Negative Equity Carryover Model: A BRILLIANT IDEA
Negative Housing Equity is Destroying Consumer Confidence and Severely Undermining the U.S. Economic Recovery
Negative home equity for America’s Homeowners has become a national economic crisis. Nationwide, homeowners are chained to their homes unable to sell due to the shackles of negative equity. This lack of mobility comes at a cost to society at a time when the public’s need to relocate is at its greatest. Industry needs labor mobility to balance workforce requirements, labor needs mobility to find and create job opportunities, families need it to consolidate households in order to care for aging relatives, and others simply to downsize into homes that they can manage and afford.
Banks are resistant to negotiate short sale settlements for the fear that the losses on these mortgages will spiral out of control and bring the banks to their knees. Many borrowers are choosing to strategically default in an effort to break the chains of negative equity in order to get on with their lives.
Negative equity, short sales and foreclosures have become a lose-lose situation for America's taxpayers, homeowners and lenders. The Federal Government needs to encourage and allow Fannie Mae, Freddie Mac and Banks to offer Negative Equity Carryovers. Negative Equity Carryovers would not be paid with taxpayer money. Quite the opposite, Carryovers would substantially reduce taxpayer losses now being incurred through Fannie Mae and Freddie Mac bailouts.
If a homeowner owes more money than their home is worth, a Negative Equity Carryover would allow the homeowner to carry forward the negative equity to a subsequent property purchase- a property better suited to their current economic, employment or lifestyle needs. The key to the Model is that negative equity would be 100% PORTABLE. This would free Americans to re-align their household expenses, allow needed mobility to secure new employment opportunities and greatly encourging economic activity. If so granted by legislation, negative equity could also be slowly extinguished for homeowners over a longer time frame reducing the need for immediate Treasury infusions into Fannie Mae and Freddie Mac as is now the case to cover current short sale and foreclosure expenses.
The “Negative Equity Carryover Model” proposes that negative equity be carried forward to a subsequent property purchase or as a personal loan to the homeowner after the property sale. Homeowners and banks won’t need to negotiate the loss of equity as is currently being done through short sales and foreclosures. Negative equity would cease to be an immediate hardship for the Taxpayer, Homeowner and Lender.
The Model suggests that rather than write the loss off at time of sale through a short sale or foreclosure, the negative equity can be carried into the future as an independent debt or lien and slowly forgiven over an amortized timeframe. The homeowner’s credit would be saved and we as a nation could avoid the wholesale destruction and lockout of a future homeownership class due to damaged credit. Lenders could amortize the negative equity over years while still maintaining a lien position with homeowners just in case equity returned as market values began to increase.
Authored by Gil Kerbashian Chief Market Analyst RealestateloanS.com
Florida Home Sales On The Rebound
HUD Sells Foreclosures for $100 Down Payment !!!
The Department of Housing and Urban Development is selling some seized homes in the United States for as little as $100.
HUD announced an agreement last week with an management companies in which the department will sell thousands of homes to stabilize neighborhoods hit hard by the foreclosure crisis. HUD will first inspect newly acquired foreclosed properties in its inventory and give ok for the $100 down payment sales. the opportunity to buy the homes at deep discounts. Homes valued at $20,001 to $100,000 will be sold at a 30% discount for an initial five-day period. After 60 days, the homes will be sold at a 50% discount. Homes worth less than $20,000 will be sold for $100, HUD said.
Some nationwide nonprofits which are to be set up by the states will receive millions in grants from HUD this year to purchase and redevelop foreclosed or abandoned properties.
Stated Income Loans to Return in 2010
House and Senate Leaders have introduced an amendment to the newly passed Financial Reform Legislation to bring back stated income loans for residential lending through the GSE's- Fannie Mae and Freddie Mac with the following conditions:
1) The loans will only be used for foreclosed properties
2) They will first be offered to liquidate Fannie Mae and Freddie Mac inventory
3) They will be available with 30% down payment
4) The borrower must have a minimum credit score of 740
5) The property must be an owner occupied residence
6) The borrower must be self-employed and in their field for five years
7) Personal bank statements for the most recent 6 months will be used to cash flow income
The effort was a bipartisan amendment initiated by Sen. Reid (D-NV), Rep. Pelosi (D-CA), Rep. Cantor (R-VA), Sen. McConnell (R-KY). The impetus for the Bill was primarily initiated by Sen. Reid and Rep. Pelosi apparently due to the shape of their states housing economies.
