “bridge” for high LTV borrowers to seek a refinancing option before the new program is fully implemented.

The HARP program has allowed 3.4 million borrowers to refinance their loans, taking advantage of lower mortgage rates and reducing their monthly payments. HARP was first introduced in April 2009 by former acting FHFA Director Edward DeMarco.

Once the HARP program expires, the new high LTV program will continue to provide underwater homeowners who are current on their payments a refinancing option. To qualify for the new program, the FHFA said, borrowers cannot have missed a mortgage payment in the previous six months or more than one payment in the previous year. They must have a source of income and the refinancing must result in a benefit such as a reduced monthly payment. FHFA will provide more details about the new refinancing option in the coming months, according to the press release.

“This new offering will give borrowers the opportunity to refinance when rates are low, making their mortgages more affordable and thus reducing credit risk exposure for Fannie Mae and Freddie Mac,” Watt said.

Only 38,300 borrowers refinanced through HARP in the first half of 2016. In 2015, HARP refis totaled 110,111, down from 212,489 in 2014.

 


Prevent the next Housing Crisis

How to Prevent the Next Housing Crisis

By Staff KnowledgeWharton – from The Fiscal Times

Loan Delinquency Rate Up, Potential Home Sales Improve

by Phil Hall, August 22, 2016 as published on National Mortgage Professional Magazine

The week is getting off to a bit of a decent start, at least in terms of the latest housing market data.

Black Knight Financial Services’ “first look” at July’s mortgage environment has determined that the U.S. home loan delinquency rate rose 4.78 percent from June, although it is down 3.38 percent from July 2015. There were more solid numbers regarding foreclosure starts—61,300 in July, down 11.54 percent from June and down 14.27 percent from a year ago—and on the total pre-sale foreclosure inventory—1.09 percent, down 1.68 percent from the previous month and down a significant 28.36 percent from one year earlier.

However, the number of properties that are 30 or more days past due but not in foreclosure reached nearly 2.3 million, up 108,000 from June but down 70,000 from July 2015.

Separately, First American Financial Corp.’s proprietary Potential Home Sales model determined that the market for existing-home sales underperformed its potential in July by 1.3 percent or an estimated 92,000 seasonally adjusted, annualized rate (SAAR) of sales. This an improvement over June’s revised under-performance gap of 1.8 percent, or 104,000 (SAAR) sales. First American also reported that the market potential for existing-home sales grew last month by 0.15 percent compared to June, an increase of 8,000 (SAAR) sales, and increased by 5.4 percent compared to a year ago.

However, Mark Fleming, chief economist at First American, noted that a thorny problem that has bedeviled the housing recovery is showing no signs of abating.

“Low inventories still remain an issue, dropping to a 4.6-month supply, down from the 4.7-month supply seen in April and May, and from the 4.9-month supply of June 2015,” he said. “The constrained supply in this sellers’ market continues to frustrate potential homebuyers and adds further upward pressure to nominal home prices, which rose an estimated five percent year-over-year in May, according to the Case-Shiller House Price Index.”


More than 10% of Homeowners Still Underwater: Zillow

By

The share of homeowners who owe more than their house is worth remains above 10% nationwide, according to data from Zillow’s second quarter Negative Equity Report.

Zillow said Thursday that 12.1% of homeowners with a mortgage are underwater, which is down from 12.7% in the previous quarter and from 14.4% a year ago.

read more…


Erroneous Foreclosure Code Still Results in Loan Denial for Past Short Sellers in Freddie Mac Loan Prospector(LP) for Conventional Loans

Loan originator is asking your assistance to share LP conventional mortgage “Caution” files of past short sellers that have passed the 4-year mark.

In August of 2014, Fannie Mae successfully implemented an automated system workaround that enabled lenders to correct conventional loan Refer/Ineligible findings when past short sale credit shows up as a foreclosure in the Desktop Underwriter or Originator. Freddie Mac’s Loan Prospector automated underwriting system never implemented a correction, and past short sale credit still results in a Loan Prospector “Caution”, or loan denial, for those trying to obtain a new conventional mortgage after a shortsale. The problem does not occur for government FHA and VA loans. Freddie Mac’s Caution findings commonly lists in the reasons for denial under Credit Risk Comments: “13. Recent foreclosure/signif derog appears on credit report”.

A Freddie Mac “Caution” denial requires a manual underwrite to overcome this error.  Lenders that will do a manual underwrite on either Freddie Mac or Fannie Mae conventional loan files are rare to find. The good news is that the credit repository(s) reporting the foreclosure is now able to be found and seen in raw data through credit reporting agencies.

This would not be of such great concern if the mortgage industry was not approaching the rollout of the new “Trended Credit Data” that will work with the Fannie Desktop automated system in Version 10.0 set to be implemented on September 24, 2016.

If there are any glitches in the DU 10.0 format, lenders will likely put their loans through the Freddie Mac Loan Prospector automated underwriting system. Because a work around was never implemented for Freddie Mac, past short sellers eligible for a new mortgage will receive an automated “Caution”, or a denial for a new mortgage.

When the problem of the “Caution” in Freddie Mac’s automated system is brought up, the response from Freddie Mac has been that their system has been corrected and problems are with individual files. This article was written to alert Freddie Mac that as more past short sellers become eligible to purchase a home again, we as lenders are experiencing the problem of the “Caution” denial of new conventional mortgages on all files that are conventional, and more often.

This is what we are finding. All files currently being entered into Loan Prospector for a conventional mortgage purchase where a past short sale exists in credit are receiving a “Caution”, even when the past short sale is past the four-year mark, the wait time required after a short sale for a new Freddie Mac conventional mortgage.

A few lenders have stated they have received an “Accept” for a past short seller on a conventional mortgage, but we have found that only loans submitted for an FHA or VA loan appear to receive an “Accept”. This is believed to be due to the fact that Total Scorecard, an additional credit mechanism found in both Fannie Mae and Freddie Mac, allows the loan to receive an Approve or Accept respectively through both systems but verification of the short sale account must be backed up with documentation proving a short sale rather than a foreclosure.

Additionally, it was checked to see if the problem was due to specific credit reporting agencies. Thus far, multiple credit agency reports for the same borrower have resulted in the same denial.

Unfortunately, Freddie Mac Loan Prospector does not designate which account it is classified as a foreclosure. However, the repository(s) that reports the short sale as a foreclosure can be visually found in raw data of the three repositories, Experian, Trans Union and Equifax in the credit report. Lenders who want to specifically see this to distinguish the problem need to make sure they contact their credit reporting agency and ask for the MOP (method of payment) and a horizontal payment history grid to be available on their report. A screen shot of raw data may ultimately be needed if where the foreclosure code exists is not evident on the visual credit report.

Because of the concern that mortgage traffic will increase in Freddie Mac Loan Prospector if a problem arises in Version 10.0 of the Fannie Mae Desktop Underwriter with the introduction of Trended Data Credit, we are proactively and respectfully bringing this known problem of short sale credit that shows up as a foreclosure on conventional loans only again to Freddie Mac’s attention. If you are a loan originator or lender that encounters a “Caution” denial in the Freddie Mac Loan Prospector automated underwriting system for past short sellers trying to obtain a conventional mortgage, please contact Pam Marron at 727-375-8986 or email pam.m.marron@gmail.com.

To best prepare, make sure that you run past short seller files through both Fannie Mae Desktop Underwriter/Originator and Freddie Mac’s Loan Prospector automated underwriting systems upfront. Don’t wait until the final submission to underwriting.

Stay tuned.


Democrat vs republican

Clinton vs. Trump: Different visions for housing finance

By Victor Whitman, Reprinted from the Scotsman Guide

Republicans and Democrats have approved party platforms with fundamentally different views on the role of government in housing and housing finance. As the presidential election shifts into high gear, we’ve looked at what both parties and the presidential candidates have to say about the future role of government in housing finance.

Republicans

The Republican platform makes the case for cutting regulations and the government’s role in housing. The document sharply criticizes the sweeping financial reforms under Dodd-Frank, calling the 2010 law the Democrats “legislative Godzilla” that is “crushing small and community banks and other lenders.” It also singles out the consumer watchdog agency created by Dodd-Frank, the Consumer Financial Protection Bureau (CFPB). According to the Republican platform, the CFPB is “a rogue agency” that if “not abolished, it should be subjected to congressional appropriation.”

Republicans also directly blame the government-sponsored enterprises Fannie Mae and Freddie Mac for sparking the 2008 housing crisis.

continue reading here


Payment Reductions Should Continue After HAMP Expires: Regulators

By Brian Collins, from National Mortgage News
July 25, 2016

Federal regulators warned mortgage servicers Monday that they will still expect them to offer loan modifications to distressed homeowners even after the Home Affordable Modification Program expires at year-end.

Continue reading…


Democratic Platform Shifts from Post-Crisis Recovery to Housing Access

By Bonnie Sinnock, from National Mortgage News
July 25, 2016

Democrats will adopt a party platform this week that omits most references to a need for continued post-housing crisis reforms, and instead focuses on expanding access to mortgage credit and support for industry regulation.

Continue reading…


Refinance Sought for Millions Trying to Remain in Underwater Homes

Pete Smith, an underwater homeowner in Chicago, Ill., is frustrated by the only option available for homeowners who have negative equity on their second mortgage.

“I’ve tried to find a refinance option, a modification option, and the only advice that my lender has given me is to go delinquent,” said Smith. “They claim that as long as I pay on time, I have no option as far as a modification with them.”

This same response is heard again and again by homeowners with these three types of negative equity mortgages:

1. Portfolio conventional first mortgages (non-Fannie Mae and non-Freddie Mac)

2. Second mortgages

3. Home equity lines of credit (HELOCs)

A refinance is what many of these folks are looking for to stay put in underwater homes, where the mortgage is greater than the value of the home. Most are stunned to find that the only option available is not a refinance, but a modification that requires mortgage delinquency first and proof of hardship.

Affected homeowners with these three mortgages are either still living with initial, higher interest rates from years ago, or their loans may be interest-only and are now resetting to fully-amortized, higher payments. Underwater elderly homeowners on fixed incomes are most at-risk and struggle to pay the steep increase when the interest-only payment changes to a fully amortized payment.

The difference between a refinance and a modification
A refinance allows underwater mortgage holders to stay current on their payment and take advantage of today’s lower rates, enabling homeowners to stay put and avoid a short sale.

A modification requires mortgage delinquency, resulting in the inability to get future credit, prolonged time-frames in order to get a refinance or a new mortgage, and the possibility of erroneous foreclosure codes on their credit when delinquent mortgage payments go past 120 days late. If the underwater homeowner must ultimately short sell the home, they often pay higher rent due to damaged credit as a result of the required mortgage delinquency required to modify.

A modification also requires proof of hardship. Underwater homeowners seeking a refinance may not be experiencing a defined hardship and are most often told they cannot receive help unless they are delinquent on their mortgage.

How a refinance can be done
Putting two finance programs in place at the same time is key to how this refinance can be accomplished.

Using government entity funds as a new, replacement second mortgage; and combining these funds with five existing mortgages, can provide a refinance for second mortgages and HELOCs, and can accommodate a restructure of funds to allow an FHA Short Refinance to replace an underwater portfolio conventional first mortgage.

The combination of government entity funds with these mortgages allows for an unlimited combined loan-to-value (CLTV) of the first and secondary loans together, a replacement refinance of the secondary loans, and the availability of a new refinance for the portfolio conventional first mortgage.

These five existing first mortgage programs are:

1. Fannie Mae DU Refi-Plus Home Affordable Refinance Program (HARP): For negative equity Fannie Mae first mortgage. No maximum loan-to-value (LTV) or CLTV.

2. Freddie Mac Relief Refinance Open Access (HARP): For negative equity Freddie Mac first mortgage. No maximum LTV or CLTV.

3. FHA Short Refinance: Available for negative equity non-FHA mortgages, the new loan’s maximum LTV ratio is 97.75 percent of the current property value and the maximum CLTV is 115 percent of the current property value. However, there is no maximum CLTV ratio for second loans held by government entities or instrumentalities of government.

4. FHA Streamline Refinance: Available for negative equity FHA mortgages.

5. VA Interest Rate Reduction Refinance Loan (IRRRL): Available for negative equity VA mortgages.

Note: the USDA Refinance was also researched. Their correspondence directs the homeowner to the specific lender who is responsible for servicing their loan.

Strategic default concerns do not exist when underwater homeowners are trying to stay put in homes. A large number of the 6.4 million underwater homeowners that still exist throughout the U.S. have the three types of loans where no refinance exists. Most of these homeowners are simply trying to stay put in their home seeking a sustainable refinance option to better rates that does not require mortgage delinquency first.

Because there are still so many seeking sustainable payments and program expiration deadlines are looming, diligent effort is being made to work on solutions with current programs available … stay tuned.


Urgent Attention Needed. Two Problems and Solutions That Exist for Negative Equity Homeowners

Let’s Work Together to Fix the Problems Now

Restructured and Refinanced: There is a way to use government entity funds as a new 2nd mortgage and combine these funds with six existing refinance programs to provide a refinance where none exists for millions of responsible, currently paying homeowners who have negative equity mortgages. The benefit? Credit stays intact, homeowners “stay put” in homes while equity escalates and communities recover.

There are over four million homeowners across the U.S. who are still trapped in their current location because they have no refinance option for a first mortgage, a second mortgage, or a Home Equity Line of Credit (HELOC). Over 454,000 of them live in Florida alone!

