Thursday, November 10, 2011

Defend your right not to be abused by you're bank

Lost notes, robbo signing, predatory loan terms, etc.  Now is the time defend against the banks abusive practices.

Wednesday, November 2, 2011

Can Obama’s new housing plan succeed?

President Obama announced recently that he has a new plan to assist struggling homeowners whose homes are facing foreclosure. The plan would entail expansion of a mortgage refinancing program for homeowners whose homes are worth less than the what they owe the bank. The program if pushed aggressively could reach as many as on million homeowners.

The new program is officially a program of the Federal Housing Finance Authority (FHFA). Under the revision, there’s no limit to how much a borrower can owe. Banks that refinance loans will be largely cleared of liability according to interim director Edward DeMarco. “We know that there are many homeowners who are eligible to refinance under HARP, and those are the borrowers we want to reach,” DeMarco said.

Fees will be especially reduced if borrowers take on a mortgage with duration of 20 years or less. Many homeowners have 30-year mortgages. Only borrowers whose loans are owned or guaranteed by Fannie Mae and Freddie Mac will be eligible. In addition, borrowers must not have missed any payments in the past year and must have taken out their loans before June 1, 2009, though exactly when will depend on the lender.

Fannie Mae and Freddie Mac generally require refinancing lenders to assume responsibility for any problems with the original mortgage because in giving the new mortgage they are relying in part on that original documentation. That has made lenders reluctant to refinance loans for which they are not already responsible. That provision will now be waived, in exchange for a fee.

The program is not expected to increase costs for taxpayers though some borrowers might not be able to enroll until the first quarter of next year.

But regardless of the proposed benefits of the new plan, many critics of the new plan say it is too little too late. Many oppose federal aid for distressed homeowners as a bailout for people who they say made bad choices. Moreover, the opponents of the plan say that the market should be allowed to fix itself. And that even if it helped some, it will only help a small amount of the effected population and put in barely a dent in the over economy.

The impact to the overall economy would be small because as we all know the US economy is primarily driven by consumer spending. Critics of Obama’s new plan say that the saving to individual homeowners would be only about $2,500 per year, per household. That amount, they say if spent in the US economy would be small compared to the US trillion economy.

There are limitations to the new plan. For example it only applies to loans that Fannie and Freddie acquired before May 31, 2009. Also, it does not reduce the amount that borrowers owe. And only borrowers with less than 20 percent equity in their homes are eligible. If your home happens to be one of the lucky ones with more than 20 percent equity then you would have to go through standard more conventional channels to refinance.
The new Obama plan is a step in the right direction. No it does not solve all the problems in the economy but its a first step. It would be a great step for the one million home owners who they say it can. That would be one million less houses sold on the court house steps. And as for the savings that each individual homeowner would receive that’s all a net positive. Although the critics say the plan only would save families approximately $2,500 per month, they don’t realize that every dollar to a struggling homeowner could be the difference between foreclosure and not foreclosure.

But the new plan still does not go far enough. Since many of the homes in the US are underwater the new plan should include writing down or reducing the principle owed to the banks as well. Yes, there has been a great push back by the banks who say that their investors would not agree to such a move. However, it would be the best way forward. And, if the housing market rebounds and the equity returns, maybe then a portions should be returned to the banks. It just seems like the banks do not want to take any responsibility for the housing crisis, or the bad loans that really prayed on the unsuspecting or the over leveraging that they encouraged by their lending practices.

Lastly, Obama’s new plan should cast a wider net. Not only loans by Fannie and Freddie acquired before May 31, 2009 should be considered. There are millions of loan that are handled and service be company’s other than Fannie and Freddie Mac. Those loans should be included too and regardless of the amount of equity. If goal is to make an impact on the housing market and thereby the economy as whole, then the approach should be large in scope and aggressive enough to make a difference even if the target number is off by ten or even twenty percent.

Mr. Obama’s critics are going to criticize him what ever plan he comes up with whether it’s too be or too small. With a larger plan designed to write down principle balances and effect more homeowners his critics and supporters will know that he just didn’t deal with the housing crisis gingerly but that his plan was large in it’s impact and aggressive.

By William Simms

Friday, July 2, 2010

When will this crisis end?

Real Estate Crisis, this hurts, how long will this last?