"Nevada and California are two of the most hard hit states when it comes to foreclosures. Speaker Pelosi and I feel that something reasonable must be introduced in order to stop the downward spiral in home prices and regain market momentum", stated Senator Reid.
"The new program and expansion of eligibility will be allowed for the most distressed properties. We've had staffers pour over the numbers and the deliquency rates to see if we were able to make this work. Our staffers came back with some surprizing information. The data showed that given the right circumstances, stated income loans were performing better than FHA and many GSE loans with 5-10% down payments", Said Rep. Peleosi.
The data shows that when it comes to stated income loans, the baby was thrown out with the bathwater in 2008. Many of the stated income loans were terribly designed loan programs during the Sub-Prime heyday but didn't start that way. The staffers looked at the historical data and found that when the down payments were kept high as in the early years of these stated income programs, along with higher credit scores, stated income loans were very well performing loans.
These loans were originally offered to a more sophisticated home buyer, one that was usually savvy with numbers and could put 'skin in the game'. In the early 2000's these well performing stated income programs were undermined when many Sub-Prime lenders entered the market. These Sub-Prime mortgage companies lowered the down payment requirements to zero and lowered the credit score requirment into the mid to high 500's. At this point, many mortgage analysts knew it was only a matter of time before the market would implode due to its own greed.
Once the implosion occurred the bank regulators, congress and various state entities rushed in with draconian efforts to do away with all stated income programs- good or bad. They cut out these programs with the proverbial hatchet and not the scalpel which would have been more appropriate. With a series of unwise measures, 35% of the home buyers in the nation- self-employed borrowers, were pushed or locked out of the housing market at a time when the market needed them most.
Many self-employed borrowers live through their tax returns and though they make a fair living, they expense their returns to the point where their net is not accurately reflective of their income potential. Many of these self-employed borrowers have the cash flow, credit scores and down payment to be incredibly sound home loan borrowers.
Contact your representatives today to encourage them to support this amendment.
stated income loans, fannie mae, freddie mac, self-employed borrowers, down payment, housing, housing bottom, california, nevada, the above scenario did not actually take place.
Fannie Mae and Freddie Mac Disclose Loan Buyback Numbers
Buyback are loans that were poorly underwritten and are required to be taken back or "bought back" from Fannie or Freddie by the underwriting lender.
Fannie Mae stated that it made servicers/lenders buy back or reimburse it for losses on $1.8 billion of loans, 64% more than a year earlier.
It was the first time the government-sponsored entities have disclosed the amount of their repurchase demands. Previously Fannie Mae only acknowledged that the number of such demands had been on the rise since 2008 as delinquencies worsened. Freddie Mac also has been sending more loans back to lenders: $1.3 billion in the first quarter, up 65% from a year earlier, according to its first-quarter filing last week.
In February Fannie announced a "loan-quality initiative" designed to reduce loan repurchase requests. If lenders do a better job on the front end of making sure the loans they deliver meet the GSE's guidelines, Fannie has said, it would not have to make lenders buy back so many defective mortgages after the fact. The initiative will begin next month.
Among other changes, lenders will have to pull a second credit report just before a loan closes to check if the borrower has taken on additional debts since submitting the mortgage application. Origination News.
Subprime Mortgage Delinquencies Fall for First Time in 44 Months... Still High Though
Subprime delinquencies increased for almost four years from a low of just over 6% in June 2006. March roll rates fell significantly from last month and are now at their lowest level in over two years. A roll rate is the pace at which performing loans become late.
