Superior Home Living
Archived News Page 4
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Foreclosure Help Is Available
July 23,2007
A lot of people are getting nervous about their mortgages, and some have real reason to worry as they approach the reset dates on their adjustable rate, interest only, or option payment loans. We have talked before about avoiding foreclosure but it is probably time to do so again. Fortunately, there are a few new options out there for homeowners who are in trouble or fear they soon may be. KNOW WHAT YOU ARE GETTING IN TO Not knowing what may happen is a sure reason to panic. Get as much information as you can while you are still in control of the situation, i.e. before you ever miss a mortgage payment. The more you know the calmer and more responsive you can be; the sooner you know it, the more options you have. Foreclosures are generally carried out under state law and there are probably 50 variations on the process. There is a lot of state-specific information available on-line but much we found was highly legalistic (judicial vs. non-judicial foreclosures, rights of redemption, etc.) and a lot of it was there because the site owners had their own agenda. Start with your state's website. A Google search for your state's name should help you find their website. You probably won't find specific info on foreclosures but the consumer protection or housing pages will give you a phone number or email address that will get you started. While state laws prevail over the actual foreclosure sale the rules the lender or servicer may have rules to follow before initiating foreclosure laid down by the actual owners or guarantors of the loans. For example, federally guaranteed loans such as Veterans Administration or FHA loans have a book of rules to follow - if only we knew what they were. Their websites were not particularly helpful regarding this subject so you may have to rely on the bank which underwrote your loan for information. Push hard enough and you will eventually find out what hoops they and consequently you have to jump through. Because of well deserved criticism from consumer groups, many agencies have become much more responsive to the troubles of borrowers over the last few years. For example, Freddie Mac and Fannie Mae now offer incentives to their agents to work out loans (and for expediting the process when the home can't be saved). It can be difficult to near impossible to find out if your loan was sold under auspices of either of the two GSEs, but you can at least be informed about their guidelines by visiting their websites (www.freddiemac.com; www.fanniemae.com) and looking at those sections dedicated to mortgage servicing companies. BE PROACTIVE Can you refinance? If your loan is less than two years old, probably not. Your financial circumstances such as credit scores, income, and so forth have probably not improved dramatically during that period of time nor has your house appreciated enough to provide the equity to get you into a conventional loan or to lose the private mortgage insurance. Underwriting standards are also being tightened by lenders who are getting burned by subprime loans they wrote over the last few years; the new standards might make you ineligible today for the loan you already have. Contact your mortgage servicer. You want to speak to someone in the loss mitigation department to find out what the possibilities are. Often they will not speak to the specifics of your loan until you are actually delinquent but you can at least find out what the process is to begin a loan workout. For example, you will usually have to provide a financial statement and copies of tax returns and maybe a proposal for curing any default. Workouts can sometimes result in a temporary or permanent reduction in the interest rate or payment or, if you are delinquent, arrangements might be made which will allow you to gradually catch up on payments. Some of these operatives are trained to be abrasive and aggressive; however, if you keep a kind tone of voice and your own cool you may come away with a wealth of information about the mitigation process and the possibilities available to you. Think beyond your mortgage. You probably have other debt such as credit cards, auto loans, or student loans. Contact those creditors to see about getting a break on interest or monthly payments. Cutting back may give you enough extra money to keep up current or escalating mortgage payments. Think about refinancing an older auto loan that may have been paid down to where a used-car loan may yield a lower payment. This seems to be a newly active form of lending but avoid the offers in the mailbox - contact your own bank or at least someone local. GET HELP There is a lot more assistance out there than there was even a few years ago. A credit counselor may be a good place to start. They will make those negotiation calls to the credit card companies and maybe even to your mortgagee. They are trained and know what to say and can remain emotionally detached during what can be some ugly conversations. There are some bad apples in the counseling business, however. Use one that is approved by the U.S. Department of Housing and Urban Development (www.hud.gov/counseling for a state by state list) or by the NeighborWorks® organization (www.nw.org.) In some larger cities Freddie Mac (and maybe Fannie Mae) has teamed up with local housing groups and/or legal assistance organizations to form foreclosure avoidance projects. Where these are available community based housing organizations will be aware of them. There are now a few funds out there to help people in precarious situations with their mortgages. NeighborWorks or local community housing organizations may be able to plug you in. If you think your problems are the result of predatory lending practices or a fraudulent loan get in touch with the state consumer protection agency (call your state attorney general or secretary of state.) If you are dug in deep enough you may need an attorney. Many of those who specialize in debtor assistance or bankruptcy will give a free one-hour consultation that may steer you in the right direction. RECOGNIZE THE WORST In the current market this may be truer than ever before. There are many, many homeowners out there who should never have qualified to buy the home they are in. Face it, if you really couldn't afford the house in 2005 and you can't afford it in 2007 there is little chance you will be able to afford it in 2008. It is time to cut your losses and do everything you can to get out with as much of your equity and credit intact as possible. The sooner you recognize and accept the inevitable the better you can handle the aftermath. Stop foreclosure before it starts.
