New lending guidelines benefit young borrowers

WASHINGTON – Nov. 29, 2010 – Under Fannie Mae’s new lending guidelines effective Dec. 13, securing a mortgage will become easier for some borrowers and more difficult for others. Freddie Mac is also considering similar new guidelines, according to spokesman Brad German.

The new rules allow buyers to use gifts and grants from nonprofit groups for their minimum 5 percent downpayment. Borrowers previously had to contribute a minimum 5 percent downpayment from their own funds, with additional downpayment money permitted from a gift.

These new rules are “definitely going to help upgrade buyers and young couples who for whatever reason don’t have enough money and are getting some from their families,” said Edward Ades, the owner of broker Universal Mortgage.

The gift rules apply only to single-family principal residences and cover mortgage amounts in excess of 80 percent of the property’s value. The loan balance also has a limit of $729,000 in high-cost areas like New York City and $417,000 in other areas.

At the same time, however, Fannie Mae is cracking down on debt-to-income ratios, with the maximum ratio for those seeking a conventional mortgage set to drop from 55 percent to 45 percent under the new guidelines. Fannie Mae is also increasing its scrutiny of payment histories on revolving debt, and buyers who have missed a payment will have 5 percent of the total balance added to their ratios.

Under the new rules, borrowers who have gone through foreclosure will be excluded from obtaining a Fannie-backed loan for seven years, an increase from the previous limit of four years.

Source: The New York Times

95% of borrowers go for fixed rates

WASHINGTON – Nov. 16, 2010 – Ninety-five percent of U.S. borrowers in the third quarter chose fixed-rate contracts when refinancing, the U.S. Federal Loan Mortgage Corp. said Monday.

Consumers who previously had 30-year loans or adjustable-rate loans most often chose 30-year, fixed-rate loans when refinancing, while those with 15-year or 20-year loans previously stuck with shorter terms, Freddie Mac said.

“We ended the second quarter excited that borrowers could lock in a rate of 4.75 percent for 30 years, and we ended the third quarter with rates at just a touch over 4.25 percent. It’s no wonder borrowers are attracted to fixed-rate loans,” said Frank Nothaft, Freddie Mac vice president and chief economist.

Copyright United Press International 2010

Tales of robo-signers hit YouTube

NEW YORK – Nov. 15, 2010 – It isn’t just Justin Bieber videos or stunning plays in a middle-school football game that are getting attention on YouTube these days. Add to the list a former hotel maid explaining how she signs thousands of mortgage documents a year without a clue to what she’s putting her name on.

“I don’t usually read the docs when I sign,” says Dhurata Doko, an employee of Nationwide Title Clearing, a mortgage services company. (YouTube search word: Dhurata Doko)

“So it is not part of your job to review the document? Your job is just to sign it?” asks Florida foreclosure defense attorney Christopher Forrest during a videotaped deposition of Doko earlier this month.

“I just look for my name and then sign,” she says.

Robo-signing mortgage document handlers have found their way to YouTube, giving a rare live view into the latest mess to rock the troubled housing industry.

The nation’s foreclosure crisis took a turn six weeks ago when it became clear that banks and processing firms had employees sign court documents that had information that was unverified or even false. The reason – or at least the reason lenders give for the sloppy work – is that they are drowning in foreclosures.

Banks have seized more than 909,000 homes through the first 10 months of the year and are on pace to take back more than 1 million homes this year. Now, foreclosures are being challenged in court because of the allegations of fraudulent documents.

Lenders say that this mess has been overblown. Some paperwork might be flawed, the banks acknowledge, but delinquent borrowers still deserve to lose their homes. The depositions say otherwise.

Doko worked as a maid and assembled electronics before joining Nationwide Title Clearing six years ago. She is one of three NTC employees whose video depositions were posted on YouTube by Forrest as part of a foreclosure case he is handling in Florida.

She and her colleagues tell of signing thousands of mortgage documents a day. One worker estimates signing 5,000 documents a day on average, another says she signs her name every 2 seconds. They acknowledge their signatures differ on certain documents.

The videos show that employees didn’t even know the most basic mortgage terminology. For instance, they don’t know what an “assignment of mortgage” is, even though that is crucial in a foreclosure case because it establishes who the final holder of the loan is.

Doko says she only signs documents as a witness. She says she never signs under the title of vice president. Forrest then shows her a document with her name on it. “Beneath your name it says vice president?” Forrest asks.

“I don’t pay attention to that,” responds Doko, looking uncomfortable as she answers.

“But you do agree with me, beneath your name it says vice president … and above your name it says Financial Freedom Senior Funding Corp. So when you sign this document, do you know whether you are signing as vice president of this company or as a witness?” asks Forrest.

“I just sign my name,” Doko says.

Courts, state financial regulators and attorneys general nationwide are investigating whether lenders violated the law by submitting fraudulent documents, often prepared by robo-signers.

The fact that delinquent borrowers face foreclosure is not the issue, but whether the documents used to get them out of their homes are signed by compromised witnesses, says Kendall Coffey, a former U.S. attorney in Miami and author of the book “Foreclosures in Florida.”

“You still need truthful witnesses. Robo-signers aren’t. They are impostors,” Coffey says.

NTC said in a statement to The Associated Press that its employees had been deposed but criticized the placement of the depositions on the Internet.

“It is unethical to imply that long-standing industry practices, which have been found in court to be legal methods of preparing common mortgage related documents, are somehow harmful to consumers,” NTC said.

The big mortgage lenders have been doing their own investigations regarding the entire foreclosure process. Some, including Bank of America and Ally Financial Inc.’s GMAC Mortgage, have started processing foreclosures again, after calling a temporary halt while they reviewed documents.

The courts will have the ultimate say over what happens next. If judges feel that borrowers have been wronged, they can halt the foreclosure process. An Ohio judge ruled on Tuesday that a state challenge to the validity of lender foreclosure documents will be heard in court early next year in Cleveland.

Attorney Craig Robins of Woodbury, N.Y., says he is already seeing some judges taking a stand.

“Many judges have seen so much sloppy and careless paperwork (from lenders) that they are saying ‘enough is enough’,” says Robins, a foreclosure defense attorney who writes the Long Island Bankruptcy Blog. “They won’t rubber-stamp the foreclosure proceedings.”

As the YouTube videos show, there already has been enough rubber-stamping.
 Copyright © 2010 The Associated Press

Mortgage rates fall to fresh lows this week

Mortgage Rate Trend Index

Mortgage rates could be headed up over the next week or so: 50% of the mortgage industry experts polled by Bankrate.com think they’ll rise; 29% think rates will fall; and 21% believe they’ll remain relatively unchanged.

NEW YORK (AP) – Nov. 12, 2010 – The mortgage rate bar is even lower, but few homebuyers are making the jump.

Rates on fixed mortgages again fell to their lowest levels in decades this week, Freddie Mac said Thursday, after the Federal Reserve unveiled a massive bond-buying program to help spur economic growth.

That marked more than a half-year of record lows. But housing activity has still faltered.

“I have zero purchase deals,” said Wisconsin mortgage broker John Stearns. “That’s how it’s been for months.”

Stiff headwinds — unemployment, foreclosures and tight credit — are undermining attractive rates and forcing buyers to the sidelines.

Home sales logged their worst summer in decades, with third-quarter sales falling by 21 percent from a year ago, the National Association of Realtors said Thursday. Median home prices fell in half of U.S. cities in the July-to-September period, up from a third in the previous quarter.

And banks are on pace to take back more than 1 million homes this year, foreclosure listing firm RealtyTrac Inc. said Thursday. Recent investigations into faulty paperwork have postponed some foreclosure sales, resulting in a 9-percent drop in home repossessions in October from the previous month.

Major lenders temporarily halted some foreclosures while they reviewed their practices and attorney generals in all 50 states launched a joint investigation into the issue. But many have resumed or plan to resume foreclosures soon.

“While that put a pause in the foreclosure process, that doesn’t do anything to help delinquencies,” said LendingTree chief economist Cameron Findlay.

Economic woes, such as unemployment or reduced income, continue to be the main catalysts for foreclosures. Borrowers who owe more than their homes are worth are also at high risk and their numbers are rising.

Zillow Inc. said Wednesday that the number of mortgage holders who are “upside down” on their home loans rose in the third quarter to 23 percent. Homeowners with negative equity have a harder time refinancing even though rates are enticingly low.

The average rate on 15-year fixed loans, a popular choice for refinancing, fell to 3.57 percent from 3.63 percent, Freddie Mac said. That’s the lowest since the survey began in 1991. The average rate for 30-year fixed loans fell to 4.17 percent from 4.24 percent last week. That’s the lowest on records dating back to 1971.

The Federal Reserve detailed plans last week to buy $600 billion in Treasury bonds. The central bank gave more details on Wednesday, saying it plans to purchase $105 billion in Treasurys over the next month. The extra demand means Treasurys will produce lower yields for investors. Mortgage rates tend to track those yields.