The Real Estate crisis is continuing to have the so called “experts” scratch their heads, acknowledging that this downtown is painful and asking “how long will this last?”.
Well, when this all began, back in 2008, those with the most optimistic view said that it would be over by the 2nd quarter of 2009. And since that did not work, all those asked expected that it would be over by the first quarter of 2010. That wasn’t the case either. In fact, mortgage delinquencies were up 36% in the first quarter of this year versus the prior year, but are actually down 7.5% from Q4. That's the first drop in mortgage delinquencies in well over two years. But new mortgage foreclosures in the first quarter were up 18.6% to a bit over 370,000. Now it appears that the housing down turn will last indefinitely or at least until a number of things happen.
Two key factors have me questioning the foreseeable future of the market:
• According to the Mortgage Banker’s Association National Delinquency Survey the total delinquency for all mortgages is at mind-numbing 14%. FOURTEEN PERCENT! How many of those will translate into foreclosures and/or short sales? Well, the answer depends on how effective programs like Home Affordable Modification Program (HAMP) become in assisting homeowners from escaping foreclosure. According to many industry analysts/experts, the current government programs are completely ineffective in producing long-term results and will need major restructuring/overhauls in order to reach their goals.

• The unemployment rate in the US is at 9.3 %. And states that help push/drive the economy are experiencing remarkably high unemployment rates: California is at 12.3%, Florida is at 11.2%, and Michigan is at a staggering 13.7%. And here in New Jersey its 9.6%. Which is higher than national average and its even higher in New Jersey’s urban centers. All those numbers are about 7-8% higher than

during the booming times of 2005-2006. How much stability and long-term appreciation in real estate can we expect if Americans are having a hard time finding and keeping work.
The growing numbers of the factors that I mentioned above help to increase the number of actual foreclosed homes on the market. Foreclosed homes sit on the market for as much as 180 days or more! This constant new crop of foreclosed homes plus the non foreclosed homes for sale combine to create a large glut of homes begging for buyers.
So where are the new buyers?
Well, mortgage rates are down to their lowest level in 39 years according to a survey released on Freddie Mac’s web site. You would think that this would bring in a flock of new buyers. That along with the $8,000 home buyer tax credit brought in some new buyers, but not nearly enough remove the glut of homes that are currently on the market.

So how long will it last?

The end is not in sight. As long as the unemployment rate remains at high levels and the housing glut continues to be feed by a new crop of REO’s (Real Estate Owned bank properties) monthly, the housing down town will continue. It’s a vicious cycle: continued high unemployment leads to more foreclosed homes which increases the glut of homes which continues to breed the real estate down turn.

But there is hope. Proposals from the President, Congress, and Community Based Organizations are all chipping away slowly at the problem. These proposals include, but are not limited to, financial stimulus, increasing jobs, decreasing the number of foreclosures and increasing the overall health of the economy. Each of these proposals will take time to work their way through the economy and eventually increase the health of the real estate market. Its impossible to say when it will end but it will take some time. It will take a lot longer than every one expected but it will end.

Tuesday, April 13, 2010

WaMu exec: We deserved to be given a chance

By Marcy Gordon

WASHINGTON - A trio of former Washington Mutual officials and a trove of documents on Tuesday portrayed a pattern of breakneck loan-making and alleged fraud at the biggest U.S. bank ever to fail.

Former CEO Kerry Killinger defended WaMu's actions at a Senate hearing and insisted the government should not have seized it at the height of the financial crisis in September 2008.

Killinger argued that WaMu had adequate capital and shouldn't have been shut down and sold for a "bargain" price of $1.9 billion. The bank "should have been given a chance to work its way through the crisis," he testified at a hearing by a Senate panel.

The 18-month investigation by the Senate Homeland Security and Governmental Affairs subcommittee found that WaMu's lending operations were rife with fraud, including fabricated loan documents. It concluded that management failed to stem the deception despite internal probes.

The bank's pay system of rewarding loan officers and sales executives for their volume of loans closed ratcheted up the pressure, the investigators found.

Sen. Carl Levin, D-Mich., the panel's chairman, has said it will decide after its hearings this week whether to make a formal referral to the Justice Department for possible criminal prosecution. Justice, the FBI and the Securities and Exchange Commission opened investigations into Washington Mutual soon after its collapse.

