20 Dec 11 Democrats Want Homeowners to Fund Payroll Tax Extension Via FHA, Fannie and Freddie
The Democrats in the House and Senate proposed a new bill to extend payroll tax cuts for two months and they suggest that an increased fee to FHA home loan to pay for it. I’ve heard some wild ideas reporting new in the mortgage industry for the last decade, but hiking home loan fees is absurd. The House was scheduled to vote on the legislation last night.
For the last few months, Washington politicians have been arguing the merits of extending the payroll tax cuts that supposed to be funding social security. Under the proposed legislation, annual mortgage insurance premiums for FHA loans would increase by 10 basis points. Guarantee fees, or “G fees” for Fannie Mae and Freddie Mac loans would also rise.
Mortgage Bankers Association President and CEO David Stevens, pleaded for the House to vote down the payroll tax extension. “The idea that you should pass a ten year tax increase for two months of payroll tax relief is appalling. Fannie and Freddie’s guarantee fees are supposed to be used to help offset the risk inherent in providing home loans, and any increases should be used for that purpose,” he said. “Siphoning off a portion of those fees into the general government coffers may be politically expedient, but it is far from sound policy.”
03 Oct 11 Guidelines for Obama Mortgage Program for Unemployed Homeowners Too Strict
Unfortunately most of the struggling borrowers who need mortgage help due to unemployment are not able to meet the qualifications for Federal aid. The Obama Administration rolled out a $1 billion program to help the unemployed homeowners make their mortgage payment will likely end up spending only half the funds, at most, because so few borrowers met the strict guidelines. The Housing Department, which had to approve the applications for the Emergency Homeowners Loan Program by Friday, expects that only 10,000 to 15,000 people will qualify. That’s only a small sliver of the roughly 100,000 who applied.
Passed last year as part of the Dodd-Frank mortgage reform bill, it was modeled after a very successful program in Pennsylvania that has helped tens of thousands of residents since 1983. The federal effort offered interest-free, forgivable loans to homeowners who lost at least 15 percent of their income because of the economy or their own medical condition. Applicants had to be at least 90 days delinquent, facing foreclosure and show that they could resume payments if they found a new job. If they qualified, they could receive up to $50,000 or 24 months of assistance, whichever came first.
Only 34 of the 174 homeowners who came to Tierra del Sol Housing Corp. in Las Cruces, N.M., met the criteria, said Rose Garcia, the agency’s executive director. Read Chicago Tribune Article on Federal Mortgage Program for Unemployed
17 Aug 11 Obama Warming to Idea of Helping Mortgage Giants Fannie and Freddie
President Obama announced yesterday that he is leaning towards funding a reorganization of the two failing government mortgage agencies Fannie Mae and Freddie Mac. The White House and Treasury Department also acknowledged that the Obama administration is working on a plan to continue the U.S. government’s role as an insurer of home mortgages for most homebuyers, keeping the struggling Fannie Mae and Freddie Mac under government management.
Fox News reported that one of the options would be to restructure Freddie Mac and Fannie Mae as public utilities managed by a government regulator. The second option being considered would be to eliminate the mortgage lenders role in the loan origination process and replace them with “successors that would have their mortgage securities guaranteed by the government in exchange for a fee.” A third option is to wind down the home financing giants and limit government’s role in insuring loans to other agencies.
Not surprisingly, the White House would not commit to any specific plan as Obama continued his bus tour. According to White House spokesman Jay Carney, “It is simply untrue that the administration has settled on a single proposal for the longer-term structure of the home financing market.” Carney stated, “The article in question mischaracterizes a lot of the core housing and finance principles that the administration laid out in its February report to Congress.”
Deputy Treasury Secretary Neil Wolin also issued a statement saying that the three options outlined in the report to Congress allow for the government’s “footprint in the housing finance market” to “shrink substantially.” Wolin continued, “For now, Fannie Mae and Freddie Mac are playing a critical role in providing support to a still-fragile housing market and making mortgage credit available. However, in each of the three options, Fannie Mae and Freddie Mac will be wound down on a responsible timeline.”
05 Aug 11 Will Congress Extend Home Loan Limits?
With all of this debt ceiling talk I think many people overlooking the real crisis that could cause our already fragile housing market to fall even more. Later this month the FHA loan limits and conforming mortgage limits for Fannie Mae and Freddie Mac are scheduled to drop. Many borrowers in high cost regions have gotten used to the $729,750 loan but they will fall to $625,000. In the other neighborhoods, the loan limits will be reduced to $417,000. Many of these borrowers have 2nd mortgage loans already so with the depressed home values, homeowners will be unable to consolidate their 1st and 2nd loans together when loan limits are lowered.