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Subprime Mess Continues To Wreak Havoc on the Mortgage Market
July 24, 2007
United Pacific Mortgage (UPM), headquartered in Woodland Hills, California, is rumored to have shut its doors, laying off its 95 employees on Friday. According to Hoovers, a Dow Jones Company, UPM is privately held and participated with 100 lenders. Its sister firm, Mandalay Mortgage, announced in January that, due to heavy losses in the subprime mortgage market, it would no longer be accepting loan applications. It is apparently losses from Mandalay's loans that are forcing UPM to close. We attempted to verify the situation at UPM on Monday but calls to both its corporate and consumer telephone numbers were not answered and direct phone numbers to employees all defaulted to voice mail. The information we received said that Countrywide Mortgage will be "absorbing" the production team. Again we attempted to verify this with Countrywide but their media office appeared to know nothing about it and at this hour we are still awaiting information from higher rungs on the corporate ladder. But it is possible that Countrywide has been just a little busy. According to Greg Morcroft, writing for MarketWatch the company on Tuesday reported a 33 percent drop in net income for the second quarter and announced that payments were delinquent on nearly 24 percent of its subprime mortgage loans compared to 15.33 percent at the same time in 2006. More disquieting, there is evidence that problems in the company's subprime sector appear to have spread to their higher rated prime loans, specifically home equity products on which 4.56 percent of customers were behind in payments compared to 1.77 percent during the same period last year. Countrywide's net income for the quarter fell to $485 million or 0.81 per share from $722 million or $1.15 a share one year ago. Furthermore the company's subprime loan production was off by 50 percent and it cut earnings estimate to $2.70 to $3.30 per share from an earlier estimate of $3.50 to $4.30. Another lender is still alive but retrenching. Indymac Bank announced late last week that they were laying off 400 employees, approximately 4 percent of its 9,600 person workforce. The layoffs are primarily in the operations and process and technology groups and are spread across various offices around the country. Indymac's CEO, Mike Perry in an email sent to all employees said that the mortgage market continues to be very tough. Indymac's dollar loan volume was down 12% in the second quarter compared to the first quarter and loan units were down by 17% because the company has eliminated the 80/20 piggyback product in favor of higher-LTV programs with mortgage insurance. "While recently our pipeline has been recovering, we concluded that we needed to both "right-size" our workforce to our current volumes and also be very "hardnosed" in redesigning our processes in our drive to become "the" low cost provider in the mortgage industry, while at the same time ensuring that we maintain our high standards for customer service and credit quality. Recent advances in our technology are enabling us to be more productive and efficient, and we simply must reap the cost savings associated with these advances and pass them on to our customers in order to be competitive in the market." In an email a few days before the layoff notification, Perry said: "... delinquencies in our $184 billion servicing portfolio increased in the second quarter of 2007... 30+ day delinquencies were 5.35 percent, up from 4.10 percent a year ago and 4.37 percent last quarter. Foreclosures also increased to 1.15 percent in the second quarter, up from 0.89 percent in the prior quarter. "While our delinquency rates have increased, they are comparable to Countrywide Financial Corp., which was ranked by the National Mortgage News as the No. 1 residential mortgage originator and the No. 2 residential servicer in the U.S. for the first quarter of 2007. On July 16, 2007, Countrywide reported a 30+ day delinquency rate in their servicing portfolio of 4.77 percent for the period ending June 30, 2007. Indymac's modestly higher delinquency rate can be attributed to the fact that Countrywide carries a much higher mix of agency/conforming loans in their servicing portfolio relative to Indymac." Perry refuted claims that the quality of Indymac's loans is just a notch above subprime saying that prime first lien loans, including those sold in Alt-A securitizations, account for 93 percent of Indymac's servicing portfolio and the delinquency rate on these loans was 4.69 percent for the second quarter of 2007. The delinquency rate on our subprime loans, which account for three percent of our servicing portfolio, was 22.5 percent, a rate consistent with industry subprime trends and not materially above where it was a year ago. This clearly demonstrates that the vast majority of our loans are of significantly higher credit quality than subprime loans-by a very wide margin. Indymac will be taking a pre-tax charge to earnings of approximately $6.5 million in the third quarter, most of which is severance for laid-off employees. Perry said the cost savings will more than offset this charge during the second half of this year, and on an ongoing basis the company projects $30 million in annual cost savings. The company was founded in the late 1980s as a semi-spin-off of Countrywide Mortgage. In 2000 the now independent company acquired a depository institution and from there became the largest savings and loan in Los Angeles. It is currently the 7th largest savings and loan and the 2nd largest independent mortgage lender in the country.
