Marc's Mortgage Matter's

A woman gets on a bus with her baby.  The bus driver says: "That's the ugliest baby that I've ever seen. Ugh!"
The woman goes to the rear of the bus and sits down, fuming. 
She says to a man next to her: "The driver just insulted me!"
The man says: "You go right up there and tell him off - go ahead, I'll hold your monkey for you."

On this Day in History, last week February 15, 1959, Fidel Castrol appointed himself Premier of Cuba. Despite our wish to get him out of power, he has survived 11 Presidents: Eisenhower, Kennedy, Johnson, Nixon, Ford, Carter, Reagan, Clinton, two Bushes, and Obama.

This Day in History Part II. It was on February 15, 1989 when the last Soviet soldier left Afghanistan. Before the year was out, a defeated, exhausted and demoralized Soviet Union started to disintegrate, and, by 1991, it ceased to exist.

Someone on the radio yesterday was talking about the Obama plan to compensate homeowners who lost their equity. “It’s just horrible how much I lost on my house, and it’s about time the banks paid back the people they screwed.” How does our society create people who think like this? As for that woman who thinks she got screwed by the bank, (1) There’s a good chance she got a stated income loan and lied about her earnings, (2) there’s a good chance she got a cash out refinance and took her equity out well before the crash, and (3) if she truly wants to live in a riskless society where no one loses, she could move to North Korea or Korea.

Even if none of these three things apply, here’s the one truth we know: No bank held a knife to her throat and forced her to take that loan.

The closing of banks is a reminder that although things have been looking up lately, the housing market is still very clearly depressed. Prices could continue declining, there's an oversupply of foreclosed homes, and many borrowers are still unable to qualify for loans. Enter the economists. Federal Reserve economists were behind the refinancing program comments in the State of the Union speech on January 24th, urging the White House take further action to ameliorate the housing crisis. Economists across the country have thrown out a few more ideas as well. Many believe that investors could play a greater role in local recovery, citing mom-and-pop investors that have bought up excess housing stock and rented it out. Encouraging that trend would help clear the "shadow supply" of foreclosures, but financing remains an issue. Increasing the number of loans that any one borrower can obtain from the GSEs is one suggestion, as is the elimination of capital-gains taxes on properties bought expressly as long-term investments with the intent to convert them to rentals. It has also been proposed that the market would benefit from policy makers finalizing a clutch of pending regulations that would restore clarity to lending. Establishing greater certainty around lending rules might make banks more generous with credit and increase consumer confidence. Another suggestion put forth by economists is that mortgage investors and banks reduce debt for the most troubled homeowners. It could be a risky move that might encourage more borrowers to default, but at this point negative equity is unlikely to cure itself. The idea here would be that borrowers would receive relief only if they stayed current on their loans, which would act as a check on a scenario of widespread defaulting.

Along those lines, in an effort to move troubled mortgages off their books, banks have begun offering more than $35,000 in cash to delinquent homeowners so that they can sell their properties for less than they owe. No lender likes short sales, but banks have decided that they're both quicker and less expensive than foreclosing. In addition to offering cash incentives, banks have been pre-approving details, streamlining the process of closing and forgoing their right to pursue unpaid debt in the hope of getting through some of the backlog. At this point, more than 14 million homes are in foreclosure, and the pending repossessions that have accumulated are standing in the way of the housing market's recovery and economic improvement. Often borrowers opt for load modification, which reduces the monthly payment and principal such that they can avoid foreclosure but as we know sometimes homeowners facing foreclosures are able to live rent-free for years before the home is actually foreclosed. Banks, then, have to offer a substantial cash benefit to sell short, and $35,000-plus appears to be the going rate to get someone out of their home. A number of banks in Arizona, California, Florida, New York and Washington are now offering cash incentives. The largest incentives are extended by JPMorgan Chase, who approve about 5000 short sales monthly, many of whom have include settlements of $10,000-$35,000 each. On average, short sale transactions, from listing to sale, take from 123 days - much less time than a foreclosure.

Egyptian dictator Hosni Mubarak’s son (now on trial) was an investment banker with BofA Merrill in London, and Syrian strongman Bashar al-Assad’s wife was an analyst for a British hedge fund. Assad himself was trained as an ophthalmologist! Weird.

How come when famous people convert to Judaism, it’s never someone like the Dalai Lama or Jeremy Lin??

I just came across this chart from the Federal Reserve Bank of Cleveland, which wonderfully captures the pain of the housing bust. It shows price per square foot for homes in 27 areas across the country in 2006 versus 2011:

Federal Reserve Bank of Cleveland

Of all the housing markets shown, only Pittsburgh, Little Rock and Oklahoma City (indicated on the Fed chart as Oklahoma) had a higher cost per square foot in 2011 than in 2006. In Raleigh, N.C., prices were about flat.

Mortgage Settlement Pisses Into the Wind – Posted by Larry Doyle

In a nation now all too familiar with a “too big to fail” banking system, a heavily manipulated and high frequency dominated equity market, and an incestuous financial regulatory system, we should not be surprised with a mortgage settlement that does little more than ‘piss into the wind’.