The Senate subcommittee is known for conducting hard-hitting investigations by bipartisan staff and has sometimes made such referrals to federal prosecutors. The former WaMu executives appeared before Congress for the first time since the bank's collapse.

Killinger deflected the criticism and laid blame on the government. He argued that even before the crisis struck with force, the government treated Seattle-based Washington Mutual unfairly. He noted it was excluded from a list of large financial firms whose stock couldn't be sold short under a temporary government ban in July 2008. In short-selling, traders bet a stock price will drop and use borrowed shares to profit from any decline.

"For those that were part of the inner circle and were 'too clubby to fail,' the benefits were obvious," Killinger said. "For those outside of the club, the penalty was severe."

Levin came armed with e-mail correspondence among senior executives at the bank showing anxiety over elevated rates of delinquency and default in the high-risk mortgage loans WaMu had made. The exchanges show the executives wanted to urgently sell the loans packaged as securities to Wall Street, Levin said.

Two former WaMu chief risk officers said they tried to curb risky lending practices by the bank. But they said they met resistance from top management when they brought their concerns to them.

As the housing bust deepened in late 2007 and early 2008, "I was increasingly excluded from senior executive meetings and meetings with financial advisers when the bank's response to the growing crisis was being discussed," Ronald Cathcart, who helped oversee risk until April 2008, testified at the hearing. By January 2008 he was "fully isolated" and was fired by Killinger a few months later, Cathcart said.

The other risk officer, James Vanasek, testified that he tried to limit loans to those who were unlikely to be able to repay and the number of loans made without verifying borrowers' income. But his efforts fell flat "without solid executive management support," Vanasek said.

He said the examiner on the ground at the bank from the U.S. Office of Thrift Supervision, Lawrence Carter, "did an excellent job" of raising issues of credit risk. But, Vanasek added, he was baffled why Carter's superiors at the Treasury Department agency "didn't take a tougher tone with the bank."

"There seemed to be a tolerance there or political influence," he said.

WaMu's release of toxic mortgage securities into the financial bloodstream contributed to the near-collapse of the system in the fall of 2008, Levin and other senators contended. Levin pressed Killinger and the other former executives on when they became aware of loan fraud at the bank and why they failed to act.

"You should have been disturbed," he told Killinger. "Instead you want to wrap it in hypotheticals."

At one point, Killinger did concede some blame. "As CEO, I accept responsibility for our performance and am deeply saddened by what happened."

Fueled by the housing boom, Washington Mutual's sales to investors of subprime mortgage securities leapt from $2.5 billion in 2000 to $29 billion in 2006. The 119-year-old thrift, with $307 billion in assets, was sold for $1.9 billion to JPMorgan Chase & Co. in a deal brokered by the Federal Deposit Insurance Corp.

Killinger said it was "unfair" that Washington Mutual didn't get the benefits of government actions that helped other financial institutions in the days of the crisis in the fall of 2008. He was referring to steps such as a doubling of the limit on deposit insurance to $250,000 and new federal guarantees for bank debt.

Between 2003 and 2007 under his tenure, WaMu cut in half its staff in the home loans division and sold 30 percent of its portfolio of loans, Killinger testified.

WaMu's pay system rewarded loan officers for the volume of loans they closed on. Extra bonuses even went to loan officers who overcharged borrowers on their loans or levied stiff penalties for prepayment, according to the report of the Senate panel's investigation.

"Washington Mutual engaged in lending practices that created a mortgage time bomb," Levin said. "Because volume and speed were king, loan quality fell by the wayside."

WaMu was one of the biggest makers of so-called "option ARM" mortgages. They allowed borrowers to make payments so low that loan debt actually increased every month.

In some cases, sales associates in WaMu offices in California fabricated loan documents, cutting and pasting false names on borrowers' bank statements, the panel found. The company's own probe in 2005, three years before the bank collapsed, found that two top producing offices — in Downey and Montebello, Calif. — had levels of fraud exceeding 58 percent and 83 percent of the loans. Employees violated the bank's policies on verifying borrowers' qualifications and reviewing loans.

Washington Mutual was criticized over the years by its internal auditors and federal regulators for sloppy lending that resulted in high default rates, according to the report. Violations were so serious that in 2007, Washington Mutual closed its affiliate Long Beach Mortgage Co. as a separate entity and took over its subprime lending operations.

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