Apparently the change will only affect 5% of homes nationally, but in some markets like Southern California, the percentage is much higher. Will Congress step in and extend the current loan limits that could have an adverse impact on the housing market if the loan limits are reduced?
07 Jul 11 Home Loan Relief for Unemployed Borrowers
Nick Timiraos published a recent article on WSJ online that outlines more government mortgage aid that extends support to unemployed borrowers. According to the Wall street Journal, the Obama administration is planning to require mortgage lenders and banks to extend more generous mortgage help for certain unemployed borrowers from losing their homes to foreclosure. New policy changes revealed that mortgage companies that collect payments on loans backed by the Federal Housing Administration will be required to offer 12 months of forbearance for qualified unemployed borrowers.
The foreclosure crisis was initially driven by adjustable rate mortgage loans that were resetting to sharply higher payments, but over the past three years, far more homeowners have faced foreclosure because they have lost their jobs or seen their income fall. Many of those borrowers can’t easily sell their homes if they get in trouble because they owe more than the properties are now worth. Officials said the change was prompted by a slow economic recovery that has seen longer stretches of unemployment than in past downturns. “We’ve been looking for ways we can go farther to help borrowers,” said Mr. Donovan. Around 3,500 borrowers with FHA mortgages fall behind on their payments every month due to unemployment, housing officials said, and around 17,000 borrowers last year had been offered some type of forbearance. HAMP offers a three-month break in loan payments for unemployed borrowers and has helped around 10,000 homeowners since the program began last August.
At a White House town hall event on Wednesday, President Barack Obama conceded that housing has become the “most stubborn” economic problem facing policy makers. “We’ve had to revamp our housing program several times to try to help people stay in their homes and try to start lifting property values up,” he said. The loan relief program won’t apply to loans backed by housing-finance giants Fannie Mae and Freddie Mac, which are under government control but answer to a separate, independent regulator. The firms offer their own forbearance programs and own or guarantee nearly half of all U.S. mortgage liens. The FHA, by contrast, backs less than 10% of all outstanding home loans. See the original WSJ article online.
19 Apr 11 Federal Reserve Announces New Mortgage Rules
New mortgage rules are coming in to play in 2011 as the government is set to put their footprint on home mortgage guidelines going forward. Under a proposal released by the Federal Reserve on Tuesday Mortgage lenders will be required to make sure prospective borrowers were able to repay their mortgages before giving them a loan. The new mortgage rule, which is required by the Dodd-Frank financial mortgage reform is intended to tighten lender standards and prevent mortgage fraud and lending abuses that led to the mortgage meltdown and the financial crisis in 2007. In 2006 subprime and bad credit loans begin defaulting, but since then we have seen a wide range of loan and credit types default.
In the lead-up to the crisis, for instance, borrowers could obtain a home mortgage loan without providing any proof of income or employment as the market churned out “subprime” loans to borrowers who were unable to afford them. The rule would establish minimum underwriting standards for most home loans such as requiring a lender to verify a borrower’s income, the amount of debt they have and whether they have a job.
Many banks have already tightened lending requirements after the mortgage market soured during the crisis and the rule may have a limited immediate impact. “This is where the banking industry is at, anyway,” said Robert Jaworski, a lawyer with Reed Smith who follows housing oversight. There is some question whether or not all loan programs would be affected by the rule. Some lenders were unclear if some of the government programs like the VA and FHA mortgage loan.
Building on existing truth-in-lending laws, lenders could be sued by the borrower if they do not take the proper steps to check a borrower’s ability to repay. In an important provision for the lending industry, the law provides protections from this type of liability if a loan meets specific standards defining a “qualified mortgage.”
A qualified home loan could not include interest-only payments, a balloon payment and regular payments that could add to the loan principle. The Fed, however, is grappling with how to implement this legal protection. The Fed said the law is “unclear” about how to define a “qualified mortgage” that would get a safe harbor, meaning it would be fully protected from litigation, or whether a borrower could still challenge the loan in court.
In its proposal, the Fed is seeking comment on two possible ways of defining a qualified mortgage. Under the first scenario, lenders would get more legal protection. It would give lenders a legal safe harbor if the “qualified mortgage” does not violate the payment provisions — even if the loan does not comply with the general underwriting standards such as income verification.