Loan modification programs may also be helping with delinquencies which could be a temporary, given their track record of re-default. Prime mortgage backed security delinquency rate climbed to 10%.
Prime jumbo loans are performing even worse especially in California, which holds 44% of the $371 billion market share.The delinquency rate for Jumbo loans climbed to 11.9% from 11.6% month-to-month in California.
In Florida, the prime borrower jumbo default rate increased to 17.5% from 17%- Florida only holds a 6% share of Jumbo loans nationally.
Home Prices Stablizing. LA and SD Up YOY. National Appreciation May be Flat for Some time
Case-Shiller House Prices Up Slightly in January
March 30, 2010 Origination News
House prices rose 0.3% on a seasonally adjusted basis in January following a similar rise in December, according to the Standard & Poor's/Chase-Shiller 20-city house price index.
On a non-adjusted basis, prices fell 0.4% in January following a 0.2% decline in December. Prices are down only 0.7% from January 2009 on a non-adjusted basis.
"Fewer cities experienced month-to-month gains in January than in December 2009 on both a seasonally adjusted and unadjusted basis," said David Blitzer, chairman of S&P's index committee. "The rebound in housing prices seen last fall is fading," he said.
Citicorp mortgage analyst Robert Young said, "Home prices could drop another 5% from current levels." He noted that the housing market is being negatively impacted by the large inventory of distressed properties and seriously delinquent mortgages. "Although we are not expecting a flood of foreclosures, the inventory is going to weigh on home prices for years. So we are not expecting much appreciation for quite a while," Mr. Young told MortgageWire. Of the 20 cities in the Case-Shiller HPI, only Los Angeles and San Diego posted price increases in January on a non-adjusted basis. In Los Angeles, prices rose 0.9% during the month and 3.9% over the previous 12 months. San Diego experienced a 0.4% price increase in January and is up 5.9% from January 2009.
Barney Frank Up To No Good Still
Judicial Watch Ranked Barney Frank as the 3rd most corrupt politician of 2009:
3.Rep. Barney Frank (D-MA): Judicial Watch is investigating a $12 million TARP cash injection provided to the Boston-based OneUnited Bank at the urging of Massachusetts Rep. Barney Frank. As reported in the January 22, 2009, edition of the Wall Street Journal, the Treasury Department indicated it would only provide funds to healthy banks to jump-start lending. Not only was OneUnited Bank in massive financial turmoil, but it was also "under attack from its regulators for allegations of poor lending practices and executive-pay abuses, including owning a Porsche for its executives' use." Rep. Frank admitted he spoke to a "federal regulator," and Treasury granted the funds. (The bank continues to flounder despite Frank's intervention for federal dollars.) Moreover, Judicial Watch uncovered documents in 2009 that showed that members of Congress for years were aware that Fannie Mae and Freddie Mac were playing fast and loose with accounting issues, risk assessment issues and executivecompensation issues, even as liberals led by Rep. Frank continued to block attempts to rein in the two Government Sponsored Enterprises (GSEs). For example, during a hearing on September 10, 2003, before the House Committee on Financial Services considering a Bush administration proposal to further regulate Fannie and Freddie, Rep. Frank stated: "I want to begin by saying that I am glad to consider the legislation, but I do not think we are facing any kind of a crisis. That is, in my view, the two Government Sponsored Enterprises we are talking about here, Fannie Mae and Freddie Mac, are not in a crisis. We have recently had an accounting problem with Freddie Mac that has led to people being dismissed, as appears to be appropriate. I do not think at this point there is a problem with a threat to the Treasury." Frank received $42,350 in campaign contributions from Fannie Mae and Freddie Mac between 1989 and 2008. Frank also engaged in a relationship with a Fannie Mae Executive while
serving on the House Banking Committee, which has jurisdiction over Fannie Mae and Freddie Mac.
The FED's MBS Purchase Program Nearing End Of Funds Allocation
Fed MBS Program Update: 94% of Funding Used
The Federal Reserve today reported on their weekly purchases of agency mortgage-backed securities (MBS).