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Mortgage Rates Virtually Unchanged From Previous Week
July 25, 2007
In perhaps the only good news in the mortgage and real estate worlds this week, both long and short term interest rates for the week ended July 19 barely budged from their positions a week earlier. With hedge funds that had heavily invested in residential mortgage-backed securities literally bleeding dry and subprime lenders announcing severely reduced earnings expectations, layoffs, or worse, more or less static interest rates had to be seen as good news. Freddie Mac’s Primary Mortgage Market Survey concluded that the 30-year fixed-rate mortgage (FRM) averaged 6.73 percent with 0.4 point for the week. Both rate and points were unchanged from the previous week and the interest rate was 7 basis points below the average for the same week in 2006. The 15-year FRM averaged 6.38 percent, one basis point lower than the week ended July 12. Fees and points were unchanged at 0.4. One year ago the 15-year FRM averaged 6.80 percent. The five-year Treasury-indexed hybrid adjustable rate mortgage (ARM) was unchanged at 6.35 percent and 0.5 point; one year ago the rate was one basis point higher. The one-year Treasury-indexed ARM averaged 5.72 percent compared with 5.71 percent the previous week. Fees and points were unchanged at 0.5. This was 9 basis points lower than the one-year ARM average a year ago. Frank Nothaft, Freddie Mac vice president and chief economist commented that, "In a week marked by stock indexes reaching new highs on Wall Street, mortgage rates lingered near the previous week's level as the latest economic indicators did not affect inflation expectations significantly. June's core producer price index inched up higher than market expectations, pushing the year-over-year growth rate to 1.8 percent, while the core consumer price index held steady at a 2.2 percent annual growth rate. "The most recent statistics suggest that the housing market has yet to reach a trough. Although June's housing starts unexpectedly rose to 1.47 million units, construction of one-unit houses still saw a decline of 0.2 percent: At 1.15 million units, it was the slowest pace since January. Building permits fell by 7.5 percent last month to the lowest level since June 1997." Very similar news came from the Mortgage Bankers Association’s Weekly Mortgage Applications Survey for the week ended July 20. The average contract interest rate for the 30-year FRM was reported to be down from 6.61 percent to 6.59 percent with points, including the application fee, decreasing from 1.6 to 1.55. The 15-year FRM also decreased, averaging 6.24 percent with 1.43 in points compared to 6.29 percent with 1.33 points the previous week. The average contract interest rate for one-year ARMs increased to 5.62 from 5.60 percent, with points increasing to 1.13 from 1.11. Mortgage application activity was off substantially from the previous week; a seasonally adjusted decline of 3.6 percent, 3.5 percent unadjusted. The trend was, however, still up from the pace one year ago with 13.1 percent more applications received. Refinancing represented 38.5 percent of total applications, up from 37.7 percent a week earlier and adjustable-rate mortgages held a 21 percent share of the market, unchanged from one week earlier.
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Home Prices Hold Their Own As Existing Home Sales Fall
July 26, 2007
There was mixed news on the existing housing front in last month. The monthly survey by the National Association of Realtors (NAR) ® showed the sales of existing homes, including single-family houses, townhouses, condos, and co-ops declined 3.8 percent off of the pace in May to a seasonally adjusted annual rate of 5.75 million units. This is a decline of 11.4 percent from annualized June 2006 sales of 6.49 million units.