As a second possible definition of a “qualified mortgage,” the Fed proposes requiring that such a loan meet the requirements laid out in option one as well as the general underwriting standards. Lenders will likely support the first option presented by the Fed, said Bob Davis, executive vice president for mortgage, markets and public policy at the American Bankers Association. “They generally will prefer certainty,” he said. The Fed is seeking comments on the proposal through July 22nd. The final rule will be implemented by the Consumer Financial Protection Bureau, which opens its doors on July 21st.
06 Apr 11 Looming Government Shutdown Could Have Negative Impact on FHA and the Mortgage Industry
Lenders across the country have been scrambling this week, because the FHA mortgage loans could be placed on hold during the government shutdown. According to FHA commissioner, David H. Stevens, if the government does shut down, HUD will be forced to stop endorsing new FHA mortgages. According to a memo drafted by a housing trade group, “FHA cannot offer endorsements for any new FHA loans in the Single Family program and are not allowed to make further commitments in the Multifamily if the government shutdown happens.” FHA lenders will need to brace for the government shutdown or shift gears with conventional loans backed by Fannie Mae and Freddie Mac.
Wells Fargo & Co. spokesman from the country’s largest home loan lender said that “Wells Fargo would expect to be able to take loan applications and close mortgages provided that a shutdown doesn’t continue for any extended period.” But if the federal government shuts down, we won’t be funding any new FHA loans because these loans would not be insured in a government shutdown. Banks can still originate FHA mortgages, but they won’t be able to close them until the government re-opens the Federal Housing Administration.
According to analysts at Keefe, Bruyette & Woods last year, the “FHA insured almost 40% of all mortgage liens totaling $200 billion. According to the GSE regulator, the government shutdown would not stop Fannie Mae and Freddie Mac from buying and securing home mortgage loans.” According to a statement issued by the Federal Housing Finance Agency, “A government shutdown would not impact the operations of Fannie Mae and Freddie Mac as the GSE’s are not subject to the annual appropriations process.” Read the original article online > FHA and the Effects of the Government Shutdown
31 Mar 11 Federal Mortgage Refinance Programs
Now more than ever, homeowners have access to loan relief with Federal mortgage programs designed to help borrowers refinance regardless of their credit or equity situation. Government mortgage help has never been more available to homeowners than in 2011. Nothing quite compares to the feelings associated with home ownership. Having a place where one can fully relax and realize the experience of being a king or queen is the dream of every individual. Maintaining your own home allows a chance to create a society that is a reflection of personal style. It also presents an opportunity to create a family legacy that can be the cornerstone of a life well lived. Dealing with the threat of foreclosure can provide a sense of discord that disrupts the ability to experience this goal. Government mortgage relief may be the solution to avoiding the risk of losing this opportunity. Utilizing the funds set aside for the federal mortgage program can prevent the loss of a part of the personal identity.
- Home Affordable Modification Program
- Home Affordable Refinance
- Emergency Homeowner Loan
- Obama Mortgage Relief
- FHA Short Refinance
With a large number of people experiencing the effects of the economic crisis on a personal level, the threat of losing their personal sanctuary is a real concern. An unstable job market only adds to the stress level for many individuals. A place of comfort is more essential than ever to unwind and escape the stress of everyday life. Utilizing the services available from the federal mortgage refinance program is an effective way to ensure that the home continues to be a castle. These government refinancing initiatives are available for anyone that wishes to seek out the services and qualifies for the program.
The purpose of the government is to provide opportunities for life, liberty and the pursuit of happiness. Working with the federal mortgage program can be the solution needed so that the investment in a personal household continues to provide these elements. We suggest working with a licensed professional from an experienced FHA mortgage company who has the ability to offer the FHA refinance package to replace your skyrocketing mortgage payment. This will eliminate the need to sacrifice the personal palace because of a series of unfortunate circumstances.
Save Your Home with Government Refinancing or Loan Modification
In order to continue on the quest for personal satisfaction, maintaining ownership of the property that has caused the titleholder to shed much blood, sweat and tears, the federal mortgage refinance program can be a savior. The monies provided by HARP will provide a security mechanism that will eliminate the need to declare anarchy against the system. With the personal kingdom well protected, the members of the homestead can continue their quest to slay dragons and rescue those held prisoner by opposing forces. The effort that went into creating a house out of a home can be continued to remain a personal treasure.
24 Jan 11 Dodd Frank Mortgage Reform
Many brokers and lending companies are nervous about the Dodd-Frank mortgage reform bill. The compensation for loan officer and brokers will change. The cost of loan origination will no doubt rise as a result of the new procedures. Will the cost of mortgage marketing rise as well?