In the week ending February 3, 2010, the Federal Reserve purchased a total of $17.63 billion agency MBS. In those five days the Federal Reserve sold $5.63 billion (supported the roll market) for a net total of $12 billion MBS purchases.
The goal of the Federal Reserve's agency MBS program is to provide support to mortgage and housing markets and to foster improved conditions in financial markets more generally. Only fixed-rate agency MBS securities guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae are eligible assets for the program. The program includes, but is not limited to, 30-year, 20-year and 15-year securities of these issuers.
Since the inception of the program in January 2009, the Fed has spent $1.17 trillion in the agency MBS market, or 93.83 percent of the allocated $1.25 trillion, which is scheduled to run out in March 2010. This leaves $77.08 billion left to purchase MBS coupons in the TBA market.
- $450 million was used to buy 30 year 4.0 MBS coupons. 3.75 percent of total weekly purchases
- $7.45 billion was used to buy 30 year 4.5 MBS coupons. 62.08 percent of total weekly purchases
- $2.68 billion was used to buy 30 year 5.0 MBS coupons. 22.29 percent of total weekly purchases
- $675 million was used to buy 30 year 6.0 MBS coupons. 5.63 percent of total weekly purchases
- $300 million was used to buy 15 year 4.0 MBS coupons. 2.50 percent of total weekly purchases
- $300 million was used to buy 15 year 4.5 MBS coupons. 3.75 percent of total weekly purchases
30.6 percent of the mortgage-backs purchased were Fannie Mae MBS, 47.1 percent were Freddie Mac coupons, and 22.3 percent were Ginnie Mae. 94 percent of purchases were 30 year MBS coupons.
The Fed's daily purchase average was $2.40 billion per day, which is unchanged from last week's daily average of $2.40 billion per day. If the Fed were to evenly disperse the remaining $77.08 billion over the next 8 weeks, they would average $1.92 billion purchases per day or $9.64 billion per week.
Given the slowdown in the mortgage market, this should be enough to offset new loan production supply from originators.
Below is a chart illustrating the evolution of the Federal Reserve's Agency MBS Purchase Program. Notice over the past few months the Fed has reduced their purchases and used remaining funds to offset new loan production supply, 4.50 (RED) and 5.00 (GREEN) MBS coupons specifically, which has helped keep mortgage rates low relative to benchmark Treasury yields. Overall, weekly purchases continue to decline, yet mortgage valuations remain stable.
Big Changes To FHA
NEW YORK (CNNMoney.com) -- It's going to be harder to get a government-backed mortgage from now on.
Looking to shore up its weakening finances, the Federal Housing Administration is set to announce stricter standards on Wednesday.
The agency, which insured nearly a third of new mortgages in 2009, will increase the premium it charges for its mortgage insurance and require those with weaker credit scores to come up with larger downpayments.
The FHA will also reduce the amount of money a seller can provide a homebuyer for closing costs, as well as tighten its enforcement of lenders.
"Striking the right balance between managing the FHA's risk, continuing to provide access to underserved communities, and supporting the nation's economic recovery is critically important," FHA Commissioner David Stevens said in a statement. "Importantly, FHA will remain the largest source of home purchase financing for underserved communities."
FHA loans have skyrocketed in popularity during the mortgage crisis since the agency backstops banks if borrowers stop paying. But housing experts are growing increasingly concerned about the agency's ability to handle rising numbers of defaults. (Cash cushion shrivels for FHA.)
In November, the agency reported that its reserve fund has dropped to .53% of its insurance guarantees, well below the 2% ratio mandated by Congress and the 3% ratio it had last fall. The fund covers losses on the mortgages the agency insures.
Federal housing officials, who took several steps to shore up the agency's finances last year, promised to do more. The new announcement is the latest set of changes to FHA policies.
What the new rules mean
The agency will increase its up-front mortgage insurance premium to 2.25%, from 1.75%. It will also ask Congress for the right to hike its ongoing premium, currently between .5% and .55% monthly.
The FHA will also require borrowers to have at least a credit score of 580 to qualify for the agency's 3.5% downpayment program. Those with lower scores will have to pay at least 10%. However, this rule may have little practical effect since Stevens recently said the average borrower score is 693.
The new policy also will reduce the amount of money sellers can provide to homebuyers at closing to 3%, down from 6%, of the home's price. That change will bring the agency in line with industry standards and remove the incentive to inflate appraisals.
Finally, officials plan to clamp down on lenders offering FHA mortgages. It will more closely monitor their performance and compliance with agency rules, as well as seek legislative authority to require mortgage firms to assume liability for all loans they originate and underwrite.
One thing the agency did not do is to broadly increase the downpayment requirement. Many industry observers said such a step is necessary to reduce the risk the FHA faces.
Agency plays crucial role
As banks have clamped down on mortgage lending, the FHA program has emerged as one of the few ways people can buy a home.
Banks are more willing to make FHA loans because they come with a federal guarantee to cover losses if the borrower defaults. And borrowers can more easily qualify for FHA loans because they only need 3.5% down and can have lower credit scores.
As a result, demand for FHA loans has exploded. The agency guaranteed more than $360 billion in single-family mortgages in fiscal 2009, which ended Sept. 30, more than four times the volume in 2007.
The agency insured about 30% of home purchases and 20% of refinanced mortgages in 2009. Nearly 50% of first-time homebuyers go through the agency.
The agency, however, has also seen a spike in delinquencies amid the mortgage meltdown. Some 14.36% of FHA loans were past due in the third quarter, according to the Mortgage Bankers Association. This compares to 9.64% of all loans
House Prices Still Up 25% Over Last Decade - Amazing!
U.S. home prices increased over 25% in the past decade per the National Association of Realtors.
The median home price climbed from $137,600 from November 1999 to $172,600 in November 2009, based on the latest existing-home sales data.
Think what your home price appreciation would have been if values hadn’t fallen drastically in the past few years???
More stats...
NAR’s decade in review revealed that fewer buyers purchased detached, single-family homes, going to 78 percent from 82 percent a decade earlier. More people bought in suburban areas, with such sales grabbing a 54 percent share, up from 46 percent a decade ago. Married couples accounted for fewer home sales, holding a 60 percent share at the end of the decade, compared with 68 percent in 1999.
The one thing that didn’t change was the median age of homebuyers, which held steady at 39.
Top Metro Areas by Mortgage Lending Volume, 2008
Top Metropolitan Areas by Lending Volume
| 1 | Los Angeles-Long Beach-Glendale, CA | $88,630,823 |
| 2 | Chicago-Naperville-Joliet, IL | $77,057,094 |
| 3 | New York-Wayne-White Plains, NY-NJ | $70,930,690 |
| 4 | Washington-Arlington-Alexandria, DC-VA-MD-WV | $53,638,942 |
| 5 | Atlanta-Sandy Springs-Marietta, GA | $39,917,873 |
| 6 | Seattle-Bellevue-Everett, WA | $38,110,276 |
| 7 | Phoenix-Mesa-Scottsdale, AZ | $37,299,327 |
| 8 | Riverside-San Bernardino-Ontario, CA | $34,543,195 |
| 9 | Santa Ana-Anaheim-Irvine, CA | $33,078,199 |
| 10 | Oakland-Fremont-Hayward, CA | $32,758,992 |
Improving Economy Means Higher Rates
The U.S. economy lost 11,000 jobs in November which was a drastic improvement from the disaster of job losses in January. As the economy improves, investments will flow from fixed to equities- mortgages to stocks.There's a massive MBS sell-off in process. Rates lost three weeks of gains in one day.
- Job loss peaked in January 2009
- Job losses are continuing even as the economy is growing
The jobs report was much better-than-expected, proof that the U.S. economy is in recovery. Bad news for rate shoppers.
If the econonmy continues to show signs of improving, count on rates to increase rapidly.
