Marc's Mortgage Matter's

A continuing steep drop in home prices combined with rising unemployment is powering a new wave of foreclosures. Unfortunately, there’s little evidence, so far, that the Obama administration’s anti-foreclosure plan will be able to stop it.

The plan offers up to $75 billion in incentives to lenders to reduce loan payments for troubled borrowers. Since it went into effect in March, some 100,000 homeowners have been offered a modification, according to the Treasury Department, though a tally is not yet available on how many offers have been accepted.

That’s a slow start given the administration’s goal of preventing up to four million foreclosures. It is even more worrisome when one considers the size of the problem and the speed at which it is spreading. The Mortgage Bankers Association reported last week that in the first three months of the year, about 5.4 million mortgages were delinquent or in some stage of foreclosure.

Not all of those families will lose their homes. Some will find the money to catch up on their payments. Others will qualify for loan modifications that allow them to hang on. But as borrowers become more hard pressed, lenders — whose participation in the Obama plan is largely voluntary — may not be able or willing to keep up with the spiraling demand for relief.

One of the biggest problems is that the plan focuses almost entirely on lowering monthly payments. But overly onerous payments are only part of the problem. For 15.4 million “underwater” borrowers — those who owe more on their mortgages than their homes are worth — a lack of home equity puts them at risk of default, even if their monthly payments have been reduced. They have no cushion to fall back on in the event of a setback, like job loss or illness.

This page has long argued that a robust anti-foreclosure plan should directly address the plight of underwater homeowners by reducing the loans’ principal balance. That would restore some equity to borrowers — and give them a further incentive to hold on to their homes — in addition to lowering monthly payments. The mortgage industry has resisted this approach, and the Obama plan does not emphasize it.

With joblessness rising, lower monthly payments could quickly become unaffordable for many Americans. In a recent report, researchers at the Federal Reserve Bank of Boston argued that unemployment is driving foreclosures and to make a difference, anti-foreclosure policy should focus on helping unemployed homeowners. The report suggests a temporary program of loans or grants to help them pay their mortgages while they look for another job.

The government will also have to make far more aggressive efforts to create jobs. The federal stimulus plan will preserve and generate a few million jobs, but that will barely make a dent — in the overall economic crisis or the foreclosure disaster. Since the recession began in December 2007, nearly six million jobs have been lost, and millions more are bound to go missing before this downturn is over.

President Obama needs to put more effort and political capital into promoting the middle-class agenda that he outlined during the campaign, including a push for new jobs in new industries, expanded union membership and a fairer distribution of profits among shareholders, executives and employees.

There will be no recovery until there is a halt in the relentless rise in foreclosures. Foreclosures threaten millions of families with financial ruin. By driving prices down, they sap the wealth of all homeowners. They exacerbate bank losses, putting pressure on the still fragile financial system. Lower monthly payments are a balm, but they are no substitute for home equity. And until more Americans can find a good job and a steady paycheck, the number of foreclosures will continue to rise.           (NYTimes:Editorial 6/2/09)

Rates, relative to where they were two weeks ago, are bad. 30-yr conforming is back into the low 5% area, “high balance” conforming is priced about .5% higher than “low balance” conforming, and jumbo loans are in the mid-6% area. Ouch! Suddenly any borrowers who waited to lock, especially if they incurred expenses in processing or having an appraisal done, are upset. And on the jumbo side, there is still no securitization of larger loans, with portfolio lenders holding on to the product. If housing is going to take us out of the recession, rates moving up won’t help.

To Be 6 Again....

A man was sitting on the edge of the bed, observing his wife, looking at herself in the mirror. Since her birthday was not far off he asked what she'd like to have for her Birthday.


'I'd like to be six again', she replied, still looking in the mirror.
On the morning of her Birthday, he arose early, made her a nice big bowl of Lucky Charms, and then took her to Six Flags theme park. What a day!
He put her on every ride in the park; the Death Slide, the Wall of Fear, the Screaming Monster Roller Coaster, everything there was.
Five hours later they staggered out of the theme park. Her head was reeling and her stomach felt upside down.
He then took her to a McDonald's where he ordered her a Happy Meal with extra fries and a chocolate shake.
Then it was off to a movie, popcorn, a soda pop, and her favorite candy, M&M's. What a fabulous adventure!