These are often people who are hanging on by a thread, but through no fault of their own, have no option for a refinance. Currently the only option available requires mortgage delinquency and proof of hardship to achieve a loan modification. We must provide solutions that do not destroy the credit of those with negative equity.

Unless we provide a solution, there will be another wave of defaulted mortgages. These are not people looking for a handout. They desperately want to keep their credit intact, but no option currently exists to let them do so. The solutions presented in this report simply restructure current debt with available programs to allow the homeowners to stay in their home while staying current on their mortgage.

Solutions to lift these homeowners out of negative equity are already available. We need to get our legislators and leaders on-board now because three of the options will expire in December, 2016.

Read the entire report! Click the button below to download it and start reading now. Comments are welcome.


Post-Foreclosure Consumers Are Ready to Rejoin Economy

From Bloomberg News, July 7, 2016

Millions of Americans lost their homes to foreclosures or short sales during the housing crisis. Fortunately for the economy, time heals most wounds — and credit reports.

The number of people joining the rolls of those knocked from homeownership peaked seven years ago, so those blotches to their histories are starting to roll off the books right about now. The resulting improvement in credit scores means more Americans will find themselves with the ability and means to once again apply for loans, and not just for home purchases.

“Improving credit scores might entice households to start borrowing more in general,” said Ralph McLaughlin, chief economist at real estate search engine Trulia. And what better time than now, when interest rates are so low.

That, combined with sustained gains in employment and bigger increases in pay, could give consumer spending, which accounts for almost 70% of the U.S. economy, an added lift over the next couple of years. The impact, though, is hard to quantify because it’s difficult to estimate how many people will once again be emboldened to borrow after experiencing such a shock, said Jacob Oubina, a senior U.S. economist at RBC Capital Markets in New York.

read more…


Underwater Homeowners are Still Looking for a Lifeline

(from the Scotsman Guide)

The housing crisis seemed to start overnight in many parts of the country, going from good sales in December 2006 to no sales abruptly a few months later, when the bottom started to fall out.

Many of those most affected by the crisis were elderly underwater homeowners who got into trouble after pursuing refinances that were often done for the purpose of helping their kids. Although the elderly are commonly more cautious when it comes to home financing, a large number mortgaged their homes with risky interest-only first and second loans — convinced by their lenders or their own children that these loans would be paid back with escalating equity fueled by rising home appreciation.

Read More Here


Candidates Need to Focus on Housing Affordability: Survey

By

Nearly two-thirds of Americans think that something can be done to address problems related to housing affordability — and they want the presidential candidates to talk about it.

Sixty-three percent of adults believe that candidates for president have not spent enough time discussing housing affordability, according to the fourth annual How Housing Matters survey released Thursday from the John D. and Catherine T. MacArthur Foundation. The survey also found that 81% of adults believe that housing affordability is a problem in America today.

And results from the survey suggest that Americans’ optimism toward the economy’s recovery from the financial crisis is waning. This year, 29% of adults said that they felt “the housing crisis is pretty much over,” down six percentage points from a year ago. In contrast, 44% believe the country is still in the midst of the housing crisis, and 19% said the worst is yet to come.

Meanwhile, having stable, affordable housing tied for second with saving for retirement as being very important for maintaining “a secure, middle-class lifestyle,” with 85% of respondents. Having a good job came in first with 90% of survey takers.

Unsurprisingly then, most respondents think more can be done politically, with 76% saying it is either very or fairly important for leaders in Washington to address the issue of housing affordability.

Democrats and independents were more likely than Republicans to say that the 2016 presidential candidates have not focused enough attention on the subject, with 75% of Democrats and 66% of independents saying this versus just 49% of Republicans, according the MacArthur Foundation’s report.


Over 20% Say Housing Will Affect Their Choice for President

by Jacob Passer, National Mortgage News – June 22, 2016

More than one in five Americans say the presidential candidates’ policies on housing and finance will shape their vote in November, according to the results of a survey conducted for loanDepot.

Altogether, 21% of survey respondents said that these policies will influence their choice of candidate, loanDepot reported Wednesday. But 36% of survey-takers said that the presidential candidates are not articulating their policies in these areas well.

Nevertheless, folks across the country are hungry for more: 35% of respondents said they want to hear more from the candidates on housing and finance, and that figure rose to 56% for Democrats and 39% for Republicans.

“People across the nation told us they want to hear more from the presidential candidates about their housing and financial policies on issues like income, access to credit, interest rates and affordable housing,” loanDepot Chairman and Chief Executive Anthony Hsieh said in the release.

“The candidate who does a good job in communicating their policies moving forward has an opportunity to influence millions of potential voters.”

Regarding the next president’s first 100 days in office, 37% of respondents said increasing the affordability of homeownership for lower- and middle-income families ranked as the top economic or housing priority to be addressed. Next was keeping interest rates low, 34%, and increasing the availability of credit to small businesses, 11%.

Nearly half of both Democrats and Republicans also responded that they wanted interest rates to remain low during the first 100 days of the next president’s term.

As for voters’ expectations of how the next president would affect their financial situation, 66% said they expected their situation to remain the same while 24% believe they will be worse off. Just 6% of voters expect the next president to improve their financial situation.

But loanDepot noted in the survey that voters’ perceptions don’t always align with reality. Case in point: 38% of respondents said they think it is harder to get a home loan today than it was immediately after the financial crisis. But as loanDepot notes, citing data from the Federal Reserve, denial rates for purchase loan applications reached 18% in 2008 versus 13% in 2014, the most recent year for which data is available.

The survey was conducted by Omniweb and included 1,000 adults, split evenly between men and women.


We’re still in a housing crisis survey reveals

by Steve Randall, from Mortgage Professional America

 

A new study reveals that 81 per cent of Americans believe that the housing affordability crisis in on the rise. More than two-thirds of respondents in a national survey by the MacArthur Foundation say that it is more challenging to find affordable housing now than for previous generations.

Just 29 per cent believe that the housing crisis is over and 76 per cent say that it is important that their elected leaders in Washington take action to address the situation.

The majority (60 per cent) believe that owning a home is an excellent long-term investment.

One area that has recently been named the metro with the highest level of underwater homes is also far above the national average for concern over affordability and putting household budgets under extreme pressure.


Defaulting HELOCs: A growing concern

Defaulting HELOCs: A growing concern

June 10, 2016 – In 2004, millions of homeowners tapped into the equity of their homes through low-interest – or no interest – home equity lines of credit (HELOC). Their 10-year grace periods are now done and they’ve had to start paying. And that’s why HELOC delinquencies are now suddenly soaring.

In March, second-lien HELOC delinquencies – the number of homeowners who are behind on this second mortgage – climbed 87 percent compared to a year ago, Black Knight Financial Services’ reports.

Delinquencies may continue to climb, and those homeowners who cannot make the increased HELOC payments or refinance could find themselves facing foreclosure.

HELOCs taken out in 2005, 2006 and 2007 comprise 52 percent of all active lines of credit. In 2005, there were about 850,000 home equity lines; in 2006 and 2007, it was 1.25 million. The grand financial total from just those three years: $192 billion.

The recent increase in HELOC delinquencies is the first annual increase since June 2012, Black Knight notes. An 87 percent spike in delinquencies among 2005 HELOCs over the past 12 months has been attributed to most of the recent spike.

Source: Black Knight Financial Services and “A Decade After the Bubble, Home-Equity Line Delinquencies Jump,” MarketWatch (June 6, 2016)

© Copyright 2016 INFORMATION, INC. Bethesda, MD (301) 215-4688


Chicago Among Cities with Largest Share of Underwater Homeowners

By

Stuck in a home you can’t sell for enough to get out from underneath the mortgage? You are not alone.

More homeowners in the Chicago area are trapped in underwater mortgages than in almost any other major metropolitan area in the country, according to two new studies released this week.

One report, released Thursday by housing research data firm CoreLogic, found Chicago slightly better off than Las Vegas and Miami. But a separate study released Wednesday by real estate website Zillow places Chicago homeowners in the worst position in the nation, with a larger portion of homes underwater than in either Las Vegas or Miami.

When homeowners are underwater, they have unpleasant choices. Their homes are worth less than they owe their lender. So if they decide to sell, they won’t make enough on the sale to repay the lender. Somehow they have to Read more…


Good Credit Doesn’t Help Those with Negative Equity

Policy still exists today that requires mortgage delinquency first before any help on lower payments for underwater homeowners is considered. There are still 6.7 million underwater homeowners “staying put” awaiting equity to return and who are paying their mortgage on time. A great majority of them have no refinance option except a modification…. which requires mortgage delinquency and a hardship first.

Homeowners who have negative equity, who are staying put, and who are current on their mortgage… need to be given a refinance option just like those with equity available to them… a refinance that does not require mortgage delinquency first and allows continued, on time mortgage payments.

Many have asked why I am obsessed with keeping problems that surround underwater homeowners at the forefront. It is because of continued policy applied to those who have negative equity that requires mortgage delinquency first just to be considered for a better finance option when no refinance is available, or when an underwater homeowner must short sale their home.

For those with a non-Fannie Mae, non-Freddie Mac conventional first mortgage, a second mortgage or a home equity line of credit that has negative equity, mortgage delinquency is still required first just to be considered for a modification, their only option.

This delinquent mortgage requirement results in a denial of a new secondary market mortgage and a prolonged period of time to get a new mortgage. This directly affects mortgage and real estate industries and the U.S. economy.

Resetting [1]Interest Only First Mortgages, Second Mortgages and Home Equity Line of Credit (HELOC)

A large number of loans originated as interest only first, second mortgages and HELOCs are now resetting to fully amortized payments. Interest only loans have a set period of time when interest is paid only. It is common to see a three, five, seven or ten year reset time frame where full principal and interest payments on the outstanding balance including principal that is unpaid start to be paid back. In areas across the nation where home values have not come back yet, homeowners are stuck with initial higher interest rates simply because they have negative equity. Fully amortized payment increases have been seen as high as 400%. The only option available for negative equity non-Fannie Mae, non-Freddie Mac conventional first mortgages, second mortgage or home equity line of credit (HELOC) is a modification that.… you guessed it… requires mortgage delinquency and a hardship first in order to get help.

An alarming number of elderly homeowners who have refused to go delinquent on their mortgage but have negative equity interest only loans are now coming forward. It is especially heartbreaking to see homeowners in their 70s and 80s demoralized by the fact that they have to destroy their credit just to be qualified for a lower interest rate.

And, if these underwater homeowners ultimately short sale, the negative credit from the required mortgage delinquency results in a higher rent payment.

A great deal of early press educated our nation about “strategic defaulters”, claiming that many who walked away voluntarily were able to make payments but chose not to. However, a 2015 study entitled [2]“Can’t Pay or Won’t Pay? Unemployment, Negative Equity, and Strategic Default” cites that though unemployment was the single biggest financial shock, most financially distressed households didn’t default and underwater homeowners tapped into retirement resources and friends or relatives to stay afloat. Even among unemployed households lacking enough savings to make even one monthly mortgage payment, more than 80% stayed current.

Another issue centered around families who could afford to keep paying their mortgage but chose not to do so. Despite media attention to strategic defaulters, the study shows that these were rare. Fewer than 1% of households with the financial means to pay instead chose to walk away.

The study largely confirmed that personal economic events led to mortgage defaults without citing negative housing equity as the overriding factor. It also showed that many underwater homeowners struggle to hang on to their homes perhaps longer than they should, wiping out retirement assets awaiting positive equity to return.

Many who are in the mortgage business in areas still affected by negative equity are acutely aware of how the required mortgage delinquency results in a downward spiral of credit that prompts other negative consequences for underwater home owners just trying to stay put.

This country can’t afford to turn a blind eye to what we all saw coming in 2007-08. Good credit is still the benchmark of the mortgage and real estate industries and the driver of a good economy. Solutions are available right now.

[1] The I-O payment period is typically between 3 and 10 years. https://www.fdic.gov/consumers/consumer/interest-only/

[2] Can’t Pay or Won’t Pay? Unemployment, Negative Equity, and Strategic Default


Rising Prices Should Take 1M More Owners Out of Negative Equity

by Jacob Passy (National Mortgage News)

There were more than a million homeowners whose properties exited negative equity status over the past year, with the potential for another million to do so if home prices continue to rise, according to CoreLogic.

CoreLogic reported Thursday that the number of underwater properties at the end of the first quarter totaled 4 million, which equates to 8% of all homes with a mortgage. That figure was down 6.2% from the fourth quarter and 21.5% from a year ago.

read more…


Negative Equity Falls Nationally, Finds Foothold in Midwest

(by Jacob Passy – National Mortgage News)

While negative equity rates continue to drop nationally from their 2012 peak, the share of homeowners underwater in the Rust Belt remains elevated, according to data from Zillow.

The negative equity rate, which measures the share of all homeowners with a mortgage who owe more than their home is worth, was 12.7% during the first quarter, down from 13.1% in the fourth quarter and 15.4% in the first quarter of 2015. The negative equity rate hit its peak in the first quarter of 2012 at 31.4% and has either fallen or held steady every quarter since then, Zillow said Wednesday.

read more…


HUD Unveils New Housing Counseling Advisory Committee

By

The Department of Housing and Urban Development (HUD) has created a new advisory committee that will explore ways to make counseling more accessible for new homebuyers and troubled borrowers.