New HUD/FHA Condo Guidelines
December 7 has been set as the date for the new condo review and approval requirements. For cases pulled on and after December 7 the condo project must either be currently approved on the approved condo list at https://entp.hud.gov/idapp/html/condlook.cfm or must be reviewed and approved before the case can close with FHA financing.
HUD offers two approval options: DELRAP and HRAP.
DELRAP stands for Direct Endorsement Lender Review Approval Process and HRAP stands for HUD Review Approval Process. HUD agreed to allow experienced lenders the option of taking on responsibility for reviewing and approving some projects while choosing to submit others directly to HUD for their expertise on others.
1. The project must include no less than two units
2. All projects must be covered by hazard and liability insurance and applicable projects must provide evidence of coverage for flood insurance and fidelity bond insurance when required.
3. For projects whose master insurance policy does not include interior unit coverage, evidence of the borrower’s HO6 coverage must be obtained and provided.
4. Right of first refusal is now deemed acceptable as long as it does not subject any person to discrimination as listed or defined under the Fair Housing Act regulation 24 CFR part 100.
5. No greater than 25% of the total project’s floor space may be used for commercial purposes.
6. No more than 10% of the units can be owned by a single individual or investor.
7. No more than 15% of the unit owners are allowed to be delinquent on their HOA fees.
8. Evidence of a minimum 50% pre-sale must be presented in the form of any of the following:
A direct builder certification requires the builder to sign and certify as to the following:
The undersigned hereby certifies that in lieu of providing (1) Copies of sales agreements and evidence that a mortgagee has issued approval; or (2) Evidence that units have closed and are occupied; the Developer/Builder has attached to the signed and dated certification, a list documenting all units sold, under contract or closed (i.e., and excel spreadsheet). This information will be used to document the required minimum presale requirement of 50 percent.
Title 18 U.S.C. 1014, provides in part that whoever knowingly and willfully makes or uses a document containing any false, fictitious, or fraudulent statement or entry, in any matter in the jurisdiction of any department or agency of the United States, shall be fined not more than $1,000,000 or imprisoned for not more than 30 years or both. In addition, violation of this or others may result in debarment and civil liability for damages suffered by the Department.
9. At least 50% of the units must be occupied by owners or sold to owners who intend to occupy.
10. Projects consisting of three or fewer units must not have more than one unit encumbered by FHA financing.
Projects consisting of four or more units must not have greater than 30% of the total number of units encumbered by FHA.
HUD will be tracking the number of cases assigned in each project and the FHA concentration will be listed within the condo approval data screens at https://entp.hud.gov/idapp/html/condlook.cfm.
11. The homeowners association budget must be reviewed for adequacy to ensure sufficient funds are available to maintain and preserve all amenities and features unique to the condominium project.
Government Moratorum Expiration Forces Jump In Illinois Foreclosures
Not only is the housing crisis far from over in the state of Illinois it may be getting worse. Thank you to the out of state banks lending in this state inconjunction with the state governments meddling in the foreclosure process through moratoriums.
Foreclosure filings jumped 56 percent in October, resulting in the highest monthly total for Illinois since January 2005, according to a new report from RealtyTrac.
Illinois had the third-highest number of foreclosures in the nation last month with 19,946, and was the only state with a foreclosure rate in the top 10 to see an increase in foreclosure activity.
The report cites a recently passed state law that gives homeowners extra time to avoid foreclosure as possibly having created pent-up activity.
Since the law went into effect in April, Illinois foreclosure activity had decreased for three straight months before the October spike.
Nevada, California and Florida posted the highest foreclosure rates in October. Illinois ranked sixth.
Mortgage Refinancing, Loans, FHA, Mortgage Interest Rates, Mortgage Bankers Association, Mortgage Bankers, Wholesale Mortgage Lending, Mortgage Banking, Mortgage Market Guide, Housing Market, RealestateloanS.com, Housing, Fixed rate mortgage, Fannie Mae, Freddie Mac, HUD, FHA, National Association of Home Builders, Homeownership, Mortgage Professional