According to the National Mortgage News, the U.S. Department of the Treasury gives notice of the establishment of a Privacy Act System of Records primarily for the benefit of the new Consumer Financial Protection Bureau which will become active July 21. Comments are being sought until Feb. 9. This new system of keeping records will also become effective February 9th, 2011
MASSACHUSETTS RESIDENT CHARGED WITH MORTGAGE FRAUD – FACTS- On January 11th, Rowland Kojo Adjei Sapong, a citizen of Ghana who formerly lived in West Boylston, was charged in for conspiring to commit wire fraud by conspiring with a mortgage broker and various property buyers to defraud numerous mortgage lenders who financed the purchase of homes. The information alleges that, between March 2002 and March 2008, Sapong bought approximately 17 multi-family homes in the Worcester area, and secured financing for most of them by making false statements on loan applications. These false statements usually concerned Sapong’s employment and monthly income, and each application also falsely stated that Sapong was a United States citizen. The Information further alleges that Sapong divided each of the properties into condominium units—over 50 in all—and sold the units, usually to friends and acquaintances, at inflated prices. Working with a local mortgage brokerage business, Sapong allegedly arranged for these buyers to make false statements on their own loan applications to secure the financing necessary to buy Sapong’s condominium units. The Information alleges that Sapong made an average of about 100% profit on each of the homes in a matter of months, and that, after the units had been sold off to buyers, all eventually went into foreclosure. According to the information, the government estimates that Sapong caused losses to mortgage lenders of over $1 million. v If convicted on these charges, Sapong faces up to 20 years’ imprisonment, to be followed by three years of supervised release and a $250,000 fine.
MORAL- I would like you to notice that the federal prosecutors went back to mortgage fraud that occurred in 2002, over nine years ago. This is to reassure you that the federal prosecutors have 10 years to bring a criminal action from the date of the last event that occurred in the transaction. This usually is when the person receives the commission check and cashes it. Cashed any checks lately? Read the entire Dodd Frank Bill Update
Tags: Dodd-Frank mortgage reform bill, mortgage marketing, Privacy Act System of Records
28 Oct 10 California Politicians Accusing Lenders of Mortgage Fraud
California foreclosures and home loan defaults continue to soar. Property values continue to fall even as California mortgage rates have declined to 50-year lows. Meanwhile politicians continue to be surrounded by controversy as Fannie Mae and Freddie Mac mortgage bailout rumors pick up speed. Lenders are tightening refinance guidelines and many banks are extending loan modification programs in an effort to curb foreclosures. Conforming and FHA loan companies have confirmed significant changes in underwriting that raise the credit and income requirements for home refinancing activity.
Mortgage Reform Focus for 2011
- Tougher Credit Standards
- Mortgage Fraud Prevention
- Home Loan Reform Measures
- Increased Mortgage Insurance Premiums
httpv://www.youtube.com/watch?v=a_mi1tH2opA
Rep. Maxine Waters (D-CA) said people were tricked into “liar loans” (also known as stated income loans) that they could not afford. Maxine Waters refused to answer if her husband’s banks offering principal reductions and mortgage relief as she claims many other financial institutions are doing. The California rep. continues to request for loan modification relief locally and a national moratorium on home loans because so many distressed homeowners can no longer afford their mortgage payment. Many Democrats are calling for immediate loan relief as an option for Americans to remain living in their homes. Waters shrugged off the home financing questions and said this interview is not about her husband.
06 Aug 10 Government Mortgage Help with FHA Short Refi Program
HUD announced another round of government mortgage help with their new FHA Short Refinance program. Many homeowners are struggling as their home values have declined dramatically in recent years. In fact many borrowers are actually underwater with their mortgage balance greater than their home value. According to HUD, 11.3 million borrowers were underwater with their home loan and most would welcome the government mortgage help. HUD Secretary Shaun Donovan told a group in a recent speech that California, Arizona, Florida, Michigan and Nevada were the states with the most underwater home loans.
The FHA Loan Blog reported that many lending companies who are approved to originate FHA loan products believe that this mortgage relief initiative will help out a lot of struggling homeowners, but the reality is that most borrowers will be unable to meet the FHA loan requirements.
Tags: FHA short refi, Government Mortgage Help, underwater home loans
28 Jul 10 Is the Financial Reform Bill Flawed?
Much to the surprise of many pundits, the recently signed Financial Reform Bill did not outline guidelines for regulators to begin crafting the future of Fannie Mae, Freddie Mac, and Ginnie Mae. Although this was viewed as an oversight by most, it was the right move because it will allow our political and financial leadership to focus on repairing the mortgage finance system. Remember that the government loan programs Fannie, