Talk about rife with symbolism: The Bank of America plaza in Atlanta — the tallest building in the South — has been repossessed by its lender in a foreclosure auction.
Note that it’s just symbolism, though. Bank of America is one tenant of the building, but it was owned by a L.A.-based BentleyForbes, which stopped making payments (aka, strategically defaulted) in December.
Yesterday we told you about banks beginning to offer cash and principal reductions for delinquent homeowners to do short sales rather than go into foreclosure. It seems like short sales are getting more and more press all of a sudden.
Earlier this week Freddie Mac said it will begin to offer larger incentives for mortgage servicers to complete short sales, as part of the Home Affordable Foreclosure Alternatives program. (HAFA is designed for homeowners who are in trouble, but who don’t qualify for a loan modification. It’s goal is to get them and their lenders to do short sales.)
“Borrowers and servicers may receive incentives for successfully closing a HAFA Short Sale or HAFA Deed-in-Lieu,” says Freddie. And soon those incentives will increase. By how much? To whom? Freddie hasn’t said. But the message is clear: Short sales are better than foreclosures.
Meanwhile, continuing the theme…
Over at The Mortgage Reports, Rob Chrisman writes that some major mortgage insurers have told Fannie Mae, ‘You don’t need our permission to do a short sale,” or as Chrisman writes, “Fannie Mae has been given the authority to proceed with a short sale or complete a deed in lieu of foreclosure by five mortgage insurers, without needing to secure their approval.”
Genworth, PMI Group, MGIC, Radian Guaranty, and Republic Mortgage Insurance, have all given Fannie Mae the authority to do the short sales on their behalf. That’ll speed the process up at least a little — and be another step to making short sales more appealing than foreclosures.
The whole robo-signing fiasco is causing problems not just for the people who were fraudulently foreclosed on by lenders, but even for people who never missed a payment and paid off their loans.
Reuters has the story, but here are some snippets. First, background on robo-signing:
Depositions from “affidavit slaves” depict a surreal, assembly-line world in which the banks and their partner firms hired hair stylists, fast-food kids and Wal-Mart floor workers, paying them $10 an hour, to pose as bank vice presidents, assistant secretaries and corporate attorneys.
These “robosigners” became a national sensation in the fall of 2010 when it was revealed that they faked titles, forged documents and backdated affidavits so they could make up for the bypassed procedures and foreclose on properties.
The story tells of people who have paid off their mortgages only to find that shoddy bank paperwork has them facing ruined credit and nasty repo men.
In July 2009, Roy and Sheila Bowers refinanced the mortgage on their suburban ranch home in Topeka, Kansas. The couple wanted to take advantage of the low interest rates that were all the rage at the time. [...]
But what the Bowers never imagined was that their old loan, the one Wells Fargo told them was paid off, would resurrect itself, trashing their credit report, scotching their son’s student loans and throwing the whole family into foreclosure. All, they say, even though they didn’t miss a single mortgage payment.
(Now Wells Fargo is claiming that the Bowerses have two mortgages — the old one and the refinanced one.)
LPS subsidiary DocX — and its founder and former president — have been indicted in Missouri on forgery charges for falsifying documents in order to speed up foreclosures on behalf of its lender clients.
The Missouri grand jury found that the person whose name appeared on 68 documents executed on behalf of a lender — someone named Linda Green — was not the person who had signed the papers. The documents were submitted to the Boone County recorder of deeds as though they were genuine, [Missouri attorney general Chris] Koster said.
With apologies to Barbie, math isn’t that hard after all. Looking at today’s crazy-low interest rates, homeowners who want to refinance are realizing that it’s worth it to bring some cash to the table to get that lower rate.
See, if you have 20% equity in your home you often qualify for the lowest of the low rates — and you avoid paying any PMI. But with home values having dropped, some folks who once had that 20% equity find they don’t anymore. When they go to lower their rates, they need to do a “cash-in” refinance in which they bring enough money to hit that magic 20% equity mark.
But it’s worth it. As Dan Green over at the Mortgage Reports points out, “Each dollar you knock from your mortgage balance is a dollar on which you won’t pay interest for the next 30 years.”
The result of this is that, for the first time ever, half of homeowners who refinance — half! — are bringing money to the table, and reaping the benefits.
Green goes into much more detail, and it’s a good read. So go. Read it.
Banks suddenly getting it: Short sales are better than foreclosures
07 Feb
By Andrew Kantor, Editor & Blogmaster
You can almost see the light bulbs above their collective heads — banks, it seems, are beginning to realize that it’s better for everyone (especially them) to do a short sale than to foreclose on a homeowner.
