The article below is from the National Association of Realtors eNewsletter. The initial commentary is mine. Now the House and Senate are finally coming up with some substantive ideas. Raising the FHA loan limits is an action that could have a huge impact on the industry, allowing more first time home buyers into the market. It would also allow for more single loan home mortgages and the recalibration of what a jumbo loan is for the entire industry. Senate wants to raise the limit to $417,000 while the House could go as high as $729,950. I'm pulling for the House version!
Mark Thorngren
Happy Holidays from the Housing Opportunity Program!
Senate passes FHA Reform
After some touch and go moments, last week the full Senate passed FHA reform legislation. The bill was delayed for nearly a month in the Senate as a couple of Senators issued a legislative holds on the bill. Late last week Senators Coburn (R-OK) and DeMint (R-SC) lifted their holds which paved the way for the measure to pass the Senate by a vote of 93-1. Much credit is due to the grassroots effort of REALTORS® in Oklahoma and South Carolina as well as the effort of many REALTOR® volunteer leaders who flew to Washington in early December to specifically lobby for this bill. The bill, S. 2338, differs from the house version, H.R. 1852, in a couple of key areas and the conference committee meetings that will be held to resolve these differences are expected to be contentious. One of the key differences expected to illicit the most debate is the discrepancy in FHA loan limits. The Senate bill increases these limits to $417,000 while the House bill increases these limits to as much as $729,750 in high cost areas. The House bill also gives the Secretary of HUD the discretion to raise this limit by as much as $100,000 in specific markets for a limited time period. NAR has urged Congress to conference the bill as soon as possible, as a reformed FHA program will help homebuyers better afford a home and it will also help homeowners refinance into a safe mortgage product. Read the NAR press release.
For more of Mark Thorngren's Real Estate Blogs visit www.markthorngren.com.
Thursday, December 20, 2007
Fed Weighs in on Mortgage Reform
This report was emailed to me today from Lorie Schweitzer at Flagstar Bank - LorieSchweitzer@FlagstarBank.com
I think most of us would consider these "reforms" to be pretty much common sense considerations that might have kept most lenders and home buyers out of trouble. The point I find especially interesting, is that the Fed may be trying to mandate tax impounds now. Previously, home sellers could choose between having a monthly tax impound included in their mortgage or elect to have their taxes paid in two installments on 1 Nov and 1 Feb each year. The statement says that creditors would have to establish "escrow accounts for taxes and insurance", we'll see what that means as this legislation works it's way through. What follows is the actual article from Business Week.
Mark Thorngren
Today the Federal Reserve Board, under the authority of the Truth in Lending Act, unanimously voted to propose important changes to the mortgage industry. According to Business Week, the following proposed changes would affect subprime loans or those loans the Fed defines as "higher-priced mortgage loans" (loans with rates at least 3 percentage points above a comparable Treasury security for first mortgages and 5 percentage points for second loans, or home-equity loans):
Creditors would be prohibited from engaging in a pattern or practice of extending credit without considering borrowers' ability to repay the loan.
Creditors would be required to verify the income and assets they rely upon in making a loan.
Prepayment penalties would only be permitted if certain conditions are met, including the condition that no penalty will apply for at least sixty days before any possible payment increase.
Creditors would have to establish escrow accounts for taxes and insurance.The Fed also proposed another set of rules for all mortgages, including what the Los Angeles Times called "stricter disclosures on 'yield spread premiums.'" These rules include:
Curb or better disclose broker incentives..
Prohibit coercion of appraisers.
Prohibit loan servicers from engaging in unfair practices.
Require better disclosure overall.The proposal has been submitted for a 90-day period of public comment. After this timeframe, revisions could be made and the proposal must be voted on again. According to the Christian Science Monitor, "the Fed has indicated it would start to implement [the new policies] next year."Proposal highlights from Business WeekStatement by Chairman Ben S. BernankeHow Fed proposal affects legislation
For more Real Estate Information visit Mark Thorngren's blogs at www.markthorngren.com
I think most of us would consider these "reforms" to be pretty much common sense considerations that might have kept most lenders and home buyers out of trouble. The point I find especially interesting, is that the Fed may be trying to mandate tax impounds now. Previously, home sellers could choose between having a monthly tax impound included in their mortgage or elect to have their taxes paid in two installments on 1 Nov and 1 Feb each year. The statement says that creditors would have to establish "escrow accounts for taxes and insurance", we'll see what that means as this legislation works it's way through. What follows is the actual article from Business Week.
Mark Thorngren
Today the Federal Reserve Board, under the authority of the Truth in Lending Act, unanimously voted to propose important changes to the mortgage industry. According to Business Week, the following proposed changes would affect subprime loans or those loans the Fed defines as "higher-priced mortgage loans" (loans with rates at least 3 percentage points above a comparable Treasury security for first mortgages and 5 percentage points for second loans, or home-equity loans):
Creditors would be prohibited from engaging in a pattern or practice of extending credit without considering borrowers' ability to repay the loan.
Creditors would be required to verify the income and assets they rely upon in making a loan.
Prepayment penalties would only be permitted if certain conditions are met, including the condition that no penalty will apply for at least sixty days before any possible payment increase.
Creditors would have to establish escrow accounts for taxes and insurance.The Fed also proposed another set of rules for all mortgages, including what the Los Angeles Times called "stricter disclosures on 'yield spread premiums.'" These rules include:
Curb or better disclose broker incentives..
Prohibit coercion of appraisers.
Prohibit loan servicers from engaging in unfair practices.
Require better disclosure overall.The proposal has been submitted for a 90-day period of public comment. After this timeframe, revisions could be made and the proposal must be voted on again. According to the Christian Science Monitor, "the Fed has indicated it would start to implement [the new policies] next year."Proposal highlights from Business WeekStatement by Chairman Ben S. BernankeHow Fed proposal affects legislation
For more Real Estate Information visit Mark Thorngren's blogs at www.markthorngren.com
Wednesday, December 12, 2007
Treasury Secretary Henry Paulson Presents Mortgage Bailout Plan
What the Mortgage Bailout Means for You
Thursday, December 6, 2007 - Provided by BusinessWeek Online
On Dec. 6, Treasury Secretary Henry Paulson, with the support of President George W. Bush, unveiled a plan to aid certain homeowners who face the prospect of higher mortgage rates in the next few years. Paulson worked with banks and other mortgage companies to develop the initiative, and thanked them for their involvement. "We have worked through an evolving process to help minimize the impact of the housing downturn on homeowners, neighborhoods and the U.S. economy," he said. While the plan is ambitious and is designed to bring stability to the shaken economy, it will affect only a narrow slice of homeowners in the U.S. "This is not a silver bullet," said Paulson. Here are some answers to questions you may have.
Can you get your mortgage payments lowered because of the bailout?
It depends. If you've got an adjustable-rate mortgage, you may qualify under certain conditions. If you've got a standard mortgage with a fixed interest rate, you're not affected.
Which adjustable-rate mortgage holders are affected?
Only a small group. To qualify, you need to have received your loan sometime between Jan. 1, 2005 and July 31, 2007, and you need to be facing a reset of your interest rate sometime between Jan. 1, 2008 and July 31, 2010. If you're within this range, you may be eligible to have your interest rate frozen, so you can keep your current, lower rate for five years.
Who qualifies within that range?
The bailout is really designed for homeowners who could run into trouble if their mortgage payments are raised sharply and face the prospect of losing their homes. If you're well enough off that you can afford the higher mortgage payments after a reset, you won't qualify. And if you're in bad enough shape that you can't handle the current low interest rate, you won't qualify. For example, if you've already fallen behind on your mortgage payments, you're not eligible for the rate freeze.
Do you need to live in your home to qualify?
Yes. The plan excludes people who don't live in the homes for which they have mortgages so that speculators can't benefit.
Why is there going to be a bailout?
Bush, Paulson, and the Administration are concerned about the fallout from the housing slump. If many people fall behind on their mortgages and have to give up their houses, there will be a series of negative repercussions. First, tens of thousands of Americans could be forced to leave their homes. They would lose whatever equity they had. Consumer spending more broadly would likely slow, hurting the economy overall. In addition, home prices could fall even more quickly than they are now. That could hurt consumer confidence well beyond those people directly affected.
Is the bailout going to be enough?
It depends on your definition of enough. The deal will add some stability to the housing market, but it won't stop all the problems in the troubled sector. The same day Bush unveiled his plan, the Mortgage Bankers Assn. said that foreclosures had reached a record high in the third quarter. The share of mortgages that have entered foreclosure hit 0.78% in the quarter, up from the previous high of 0.65% set in the previous quarter. At the same time, delinquencies for all mortgages rose to 5.59%, from 5.12%, in the second quarter. None of the people who are delinquent or facing foreclosure will be helped by the plan.
The deal almost certainly won't stop the decline in housing prices. Investors are betting that there will be double-digit declines in home prices in nine of 10 major markets over the next year. The only exception is Chicago, and there the estimate is for a 5.6% drop in home prices.
So why not go further?
Some Democrats are criticizing the Bush Administration on that exact point. Senator Hillary Clinton (D.-N.Y.), among others, is arguing for a more ambitious approach, including at least a seven-year freeze on interest rates.
Who stands in the way of such an effort?
Investors in mortgages and mortgage-backed securities. If homeowners are going to pay less on their mortgages than originally planned, then somebody is going to lose money. These aren't just fat cats on Wall Street—although many such firms have invested in these securities—they're also pension funds for teachers, firemen, and police, as well as mutual funds whose clients include all sorts of individual investors. They probably even include homeowners who are facing the prospect of higher payments on their adjustable-rate mortgages.
Thursday, December 6, 2007 - Provided by BusinessWeek Online
On Dec. 6, Treasury Secretary Henry Paulson, with the support of President George W. Bush, unveiled a plan to aid certain homeowners who face the prospect of higher mortgage rates in the next few years. Paulson worked with banks and other mortgage companies to develop the initiative, and thanked them for their involvement. "We have worked through an evolving process to help minimize the impact of the housing downturn on homeowners, neighborhoods and the U.S. economy," he said. While the plan is ambitious and is designed to bring stability to the shaken economy, it will affect only a narrow slice of homeowners in the U.S. "This is not a silver bullet," said Paulson. Here are some answers to questions you may have.
Can you get your mortgage payments lowered because of the bailout?
It depends. If you've got an adjustable-rate mortgage, you may qualify under certain conditions. If you've got a standard mortgage with a fixed interest rate, you're not affected.
Which adjustable-rate mortgage holders are affected?
Only a small group. To qualify, you need to have received your loan sometime between Jan. 1, 2005 and July 31, 2007, and you need to be facing a reset of your interest rate sometime between Jan. 1, 2008 and July 31, 2010. If you're within this range, you may be eligible to have your interest rate frozen, so you can keep your current, lower rate for five years.
Who qualifies within that range?
The bailout is really designed for homeowners who could run into trouble if their mortgage payments are raised sharply and face the prospect of losing their homes. If you're well enough off that you can afford the higher mortgage payments after a reset, you won't qualify. And if you're in bad enough shape that you can't handle the current low interest rate, you won't qualify. For example, if you've already fallen behind on your mortgage payments, you're not eligible for the rate freeze.
Do you need to live in your home to qualify?
Yes. The plan excludes people who don't live in the homes for which they have mortgages so that speculators can't benefit.
Why is there going to be a bailout?
Bush, Paulson, and the Administration are concerned about the fallout from the housing slump. If many people fall behind on their mortgages and have to give up their houses, there will be a series of negative repercussions. First, tens of thousands of Americans could be forced to leave their homes. They would lose whatever equity they had. Consumer spending more broadly would likely slow, hurting the economy overall. In addition, home prices could fall even more quickly than they are now. That could hurt consumer confidence well beyond those people directly affected.
Is the bailout going to be enough?
It depends on your definition of enough. The deal will add some stability to the housing market, but it won't stop all the problems in the troubled sector. The same day Bush unveiled his plan, the Mortgage Bankers Assn. said that foreclosures had reached a record high in the third quarter. The share of mortgages that have entered foreclosure hit 0.78% in the quarter, up from the previous high of 0.65% set in the previous quarter. At the same time, delinquencies for all mortgages rose to 5.59%, from 5.12%, in the second quarter. None of the people who are delinquent or facing foreclosure will be helped by the plan.
The deal almost certainly won't stop the decline in housing prices. Investors are betting that there will be double-digit declines in home prices in nine of 10 major markets over the next year. The only exception is Chicago, and there the estimate is for a 5.6% drop in home prices.
So why not go further?
Some Democrats are criticizing the Bush Administration on that exact point. Senator Hillary Clinton (D.-N.Y.), among others, is arguing for a more ambitious approach, including at least a seven-year freeze on interest rates.
Who stands in the way of such an effort?
Investors in mortgages and mortgage-backed securities. If homeowners are going to pay less on their mortgages than originally planned, then somebody is going to lose money. These aren't just fat cats on Wall Street—although many such firms have invested in these securities—they're also pension funds for teachers, firemen, and police, as well as mutual funds whose clients include all sorts of individual investors. They probably even include homeowners who are facing the prospect of higher payments on their adjustable-rate mortgages.
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