Finally she wobbled home with her husband and collapsed into bed exhausted. He leaned over his wife with a big smile and lovingly asked, 'Well Dear, what was it like being six again?'
Her eyes slowly opened and her expression suddenly changed. 'I meant my dress size, you retard!!!!'

The moral of the story: Even when a man is listening, he is gonna get it wrong.

Scams that claim to help consumers avoid foreclosure have been on the rise lately as some individuals try to take advantage of financially distressed homeowners. Now state and federal authorities are intensifying efforts to combat these schemes while also reminding consumers that legitimate services are free and widely available.

The New York attorney general, Andrew M. Cuomo, announced this month that he intended to file a civil lawsuit against the American Modification Agency, a company based in Uniondale, N.Y., that markets itself as a loan-modification specialist under the Amerimod brand. He said he had also issued subpoenas to 14 other loan-modification companies.

Mr. Cuomo’s office alleged that Amerimod “charged homeowners heavy upfront fees in advance of providing any services, a violation of New York law,” and engaged in misleading advertising, among other things.

Amerimod, which assists borrowers in loan-modification negotiations with lenders, did not return telephone calls seeking comment. But Salvatore Pane Jr., the company’s chief executive, sent an e-mail statement that read, in part: “Amerimod has been and will remain a front-runner for compliance as well as a reliable source for distressed homeowners and consumer advocacy groups.”

Federal authorities are also more closely scrutinizing foreclosure-rescue services. The Federal Trade Commission filed a civil contempt action this month against the Financial Group Inc., an Orange, Calif., company doing business as Tax Relief ASAP. The F.T.C. said it had charged homeowners up to $5,500, and “obtained few, if any, loan modifications for customers.”

Last week, Tax Relief ASAP’s phone number was answered with an automated message, saying that a federal court had frozen the company’s assets and suspended its business operations. It provided no further contact information for the company’s principals.

Other state attorneys general have made this issue a priority as well.

In February, Connecticut’s attorney general, Richard Blumenthal, began an investigation into H.O.P.E. Alliance of Tampa, Fla. Mr. Blumenthal said the company had charged two homeowners $1,500 for services, directed them to stop making mortgage payments and then failed to help them save their homes.

Mark Roberts, a spokesman for H.O.P.E. Alliance, disputed Mr. Blumenthal’s allegations. He said that his company’s loan-modification negotiators provided better service than the free services affiliated with HUD. “Our counselors have better qualifications,” Mr. Roberts said, adding that two of them are former bankers and one is a former Fannie Mae employee.

When the investigation was announced, Mr. Blumenthal noted that H.O.P.E. Alliance’s name was similar to that of Hope Now, a nonprofit consortium of mortgage industry companies and counseling organizations that last year began a widely publicized initiative to offer free foreclosure counseling to borrowers. Distressed homeowners can get more information about its services at www.hopenow.com.

Douglas Robinson, a spokesman for Neighborworks America, a nonprofit housing preservation group that participates in the Hope Now initiative, says that fraudulent counseling groups often use variations of the names of legitimate government programs.

These fraudulent operations, Mr. Robinson said, often buy advertisements on search engines like Google and Yahoo. The ads frequently link to Web sites with official-sounding names, and although they may offer free consultations, the companies often charge fees for their services, he said.

Direct-mail campaigns or cable advertising campaigns, which are relatively inexpensive, follow the same branding approach, Mr. Robinson said.

“It’s a very slick way of getting the consumer’s attention,” he said.

BORROWERS who struggle with their mortgage payments should never pay for help when negotiating with a lender to avoid foreclosure, said Susannah Gillette, the director of program quality and impact at Neighborhood Housing Services of New York City.

