HUD May Allow Principal Reductions of 30%

HUD May Allow Principal Reductions of 30%

The Department of Housing and Urban Development is seeking expanded loss mitigation authority allowing the principal amount of an FHA-insured mortgage to be reduced by up to 30% to help homeowners avoid defaults. The Federal Housing Administration would pay a partial claim to the servicer/investor to cover the writedown and make the mortgage current. Eventually, though, the borrower would have to repay the forgiven principal — but without interest. "It would save FHA money," said William Apgar, a senior advisor to the HUD secretary. He noted that such an aggressive approach is "consistent" with President Obama's loan modification plan. "We do believe FHA should have state-of-the-art modification tools," Mr. Apgar told National Mortgage News. Meanwhile, FHA's "serious" delinquency rate is creeping up. FHA loans 90 days or more past due, in foreclosure and in bankruptcy hit 7.46% in February, compared to 6.16% a year ago.

IAS Touts Hybrid AVM/BPO Property Valuation

IAS (Integrated Asset Services, LLC) has launched a new hybrid AVM/BPO model. I will do further research to find out the cost and scope of this new valuation method.

More Fraud In The Financial Markets

OTS Acting Director Placed on Leave

The nation's top thrift regulator, Scott Polakoff, has been placed on leave while the Treasury Department Inspector General completes a review of several cases where the Office of Thrift Supervision back-dated capital infusions so the institutions could retain their "well capitalized" classification. Treasury Secretary Timothy Geithner appointed OTS deputy director John Bowman to replace Mr. Polakoff as the acting OTS director. "Mr. Polakoff is on leave pending a review by the Department of the Treasury of the OTS's August 2008 actions related to post-period capital contributions," OTS said. A career regulator, Mr. Polakoff was the senior director under former OTS director John Reich who stepped down in February. In December, the Treasury IG notified Congress that OTS allowed IndyMac Bank to count an $18 million capital contribution made on May 9, 2008 toward the thrift's first quarter financial cash report. IndyMac was closed in July after a run on the bank. After the IG reported the IndyMac case, an OTS review found that three other thrifts were allowed to back date capital infusions from their holding companies. OTS has not identified those institutions

Beware! Additional REO Requirements For Miami-Dade County

Miami-Dade County is imposing addition requirements. Please open the link and read the entire article. Below is a very brief outline of the changes.

New Certificate of Use Requirement for the Sale of Foreclosed Properties

Effective April 1, 2009, buyers of foreclosed properties in unincorporated Miami-Dade County will get some protection against unexpected repairs or other deficiencies of the property under an ordinance adopted by the Miami-Dade Board of County Commissioners (BCC) on December 2, 2008.

Ordinance No. 08-133 applies to all residential properties in unincorporated Miami-Dade County which are acquired through a Certificate of Title (Foreclosures and Judgments), in accordance with Chapter 45, Florida Statutes. Residential properties affected include single-family homes, condominiums, townhouses and duplexes.

The adopted ordinance requires that title holders of foreclosed properties obtain a Certificate of Use (CU) prior to offering the property for sale, transfer or alienation.

Will A Foreclosure Affect Your Credit Score?

Credit algorithims may need to be re-calculated in order to address the millions that have been affected by foreclosure or economic downturn. I've been saying for quite some time that we are in need of some sort of credit report or credit amnesty program. This article seems to be a step in that direction.

Using Racketeering Law To Recoup Fraud Losses

The attached article outlines the additional steps that lenders are taking to recover losses they've incurred from this downturn in the real estate market. For those JMO readers that have been with us for a while, you will recall that I warned of this several months ago. Actions like this are last-ditch efforts on the part of the lenders to do the due diligence/compliance AFTER the fact.

Keep A Close Watch On Possible Bottom

Although I don't consider a one-month change in direction a "trend", it is definitely worth keeping a eye on new and existing homes sales over the next quarter. If you look at the graph below you will see that July of 2008 showed an "uptick" then the market continued to fall.

New Home Sales Suggest Possible Bottoming

New homes sales jumped 4.7% in February from January and it could be a sign that the housing market is finally bottoming out. "We have been looking for a bottom to form sometime in the first half of the year and it looks like things have firmed up a little bit," said Scott Anderson, senior economist at Wells Fargo & Co. The U.S. Census Bureau reported that sales of new single-family homes rose from a seasonally adjusted annual rate of 322,000 in January to 337,000 in February. The bureau revised the January sales number upward from 309,000. The new home sales report combined with the 4.4% jump in sales of previously owned homes is "very encouraging at this point," Mr. Anderson said. But he wants to see a couple more months of good reports before calling a bottom. "Now that the Federal Reserve is trying to push down mortgages, we are seeing a refi boom and it seems like it is helping to give some confidence to buyers to go ahead with a purchase."