That’s what this Bloomberg story is all about.
Now banks have decided the deals [short sales] are faster and less costly than foreclosures, which have slowed in response to regulatory probes of abusive practices. Banks are nudging potential sellers by pre-approving deals, streamlining the closing process, forgoing their right to pursue unpaid debt and in some cases providing large cash incentives.
Those are the words of Bill Fricke, senior credit officer for Moody’s Investors Service. His point: If lenders can’t fast-track their foreclosures, short sales are a better option. Imagine that.
Not only is a bank likely to get more money from a short sale (“Losses for lenders are about 15 percent lower on the sales than on foreclosures”), but it doesn’t have to add in the cost of taxes, maintenance, HOA dues, and so on. When foreclosures were rare that was one thing, but these days the market is flooded with the things.
And get this: In some cases, banks are paying people to take the short-sale route.
JPMorgan Chase (the Bloomberg article explains) agreed to let one woman sell her San Marcos, Calif., home for about $200,000 less than what she owes, and gave her $30,000 to cover finding and moving to a new home.
Now, this clearly differs from “principal forgiveness” because… oh, wait.
The Virginia Real Estate Board is composed of seven real estate licensee members and two citizen members, all appointed by the governor and confirmed by the General Assembly. The term of office is four years.
The terms of three licensee members expire on June 30, 2012. Two of these members are not eligible for reappointment.
VAR makes recommendations to the governor on appointments to the Real Estate Board. If you are interested in being considered by VAR for recommendation, please contact Jay DeBoer at jay@varealtor.com.
Because lenders have shown that they can’t necessarily be trusted to evaluate potential borrowers, the federal government will be setting standards that lenders must used to determine whether someone can repay a loan.
No, I’m not being snarky about lenders. That’s the sentiment of Consumer Financial Protection Bureau Director Richard Cordray.
When discussing the forthcoming QA rule — which tells lenders what they have to consider when deciding whether a borrower has the “ability to repay” — Cordray quipped, “You wouldn’t think that you would really need a rule that a lender would have to pay attention to whether or not a borrower could repay a loan.”
The definition of a qualified mortgage — a QM (not to be confused with QRM, which is a stricter standard) — is expected this summer.
Mortgage rates fall to record low. There. I said it. Again.
That is all.
Let’s look at President Obama’s mortgage refinance plan. Its goals are to allow a lot more home owners to refinance at today’s lower rates, and thus pump more money into local economies. It will also reduce foreclosures, which might help bolster property values — not to mention allowing people to stay in their homes.
Essentially, the plan the President outlined will allow any borrower, not just those with Fannie or Freddie loans, to refinance through the FHA if they meet the qualifications.
It’s estimated to save a typical borrower $3,000 a year — three grand being pumped back into local economies.
So, what’s a guy gotta do to qualify?
1. It’s only available to responsible borrowers – those who are current on their mortgages for at least six months, haven’t missed a payment in a year, and have reasonable credit (a FICO score of at least 580).
2. The mortgage they’re looking to refinance has to be within the FHA’s conforming loan limits.
3. If borrowers owe more than 140 percent of the value of their home, the lender has to agree to reduce the loan balance. The White House also said Tuesday it wants to help banks that want to refinance those deep-underwater borrowers.
If a borrower can verify his employment, he won’t have to file the whole magillah of paperwork. And appraisals won’t be necessary.
One independent estimate found that about 3.5 million people would qualify to refinance.
Risks and rewards
In a way, President Obama is saying that if banks won’t help these responsible homeowners, the federal government will — and it will also reap the rewards. Remember, FHA doesn’t cost taxpayers money, it generates profit. More so if it can expand its roll of responsible ‘customers’.
Further, as insurance against some of those borrowers not being as qualified as they seem, banks will be charged fees based on “their size and riskiness of their activities” — in other words, the more sloppy a lender’s underwriting, the higher that fee.
Of course, that would seem to leave lenders with the rest: the borrowers who don’t take advantage of the lower rates for whatever reason, and those who are behind on payments or have too low a credit score to qualify.
And the rest
Also part of the Obama plan is prohibiting banks from dual-tracking: working to modify a home owner’s mortgage on one hand, while beginning foreclosure procedures on the other — speaking with a forked tongue, as it were. Before a lender can foreclose, it will have to show it took all reasonable steps to modify a borrower’s mortgage.
Finally the plan would start the process of having Fannie Mae make foreclosures available to investors in bulk, provided those investors then make the homes available as rentals. (Between them, Fannie, Freddie, and FHA own about 25,000 foreclosed properties.) But the details of how that would work are still up in the air.