The Dodd-Frank Act of 2010 called for the creation of a 12-member advisory committee to improve housing counseling and develop innovative strategies to support community-based counseling agencies.

The Housing Counseling Federal Advisory Committee includes three representatives from each of the four mortgage, real estate, consumer and housing counseling sectors.

The committee members are slated to have their first meeting in August, according to committee member Pamela Marron from New Port Richey, Fla., a senior loan officer at Innovative Mortgage Services Inc.

“I’m in Florida, the land of underwater homes,” Marron said an interview Wednesday. She noted non-government-sponsored enterprise interest-only mortgages and home equity lines of credit are starting to reset and it is very difficult to refinance.

“I would tell them what is really happening at ground zero. And I am expecting the other members will have similar stories,” Marron said. “We have a good diverse group and I am excited about that.”

Read More…


Pam Marron, Mortgage Professional

HUD Names New Federal Housing Advisory Committee

Written by Brian Sullivan, (202) 708-0685

WASHINGTON – The U.S. Department of Housing and Urban Development (HUD) today named 12 persons who will constitute the first-ever Housing Counseling Federal Advisory Committee (HCFAC). Established under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, this advisory panel will help HUD’s Office of Housing Counseling improve upon all the efforts to provide consumers with the knowledge they need to make informed and lasting housing decisions.

Last April, HUD solicited nominations to serve on the first-ever federal advisory committee. Those selected hail from among mortgage, real estate, consumer and housing counseling sectors. They include:

Mortgage Sector
1.    Pamela Marron New Port Richey, Florida
2.    Linda Ayres Las Vegas, Nevada
3.    José Larry Garcia El Paso, Texas
Real Estate Sector
4.    E.J. Thomas New Albany, Ohio
5.    Cassie Hicks Hattiesburg, Mississippi
6.    Alejandro Becerra Silver Springs, Maryland
Consumer Sector
7.    Afreen Alam Long Island, New York
8.    Meg Burns Arlington, Virginia
9.    Ellie Pepper New York State, Schenectady, New York
Housing Counseling Sector
10.  Judy Hunter Sacramento, California
11.  Arthur Zeman Saint Louis, Missouri
12.  Terri Redmond Hummelstown, Pennsylvania

Read brief bios of the HCFAC members.

The Housing Counseling Federal Advisory Committee will explore new opportunities to expand access to HUD housing counseling programs, develop new innovative strategies to support community-based counseling agencies, and identify methods to leverage our resources to amplify the impact of federally funded housing counseling. This panel will also develop new metrics to evaluate the health and capacity of the housing counseling industry, specifically in the context of disaster recovery and identify ways to improve the use of technology in housing counseling.

By teaching consumers basic principles of housing and money management, HUD’s network of approximately 2,000 HUD-approved housing counseling agencies help families to improve their financial situation, address their current housing needs, and pursue their housing and financial goals over time. Housing counselors increase awareness of both rights and responsibilities of homeownership and rental tenancy, addressing fundamental concepts such as anti-discrimination laws, the types of ownership and tenancy, budgeting, affordability calculations, maintenance and upkeep responsibilities, eviction and homelessness prevention, and where to get help when future housing challenges arise. Housing counselors provide support to households facing unemployment, finding and maintaining housing after returning from military deployment, or moving their families because their current housing situation is unsustainable.

There are many ways to find a HUD-approved housing counseling agency. Visit HUD’s website or call 1-800-569-4287 for our interactive telephone directory. Get the free housing counseling i-phone app from the app store (not yet available for android). Watch HUD’s video on how housing counseling can help families find (and keep) housing.


Fannie Readies Launch of ‘Trended Data’ Initiative

by Brian Collins, National Mortgage News

WASHINGTON — Lenders and credit bureaus are gearing up for Fannie Mae’s June 25 launch of its “trended data” initiative, which provides a new data element to its automated underwriting process.

The program provides a snapshot of an applicant’s revolving credit payments in an attempt to better divine a borrower’s creditworthiness. The launch marks a significant change for the mortgage industry.

Read More: http://www.nationalmortgagenews.com/news/secondary/fannie-readies-launch-of-trended-data-initiative-1078111-1.html?zkPrintable=true


Foreclosure rate is likely two years away from a return to true normal, CoreLogic economist says

The U.S. foreclosure rate and mortgage delinquencies have fallen to levels not seen since before the housing crash eight years ago, but that doesn’t necessarily mean that the housing market has return to normal. CoreLogic’s Chief Economist Frank Nothaft spoke with Scotsman Guide News about the improved housing market and why the foreclosure rate could take another two years to return to its traditional norm.

Completed foreclosures ticked up for the month in March, but overall the trend has been down, right?  

When you look on a year-over-year basis, and we compare our latest data from March 2015 to March 2016, the news is very good, and it has been very good for  a number of years. The total amount of foreclosure inventory — that is the percentage of mortgaged property that is some stage of  the foreclosure process — that’s dropped 23 percent from a year ago. We are now at the lowest inventory level, the lowest foreclosure rate, since November 2007 prior to the onset of the Great Recession. It is still elevated if we compare it to what the foreclosure rate was 15, 20 years ago, so we are not back to a normal foreclosure rate yet, but we have made substantial progress in the U.S.

Do you believe we’ll get back to a foreclosure rate that would be considered normal and, if so, when?

Yes, I do think we will, but I think it is probably still a couple of years away. There are still a lot of what we refer to in the industry as “the legacy books,” that is, the book of loans that originated in ’05, ‘06 and ’07, which continue to have poor performance — in other words, high default rates. The loans that have been originated since 2009 have performed… read more here


Pam Marron, Mortgage Professional

Pam Marron Selected for Housing Counseling Federal Advisory Committee

Yesterday I received a letter from HUD Secretary Julian Castro that I have been selected to serve on the U.S. Department of Housing and Urban Development’s Housing Counseling Federal Advisory Committee.

Millions of homeowners across the U.S. have been devastated with lives changed forever due to the housing recession. I want you to know that it is your stories of challenges… how you plodded through even though you lost a great deal and did everything possible to stay afloat… before you finally had to ask for help… that changed my perspective on how I will do business in the mortgage industry forever.


Help set the agenda for the Florida Senate debate between Alan Grayson and David Jolly!

Hi there!

I just participated in a first-of-its-kind Open Debate for U.S. Senate candidates in Florida where all questions will be chosen from among the Top 30 voted on by the public online.

Could you vote on this question so David Jolly and Alan Grayson can answer it live at the debate?

https://floridaopendebate.com/questions/17097/vote/

There are tons of other great questions to vote on at FloridaOpenDebate.com. You can search by topic area or keyword, or you can even submit your own question. Voting closes just before the debate begins at 7:00 pm EDT on Monday, April 25. Tune in to FloridaOpenDebate.com to watch this event, co-hosted by the Open Debate Coalition and the Progressive Change Institute.

Thanks for helping us create a debate for U.S. Senate that reflects the real concerns of Americans!


FHFA makes it official: Principal reduction is coming

Plan is ‘final crisis-era’ modification program (April 14, 2016)

Eligible borrowers should expect a letter from their mortgage servicer about a principal reduction no later than Oct. 15, 2016, the FHFA said.

A day that many in the housing industry thought would never come is finally and actually here, as the Federal Housing Finance Agency is making official what was first reported several weeks ago – widespread principal reduction is coming.

In what it is calling a “final crisis-era modification program,” the FHFA announced Thursday that it will be launching a principal reduction program for some borrowers whose loans are owned or guaranteed by Fannie Mae or Freddie Mac.

But the program is not quite as widespread as was first reported.

Initial reports in the Wall Street Journal suggested that the FHFA’s principal reduction program may make fewer than 50,000 “underwater” borrowers eligible for principal reduction, but what wasn’t known until Thursday was the exact number of borrowers the FHFA’s program could affect.

Read more here: http://www.housingwire.com/articles/36799-fhfa-makes-it-official-principal-reduction-is-coming


Negative Equity still Plagues Lowest Tier Homes

While the percentage of properties with negative equity decreased during 2015, the lowest-priced homes continued to struggle to regain value, according to Black Knight Financial Services.

The number of underwater borrowers dropped by 31%, or 1.5 million homeowners, but there are still a total of 3.2 million borrowers in negative equity positions, representing $126 billion in underwater first- and second-lien housing debt, Black Knight said in its year-to-year Mortgage Monitor Report for February. read more…


Combining Hardest Hit Funds with Existing Refinance Programs Can Help Millions of Underwater Homeowners

There are five existing refinance loans available for underwater homeowners that allow for:

  • new secondary refinancing
  • no maximum combined loan to value (CLTV) of the 1st and 2nd mortgage
  • mortgage payments to stay current

This could enable Hardest Hit Funds to be used as a new second mortgage to refinance underwater higher 2nd mortgages and reset interest only home equity lines of credit unable to be refinanced.

One of these mortgages, the FHA Short Refinance, can even provide a refinance where none is available for conventional 1st mortgages that are not Fannie Mae or Freddie Mac, therefore not eligible for the Home Affordable Refinance Program (HARP).

The five refinances are:

  1. Fannie Mae DU Refi Plus Home Affordable Refinance Program (HARP) for existing Fannie Mae conventional 1st mortgages
  2. Freddie Mac Relief Refinance (HARP) for existing Freddie Mac conventional 1st mortgages
  3. FHA Short Refinance for negative equity non-FHA 1st mortgages
  4. FHA Streamline for existing FHA mortgage
  5. VA Interest Rate Reduction Refinance Loan (IRRRL)

Written Guidelines for Five Refinances

[1]Fannie Mae DU Refi Plus (HARP): B5-5.2-01: DU Refi Plus and Refi Plus Eligibility (03/29/2016)B5-5.2-01: DU Refi Plus and Refi Plus Eligibility (03/29/2016)

  • No Maximum Loan to Value (LTV) ratio for fixed rates and No Maximum Combined Loan to Value (CLTV) and Home Equity Combined Loan to Value (HCLTV) ratio. (pg. 2)
  • Eligible Subordinate Financing
    New subordinate financing is only permitted if it replaces existing subordinate financing. (pg. 2)
  • Using Hardest Hit Fund Programs for Principal Reduction or Closing Cost Assistance
    Housing Finance Agencies (HFAs) have established programs utilizing Hardest Hit Fund (HHF) programs, which provide funding for various purposes, including funds for principal curtailment, to help homeowners obtain more affordable mortgages or to help homeowners retain their homes. (pg. 3)
  • [2]Existing mortgage must be current for last 12 months. (pg. 3)

The Home Affordable Refinance Program (HARP) will expire on Dec. 31, 2016.

[3]Freddie Mac Relief Refinance Mortgages (HARP) – Same Servicer and Open Access: 2016

  • No maximum Loan to Value (LTV) ratio for fixed-rate mortgages and maximum LTV ratio for ARMs is 105 percent. There are no maximum Total Loan to Value (TLTV) or Home Equity Total Loan to Value (HTLTV) ratios. (pg. 2)
  • Secondary Financing

Existing junior liens may be refinanced simultaneously with the first mortgage provided the junior lien is being refinanced for one of the following purposes:

  • A reduction in the interest rate of the junior lien, to replace an ARM, a balloon or call option with a fixed-rate, fully amortizing junior lien.
  • A reduction in the amortization term or the monthly payment of the junior lien. (pg. 4)
  • [4]Evaluating Borrower’s Credit Reputation

If an Accept is received through Loan Prospector, the credit reputation is acceptable. Otherwise, the homeowner must show they have been making payments on time for the last 12 months. (pg. 1-2)

 

The Home Affordable Refinance Program (HARP) will expire on Dec. 31, 2016.

[5]FHA Short Refinance

Allows refinance of a non-FHA-insured Mortgage in which the Borrower is in a negative equity position. (Pg. 416)

  • The new loan’s maximum LTV ratio is 97.75% of the current property value.
  • There is no maximum CLTV ratio for second liens held by government entities or instrumentalities of government. (pg. 416)
  • Borrower must be current on the existing mortgage, or have successfully completed a qualifying three-month trial payment plan. (pg. 416)

 The FHA Short Refinance program expires on Dec. 31, 2016.

 [6]FHA Streamline Refinance

  • Proceeds are used to extinguish an existing FHA-insured first mortgage lien. (pg. 407)
  • There is no maximum CLTV with subordinate financing. (pg. 414)
  • New subordinate financing is permitted only where the proceeds of the subordinate financing are used to:
    • Reduce the principal amount of the existing FHA-insured Mortgage, or finance the origination fees, other closing costs, or discount points associated with the refinance. (pgs. 413-414)
  • No more than 1 x 30 day late on mortgage in last 12 months. (pg. 409)

[7]VA Interest Rate Reduction Refinance Loan (IRRRL)

  • VA is not concerned about the 2nd mortgage being refinanced, other than it must be assumable.

VA Loan Center: FL/homeloan@va.gov. 4/4/16: per Nancy, 727-319-7500.