Pardon my cynicism, but one does not need to look too deeply into the recently announced mortgage settlement to understand there is little in the way of meaningful justice embedded in this contrivance. Has America become so numb to the news emanating from both Wall Street and Washington that we expect so little and receive less than that when it comes to real justice? I believe we have.

If the mortgage settlement were derived from shoddy mortgage servicing practices at the five institutions (Ally Financial, Bank of America, JP Morgan Chase, Citigroup, Wells Fargo), then how is it and why is it that the executives running those business units are not singled out in this settlement and handled accordingly?

I believe it defies logic to think that the mortgage servicing units within these institutions were not fully aware of the practices (robo-signing of documents and the like) ongoing at each bank and perhaps jointly shared information. Would that sharing of information be considered a conspiracy and ultimately a form of racketeering?  Did these institutions actually violate the Racketeering Act? I posed that question during 2011, but we see nary a whisper of that sort in this settlement.

What do we see? Very little actually.

As the American Banker highlights, Missing Settlement Documents Raise Doubts About $25B Deal:

More than a day after the announcement of a mammoth national mortgage servicing settlement, the actual terms of the deal still aren’t public. The website created for the national settlement lists the document as “coming soon.”

That’s because a fully authorized, legally binding deal has not been inked yet. The implication of this is hard to say. Spokespersons for both the Iowa attorney general’s office and the Department of Justice both told American Banker that the actual settlement will not be made public until it is submitted to a court. A representative for the North Carolina attorney general downplayed the significance of the document’s non-final status, saying that the terms were already fixed.

“Once the documents are finalized, they’ll be posted to nationalmortgagesettlement.com,” the representative said in an email toAmerican Banker. Other sources who spoke with American Banker raised doubts that everything is yet in place.

A person familiar with the mortgage servicing pact says that a settlement term sheet does not yet exist.

Does this sound like “declare victory, take a ceremonious lap, and rely upon an uninformed American public to buy a bill of goods”? You bet. Do not think for a second that the funds involved in this settlement will provide meaningful relief for the housing market. The settlement funds represent mere pennies on the dollar in terms of the overall negative equity within American homes.

Additionally, do not discount that homeowners who receive some of these funds will spur other current homeowners to forestall making their own mortgage payments. More unintended consequences and subsequent foreclosures in the process. Why is it that mortgage investors who will suffer from principal reduction programs also bear some of the costs of this settlement? The cost of this component will be borne immediately by investors and ultimately by higher mortgage rates for all.

When you add all of these shortcomings, misfirings, and injustices together, the simple fact is this mortgage settlement is at best justice deflected, more accurately justice neglected, and in summation justice denied.

As American Banker concludes:

“Even once we get to the final terms, the servicers we’re told are going to be allowed to develop their own plans,” says NCLC’s Thompson. “They’re going to have three months to develop those from when the settlement is approved by the court. We are a long way in lots of ways from being able to kick the tires.”

Why does this happen? Two reasons:

One, our Washington political establishment is currently more driven in its pursuit of any and all funds that might be injected into the economy than anything else.

Two, can’t you just picture the heads of the banking institutions involved in this settlement chuckling about this settlement knowing that “these regulators and pols really work for us.”

Pissing into the wind in America 2012. How pathetic!

Navigate accordingly!!

An increasing share of refinancing borrowers chose to shorten their loan terms during the fourth quarter. Of borrowers who paid off a 30-year fixed-rate loan, 43 percent chose a 15- or 20-year loan, the highest such share since the first quarter of 2003.

Fifty-eight percent of borrowers who had a hybrid ARM transitioned to a fixed-rate loan during the fourth quarter, while the remaining 42 percent chose to refinance into the same type of product.

QuotesAttributed to Frank Nothaft, Freddie Mac vice president and chief economist

"Fixed mortgage rates averaged 4.00 percent for 30-year loans and 3.50 percent for 15-year product during the fourth quarter in Freddie Mac's Primary Mortgage Market Survey®, well below long-term averages. These rates typically include at least a 1 point discount or origination fee. The Bureau of Economic Analysis has estimated the average coupon on single-family loans was about 5.2 percent during the fourth quarter of 2011. It's no wonder we continue to see strong refinance activity into fixed-rate loans.

"For borrowers motivated to refinance by low fixed-rates, they could obtain even lower rates by shortening their term. Compared to a 30-year fixed-rate mortgage, the interest rate on 15-year fixed was about 0.7 percentage points lower during the fourth quarter. And for borrowers who plan to remain in their current home for only a few years, the hybrid ARM allows for even a greater interest-rate savings. The initial interest rate on a 5/1 hybrid ARM was about 1.1 percentage points lower than on a 30-year fixed-rate loan."

Contact me for clearer picture as is well known in the end it each loan and individual situation is different then the next.

Pitfalls to watch out for in purchasing domestic properties.