Still, prices rose modestly and inventories declined slightly. The national median existing home price for all housing types was $230,100 last month, up 0.3 percent from $229,300, the median one year earlier. The back-log of unsold homes also improved, falling 4.2 percent from May figures to 4.20 million units available for sale. Once the May figures were revised, the inventory remained at an 8.8 month supply even with slower sales.
"Home buyers have been getting mixed signals about the housing market, which is causing some of them to hesitate," Lawrence Yun, NAR senior economist, said. "Mortgage interest rates have risen recently, and tightening lending standards are continuing to hamper sales, but fewer risky loans will put the market on a healthier path. Although general buying conditions remain favorable for long-term home buyers, it appears some buyers are looking for more signs of stability before they have enough confidence to make an offer.
"Two bright spots in the June report are a decline in housing inventory and a modest gain in home prices," he said. "Although we've seen seasonal month-to-month price increases over the past four months, this is the first time in 11 months that the median home price is higher than the year-ago price."
Single family home sales declined 3.5 percent from May figures and are 12.1 percent below the 5.70 million-unit level in June 2006. The median existing single-family home price was $230,300 in June, up 0.1 percent from a year ago.
Existing condominium and co-op sales dropped 6.3 percent to a seasonally adjusted annual rate of 740,000 units in June from 790,000 in May, and are 6.6 percent lower than the 792,000-unit pace a year ago. The median existing condo price was $228,900 in June, up 2.6 percent from June 2006.
Existing-home sales in the South eased by 1.7 percent to an annual sales rate of 2.26 million in June, and are 11.4 percent below a year ago. The median price in that region was $190,800, up 0.7 percent from June 2006.
In the
The West saw a drop of 6.8 percent to an annual pace of 1.10 million, 19.1 percent below a year ago. The median price in the West was $340,000, down 0.4 percent from June 2006.
Sales in the Northeast fell 7.3 percent to a level of 1.01 million in June, and are 7.3 percent lower than June 2006. The median existing-home price in the Northeast was $294,400, up 1.8 percent from a year ago. The report of new home sales is due from the Census Bureau on today
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State Of
Monday, July 30, 2007
The Harvard Joint Center for Housing Studies recently released its annual State of the Nation's Housing report for 2007. It is dismal reading. While it states that the longer-term outlook for housing is (more) upbeat, the length and depth of the current correction will depend on the course of employment growth and interest rates, as well as the speed with which builders pare down excess supply. The influx of immigrants and their children has and should continue to drive household growth between 2005 and 2015 and, with the enormous increase in household wealth over the past 20 years, healthy income growth will help propel residential spending to new heights.
That's the good news. The flip side is that basic housing affordability remains a major problem. "In just one year, the number of households with housing cost burdens in excess of 30 percent of income climbed by 2.3 million, hitting a record 37.3 million in 2005." The report reprises the run-up in housing demand and prices over the last few years, placing much of the responsibility for both with falling interest rates and the increased and probably inappropriate availability of credit in many sectors of the market.
The State of the Nation's Housing pegs the beginning of the downturn to late 2005 although it didn't show up in most economic reports until mid 2006. According to the
At this time builders pulled back hard on production but "the retrenchment came too late." By the third quarter of 2006 the correction had begun to spread to numerous metropolitan markets and 277 of these registered a falling rate of housing permits in the fourth quarter of 2006 compared to the fourth quarter of 2005. 74 of the 148 metro areas studied by the National Association of Realtors? (NAR) showed a year-over-year decline in median home prices.