Three Months Before 'Toxic' Sales Begin

Three Months Before 'Toxic' Sales Begin

Federal Deposit Insurance Corp. officials are ready to begin discussions with banks that want to sell pools of troubled real estate loans under its new "Legacy Assets" program, but it could be three or more months before the agency is ready to conduct the first competitive sealed bid auctions. FDIC intends to solicit public comments on the new program, which is designed to cleanse banks of high-risk residential mortgages and commercial real estate loans. Although the comment period will be very short, FDIC officials want to "nail down" the structure before they begin marketing the program to private investors who will be asked to take a 50% equity position in the loan pools as part of a public-private investment fund. FDIC also has to provide private investors time for due diligence to evaluate the assets before they submit bids. FDIC chairman Sheila Bair estimates that the Legacy Asset program could remove $500 billion in high-risk mortgages from the banking system if private investors put up $50 billion in capital. There are "huge challenges of implementing a program of this magnitude quickly," Ms. Bair said. "We intend to move forward with this program in a methodical and a transparent fashion."

For recent items on federal legislation and regulation, see Washington News page

HUD Awards $4B to Buy and Fix Foreclosed Properties

The Department of Housing and Urban Development has completed the process of allocating $4 billion to states and communities for the purchase and renovation of foreclosed properties. Another $2 billion in neighborhood stabilization funds will available soon. "These funds will be used to buy up and rehabilitate vacant foreclosed homes and resell those homes with affordable mortgages," President Barack Obama said. On Friday, HUD said it awarded the last $731 million of the $4 billion in funds that Congress approved last July as part of the Housing and Economy Recovery Act. These funds were allocated by formula to states and local communities hardest hit by the housing crisis. HUD is working to execute the grants to the 309 state, city and county recipients by the end of this month so the funds can be disbursed in April. The massive economic stimulus bill Congress passed in February provides another $2 billion in neighborhood stabilization funds. These funds will be awarded through a competitive process. HUD is expected to solicit proposals by May 3.

Fed Preparing To Buy Toxic Assets - Finance Private Investors

The rumors appear to be turning to fact. After months of indicating that the Fed would buy toxic assets (remember TARP?). It appears that the Fed is going to move forward with their plan to begin buying bad loans in order to allow banks to begin lending again. According to the attached article it appears that they will begin by buying Notes (the article seems to infer that it will be Non-Performing Notes), but I'm assuming that they will also buy REO's as well. Of greater interest is the possibility the Fed is looking to work with private investors to help finance the acquisition of these toxic assets. I will continue to follow this development and keep everyone updated as new information becomes available.

Treasury Explains Housing Plan Website's Use

The Treasury Department has explained how to use a new website that allows homeowners to learn about Obama administration's new housing plan and whether they can qualify for a loan modification. The new MakingHomeAffordable.gov website has a calculator that allows homeowners to estimate how they could benefit from a modification. "Be sure to check out the calculator that allows homeowners to estimate the reduction to their monthly mortgage that they might get under the plan," a White House blog says. Meanwhile, agency officials are working on a net present value (NPV) test that servicers will use to determine if a loan should be modified. They plan to roll out a standard NPV model soon that provides some flexibility for servicers. For example, a servicer with a low re-default rate would not have to use the national rate.

Are You Selling Tangible Asset Or Software Applications?

Despite the name of the blog "Just My Opinion" I have been reluctant to bring my subjective views to any of my blog posts. But with wave after wave of newbies coming into the REO/BG/CMO/etc, industries with absolutely zero background or experience I believe this is an opportunity for those of us that have had success in this and other transaction based industries to set ourselves apart. I recently had a record setting week where I signed 34 NCND's and yet was not able to verify a single REO package as available for sale. Part of my job as a mandate is to insulate my clients from this futile exercise, by allowing them to focus on closeable transactions. So here are some of my thoughts, remember they are "Just My Opinion"

First, let's stop selling "Excel Spreadsheets", tapes, ports or whatever else you want to call them. Real investors are buying and selling the actual asset. That means due diligence is crucial. I have been offered product by many "private sellers that just took it down", only to find that they did not perform any due diligence, or transfer title of the asset into their own name. In many cases, sellers cannot even provide access to the asset for someone to perform due diligence, such as BPO's This is my first indicator that the product is an assignment or under contract, but has not been purchased. Most buyers will accept this type of transaction, but want to deal with the owner of the product. Conversely, there are many buyers that claim to have the ability to close a deal, but cannot provide proof of past acquisitions or suitable proof of funds.