  • The IRRRL must replace the existing VA loan as the first lien on the same property. Any second lien-holder would have to agree to a subordinate to the first lien holder. (pg. 6-7)
  • The prior loan is current (not 30 days or more past due) at the time of loan closing. (pg. 6-12)

[1]

[2] B5-5.2-02: DU Refi Plus and Refi Plus Underwriting Considerations (09/29/2015): https://www.fanniemae.com/content/guide/selling/b5/5.2/02.html and Fannie Mae Mortgage Delinquencies: https://www.fanniemae.com/content/guide/selling/b3/5.3/09.html

[3] Freddie Mac Relief Refinance Mortgage -Open Access: http://www.freddiemac.com/singlefamily/factsheets/sell/relief_refi_open_access.html

[4]Freddie Mac Seller/Servicer Guide, Chapt. 5201.1: Credit Assessment with Loan Prospector, (b)Evaluating borrower’s credit reputation and (d)significant inaccurate credit information: http://www.allregs.com/tpl/main.aspx

[5]HUD Handbook 4000.1: http://portal.hud.gov/hudportal/documents/huddoc?id=40001HSGH.pdf

[6]HUD Handbook 4000.1: http://portal.hud.gov/hudportal/documents/huddoc?id=40001HSGH.pdf

[7]Benefits.VA.gov, Ch 6: http://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=2&cad=rja&uact=8&ved=0ahUKEwjpy4TvwPTLAhUCRSYKHXu9AEEQFgg0MAE&url=http%3A%2F%2Fwww.benefits.va.gov%2Fwarms%2Fdocs%2Fadmin26%2Fpamphlet%2Fpam26_7%2Fch06.doc&usg=AFQjCNEf3ujFlgh6GVKHIZXGiJkKfYaBXg&sig2=aC5d5K1lPKZWRLOkL6u-wQ

 

[1]Freddie Mac Seller/Servicer Guide, Chapt. 5201.1: Credit Assessment with Loan Prospector, (b)Evaluating borrower’s credit reputation and (d)significant inaccurate credit information: http://www.allregs.com/tpl/main.aspx

[1]HUD Handbook 4000.1: http://portal.hud.gov/hudportal/documents/huddoc?id=40001HSGH.pdf

[1]HUD Handbook 4000.1: http://portal.hud.gov/hudportal/documents/huddoc?id=40001HSGH.pdf

[1]Benefits.VA.gov, Ch 6: http://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=2&cad=rja&uact=8&ved=0ahUKEwjpy4TvwPTLAhUCRSYKHXu9AEEQFgg0MAE&url=http%3A%2F%2Fwww.benefits.va.gov%2Fwarms%2Fdocs%2Fadmin26%2Fpamphlet%2Fpam26_7%2Fch06.doc&usg=AFQjCNEf3ujFlgh6GVKHIZXGiJkKfYaBXg&sig2=aC5d5K1lPKZWRLOkL6u-wQ


FHFA Director Watt: Expect Decision on Principal Reduction within 30 Days

In remarks delivered at a luncheon sponsored by Women in Housing and Finance last week, FHFA Director Mel Watt acknowledged that the “FHFA has received substantial criticism, both before and since I became the Director” for not allowing the GSEs to offer principal reduction as a part of their loss mitigation strategy.  However, Watt was quick to point out that the FHFA staff has been “methodically studying” the issue since he became Director two years ago seeking a “win-win” strategy – one that “would benefit both borrowers and the Enterprises” and that he “expect[s] to announce a decision within the next 30 days about whether we have been able to find a ‘win-win’ principal reduction strategy or whether, on the other hand, we will take principal reduction off the table entirely.”  He added: “stay tuned for more on this in the near future.”

The complete text of Watt’s prepared remarks are available at:

http://www.fhfa.gov/Media/PublicAffairs/Pages/Mel-Watt-Prepared-Remarks-WHF-Public-Policy-Luncheon-3-22-16.aspx


6.2 million Underwater Homeowners in Crisis

The housing crash might seem like old news, but for families left behind by the recovery it remains a defining economic reality, with negative equity preventing moves and limiting choices in life.

 Seven years after the Great Recession, some Chicago suburbs may never recover

Chicago Tribune   By Kim Janssen    March 26, 2016

Highlights below:

Cook County’s top 10 towns for foreclosures are all in the south suburbs, according to data compiled by the Institute for Housing Studies at DePaul University. Residents on a typical block in middle-class towns like Matteson, Country Club Hills and Richton Park can expect one of their neighbors to be in foreclosure, because about one in 30 homes was in foreclosure as recently as 2014.

In a handful of the poorest towns — Harvey, Ford Heights, Phoenix, Riverdale, Robbins and Sauk Village — more homeowners are foreclosed upon than obtain new mortgages, a surefire recipe for vacant homes, declining tax bases and blight.

“Everybody seems to think we’ve recovered from the housing crisis, but for many communities of color that’s not the case,” Petruszak said.

The number of lender-mediated sales in the Chicago area — short sales and foreclosures — accounted for 26 percent of existing home sales in February, compared with more than 50 percent just two years ago, according to Midwest Real Estate Data, the local multiple listing provider. But the long-term snowball effect of so many vacant, foreclosed properties in mainly black neighborhoods was exacerbated because banks took less care of the properties they owned there than they did in largely white communities, said Petruszak, who has helped bring national discrimination cases against six lenders.

The couple have friends who walked away from mortgages that no longer made sense, but Mitchell Versher said that wasn’t his style, and that if his wife hadn’t suffered a couple of layoffs, or if they were able to renegotiate their debt again, he’d have liked to stay put.

“I come from the old school,” he said. “My grandchildren visited me in this house. It was supposed to be our home for the rest of our lives.”

Still, he and his wife expect ultimately to be forced from their home. And any hope Mitchell Versher had of retiring is gone.

“I’m gonna have to work till I die,” he said. “Don’t get me wrong, Vietnam taught me that I’m blessed for every moment that I have. But the majority of us who are living paycheck to paycheck are being held hostage by an indifferent political class.”

He’s looking online, for a rental, he said.

kjanssen@tribpub.com

Twitter @kimjnews

Copyright © 2016, Chicago Tribune

 It is time to get changes made for underwater homeowners; Still 6.4 million underwater nationally, and most are desperately trying to stay put!


Credit is Central to WHY Help Network Started

History: WHY Help Network Started

The housing recession since 2007 has resulted in real estate and mortgage problems never experienced before in U.S. history. One of those newer problems was a massive number of short sales, where homes are sold for less than the mortgage balance on the loan.

In order to short sale, a common practice of nearly every lender in the U.S. was to require that the distressed homeowner go delinquent on their mortgage before the short sale approval could be given. The short sale process was lengthy and the required delinquency almost always exceeded 4 months. After 120 days of mortgage delinquency, a foreclosure code was placed on the credit of unsuspecting short sellers. The foreclosure code was not apparent to those of us in the mortgage industry until years later when the past short seller, eligible for a new conventional mortgage, received a “Refer with Caution” denial for a new loan. Lender underwriters unaware of the erroneous credit code would tell past short sellers to go back to their short sale lender and get the problem fixed. The short sale lenders would claim they had coded the short sale correctly, and point to credit reporting agencies to make the fix. The credit reporting agencies, now seeing this problem throughout the U.S., started drilling down to where the problem was in the code. This is when it was discovered that there was multiple credit code being used for a short sale, but borrowed from the Metro 2 foreclosure code. Additionally, foreclosure payment history codes of “8”(repossession) and “9”(collection) were adding to the mix. And when fixes were applied, “dates reported” were pulling forward, suggesting the credit problem was more recent than the short sale closing.

Why was this a problem for the mortgage and housing industry? A foreclosure code meant a 7 year wait to get a new mortgage, rather than the 2 year wait after a short sale in effect at the time. At that point, there were over 9 million past short sellers. That equated to over 16% of total U.S. mortgages! The slowdown of the housing comeback was critical, and stalling the reentry of 9 million past homeowners back into the housing market would affect the housing market. It was imperative for this problem to be solved.

The road to a solution started with a loan officer in Florida and a credit reporting agency, Acranet Credit, in California. The loan officer saw the seller credit was being coded as a foreclosure over and over again in the Fannie Mae and Freddie Mac automated systems and went to Acranet credit reporting agency. The Acranet credit manager was a board member of the National Consumer Reporting Association (NCRAinc.org) and brought the problem to the NCRA. The Florida loan officer attended the 2012 NCRA Conference with proof and met a representative with the Consumer Financial Protection Bureau (CFPB) at the conference.

In April of 2013, the Florida Loan officer and the executive director of the NCRA went to Washington, D.C. and, thanks to U.S Congressman Gus Bilirakis’s office, met with staff of the Senate Banking and Finance Committee. On this first meeting, multiple problems were presented and it was quickly determined that pinpointing the critical credit code problem was paramount. Offices of representatives for “Hardest Hit” states, where it was thought that the credit code problem would be most apparent, were visited. The offices of the U.S. Treasury, the Consumer Financial Protection Bureau and U.S. Senator Bill Nelson’s (D-FL) office were also visited.

U.S. Senator Nelson’s office took a special interest in this problem along with the CFPB. Senator Nelson is from Florida, a state that was 3rd from the top where housing had been hit hardest. In 2012, Florida’s average of homes sold as short sales was tipping 30%, and 48% of homes owned in the state had negative equity. This problem threatened a real housing recovery for Florida.

On May 7, 2013, U.S. Senator Bill Nelson required that the CFPB and the FTC get a solution to the credit code problem within 90 days. There was much talk about a “specific, universal short sale credit code” just like there was for a foreclosure or repossession, or judgment.

In June 2013, the Florida loan Officer, the NCRA executive director and 30 NCRA board members met in Washington, D.C. again and met with CFPB Director Richard Cordray and 4 CFPB directors.

Later that afternoon, the Florida loan officer and the Acranet credit agency manager met again with the CFPB and were stunned to learn that, though affected consumers were consistently stating they were told by their short sale lender that a delinquency of their mortgage was a requirement to get the short sale approved, in fact the lenders were telling another story…. that underwater homeowners were ceasing to make payments, waiting to be served foreclosure by their short sale lender.

To hear this was shocking. All of the press seemed to be about strategic defaulters, who are able to make mortgage payments but chose not to. Yet, we were finding little evidence of underwater homeowners who wanted to stop paying their mortgage. Instead, homeowners who called for help were bewildered that they had to destroy their credit to exit an underwater home. They wanted to make their payments but were told no help was available until they went delinquent!

While in Washington, D.C., it was also learned that the credit code change all of us were fighting for would not happen. Instead, lenders would be allowed to make a change in the Fannie Mae system when the erroneous foreclosure code showed up on past short seller credit. This would take effect on Nov. 16, 2013.

The Nov. 16, 2013 change did not work…. but 2 fixes found by accident were working! The CFPB Complaint Letter worked the most and seemed to trigger an immediate “change” in the credit that resulted in an “Approve” upon a new credit pull and resubmission to Fannie Mae. The same change occurred if a Lender Letter could be obtained from the lender stating the loan closed as a short sale and not as a foreclosure. The critical key here was that lenders were able to make a change of the code internally.

And, on August 16, 2014, Fannie Mae again made a change to their automated systems Desktop Underwriter/Originator that finally allowed lenders to go into the system and make a change when a foreclosure showed up on credit code for a past short seller.

So WHY Help Network?

Because so many lenders, loan originators, credit reporting agencies and governmental agencies are now aware of the credit code problem of past short sellers, it was decided to switch gears. Instead of using efforts to find more solutions (though this is an ongoing process!), emphasis is now on the network of help available to past short sellers.

The Help Network is a growing resource center that includes lenders, loan officers, realtors, credit reporting agencies, HUD Approved Counseling Agencies and governmental agencies and representative offices that are aware of this problem and can help.

And if you are not sure who can help in your state, email Pam Marron at pmarron@tampabay.rr.com and ask for help with resources.

 

 


Back from the Housing Brink

Back from the Brink logo

 

 

Sponsored by the Gulf Coast Chapter of the Florida Association of Mortgage Professionals, a member of the Pinellas Realtor Affiliate Business Partners Program

 

“Back from the Housing Brink” defines 3 different client types that have developed from the housing crisis and where opportunity exists for loan originators and realtors to assist these clients.

GulfCoast Chapter of the Florida Association of Mortgage Professionals wishes to thank the Pinellas REALTOR Organization for joining with us to support this program!


Pro member

nonPro member

 

Special Guest Daren Blomquist, Vice President of RealtyTrac

RT.Daren lg
Status of Distressed Homeowners and Boomerang Buyers
  • Defined, statistics, where these homeowners are at and where they are moving to in the U.S. and specifically Florida.
Assist 7.1 million Distressed Homeowners (still in underwater homes) to stay put
  • PURE HARP refinancing, shorter term
  • Hardest Hit Funds available for principal reduction through Florida
Assist 7.3 million Boomerang Buyers (had past short sale or foreclosure) eligible to re-enter housing market over next 8 years
  • wait timeframes for all mortgage types
  • Shorter wait time frame underwriting criteria for FHA “Back to Work” and conventional mortgage “Extenuating Circumstances”
Assist real estate agents to sell damaged housing by providing repair list with costs and renovation loan financing at listing upfront
  • Retrieve “feasibility report” commonly done by FHA Inspectors and useful to attract buyers and for mortgage financing. Report cost: $200-$250.
  • Provide financing option upfront for either FHA 203K (owner occupied loan) or conventional Homestyle renovation loan (owner occupied, 2nd home, investor)

Challenge to mortgage and real estate industries:
Need for refinance option of non-Fannie Mae, non-Freddie Mac 1st mortgage and 2nd mortgages and HELOCS for 7.1 million homeowners still underwater! Only option currently is modification that requires delinquency.

Realtor/Loan Originator resources:
  • Specialized lists from RealtyTrac
  • Free promotion of industry professionals who would like to assist these clients at HELP Network on *HousingCrisisStories.com

*HousingCrisisStories.com is set up to provide buyer and loan originator assistance to prepare cases for underwriting FHA “Back To Work” and where “Extenuating Circumstances” may exist for a conventional mortgage. Lenders who provide FHA Back to Work, allow Extenuating Circumstances and provide pure HARP 2 will be promoted.

Homebuyers/Homeowners resources:
  • Downpayment assistance: Hillsborough, Pinellas, Pasco, Hernando, Citrus counties, state of Florida
  • “Fix It” programs for those with no equity: Pasco County
  • Student Loan consolidation/refinance program

 


Prevent the next Housing Crisis

7.4 MILLION STILL Underwater in U.S. Q2/2015

Overall Seriously Underwater Share Edges Higher For Second Straight Quarter;
Number of Equity Rich Homeowners with a Mortgage Increases by 1 Million From Year Ago, But Down 300,000 in First Six Months of 2015

IRVINE, Calif. — July 30, 2015 —

RealtyTrac® (www.realtytrac.com), the nation’s leading source for comprehensive housing data, today released its Q2 2015 U.S. Home Equity & Underwater Report, which shows that as of the end of the second quarter there were 7,443,580 U.S. residential properties that were seriously underwater — where the combined loan amount secured by the property is at least 25 percent higher than the property’s estimated market value — representing 13.3 percent of all properties with a mortgage.

The second quarter underwater numbers were up from 7,341,922 seriously underwater homes representing 13.2 percent of all homes with a mortgage in the previous quarter — making Q2 the second consecutive quarter with a slight increase in both the number and share of seriously underwater properties — but were down from 9,074,449 seriously underwater properties representing 17.2 percent of all homes with a mortgage in the second quarter of 2014. The number and share of seriously underwater homes peaked in the second quarter of 2012 at 12,824,729 seriously homes representing 28.6 percent of all homes with a mortgage.

“Slowing home price appreciation in 2015 has resulted in the share of seriously underwater properties plateauing at about 13 percent of all properties with a mortgage,” said Daren Blomquist, vice president at RealtyTrac. “However, the share of homeowners with the double-whammy of seriously underwater properties that are also in foreclosure is continuing to decrease and is now at the lowest level we’ve seen since we began tracking that metric in the first quarter of 2012.”

The share of distressed properties — those in some stage of the foreclosure process — that were seriously underwater at the end of the second quarter was 34.4 percent, down from 35.1 percent in the first quarter of 2015 and down from 43.6 percent in the second quarter of 2014 to the lowest level since tracking began in the first quarter of 2012. Conversely, the share of foreclosures with positive equity increased to 42.4 percent in the second quarter, up slightly from 42.1 percent in the first quarter and up from 34.1 percent in the second quarter of 2014.

 

Historical U.S. Underwater Trends 

Qtr-Yr Percent of All Loans Seriously Underwater QoQ Pct Change Percent of Loans in Foreclosure Seriously Underwater QoQ Pct Change
Q1 2012 27.8% 59.1%
Q2 2012 28.6% 0.8% 62.0% 2.9%
Q3 2012 27.6% -1.0% 60.0% -1.9%
Q1 2013 25.8% -1.7% 58.2% -1.8%
Q2 2013 25.7% -0.1% 57.5% -0.8%
Q3 2013 23.2% -2.5% 56.3% -1.2%
Q4 2013 18.8% -4.4% 47.5% -8.8%
Q1 2014 17.5% -1.4% 45.0% -2.5%
Q2 2014 17.2% -0.2% 43.6% -1.4%
Q3 2014 15.0% -2.2% 38.9% -4.7%
Q4 2014 12.7% -2.3% 34.6% -4.2%
Q1 2015 13.2% 0.4% 35.1% 0.4%
Q2 2015 13.3% 0.1% 34.4%

Share of equity rich mortgaged properties up 1 million from year ago, down 300K YTD

The universe of equity-rich mortgaged properties — those with at least 50 percent equity — decreased on a quarter-over-quarter basis for the second straight quarter, down to 10.9 million representing 19.6 percent of all properties with a mortgage at the end of the second quarter. That was down from 11.1 million representing 19.8 percent at the end of the first quarter and down from 11.3 million representing 20.3 percent at the end of the fourth quarter, but still up from 9.9 million representing 18.9 percent at the end of the second quarter of 2014.

“Although the number of equity rich homeowners with a mortgage has increased by 1 million compared to a year ago, that number dropped by nearly 300,000 between the end of 2014 and the middle of 2015,” Blomquist added. “The number of homeowners with a mortgage who have at least 20 percent equity has dropped by more than 900,000 during the past six months, indicating that homeowners who have gained substantial equity thanks to the housing price recovery over the past three years are taking advantage of that newfound equity. Some are leveraging that equity into a higher LTV refinance or a move-up purchase, some may be downsizing into an all-cash purchase and some may be cashing out of homeownership altogether. Those homeowners cashing out of homeownership altogether would explain why the nation’s overall homeownership rate continued to decline in the second quarter even as homeownership rates among millennials increased.”

Major metro areas with the highest percentage of equity rich properties reflect areas of continued growth in home prices: San Jose, California (43.8 percent), San Francisco, California (38.3 percent), Honolulu, Hawaii (36.7 percent), Los Angeles, California (32 percent), New York (30.7 percent), Pittsburgh, Pennsylvania (29.4 percent), Poughkeepsie, New York (28.0 percent), Oxnard, California (27.5 percent) and San Diego, California (26.9 percent).

“Over the past two years, the Seattle region has seen the percentage of homeowners who are seriously underwater drop by over 56 percent, one of the fastest and most impressive drops in the country,” said Matthew Gardner, chief economist at Windermere Real Estate, covering the Seattle market. “Usually a decline of this magnitude would suggest an uptick in the number of homes for sale, but unfortunately for Seattle, I don’t see this taking place. Many of these homeowners are simply too apprehensive or don’t have the financial capacity to move. But what we lose in new listings, we gain in overall market stability.”

Historical U.S. Home Equity Rich Trends 

Qtr-Yr Percent of Equity Rich Mortgaged Homes QoQ Pct Change
Q4 2013 18.5%
Q1 2014 19.1% 0.7%
Q2 2014 18.9% -0.3%
Q3 2014 20.1% 1.2%
Q4 2014 20.3% 0.2%
Q1 2015 19.8% -0.5%
Q2 2015 19.6% -0.2%

 

Markets with the most seriously underwater properties

Markets with a population greater than 500,000 with the highest percentage of seriously underwater properties in Q2 2015 were Lakeland, Florida, (28.5 percent), Cleveland, Ohio (28.2 percent), Las Vegas, Nevada (27.9 percent), Akron, Ohio (27.3 percent), Orlando, Florida (26.1 percent), Tampa, Florida (24.8 percent), Chicago, Illinois (24.8 percent), Palm Bay, Florida (24.4 percent) and Toledo, Ohio (24.3 percent).

Markets where the share of distressed properties —  those in some stage of foreclosure —  that were  seriously underwater exceeded 50 percent in the second quarter of 2015 included Las Vegas, Nevada (57.7 percent), Lakeland, Florida (54.8 percent), Cleveland, Ohio (52.9 percent), Chicago, Illinois (52.5 percent), Tampa, Florida (51.7 percent ), Palm Bay, Florida (51.5 percent), and Orlando, Florida (51.2 percent).

“Many consumers in foreclosure don’t understand the positive effects of the increased equity we are seeing across the Ohio markets, and the opportunities that this might bring in assisting them to avoid foreclosure,” said Michael Mahon, president at HER Realtors, covering the Cincinnati, Dayton and Columbus markets in Ohio. “Across much of Ohio, housing demand is driving increased prices and lower days on the market, contributing to positive equity growth. For homeowners facing troubled financial circumstances due to job loss, divorce, death in the family, or health concerns, the best advice would be to consult with a real estate agent early in the process.”

Markets with the highest share of positive equity foreclosures

Those states with the highest percent of distressed properties with positive equity included Colorado (72.0 percent), Alaska (69.8 percent), Texas (66.4 percent), Oklahoma (65.2 percent), and Nebraska (64.4 percent).

Major markets where the share of distressed properties with positive equity exceeded 60 percent included Denver, Colorado (83.7 percent), Austin, Texas (83.1percent), Honolulu, Hawaii (77.5 percent), San Jose, California (77 percent), Pittsburgh, Pennsylvania (75.9 percent), Jackson Mississippi (75 percent), Nashville, Tennessee (69.3 percent) and Houston, Texas (69 percent).

“The strong South Florida price increases over the past few years have moved many homeowners from negative to positive equity. We would encourage the remaining distressed homeowners to ask for a Broker Price Opinion (BPO) regarding the value of their property — many may be surprised at their improving value,” said Mike Pappas, CEO and president of Keyes Company, covering the South Florida market.

“Many homeowners that found themselves upside down in their homes just a few years ago are finding that they are now in a much better position with equity to spare, based on the strong appreciation we have experienced over the last few years,” said Greg Smith, owner/broker at RE/MAX Alliance, covering the Denver market in Colorado.  “When we look at other areas, such as Las Vegas, where homes seriously underwater have dropped by close to 50 percent, we see the strengthening of the economy as a whole provided by housing.”

Homes owned seven to 11 years account for 38 percent of all seriously underwater homes

Residential properties owned between seven years and 11 years accounted for 38 percent of all seriously underwater homes as of the end of the second quarter. The highest seriously underwater rate is for homes owned for nine years, 21.6 percent of which are seriously underwater, followed by those owned for 10 years, 19.8 percent of which are seriously underwater, and those owned for eight years, 19.0 percent of which are seriously underwater.

Report methodology
The RealtyTrac U.S. Home Equity & Underwater report provides counts of residential properties based on several categories of equity — or loan to value (LTV) — at the state, metro and county level, along with the percentage of total residential properties with a mortgage that each equity category represents. The equity/LTV calculation is derived from a combination of record-level open loan data and record-level estimated property value data, and is also matched against record-level foreclosure data to determine foreclosure status for each equity/LTV category.

Definitions

Seriously underwater: Loan to value ratio of 125 percent or above, meaning the homeowner owed at least 25 percent more than the estimated market value of the property.

Equity rich: Loan to value ratio of 50 percent or lower, meaning the homeowner had at least 50 percent equity.

Foreclosures w/equity: Properties in some stage of the foreclosure process (default or scheduled for auction, not including bank-owned) where the loan to value ratio was 100 percent or lower.

Report License

The RealtyTrac U.S. Foreclosure Market Report is the result of a proprietary evaluation of information compiled by RealtyTrac; the report and any of the information in whole or in part can only be quoted, copied, published, re-published, distributed and/or re-distributed or used in any manner if the user specifically references RealtyTrac as the source for said report and/or any of the information set forth within the report.

Data Licensing and Custom Report Order
Investors, businesses and government institutions can contact RealtyTrac to license bulk foreclosure and neighborhood data or purchase customized reports. For more information contact our Data Licensing Department at 800.462.5193 or datasales@realtytrac.com.

About RealtyTrac
RealtyTrac is a leading provider of comprehensive U.S. housing and property data, including nationwide parcel-level records for more than 130 million U.S. properties. Detailed data attributes include property characteristics, tax assessor data, sales and mortgage deed records, distressed data, including default, foreclosure and auctions status, and Automated Valuation Models (AVMs). Sourced from RealtyTrac subsidiary Homefacts.com, the company’s proprietary national neighborhood-level database includes more than 50 key local and neighborhood level dynamics for residential properties, providing unrivaled pre-diligence capabilities and a parcel risk database for portfolio analysis. RealtyTrac’s data is widely viewed as the industry standard and, as such, is relied upon by real estate professionals and service providers, marketers and financial institutions, as well as the Federal Reserve, U.S. Treasury Department, HUD, state housing and banking departments, investment funds and tens of millions of consumers.

Media Contacts:
Jennifer von Pohlmann
949.502.8300, ext. 139
jennifer.vonpohlmann@realtytrac.com

Ginny Walker
949.502.8300, ext. 268
ginny.walker@realtytrac.com

Data and Report Licensing:
800.462.5193
datasales@realtytrac.com

 


USDA Wait Timeframe

There are no extenuating circumstances available for USDA loans and a short term.

USDA Chapter 10: Credit Analysis 7 CFR 3555.151 Effective 9/1/2014 https://usdalinc.sc.egov.usda.gov/docs/rd/sfh/3555/ByIndividualChapter/Chapter10_Credit_Analysis_DRAFT.pdf

Evaluating Credit Involving Short Sales (Pg 10-24)

  • A short sale is considered a pre-foreclosure activity or event.
  • An applicant is ineligible for a mortgage loan if they pursued a short sale agreement on their principal residence to take advantage of declining market conditions and purchases at a reduced price a similar or superior property within a reasonable commuting distance.
  • If an applicant was current at the time of short sale, they may be eligible for a new mortgage loan. The prior mortgage payment history must reflect all mortgage payments due were made on time for the 12 month period preceding the short sale and all installment debt payments for the same period were also made within the month due.
  • An applicant in default on their mortgage at the time of the short sale (or preforeclosure sale) is not eligible for a new mortgage loan for three years from the date of pre-foreclosure sale.

 

Indicators of unacceptable credit: (Pg 10-9)

  • Foreclosure within 3 years:

o Including pre-foreclosure activity, such as a pre-foreclosure sale or short sale in the previous 3 years;

  • Bankruptcy within 3 years:

o Chapter 7 bankruptcy discharged in the previous 3 years;

o Chapter 13 bankruptcy that has yet to complete repayment or has completed payment in the most recent 12 months;

  • Late mortgage payments if any mortgage trade line during the most recent 12 months shows 1 or more late payments of greater than 30 days.

FHA: Economic Events

FHA is allowing for the consideration of borrowers who have experienced an Economic Event and can document that:

  • certain credit impairments were the result of a Loss of Employment or a significant loss of Household Income beyond the borrower’s control;
  • the borrower has demonstrated full recovery from the event; and,
  • the borrower has completed housing counseling.

Definitions: An Economic Event is any occurrence beyond the borrower’s control that results in Loss of Employment, Loss of Income, or a combination of both, which causes a reduction in the borrower’s Household Income of twenty (20) percent or more for a period of at least six (6) months.

Please read the FHA Back to Work – Extenuating Circumstances Mortgagee Letter 2013-26 dated August 15, 2013 for all criteria that allows exception for a new FHA mortgage as soon as one year after a short sale, foreclosure or bankruptcy, within the three year required wait period of FHA.


Better Details Needed for FHA Back to Work & Conventional Loan Extenuating Circumstances

By Pam Marron

For past short sellers who have gone through the loss of a home and are eligible to return, criteria needed for a new mortgage is vague. The result is a partial story.

Proving “extenuating circumstances” and confining the timeline for an economic event is a struggle for loan originators and underwriters trying to comply with vague  criteria. Because of so many variables, lenders deny new loans for borrowers with a short sale or foreclosure in their past even when they may be eligible to repurchase again.

We HAVE to get this right. Detailing WHY the loss of a home is the hardest thing for affected consumers to provide… not because they can’t remember, but because they relive it.

In attempting to originate the FHA “Back to Work” loans, it would seem the process is simple. The criteria for “Back to Work” is to show a 20% reduction in income sustained for 6 months minimum that resulted from a loss of employment or reduction in income, which is considered the “economic event”.

Here’s the bigger problem. Most who had an “economic event” tried to hang on, wiping out assets along the way. But, while trying to hang on, homeowners accumulated more debt to stay solvent and in most cases, to stay current on their mortgage.  Then, another “economic event” hit, assets were gone and debt is so excessive that there is no choice but to short sell.

As a mortgage broker in Florida where it is common to see Boomerang Buyers (those eligible to re-enter the housing market after a short sale or foreclosure), I often hear the full story for those who have lost a home and want to re-try home ownership again. An economic event followed by a prolonged period of trying  to stay put, finally ended with another event where funds were no  longer available and the only choice was to short sale, occurred in a great deal of these cases.

Proof also exists to show a good number of these folks  had excessive debt that pushed up debt to income ratios incredibly high prior to the sale of their underwater home.

But, it gets confusing for a new mortgage. For the FHA “Back to Work” program, HUD approved counselors are able to determine hardship and can provide those who attempt a re-purchase one year after a short sale, foreclosure or bankruptcy with a housing counseling certificate.

However, that doesn’t mean the mortgage company will approve the mortgage. Because the economic event may have occurred years ago and short sale processes took months or years, documentation such as tax returns and bank statements needed to show a lack of assets may stretch over the previous five to seven years rather than the most recent two years that lenders are accustomed to evaluating.

Mortgage companies who offer  FHA “Back to Work” are reluctant to promote this almost two year old program due to few of these loans getting approved. Part of this is because loan originators don’t provide enough documentation, and the other problem is that there seems to be wide discrepancy between underwriting opinion on these files.

Varying opinion also exists for “extenuating circumstances” noted in Fannie Mae and Freddie Mac guidelines for eligibility of a new mortgage under four  years. Underwriting interpretation of these guidelines vary greatly from lender to lender for the few mortgage companies who offer these loans.

For loans submitted with what seems to be an iron clad “extenuating circumstance” or proof of the 20% reduction in income for 6 months minimum for FHA’s “Back to Work” program, underwriter opinion seems to vary widely. Some underwriters think the decision to short sale was too soon, while others wonder why homeowners waited. It seems they are trying to justify the sale was “not strategic”.

The income, current credit and assets of borrowers who have gone through a short sale and are trying to re-enter the housing market is more than acceptable per current guidelines. They have to be next to perfect, and they know it. Other than knowledge of the past short sale, these are loans that any lender would want to have on their books.

Those who make policy need to talk directly with affected past short sellers. They need to come to where underwater home problems still exist and see for themselves what is really happening. This can truly help the housing industry recover.

 

 


HELOC Shock Heat Map

April 8, 2015 | Daren Blomquist, RealtyTrac

A RealtyTrac analysis of open Home Equity Lines of Credit originated during the housing bubble years of 2005 to 2008 shows that there are nearly 3.3 million HELOCs scheduled to reset at fully amortizing monthly mortgage payments between 2015 and 2018 after a 10-year period with interest-only payments. The average increase in monthly payments when these HELOCs reset will range from $138 for those resetting in 2016 to $161 for those resetting in 2018.

More than 1.8 million of the resetting HELOCs (56 percent) are on homes that are seriously underwater, with a combined loan to value ratio of 125 percent or more, and the percentage of underwater homes with resetting HELOCs is much higher in some markets such as Las Vegas (89 percent), Inland California (80 percent or more in many markets), Orlando (79 percent), Reno, Nevada (78 percent), and Phoenix (76 percent).

The heat map below shows markets with the most resetting HELOC shock over the next few years, both by sheer number of HELOCs scheduled to reset (size of the bubble) and by the percentage of resetting HELOCs that are on homes seriously underwater (color of bubble). This heat map displays metropolitan statistical areas with a population of 200,000 or more.

 


How to Make a Niche Market out of 7.3 Million Boomerang Buyers

NMP Instant Webinar

NMP logo

Click here to view the webinar NOW.

In January 2015, RealtyTrac reported that there are approximately 7.3 million Boomerang Buyers that will have the ability to re-enter the housing market over the next 8 years. Boomerang Buyers are those who had a short sale or foreclosure in the past and are eligible to obtain a new mortgage again. A new website, HousingCrisisStories.com, was created to assist Boomerang Buyers back into the housing market, with direction for loan originators that can provide them with a new mortgage. The site also provides assistance for more than 7 million distressed homeowners who are still in underwater (negative equity) homes.

In this instant webinar:

▪ RealtyTrac Vice President Daren Blomquist will explain where the Boomerang Buyers are located, and how they can be found.

▪ Terry Clemans, Executive Director of the National Consumer Reporting Association, will tell you about the QMCR (Qualified Mortgage Credit Report), a novel credit idea that can help with persistent credit errors that hamper these folks and many others from getting a new mortgage.

▪ There’s even a HELP Network, where lenders, loan originators, credit reporting agencies, HUD approved counselors, PMI companies and government agencies that can assist Boomerang Buyers and Distressed Homeowners will be promoted for free.

▪ Jim McMahan NMLS#218164, a loan originator from Georgia, will explain the benefits of assisting these borrowers.

▪ Pam Marron NMLS#246438, a loan originator from Florida, will explain how the website helps these borrowers and loan originators, and invites those who want to assist these clients to be part of a national HELP Network.

Click here to view this FREE Webinar!

 


Past Short Sales Are Like a Bad Divorce

Helping Borrowers with Extenuating Circumstances Through the Mortgage Process

By Pam Marron April 1, 2015

Explaining a past short sale is a harder task than most think, and it re-opens a period of time that many who have had the experience don’t want to go through again. Loan originators should not be surprised when past short sellers show anger, reluctance and may even opt out of re-purchasing a home upon learning what they must do.

Part of the problem is that guidelines, especially those surrounding explanation of extenuating circumstance, are vague. And detail needed is not always easily accessible. Quietly, more than one lender has told me that documentation received is not enough to prove extenuating circumstances, which results in a new mortgage denial for those who may be eligible to re-enter the housing market. Though lenders offer the FHA “Back to Work” program, a low percentage of these loans have been approved.

Extracting and clearly defining the detail of extenuating circumstances to show how past sellers ended up with a short sale or foreclosure falls upon loan originators. So, what is the extra work and detail needed for these loans?

At HousingCrisisStories.com,  there are 3 worksheets for the borrower and loan originator to prepare a case for an underwriter.

  1. Borrower Makes Case:  extensive list of questions for the borrower to detail. Items needed are included on this list.
  2. LO: Economic Event Worksheet:  loan originator uses “Borrower Makes Case” and provided documentation to complete.
  3. LO: Reduced Income and Increased Debt Table: made to show percentage of reduced income for FHA Back to Work and increased expenses needed for Fannie Mae, Freddie Mac and USDA(medical). Also, lower table shows how “Un-anticipated Additional Debt” can be substantial, showing the REAL hardship.

Loan Originators

  1. Be attentive to your borrowers’ entire story. Question needed details.
  2. Be prepared to document income 1 year prior to the event and over multiple years. Many affected saw trouble coming and tried to prepare. However, the process of going through a short sale or foreclosure with a lender is often drawn out and some take years. During this time, assets are depleted, income fluctuates and credit becomes worse.
  3. Do not be surprised when the borrower is reluctant to detail this timeframe. Many try to forget, and having to dig up paperwork or discuss the event again can be highly emotional.
  4. Loan originators must go the extra mile to prove all remedies tried. WHY? Even when jobs were lost or incomes reduced, when rental income did not cover the mortgage payment on an underwater property, when divorce or a death occurred, a great majority of these homeowners whittled away at savings and retirement funds trying to stay afloat. For many, there is often a final problem  after the economic event where there was no choice left but to sell the home.
  5. It is very common to see an alarmingly high BACK debt to income (DTI) ratio (Reduced Income and Increased Debt Table) even when the mortgage payment is made. This worksheet is intended to show that reduction in income is not always the primary reason to sell.
  6. On short sales, retrieve the HUD-1, the final lender short sale approval letter on 1st and 2nd mortgages and proof of the wire sent from the closing of the property. Why? It is common for the date of payoff on a credit report to be a different date than the actual closing date.
  7. Borrowers that had a deficiency payment may have a “Satisfaction of Mortgage” that shows a release of lien/mortgage but “does not constitute a satisfaction of debt”, so check documents received.  Retrieve the letter to the borrower stating when the deficiency is satisfied the 1099 that often states “forgiveness of debt”. (Documents noted above can be retrieved from the title company noted on the HUD-1 or listing agent.)
  8. Preferably, run file through Fannie Mae’s automated system upfront, which specifies which account and what date causes a Refer. If the short sale shows up as a foreclosure or findings note an incorrect  disbursement, contact your [1]credit reporting agency to correct the date and repository comment.
  9. For an FHA mortgage, make sure the homeowner goes to a HUD Approved counselor at least 30 days before a contract is written or an application taken.

Bonus: the gratitude of these clients will remind you of why you are in the mortgage business.

Pam Marron (NMLS#246438) is senior loan originator with Innovative Mortgage Services Inc. (NMLS#250769) in Tampa Bay, Florida. She may be reached by phone at (727) 375-8986 or e-mail  pmarron@tampabay.rr.com. Websites: HousingCrisisStories.com, CloseWithPam.com, 8Problems.com.

[1] National Consumer Reporting Association (NCRAinc.org) is aware of the erroneous foreclosure code on short sale credit and error in dates. Go to http://www.ncrainc.org/mortgage-credit-reporting-referral-network-by-state.html to find credit reporting agencies in your state.

 


Where Boomerang Buyers will move in the next 8 Years | RealtyTrac

Jan 24, 2015

RealtyTrac analyzed foreclosure, affordability and demographic data to provide predictions of when and where these boomerang buyers are most likely to materialize. Nearly 7.3 million potential boomerang buyers nationwide will be in a position to buy again from a credit repair perspective over the next eight years.

 


NCRA QMCR…Good Idea Needed Now!

The National Credit Reporting Association introduced the QMCR (Qualified Mortgage Credit Report) which provides a deeper review of the consumer’s credit and includes verifying disputed data, the inclusion of non-traditional data and alternative data not currently reported to credit reporting agencies.

Credit reporting agencies can accurately code a short sale with proper documentation provided by the past homeowner or creditor. Because of a desire for credit reporting in seconds rather than the 72 hours needed to accurately document, there is pushback to this idea.

QMCR pg 1


Specifically pages 7-8 below:

pg1pg2pg3pg4pg5pg6pg7pg8pg9


Loan Originators: “DIG” and Document

Document-icon

Boomerang Buyers, (those who have had a past short sale or foreclosure) are coming back into the housing market and loan originators who assist these folks with a new mortgage are going to need to hone up on research skills.

Even though there had to be a valid hardship to get be approved for the actual short sale, the hardship and circumstances surrounding a short sale will be looked upon differently when applying for a new mortgage afterwards. Those who have been in the mortgage industry for any length of time probably remember the days of the RMCR where supplements needed to be added to correct credit errors. Today, lightning speed for credit reports done in seconds is required by the industry. But with the unprecedented events that have occurred in the last 7-8 years, the need for loan originators to slow down and “get the story and credit” right is more important now than ever before.

Lenders are starting to see an increase of mortgage files for boomerang buyers, but they caution us that loan originators need to thoroughly review documents to make sure that what is necessary to approve these clients is there upon submission. United Mortgage Corp. Sales Director Jason Frangoulis states, “it’s got to make sense. Hardship had to be apparent and it’s got to be documented.” And even though more lenders are underwriting those with a short sale or foreclosure in the past, these same lenders are reluctant to promote this as a service. “Some of the files we are getting are sloppy and not well documented. We look like the bad guy when we have to turn down one of these loans because it was not well put together,” claims an anonymous lender.

So we decided that www.HousingCrisisStories.com has to be more than just a place where Boomerang Buyers and Distressed Homeowners get assistance. We also need to assist loan originators with what  documentation is needed. Letters of explanation need to be backed up with any matching documentation available, and credit MUST be correctly represented on the mortgage credit report. Yes, you may need credit supplements for accurate dates and you might have to submit to Fannie Mae or Freddie Mac’s automated system more than once. Your borrower may need to go back to the short sale lender for missing documentation. There is no doubt this is not an easy job.

If it doesn’t make sense to you, it won’t to an underwriter. DIG DEEP. Get the details. Ask questions. Let there be no doubt your client had a hardship. And in the end, if the story does not make sense and can’t be proven, give your client future options.

The hope is that the Help Network on HousingCrisisStories.com can grow with industry professionals that learn how to assist the 7.3 million projected consumers who will be eligible to  re-enter the housing market within the next 8 years.


Thank You, National Consumer Reporting Association!

Error of foreclosure placed on past short sale credit found in credit report code!

Renee Erickson, Acranet credit/NCRA board member, got the ball rolling….

Terry Clemans, NCRA Executive Director, wrote about this and took a group to Washington, D.C. to meet with U.S. Senator Bill Nelson, the Consumer Finance Protection Bureau (CFPB), and Director, Richard Cordray. 

Brian Webster, who was put in charge of getting the problem fixed. Mr. Clemans, and the NCRA also worked with Fannie Mae.

The NCRA has 64 credit reporting agencies across the U.S. that work with mortgage companies and consumers to “get credit right….

“Thank you, National Consumer Reporting Association, and for your continued efforts to help consumers…”


Underwater and Home Equity Report, 4th Quarter 2014 | RealtyTrac | Jan. 14, 2015

4th Quarter 2014 Underwater and Home Equity Report | RealtyTrac Report | Jan. 14, 2015
SUPERB data collection for Distressed Homeowners and Boomerang Buyers.


NREP: What has credit got to do with Boomerang Buyers? EVERYTHING!

National Real Estate Post explains credit scores and 7.3 million Boomerang Buyers who may be getting back into housing.
2/4/2015: http://thenationalrealestatepost.com/…


How the Consumer Financial Protection Bureau Helped!

CFPB.largest.32638950-859f-11e2-810d-2d54590909ce

The erroneous foreclosure code on past short seller credit was taken to the Consumer Financial Protection Bureau (CFPB). Senator Bill Nelson of Fl. demanded that the problem get fixed as it was affecting the state of Florida in a big way. The CFPB worked with Fannie Mae on a solution that came out on Nov. 16, 2013, but it did not work.

So, complaints started being placed with the CFPB on banks that would not change the credit code to other than a foreclosure….. and it worked!

It was also learned that in fact the code could be changed! On August, 16, 2014, Fannie Mae came out with a second workaround and changes have bee evident since then. The problem is still in the Freddie Mac system, but hopes are this will be corrected soon. Thank you to the Consumer Financial Protection Bureau (CFPB), Brian Webster with the CFPB, Fannie Mae, Senator Bill Nelson who got the ball rolling and pushed hard to get this problem resolved, and the National Consumer Reporting Association who took this to the CFPB in the 1st place and whose 64 members have been working diligently with mortgage consumers across the U.S.!


Hero… U.S. Senator Bill Nelson (D-FL) May 7, 2013

On May 7, 2013, Senator Bill Nelson of Florida took the problem of short seller credit being erroneously coded as a FORECLOSURE to the Senate hearing on “Credit: What Accuracy and Errors Mean to Consumers.” Senator Nelson is a true hero… and took on the problem of short sale credit erroneously coded as a foreclosure that resulted in a mortgage denial for eligible past short sellers. He demanded that the Consumer Financial Protection Bureau (CFPB) and the Federal Trade Commission (FTC) get this problem fixed in a Senate hearing on May 7, 2013. The Consumer Data Industry Association (CDIA) was also included in that hearing.


Thank You, Ken Harney of the Washington Post

For Short Sellers, Some Good News
Kenneth R. Harney, Washington Post – Sept. 6, 2013

Policy changes by two of the biggest players in the mortgage market could open doors to home purchases this fall by thousands of people who were hard hit by the housing bust and who thought they’d have to wait for years before owning again. Read More

 

Short Sales may be Treated like Foreclosure by Credit-Reporting Agencies
Kenneth R. Harney, Washington Post – May. 17, 2013

Are large numbers of homeowners who have negotiated short sales with lenders at risk because of a startling omission in the American credit system? Do their credit reports and scores indicate that they were foreclosed upon, rather than having negotiated a mutually agreeable resolution with their lender? Read More

 


Why we created HousingCrisisStories.com

Why did we create HousingCrisisStories.com?

We created this site to help the sheer number of those affected by Short Sale and Foreclosure issues.

8 to 9.1 million still underwater in July 2014 per RealtyTrac. This appears to have come down to 5 million per Corelogic, Dec. 2014.

That’s still a lot of underwater homeowners we want to help.


Why pay attention to underwater homeowner numbers?

In May 2013, RealtyTrac stated that 9.1 million, or 17% of U.S. mortgage holders are still underwater + 2.2 million past short sellers = 21% of mortgage market affected!


Difference Between 1985 S&L Crisis & 2006 Housing Crisis: Houses not Repaired!

The difference between the 1985 S&L crisis and 2006 housing crisis is that during the S&L crisis, lenders repaired damaged properties to make them safe and salable. Lenders did not do this during the recent recession, and potential buyers were worried of the “unknown”… and mortgages that could repair these homes were not widely available and had higher interest rates. This has led to a glut of homes in need of repair that sit in lender inventories.


HOW Lender Required Mortgage Delinquency resulted in FORECLOSURE coding for Short Sellers

Lenders require mortgage delinquency in order for underwater homeowners to get a short sale approval.

When the mortgage goes delinquent past 120 days, the mortgage is credit coded as a FORECLOSURE.

Many past short sellers are not aware of this until they apply for a new conventional mortgage 2 years later.

 


FORECLOSURE Code in Conventional Fannie Mae and Freddie Mac Loans

The first time the FORECLOSURE credit for past short sellers was seen was on new conventional Fannie Mae and Freddie Mac findings for eligible past short sellers trying to re-enter the housing market again.


FORECLOSURE code did not affect FHA or VA

The FORECLOSURE code did not affect FHA or VA loans due to the Total Scorecard secondary automated underwriting system that runs parallel to the Fannie Mae and Freddie Mac automated system. Total Scorecard allows an approval but designates there may a property in foreclosure and requires that this be checked in underwriting.


How the National Consumer Reporting Association (NCRAinc.org) got involved!

We worked with Renee Erickson, of Acranet and a NCRA Board member, to show where past short seller credit was showing up as a FORECLOSURE even though the consumer had proof of past short sale. This resulted in denial in both Fannie Mae and Freddie Mac automated underwriting systems. Renee took this to the NCRA (National Consumer Reporting Association).


Short Seller Credit Rebounds – Automated Error Confusion Persists

Short Seller credit is often surprisingly good, in spite of late payments required by their lender for the short sale. Loan files were acceptable for a new loan per Fannie Mae/Freddie Mac guidelines; yet both automated underwriting systems were turning past short sellers down and showing the short sale as a FORECLOSURE! And, there was a reluctance to downgrade the credit from a FORECLOSURE, even with proof in hand!


Confusion about Short Sale: LENDERS require delinquency, but CREDIT IS IMPORTANT to homeowners!

“One time life event mortgage defaulters are vastly different than chronic mortgage defaulters,” states the May, 2011 Financial Summit/TransUnion/Life after Foreclosure and Hidden Opportunities article.  

Judgment en-masse… how could people undergoing such hardship  have credit that seemed to be intact? And if credit was intact, these homeowners must really be strategic defaulters.

The reality was that short sale lender policy required mortgage delinquency in order to get short sale approval… then… and most still require delinquency now. And homeowners were wiping themselves out financially and feeling humiliated that they had not seen this coming. 

 The common thread in hundreds of cases we have worked on can prove that homeowners did everything that they could to stay afloat and hang on – until they could not any longer. Credit was of utmost importance to the overwhelming majority of the homeowners who were affected by short sale.


Short Sellers labeled as “Strategic Defaulters,” even though Lenders Required Default!

The second problem causing a backlash against short sellers is that the press was reporting that short sellers were “strategically defaulting,” or choosing not to make their payments even when possible, when reality was that SHORT SALE LENDERS REQUIRED MORTGAGE DELINQUENCY to approve a short sale. Homeowners allowed 3-way calls to confirm this was being told to them by their lenders… and the homeowners were telling the truth. Loss mitigation practices for most investors require mortgage delinquency for a short sale approval… to this day.


The Root of Problem: Lender required delinquency policy needs to be changed!

Loss mitigation practices for most investors require mortgage delinquency for a short sale approval in the first place and that policy continues today.

If underwater homeowners were given an option to stay current through the short sale process, lenders would receive a greater net amount for the property.

If given the option, homeowners would stay current to keep credit built over a lifetime intact, even with hardship.

That is how important credit is to these consumers. Credit is the benchmark for the mortgage industry. This policy is knowingly destroying consumer credit and needs to be changed!


Rental Problem, Dwindling Income

Sept. 21, 2014

I found your website through a google search and I wanted to get in contact with you and see if you may be able to help my wife and I obtain a mortgage.

To describe our situation better to you, here is the current situation we are in. My wife and I had purchased our first home, which was a town home in 2006. We outgrew that home because we had a baby and it was a small town home, and in addition I ended up taking a job that required me to travel further to work. Because of the housing situation and everything being under water, our only option we to rent out the town home and purchase a home that was more adequate for our size. Since it was our first time renting, we were very nervous doing so, so we decided to hire a property management company for us and pay them to ensure we were getting a renter of good quality in there. Even with paying the property management company we were losing roughly $400 per month on the place, however with our high income it still allowed us to take the loss.

However 8 months into the renting process, the renter did roughly $20,000 worth of damage to our property at the town home and stopped paying rent, and eventually moved out on her own. Because of the lack of funds to invest another $20,000 into fixing the town home just to get it back into rental shape, on top of the money we were already losing per month on it, and at that time my side business income had dwindled, we were facing a financial difficulty all of the sudden.

We were forced to do a short sale on the town home. We even attempted to do a short sale by keeping our mortgage current as well and the lender, Wells Fargo, informed us that they would only work with us on the short sale if we stopped paying on the mortgage. It was a difficult decision to make because we haven’t defaulted on anything we owe on, but unfortunately it was something we would have to face in the future regardless had they not approved a short sale as our savings and income was dwindling due to the town home property.

Wells Fargo approved our short sale on December 2013, roughly 9 months ago. We have not missed payments on anything since. We are currently looking to sell our current home and purchase another home closer to my parents as they are aging and we would like to help take care of them. Our current home is currently valued at roughly $60,000 more than what we will be able to use that profit to put down on the new house we would like to purchase. We currently have already found the home we would like to purchase and have listed our current home for sale. However I was not aware how difficult this would be to obtain a mortgage since our short sale is not even a year old. My wife and I both have a combined income of over $100,000 per year and our credit scores are both over 700.

Are there any options available that you may be able to help us with?

Thank you for your time and consideration and I hope to hear from you soon!

Sincerely,
Chris, Florida

 


Real Hardship: Be Grateful That You don’t Have It

By Pam Marron

Troubled by negative comments directed at Senators Warren, Menendez and Merkley about their questioning of Federal Housing Finance Agency director Mel Watts’ reluctance to allow principal reduction for underwater homeowners, I had to write.

Every discussion about how to help millions of homeowners that are STILL  underwater (in a negative equity position) starts like this: “If they hadn’t taken out a second mortgage to buy all of those toys” or “bought more house than they could afford”, they would not be in this position.

Here’s the reality of the majority of these cases. Divorce happened. Families grew or kids moved out, resulting in need of a move for growth or downsizing. Jobs were cut and folks had to move to regain employment, or couldn’t afford their existing mortgage with a new job obtained. All of these reasons are why folks have to move. But, when an underwater homeowner must move and a short sale is contemplated, there is harsh judgment for how they got underwater, even when the need for a move is from real hardship.

The problem worsens when lenders require mortgage delinquency first to approve the short sale. This is still required today and I have seen very few exceptions where short sellers were allowed to make payments to the closing date. Little attention is given to the lender servicing practice that requires the delinquency. Instead, loads of press has reported on the “strategic defaulters”, those who can make their mortgage payment but choose not to. There has been virtually no press that many so-called strategic defaulters weren’t making their payment because it was the only option they were given to get short sale approval and exit their home…. advice given to them by their lender.

I am a mortgage broker in Florida, where 28% of home mortgages are still underwater. Three years ago, the percentage was around 62%. My sites were set on helping folks back into the real estate market when they could re-enter. During these years, a pattern became evident. Underwater homeowners were being told by their lenders that the only way they could get approved for a short sale was to go delinquent. These homeowners were bewildered that their credit had to be stellar to get the mortgage initially, and now they were being told that to exit the home the credit had to be delinquent.

Not believing this, desperate homeowners allowed me to be on calls with their lender to confirm what they were telling me. It was clear, and with multiple lenders and homeowners. The requirement to be delinquent on mortgage payments in order to get short sale approval was told directly to affected consumers by their mortgage lenders, and on recorded calls.

The reality was that many underwater homeowners were willing to make mortgage payments during the short sale process, but mortgage lender servicing rules required these homeowners to be delinquent.

Underwater homeowners face a lose-lose proposition. If the homeowner must sell but does not have the funds to pay the difference needed between the mortgage balance and the lower house value, a short sale, foreclosure or renting out the home are their only options.

Loss on Three Options

1. Short sell: the homeowner works with the lender on a lengthy process that, to this day, requires delinquency of the mortgage. Hardship must be explained by the homeowner and acknowledgment is part of the approval process for the lender short sale. Credit is incorrectly coded as a foreclosure after 120 days of delinquency which results in a new mortgage denial years later when past short sellers are eligible for a new conventional loan. And, a foreclosure requires a 7 year wait rather than the 2 year wait after a short sale, per Fannie Mae and Freddie Mac [1]Seller Guides. And recently, we are seeing [2]Fannie Mae and [3]Freddie Mac coming back after past short sellers for deficiencies, per 9/24/2013 FHFA Recovery Reports.

2. Foreclosure:  the homeowner ceases to make payments or is turned down for a short sale. Credit is coded as a foreclosure which results in a 7 year wait for a new conventional mortgage.

3. Renting Out Underwater Home: many did this years ago when a move from the home had to be done. However, many who rented are now preparing for a short sale, financially wiped out after years of making up the difference between rent received and the mortgage payment.  Many tried this option hoping to eventually have enough equity to sell the home without a loss. However, the rate of appreciation has not happened quick enough, and those who are still trying to dig out of these properties often have little or no choice but to short sale.

And for those underwater homeowners trying to stay in their home, a refinance available called HARP 2.0 has had limited success because many lenders cap the amount of negative equity… for a program that has no cap on negative equity! And, if you have a conventional mortgage that is not owned by Fannie Mae or Freddie Mac, there is no refinance for you.

So how do you answer the common perception that “those who are underwater got there on their own accord” and “what will be done for all who are NOT underwater?”

Here’s the answers:

  • Be grateful that you are not in the shoes of those still underwater, that your credit is not wrecked, and that you can get on with your life.
  • U.S. Housing: Seriously work on and get implemented HARP 3.0, or an alternative refinance plan that allows unlimited loan to value (like it is supposed to!) for all conventional mortgages including Fannie Mae and Freddie Mac. Give a pricing incentive to lenders who apply REAL written guidelines to these loans, instead of so many overlays and limits that fewer homeowners can get any benefit. This is not a handout. These are performing loans and banks will make a profit while building goodwill.
  • Don’t take advantage of these folks, who are either locked out or still having trouble getting a conforming mortgage, even though Fannie Mae and Freddie Mac have specific rules that allow these mortgages. Non-QM mortgages at higher rates have come into the mortgage marketplace and qualified consumers must often settle for a higher rate with non-QM lenders even though they meet criteria for a new mortgage with Fannie Mae and Freddie Mac.
  • Pay attention to the credit of these consumers that is being destroyed! There seems to be little regard for credit that continues to be screwed up for folks who have gone through a short sale. Credit is the key to the growth of our country. New credit products promising better service continue to be pushed, while consumers with credit problems who have proof of the real credit have to pay enormous amounts of money just to get corrections.
  • Stop ignoring the underwater mortgage problem and judging those affected as “strategic defaulters en masse”. The majority of those affected are trying to get on with their lives and want to contribute. There will always be takers, but [4]reporting of strategic default has been over stated.
  • Ask these folks what REALLY happened, and you will hear unbelievable stories of hardship where great thought went into how to dig themselves out.
  • States that have Hardest Hit Funds available for underwater homeowners need to promote this.

For all homeowners who are not underwater, be damn glad you are not in their shoes.

 

 

[1] Requirements for an FHA, VA and USDA mortgage are different.
[2] FHFA Can Improve Its Oversight of Fannie Mae’s Recoveries from Borrowers Who Possess the Ability to Repay Deficiencies http://fhfaoig.gov/Content/Files/AUD-2013-011_0.pdf
[3] FHFA Can Improve Its Oversight of Freddie Mac’s Recoveries from Borrowers Who Possess the Ability to Repay Deficiencies  http://fhfaoig.gov/Content/Files/AUD-2013-011_0.pdf
[4] Unemployment, Negative Equity, and Strategic Default/Federal Reserve Bank of Atlanta/August 2013 http://www.urban.org/events/upload/Gerardi-Kerkenhoff-Ohanian-Willen-Strategic-Default.pdf

 


A Public “Thank You!” to Fannie Mae and a Request for Conventional Hardship Counseling Certification for Past Short Sellers

A Public “Thank You!” to Fannie Mae and a Request for Conventional Hardship Counseling Certification for Past Short Sellers

Dear Mr. Watts;

First, Thank You to Fannie Mae for the August 16, 2014 Desktop Originator [1]”fix” that provides  for past short sale credit reported as a FORECLOSURE to be corrected! This allows thousands of eligible past short sellers to  re-enter the housing market!

There is another problem we need your help with: confusion of real hardship with strategic default.

Underwriters are now reviewing more borrowers  who had a past short sale. Many underwriters have a problem with the fact that the mortgage was on time and then all of a sudden went delinquent right before the short sale and  assume these folks were strategic defaulters. However, an overwhelming majority of underwater homeowners were told by their lenders that they could not receive help unless the mortgage was delinquent. A massive number of short sellers will tell you they went delinquent because it was the only option given to them by their lender to get a short sale approval. Further, it can be proven that a massive number of these folks stayed in their homes until they could not do so any longer.

Staying current was a struggle. Hardship is what forced the short sale.

In the midst of  the worst recession in U.S. history, many underwater homeowners wiped themselves out, emptying 401K’s and savings to stay afloat. The hardship was the circumstance that occurred when these folks were at the end of their rope, and had no option left except to short sale.

And, yes, there were those who took advantage of the system. But the great majority continued to make payments, expecting to gain back equity and eventually move on. However, there are areas across the U.S. where appreciation has not happened fast enough and life events have resulted in continued short sales for underwater homeowners (approximately [2]9.1 million per RealtyTrac in July  of 2014).

FHA has “Back to Work” Certification

The Federal Housing Authority (FHA) has a [3]”Back to Work” program, where those who have had a past short sale, foreclosure or bankruptcy can get a certificate from a HUD Approved Counselor where hardship existed and where  a 20% reduction in income was sustained for 6 months or more. In acceptable circumstances, a new FHA mortgage can be approved one year after the short sale, foreclosure or bankruptcy as another option to the three year wait required now.

Could FHFA allow a Hardship Certification from a HUD Approved Counseling Agency or Private Mortgage Insurance Company (PMI) for conventional mortgages?

Why? Because underwriters unfamiliar with problems surrounding short sales are turning down qualified conventional borrowers with extenuating circumstances at the two year mark after a short sale.

Real Hardship Examples

A husband loses his job after a brain aneurysm. The medical crisis causes the couple to file bankruptcy, but they continue to pay the mortgage on the wife’s salary alone. Soon, it is evident the husband will no longer be able to work. It takes 18 months to get Social Security Disability for him and the underwater home is put up for a short sale. The short sale takes almost two years with two contracts that fall apart due to the lengthy short sale process.  The employed wife struggles to make the house payments, wiping out the 401K’s of both her and her husband. The wife is told she must go delinquent in order to get a short sale approval, so she does. Two years later, the wife attempts a new mortgage. The underwriter turns her down, stating she made the mortgage payments after the bankruptcy. The wife asks, “how hard does my hardship have to be?”

Another couple kept their underwater property as a rental. Both moved to another state for jobs, rented out their home and paid monthly for  the difference between rent received and the mortgage payment. 401K’s and savings reserves were wiped out to cover the difference of funds needed. When they lost their final tenant, the options were to short sale or go into foreclosure, as all funds were depleted. They short sold the property.

Please allow trained HUD Counselors or PMI Underwriters to provide a certification for hardship to prove Extenuating Circumstances.

Lenders will not approve a short sale unless a hardship exists. Questioning hardship requires that borrowers must revisit a difficult time all over again. Allowing those trained with allowable criteria to determine real hardship and provide borrowers with an option to layout their story to an unbiased third party can make a difference in the growth of the housing market.

Sincerely,

Pam Marron NMLS#246438

Florida Mortgage Broker

 

[1] Desktop Originator/Desktop Underwriter Release Notes/DU Version 9.1 August Update/June 17, 2014   https://www.fanniemae.com/content/release_notes/du-do-release-notes-08162014.pdf
[2] U.S. Homes Underwater Stalls at 9.1 Million in Second Quarter as Home Price Appreciation Slows in Many Marketsc.com/July 24, 2014/RealtyTrac                     http://www.realtytrac.com/content/foreclosure-market-report/us-q2-2014-home-equity-and-underwater-report-8118
[3]Back to Work Program: Get Your Certificate    http://backtoworkprogram.org/

 


New Buyers Hurt by Servicing Transfer Policy for Short Sales and Foreclosure Properties in Loss Mitigation

By Pam Marron

Sept. 19, 2014

The practice of transferring servicing from one servicer to the next is often a surprise to unsuspecting homebuyers. The transfer can start the short sale process all over again with no regard for buyers already in the purchase process who are trying to close on a newly purchased property. Some are losing appraisal  fees, home inspection costs, and repair estimate fees when servicers opt for foreclosure rather than to extend the contract.

The practice of servicing loss mitigation properties is taking a toll on new buyers who have signed contracts to purchase these homes. Servicing contracts for loss mitigation properties appear to span four to five months. Buyers of these serviced properties are unaware of the contract timeframes and may sign a purchase contract within this term. When servicing is at the end of a cycle, buyers are given little notice of the servicing deadline. Buyers have often paid for appraisals, home inspections, and estimates for needed repairs to make the applied for mortgage approvable on “As Is” contracts.

Servicer transfer dates are not told to the buyers until shortly prior to the date, and in most cases, new buyers and their lenders are unprepared to close before that date. Then, buyers are further delayed as they wait for the new servicer to order a brand new BPO and go through the loss mitigation cycle again. Often, new BPO’s are ordered for a property that has a valid appraisal already done and paid for by the purchaser. And, if the servicer opts to foreclose, the purchaser of the home is out all of the funds they spent upfront, even if they are not notified of the deadline date until after the mortgage process has started.

Title companies, frustrated with contracts where this is happening on a regular basis, tell of this common problem. Realtors aware of this practice are reluctant to show short sales, where this happens the most, fearful they will never get the new buyer to the closing table. And unsuspecting buyers are left stranded, stunned that there is no protection for them through the daunting mortgage process.

Homeowners going through a short sale or foreclosure are notified that servicing is changing and who the new servicer is. However, homebuyers trying to purchase these homes are not given the same information nor the ability to access loss mitigation negotiators for an extension of a contract already in process.

The [1]”Protecting Tenants at Foreclosure Act of 2009″ was legislation that allowed renters who suddenly lost their lease due to a foreclosure to stay until the end of the lease or be entitled to a 90 day notice before having to move. The same protection for new homebuyers who are investing upfront in a property that can improve a community when closed, needs to be applied.

Why should this policy be changed?

Buyers who purchase these often distressed properties are clearing out problematic mortgages for servicers and are almost always paying for repairs needed on these homes. Coming up with a sound policy to insure protection for the process to finish for these buyers can only improve values – and encourages realtors to sell these properties. A better policy that encourages and better accommodates a short sale will provide a higher net than a foreclosure will to servicers and investors.

[1]

Protecting Tenants at Foreclosure Act of 2009  http://www.occ.gov/publications/publications-by-type/comptrollers-handbook/ptfa.pdf

 


Lenders Requiring Delinquency/Non-Delinquency For Short Sale Update

LENDERS REQUIRING DELINQUENCY/NON-DELINQUENCY FOR SHORT SALE UPDATE:

U.S. Bank: as of 5.2.2014, will allow an FHA mortgage holder to proceed with short sale with less than 90 days delinquency, which was required 30 days ago.

Wells Fargo: As of 4/17/2014, will allow homeowner to apply for short sale without delinquency but with hardship. Homeowner in process for 5th time.

Fannie Mae (Federal National Mortgage Association (FNMA) ): will approve homeowner with hardship for short sale without delinquency. Homeowner closed 6/2014.


Past Short Sellers Can Be Homeowners Again!

  • Please note that this problem only existed for conventional mortgages for Fannie Mae and Freddie Mac. Because of the parallel Total Scorecard automated system, FHA and VA loans are not denied in the system. Both Fannie Mae’s Desktop Underwriter/Originator and Freddie Mac’s Loan Prospector require an underwriter to verify the past mortgage was not a foreclosure.
  • The Fannie Mae”fix” did not work on Nov. 16, 2013. However, filing the complaint that with the CFPB does commonly result in the short sale credit code being downgraded.
  • On August 16, 2014, Fannie Mae came out with a workaround that does work. And the Fannie Mae Desktop Underwriter/Originator automated approval system is not providing a denial or “Refer with Caution” for past short sales in most cases. However, the Freddie Mac Loan Prospector automated system still provides a denial.