The report notes that, now that the downturn is in full swing, the question of its depth and duration hangs over that market. While the economy, interest rates, and credit availability will pay major roles in the outcome, so will the rapidity with which builders can work off excess inventory. The number of vacant homes for sale jumped by one-half million between the end of 2005 and the end of 2006 but this figure may be misleading as some seasonal or occasional use home may have been taken off the market until conditions improve. Assuming this oversupply "overhang" as the study calls it, is correct, this means that demand for new homes was running about a quarter-million units below the 2 million plus production in 2004 and 2005. This translates to a sustainable demand for houses of about 1.9 million homes during that pre-slump period. As this was about the number of homes built (or in the case of manufactured housing, placed) last year, no progress is being made toward cutting inventories. Any meaningful progress in this area would require that production falls to 1.66 million and it would take at least two years to work off the excess inventory. "In the most pessimistic view, the overhang may exceed 1 million units, meaning some rental vacancies may need to be worked off as well." But yet, the report concludes, the potential impact of the slowdown on consumer and remodeling spending hasn't quite hit. Home prices are bound to soften further as they follow the downturn in home sales and starts; homes will stay on the market for longer periods, and motivated sellers, builders, and investors will reduce their prices. This process only began in late 2006 and then only in some locations. It has a ways to go. With house prices no longer appreciating at a break-neck price, the risks inherent in subprime lending products will increase. As more and more borrowers risk losing their homes to foreclosure an accompanying problem is the number of mortgage companies that have been and will be driven into bankruptcy and those that will increase their reserves against losses. But the study emphasizes the growing lack of affordability of housing in the
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PendingHome Sales: A Little Good News In A Grim Time
August 3, 2007
We don't usually cover the monthly report on pending home sales issued by the National Association of Realtors® (NAR), concentrating instead on NAR and the Census Bureau's other reports on housing permits and starts and the completed sales of new and of existing homes. However, with good news in such short supply lately - perhaps the understatement of the year - it seems worth talking about the smidgen of sunshine that accompanied the pending sales report for June.
The Pending Home Sales Index, based on residential home contracts signed in June was 102.4, 5 percent higher than the downwardly revised May index of 97.5. The index was still lagging behind the 112.0 pace in June, 2006 by 8.6 percent, but the increase over May was the biggest jump in more than three year, since March 2004 pending sales were 6.1 percent higher than those in February 2004.
The index has a baseline established in 2001, the first year pending sales were examined, based on the average of contract activity that year. That level was designated at 100 in the index. Coincidentally 2001 was also the first of five consecutive years when existing home sales set records.
The official NAR website states that annual changes in the index are more closely related to actual market performance than are month-to-month comparisons but as the relatively new index matures and seasonal adjustment factors are refined, the month-to-month comparisons will become more meaningful.
The Index increased 8.6 percent to 103.6 in the Western region in June but declined 5.5 percent year-over-year. In the Northeast the index was 96.0, 2.4 percent lower than last year but 3.1 percent higher than in May. The South had an index of 111.6 which was 4.7 percent above May figures but 12.7 percent below one year ago. The
Lawrence Yun, NAR senior economist, said that it was especially encouraging that all four regions saw increases. "However, it is too early to say if home sales have already passed bottom. Still, major declines in home sales are likely to have occurred already and further declines, if any, are likely to be modest given the accumulating pent-up demand."
The index is a leading indicator for the housing sector. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing. Pending sales for June will represent a subset of the actual sales of existing homes that close in July. NAR will release those sales figures near the end of this month.
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August 9, 2007
Mortgage ratesdeclined again during the week ended August 2 according to the Weekly Mortgage Market Survey conducted by Freddie Mac and the week ended August 3 per the Weekly Mortgage Applications Survey released by the Mortgage Bankers Association.
FreddieMac's report indicted that the 30-year fixed-rate mortgage (FRM) decreased from 6.69 percent with 0.4 point to 6.68 percent with 0.3 point. This is 5 basis points higher than the 30-year interest rate one year ago.
The 15-year FRM declined 5 basis points to 6.32 percent with 0.3 point. Last week fees and points averaged 0.4. The rate is also 5 basis points higher than the same week in 2006.
The five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 6.29 percent this week, down from last week when it averaged 6.30 percent. Fees and points increased from 0.4 to 0.5. A year ago, the 5-year ARM averaged 6.27 percent.
One-year Treasury-indexed ARMs carried an average contract interest rate of 5.59 percent with 0.5 point. Last week it averaged 5.69 percent also with 0.5 point. At this time last year, the 1-year ARM averaged 5.69 percent.
Frank Nothaft, Freddie Mac vice president and chief economist speculated that "Market investors seeking safety from the subprime fallout bought Treasury securities, pushing bond yields down and allowing mortgage rates to drift a bit lower. Sales of new and existing homes fell in June, and prices continue to weaken, especially in the markets that had recorded the strongest gains over the past few years. There are early signs, however, that the market is stabilizing. As construction spending levels off, the drag on GDP growth will continue to diminish. Meanwhile, the 5 percent rise in pending home sales in June suggests that sales in July and August may reverse last month's decline."
PerhapsNothaft is reserving any comment on the brutal fallout in the subprime and alt-A markets, particularly the sudden demise of American Home Mortgage, for the Freddie Mac August forecast due out later on Wednesday. There certainly needs to be something said beyond the rather innocuous remark about investors seeking safety. In fact, it would be nice to know that the two GSE's which control so much of the residential purchasing in this country are doing some contingency planning in the midst of the current meltdown.
Meanwhile, some interesting figures have been released by the Mortgage Bankers Association which has announced that mortgage application activity increased 8.1 percent on a seasonally adjusted basis from the previous week and 7.7 percent when unadjusted. The activity is 18.0 percent higher than one year ago.
Ourfirst reaction on hearing about this relatively steep increase in applications was to wonder how many of the applications were approved, but Alex Baron, a housing analyst for the Agency Trading Group, speculated in a CNBC interview with Erin Burnett that this increase in applications is illusory because potential borrowers are filing multiple applications in the hope of finding a willing lender in the current credit crunched market.
Applications to refinance were also up, representing 39.9 percent of total applications activity compared to 39.4 the previous week. Applications for ARMS increased slightly to 22.5 percent from 22.3 the previous week.
MBA'ssurvey of rates also noted average decreases; the 30-year FRM averaged 6.41 percent with 1.62 points including the origination fee. Last week the 30-year averaged 6.50 with 1.66 points.
15-year fixed-rate mortgages decreased to 6.16 from 6.20 percent, with points decreasing to 1.18 from 1.30 while the average contract interest rate for one-year ARMs decreased to 5.69 from 5.73 percent, with points decreasing to 1.09 from 1.12. All rate figures are for 80 percent loan to value originations.
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Wednesday, August 22, 2007
Big Players Call On OFHEO to Rethink GSE Decision
Several key players have rung in on the decision by the Office of Federal Housing Enterprise Oversight (OFHEO) to retain limits on the mortgage portfolios owned by Freddie Mac and Fannie Mae.
The two government sponsored enterprises (GSEs) had petitioned OFHEO, its regulator, last week asking to be allowed to raise those portfolio ceilings in order to offer some relief to lenders in the current mortgage credit crunch. Both the head of OFHEO James Lockhart, III and President Bush stated that the GSE's should clean up the remainder of their accounting problems dating back to 1994 before they are allowed to increase the size of their portfolios. The President also said that the free market was better suited to handling the current crisis than were Freddie and Fannie.
This week the Mortgage Bankers Association (MBA), the National Association of Home Builders (NAHB) and the National Association of Realtors® (NAR) sent a letter to OFHEO urging the agency to take action to temporarily increase the caps on the GSE portfolios "'with appropriate controls,' to inject needed liquidity and stability into the mortgage market."
According to a press release issued by the MBA, the joint letter states that "The nation's mortgage markets are facing a liquidity crisis of a force and magnitude not seen in decades. The chill will have far reaching effects throughout the housing market if stability is not restored. A temporary increase in the allowable size of the GSEs' loan portfolios for the purpose of easing this credit crunch would help stem the crisis.
"An increase in the portfolio caps should be appropriately targeted to assure that GSEs use the increased capacity to help lenders meet the most urgent credit needs, including the private label mortgage-backed-securities (MBS) market and mortgages for creditworthy families who would otherwise find it difficult or impossible to obtain a mortgage loan. The authority should be consistent with safety and soundness and include appropriate conditions concerning how long this new capacity will be available to the GSEs, the specific size of the increase, the types of assets eligible for purchase, appropriate reporting and monitoring provisions, and a reasonable schedule for returning to the current limits to avoid future disruptions to the mortgage market.
"Quick and reasonable action is urgently needed to provide liquidity and stability to the mortgage markets and to serve the financing needs of
Also weighing in was Senator Charles Schumer (D, NY), a member of the Senate Banking, Housing, and Urban Affairs Committee. On Tuesday the Senator wrote to James B. Lockhart urging him to temporarily raise the limit on purchases of home loans by the GSE's. Then with the announcement that the nation's largest mortgage lender, Countrywide, had drawn on and perhaps even drained its huge emergency credit facility coupled with bad news on housing starts and permits coming from the Census Bureau and the Department of Housing and Urban Development, Senator Schumer renewed his call that Fannie Mae and Freddie Mac to allowed to ease the liquidity concerns in the mortgage markets.
"We cannot afford a 'wait and see' approach when it comes to a credit crisis that threatens to derail our economy," said Schumer in a press releases on his website. "The Bush administration continues to ignore one tell-tale sign after another that the subprime woes are threatening the broader mortgage markets. Fannie and Freddie are uniquely positioned to inject badly needed liquidity into the economy, but the President won't let them do their job. These companies need their caps lifted now. If the Bush administration won't act, we will."
Schumer said that "Liquidity is virtually nonexistent for loans that do not conform to Fannie and Freddie's portfolio standards (e.g., "jumbo" loans), which is hurting current and aspiring homebuyers' ability to access lending."
If the regulators do not take action to allow Fannie Mae and Freddie Mac to perform their critical role as market stabilizer, Senator Schumer said he would introduce legislation in September to temporarily raise the portfolio caps. "This emergency measure is not only important to restore confidence in the mortgage market for current and aspiring home buyers, but it would also allow Fannie and Freddie to engage in subprime foreclosure relief efforts across the country before the 'October surprise' of subprime resets further shocks the mortgage markets."
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Help For Homes' Owners
Similar Bills Advance In House And SenateMonday, October 01, 2007
|Washington Bureau Chief
WASHINGTON - Both houses of Congress sent strong signals this week that help is on the way to lower- and middle-income homeowners, both current and prospective, as members took steps to refashion the Federal Housing Administration as a stronger, more consumer-sensitive agency.
The Senate Banking Committee, by a 20-1 vote Wednesday, agreed to lower the minimum down payment on FHA-backed loans and raise the loan amounts. On Tuesday, the House took similar action and endorsed even bigger loan limits by an overwhelming margin.
Both bills have much in common, notably their chief goal: To ease the subprime mortgage crisis and make the FHA, the New Deal agency that once helped so many lower- and middle-class homeowners for so long, a major player again.
The two houses have some disagreements, and unless those can be reconciled, the help may have to wait. But key players and experts were optimistic.
David Berenbaum, executive vice president of the National Community Reinvestment Coalition, said that he expected consensus on key issues to "emerge quickly," and that the bills are "substantially similar."
Barney Frank, D-Mass., chairman of the House Financial Services Committee, thought a compromise could be reached, and Rep. Christopher Shays, R-4th District, a committee member, was also upbeat, saying the House bill gave "flexibility to support sound lending in the 21st century by enabling FHA to serve more subprime borrowers at reasonable rates and offer refinancing loan opportunities to struggling homeowners."
Senate Banking Committee Chairman Christopher J. Dodd, D-Conn., who had to negotiate with Republicans to craft Wednesday's legislation, has a long history of finding common legislative ground.
The goal is clear, he said: "A revitalized, strengthened and modernized FHA can be and, under this legislation, will be a source of this constructive, wealth-building credit, both for new homeowners and for people who are seeking a way out of the abusive loans in which they are currently trapped. "
Dodd may have more clout because the House measure raises the amount of mortgages the FHA can back to 125 percent of the local median home price, or 175 percent of the loan limit allowed by Fannie Mae in high-cost areas, or whichever is lower.
The Senate bill, though, limits an FHA-insured loan to 100 percent of the median home price in an area, up from 95 percent, or $417,000, whichever is lower.
Currently, FHA loans cannot exceed $362,790, and limits vary depending on the housing market in certain areas. In
The White House has said it "strongly opposes" any provision to allow such loans above $417,000, though the administration stopped short of saying it would veto a higher limit. A policy statement said the program "should remain targeted to traditionally underserved homebuyers, such as low- and moderate-income families."
The administration and some senators are concerned that a higher FHA limit would get the government too involved in risky loans.
Dodd's bill, which is expected to be considered by the full Senate this fall, would also:
· Lower down payments. Currently, FHA-insured loans require at least 3 percent down. The Dodd bill cuts that to 1.5 percent, in most cases. The down payment reduction had been a source of controversy; the 1.5 percent is seen as an important compromise. Some senators wanted to allow no money down. The House bill would allow no down payments.
· Make reverse mortgages easier to obtain. Elderly homeowners would find the loan limit up, a key provision championed by Republican committee members.
· Lower origination fees for elderly homeowners. The current fee is 2 percent; it would drop to 1.5 percent.
Dodd's FHA measure has picked up strong support. Dodd's chief collaborator was Sen. Mel Martinez, R-Fla., general chairman of the Republican National Committee, and letters of support came from the Mortgage Bankers Association, the Realtors, the Homebuilders, Bank of America, LendersOne, JP Morgan Chase, Wells Fargo and Countrywide.