To calculate average mortgage rates, Freddie Mac collects rates from lenders across the country on Monday through Wednesday of each week. Rates often fluctuate significantly, even within a single day.

Rates on five-year adjustable-rate mortgages fell to their lowest level in at least five years. They averaged 3.25 percent, down from 3.39 percent a week earlier. It is the lowest rate on records dating back to January 2005.

Rates on one-year adjustable-rate home loans were unchanged at 3.26.

The rates do not include add-on fees, known as points. One point is equal to 1 percent of the total loan amount.

The average fee for 30-year and 15-year fixed loans in Freddie Mac’s survey was 0.8 point. It was 0.7 point for 1-year and five-year mortgages.
 Copyright © 2010 The Associated Press

31% of defaults could be strategic

WASHINGTON – Nov. 1, 2010 – The financial crisis and ensuing recession apparently changed the mindset of Americans toward their homes, turning what long has been the American Dream into just another financial investment.

The result, strategic defaults – people walking away from the property and mortgages not because they have to, but because they can.

The key consideration is time, said Jon Maddux, of YouWalkAway.com, which helps people turn their properties back to their banks. Some experts estimate nearly a third of all mortgage defaults – 31 percent – are of the strategic variety.

RealtyTrac reported 2 million foreclosures in September and said one in 371 housing units received a foreclosure notice.

Easy mortgages made people glorified renters rather than proud homeowners, with no emotional or financial ties.

“People who made the decision to buy at the wrong time got stuck in a house that may not recover (its value) for 10 to 15 years. Does it make sense to keep it as an asset? No. It’s throwing good money after bad when it takes so long to break even. So they decide to stop now. Their credit will recover in three or four years,” Maddux told UPI.

“Life is too short,” Jeff Horton, 33, of Orlando, Fla., told the Chicago Tribune earlier this month. Horton has $400,000 in mortgages with Bank of America and said he decided to walk away from his loans because he can’t sell or rent the properties for enough money to cover the payments.

As the housing bubble burst, real estate values plummeted and homeowners found themselves “underwater” – owing more than their homes were worth.

“I felt guilty at first,” Horton told the Tribune. “It all stopped when I saw them (Bank of America executives) take $90 million in executive bonuses. They take bailout money and do nothing for the little guy. They wouldn’t do anything for me.”

Banks made the situation worse, giving people who wanted to refinance a hard time, even refusing to do anything for them at all – sometimes because the homeowners were still making payments.

Chris Deaner of Sun City, Ariz., told CBS’ “60 Minutes” he was fed up. Deaner and his wife bought a house in 2006 for $262,000 but the property is worth only $142,000 on today’s market. He asked his bank for help.

“They refused to,” he said. “They said it was gonna affect my credit and they were gonna take my house. And I pretty much said, ‘Go for it.’”

The federal government has to take some of the blame. As Washington pushed banks to make homeownership easier, bankers heard “open the floodgates,” Maddux said. Banks started offering no-money- or little-money-down mortgages to people who wouldn’t be able to sustain the payments for the long-term, then bundled the mortgages into security instruments and sold them off.

“They (the banks) didn’t hold the paper any more. They felt no responsibility to make good loans,” Maddux said. “They only had to be good for a little bit of time and then they could sell them off. It was make money quick and pass the hot potato.”

Gone are the days of George Bailey’s Building and Loan where the bank took its proceeds and invested them back into the community.

But home ownership still is usually one’s biggest investment and there are indications attitudes toward mortgages are changing.

Freddie Mac, the Federal Home Loan Mortgage Corp., reported last week people are putting more money into their mortgages rather than taking out when they refinance – something that was all but unheard of in recent years. The report said 33 percent of refinancers put more money into their principal, compared to 18 percent who pulled equity out.

Foreclosures are running 65 percent higher than last year in the third quarter, RealtyTrac reported.

“The underlying problems that are causing homeowners to miss their mortgage payments – high unemployment, underemployment, toxic loans and negative equity – are continuing to plague most local housing markets,” RealtyTrac Chief Executive Officer James Saccacio said. “And these historically high foreclosure rates will continue until those problems are resolved.”

And the foreclosure process itself is not without problems. A number of large mortgage lenders in the past month halted foreclosures because of paperwork errors and Wells Fargo last week admitted problems with 55,000 of its foreclosures, although saying the problems were minor and no one who was current on payments had been affected.

“People need to know a mortgage contract clearly spells out you have two options: You promise to pay and if you don’t you’ll give the property back to the lender. It’s not a solemn oath you’re going to pay,” Maddux said.

Copyright © 2010 United Press International