Second, let's use appropriate and universal terminology. In my company an "owner" is the entity that holds verifiable title to the asset. a "seller" is someone authorized, in writing, to sell the asset, but may or may not be the owner. A mandate/rep is someone authorized by the seller, in writing, and in some cases with signatory authority, to market the asset or present the buyer, and assist with vetting and due diligence. The only other parties are either "intermediaries" or "referral sources". We do not recognize a position many refer to as "next to the rep/mandate". Too many viable transactions fail to close because the parties misrepresent or misunderstand their role in the transaction.

Third, Do Deals!. "sanitized" tapes, one-sided proofing/vetting, zero earnest money deposits, are all smoke screens that prevent deals from closing. Somehow, we've transformed our industry into one in which days and weeks are being spent confirming that the other side is "real". Escrow/Title companies are the best resource for this process and they have a fiduciary responsibility for confidentiality. Consider using 3rd party proofing services such as these, your clients will consider it to be money well spent.

Here's the example that I share with new clients.

• When I've sold a piece of real estate, I not only gave the buyer my address, I gave him access to my home. I allowed him to physically view the property and 'kick the tires'. This is my way of proving that I am a legitimate owner/seller. In today's market many homeowners are even letting potential buyers "sleep on it" by allowing them an opportunity to spend the night in the property before buying. In return, that buyer, when interested in buying, put up earnest money and immediately begins due diligence (appraisal, inspection, title search, etc) and proves his financial ability to complete the transaction. This was his way of proving that he is a legitimate buyer/investor. The same applies when I've sold automobiles or any other asset. Even car dealerships let you SEE and DRIVE the car before you even have to prove your ability to purchase.
  

• Here is what I was told by the Asset Manager of a well known regional bank...
  "Robin, we're not worried about someone having the addresses. How else would they know what they're buying? Since we are the owner, it doesn't matter who buys it or how they found out about it, we will get paid when it sells. Anyone that is not willing to give you addresses or other relevant information is probably not the owner and is concerned that they won't get paid if it sells". I'm sure we've all found this to be true.
  

Finally, let's all agree to run integrity based businesses. In my experience, buyers and sellers cannot make "informed" decisions to buy or sell without "information". Our job, whether as mandates/rep, intermediaries or referral sources is to obtain and provide this information. The accuracy and timely delivery of this information is paramount in successfully closing any transaction.

Watch Closely...This May Be A Sign Of A Turnaround

Pay close attention! This article is an indication that there may be signs of a turnaround in residential real estate. For those of you that are economic historians you will agree that by the time the "average Joe/Jane" gets into any market (real estate, stocks, etc) that market usually makes a turn in the other direction. If average investors are looking to buy discounted real estate it means that the discounts will likely go away. Here are a few things relevant about this article:

1. average investors are attending foreclosure sales again. a distinct turnaround from a year ago
2. in the case of this particular article, homes are selling at auction for up to 75% of value
3. there is money out there.
   

For those of you that are still beating your heads against the wall trying to buy assets in the 40's-50's with the hope that you can flip it at a profit, you may want to consider a new acquisition strategy that allows to get the same return but may require a longer holding period.

Interesting Interpretation Of Stimulus Package

I was doing my usual daily research and came across an article written by Lew Sichelman for Managing REO magazine. I found it to be both well written and insightful. There are a few ideas that warrant further exploration (like doubling the mortgage interest deduction). Enjoy.

Track Spending Under The New Stimulus Plan

as Promised, the new administration is keeping their promise regarding transparency and accountability. Log on to this website to track spending under the new stimulus plan. I also found the timeline at the bottom of the website to be very informative.

Freddie Mac Short Sale Web-Ex

For those of you new to short-sales or wanting to "sharpen the saw" Check out this video. It's about 25 minutes long so you make sure you give yourself enough time to view the entire presentation.

Foreclosures Continue To Rise

Foreclosures continue to rise across the country. Despite the moratorium place on foreclosures by many lender, it is not at all surprising that foreclosures (and pre-foreclosures) continue to increase. Here are a few reasons we believe foreclosures are growing:

• More lenders are following the new rules for foreclosure by giving earlier notice.
  
• More homeowners are unemployed, or have had their pay significantly decreased
• More homeowners have simply stopped making their payments, despite an ability to pay
• Home prices, though stabilizing in many areas, have created negative equity for homeowners
• Many lenders are avoiding bailout funds, due to the "strings" attached
• Loan Modifications and Short Sales continue to be difficult and time consuming
  

B of A Ramping Up For More Jumbo Loans

This is worth following...for those of you that have been in the Real Estate and Mortgage Industries you will recall that in early 2002, the increase in jumbo loans signaled the first of many real estate "booms" that would continue over the next several years. Bank of America is committing resources and staff to targeting this recently ignored market. Of course we will need to follow closely to see if their guidelines for these loans are realistic. In particular, loan-to-value and interest rates are the key elements of qualifying for jumbo loans. In addition, because most of America's wealth comes from self-employment, there will most likely need to be an "Alt-A" component that will allow for alternative income documentation.