She noted that the Web site FindAForeclosureCounselor.org lists all the free services affiliated with the federal government’s National Foreclosure Mitigation Counseling Program.

Ponder Points

“If you think no one cares you're alive, miss a couple of house payments.”

“There is no longer a need for the neutron bomb. We already have something that destroys people and leaves buildings intact. It's called a mortgage.”

THE subprime mortgage crisis has had at least one positive outcome: many unscrupulous professionals who steered unsophisticated borrowers into risky loans went out of business. 

Some of those people have since returned to the industry, lenders and mortgage brokers say, only this time they are involved in loans insured by the Federal Housing Administration, which are also often sought by less sophisticated borrowers.

Now the F.H.A. is tightening its review of mortgage professionals who are permitted to originate its loans. Some longtime F.H.A. mortgage brokers say the efforts will help spare borrowers some of the abuses of the subprime era.

Among other things, brokers who help originate F.H.A. mortgages will be required to obtain approval in advance from the federal Department of Housing and Urban Development, of which F.H.A. is a division. In the past, nonapproved brokers could refer applicants to approved lenders and charge the borrower a fee. Additionally, people convicted of making fraudulent loans cannot take part in the F.H.A. program. Previously, though companies were penalized by the F.H.A. for such behavior, the individuals responsible could simply switch employers.

William Apgar, the senior adviser to the secretary for mortgage finance at HUD, said that some of these individuals were probably among the roughly 1,500 new mortgage professionals who have obtained licenses to make F.H.A. loans in the last two years. (There are 13,500 in all, according to Mr. Apgar.)

“These folks know how to scam people,” he said, “and they’re now trying to scam people in a new way. But these guys haven’t just invaded F.H.A. They’re in every corner of the world.”  The new requirements for F.H.A. lenders, as well as more than $400 million in additional financing, partly for mortgage-fraud investigations, Mr. Apgar said, will help mitigate fraud among F.H.A. lenders.

F.H.A. loans are similar to subprime loans, because they are typically made to borrowers who have difficulty qualifying for prime loans — people with less money for down payments and those with damaged credit.

A frequent choice for first-time home buyers, F.H.A. loans carry competitive interest rates — late last week, for instance, the rate on a 30-year fixed-rate loan was 5.5 percent — but borrowers must pay a monthly insurance premium. (On a $400,000 loan, the insurance is $183 a month.)

Borrowers with low credit scores or low cash reserves rarely considered F.H.A. loans over the past decade, partly because of the insurance fees, but also because they could easily get other subprime mortgages with no or low down payments and with interest rates initially much lower than for F.H.A. mortgages.

The problem was that many of those loans were adjustable-rate mortgages, or ARMs, whose interest rates often spiked in the first few years. Now that these “exploding ARMs,” as they were known, have vanished, subprime borrowers are again flocking to F.H.A. loans.

Of the mortgages made in the past 12 months, about 20 percent have been F.H.A. loans, compared with about 2 percent in 2006, according to HUD.

Here is a guide to familiar real-estate ad phrases.

Charming - Tiny. Snow White might fit, but five of the dwarfs would have to find their own place. See "Cute," "Enchanting," and "Good Starter Home."
Much potential - Grim. Steer clear unless you have a lot of money and believe your blind dates re ally did have nice personalities. See "Ready to Rehab," and "Fixer Upper."
Unique city home - Used to be a warehouse.
Hi-tech/Contemporary - Lots of steel shelving with little holes - the kind your dad used to store tools on in the basement.
Daring design - Still a warehouse.
Completely updated - Avocado dishwasher and harvest gold carpeting or vice versa.
Sophisticated - Black walls and no windows. See "Architect's Delight."
One-Of-A-Kind - Ugly as sin.
Brilliant concept - Do you really need a two-story live oak in your 30-foot sky dome? See "Makes Dramatic Statement."
Upper bracket - If you have to ask . . .
You'll love it - No, you won't.
Must see to believe - An absolutely accurate statement ;/

At least the stock market is going up, right? After being stagnant this week, it would appear that equities will be rallying this week. Haven’t you heard? In spite of more housing foreclosures ahead, and commercial lending being in trouble, the economy is doing great! Commodities are going up, with oil now over $71 per barrel and gold up $10 an ounce. Yesterday the Fed was in buying their usual $5-6 billion, but it didn’t seem to help mortgage rates which hit a 7-month high, ouch!

The Obama administration marked with little fanfare a major milestone in its bank rescue effort — its decision on Tuesday to let 10 big banks repay federal aid that had sustained them through the worst of the crisis — as policy makers and industry executives focused on the challenges still before them. 

“This is not a sign that our troubles are over,” President Obama said. “Far from it.”

While the announcement had been expected for weeks, the official word put the administration’s imprimatur on a corps of big banks considered healthy enough to extricate themselves from Washington’s grip.

The bank holding companies, among them American Express, Goldman Sachs, JPMorgan Chase and Morgan Stanley, plan to return a combined $68.3 billion. That represents more than a quarter of the federal bailout money that the nation’s banks have received since last October, when many feared that failures might cascade through the industry.

But the decision to allow the banks to exit the Troubled Asset Relief Program, or TARP, also ushered in a new, and potentially risky, phase of the banking crisis. Letting the lenders out now — earlier than many had envisioned, and without the industry reforms some consider necessary to prevent future crises — raises many sobering questions for policy makers, bankers and taxpayers.

The program was aimed at purchasing assets and equity from banks to strengthen them and encourage them to expand lending during a tightening credit squeeze. But after banks return the TARP money, the administration will forfeit much of its leverage over them. With that loss goes a rare opportunity to overhaul the industry. The administration’s ability to push institutions to purge themselves quickly of bad assets and do more to help hard-pressed homeowners will be diminished.

Of even deeper concern is the running trouble inside the banking industry. Despite tentative signs of revival, many banks remain fragile. Four of the nation’s five largest lenders, including Citigroup and Bank of America, were not allowed to return their bailout funds.

Some analysts worry that financial institutions that repay bailout money now may turn to Washington again if the economy worsens and losses overwhelm banks. One of the most vexing problems of the credit crisis — how to rid banks of their troubled mortgage investments — remains unresolved.

The banks are eager to escape TARP and the restrictions that come with it, particularly the limits on how much they can pay their 25 most highly compensated workers. (This part makes me puke!)

But homeowners and consumers are unlikely to benefit if banks repay their TARP funds en masse. Banks are giving back money that might otherwise be used to make loans.

The announcement on Tuesday underscored the stark dividing line across the banking industry. On one side are big banks now considered healthy enough to forgo their TARP money. On the other side are those considered too weak to go without it. Still, some of those weaker banks may be allowed to repay the money soon....

BBQ RULES

We are about to enter the BBQ season. Therefore it is important to refresh your memory on the etiquette of this sublime outdoor cooking activity, and when a man volunteers to do the BBQ the following chain of events are put into motion:
Routine...
The woman buys the food, makes the salad, prepares the vegetables, makes dessert, prepares the meat for cooking, places it on a tray along with the necessary cooking utensils and sauces, and takes it to the man who is lounging beside the grill - beer in hand.
The woman remains outside the compulsory three meter exclusion zone where the exuberance of testosterone and other manly bonding activities can take place without the interference of the woman.
Here comes the important part:
THE MAN PLACES THE MEAT ON THE GRILL.
The woman goes inside to organize the plates and cutlery, and comes out to tell the man that the meat is looking great. He thanks her and asks if she will bring another beer while he flips the meat.

THE MAN TAKES THE MEAT OFF THE GRILL AND HANDS IT TO THE WOMAN.
The woman prepares the plates, salad, bread, utensils, napkins, sauces, and brings them to the table. After eating, the woman clears the table and does the dishes.
And most important of all:
Everyone PRAISES the MAN and THANKS HIM for his cooking efforts, and the man asks the woman how she enjoyed “her night off” and, upon seeing her annoyed reaction, concludes that there's just no pleasing some women.