New Short Sale Approval Form Targets Potential Loan Fraud

JMO readers may recall that I mentioned that short-sales and modifications could be a double-edged sword for those that obtained their original mortgages using "stated income" loans programs. If the amount stated as income can be proven to be a misrepresentation then the loan could be considered to have been obtained under fraudulent circumstances... Please read below.

Thanks to JMO Reader Bryan Jones from the Talon Group for supplying this information:

We have just been alerted to the fact that Countrywide has a new form of short sale approval letter, in which it now attempts to retain the right to invalidate a transaction for events which may have occurred at the loan’s inception or in our transaction. This condition was found in paragraph 16 and read as follows:

“If the property was acquired by any means of fraud, [lender’s name] reserves the right to pursue any and all actions available to it to pursue any and all actions available to it to offset its losses. If it is determined that Sellers and/or Buyers participated in any way to the fraud, this short sale will be void, and the Note and Security Instrument will remain in full force and effect.”

Title insurance cannot be issued to either the buyer or the buyer’s lender free and clear of the loan if the lender can assert after close of escrow that money is still due. There is no workaround to this provision. If you receive a short sale approval letter with this condition, advise the Lender that the condition must be removed, in writing, or we cannot close. If one lender has started inserting this into their short sale approval letter be assured additional lenders will follow suit.

This is yet another reminder that all short sale approval letters have conditions for the lender’s agreement to take a short pay off to be effective. If there is ANY provision which purports to allow the lender the right to refuse a reconveyance after close of escrow, do not close your escrow without legal department approval

Fannie Mae Revised Policies

Fannie Mae has made some revisions to their policies. Below are a couple that may impact you.

Here is the original link.
(click on Miscellaneous Servicing Policy Changes)

No Negotiation of Preforeclosure Sales Commission
Servicing Guide, Part VII, Section 504.02: Contacting Selected Borrowers
Effective March 1, 2009, closing of preforeclosure sales may not be conditioned upon a
reduction of the total commission to be paid to real estate agents to a level below what was
negotiated by the listing agent with the borrower, unless the fee exceeds 6 percent of the sales
price of the property in aggregate. Servicers are reminded that they must continue to obtain
any approvals that may be required by interested third parties in connection with preforeclosure
sales.

Delinquency Status Reporting to Begin at 30 Days Delinquent
Servicing Guide, Part VII, Section 602: Reporting Monthly Mortgage Status
Effective with the May 2009 reporting month, servicers will be required to report the
delinquency status code, delinquency status code effective date, and reason for delinquency code
for any mortgage loan that is one or more months (30 days or more) past due as of the last day of
the preceding month.
Servicers are reminded that beginning with the July 2009 reporting month, the scheduled
completion date for forbearances and repayment plans must be reported. Servicers are
encouraged to comply with the new delinquency status reporting requirements immediately, if
possible.

Update On Cramdowns

Democrats Agree to Compromise on Cramdowns

March 4, 2009

House Democrats have agreed to a compromise on pending bankruptcy/cramdown-related legislation that gives preference to interest rate reductions over reducing the loan amount. According to combined press reports, principal reductions would still be allowed but lenders would have to share any profit on the eventual sale of their residence with the owner of the mortgage. Also, limits would be placed on cramdowns if the homeowner has already modified his loan. Details were still being worked on at press time. The compromise comes just as new figures show that 8.3 million homes are now worth less than their loan value with another 2.2 million units approaching a negative equity position.

Prognosticators Exposed!

Please take a minute to review the Jon Stewart Video that is included in this link. Although it is very funny, it is also very telling how out of touch our "experts" are. Even the infamous Jim Cramer (CNBC's Mad Money) said to "buy, buy, buy" when the Dow was over 12,000 (Dow closed today below 6,600). I enjoyed a healthy debate yesterday with someone for whom I have a great deal of respect and he also mentioned how it appears that no one really has a clue what's going on.

T.A.R.P. Losing Steam...Many To Return Funds

In what has become a growing sentiment, more banks are expressing their dissatisfaction with the "strings" attached to the TARP funds. U.S. Bancorp has already expressed it's intention to return the funds as soon as possible.

Treasury Dept Guidelines For Loan Modification Qualification

Here are the guidelines for the loan modification program that went into effect today. Please review this information so you can properly advise your clients of the benefits that may be associated with this opportunity.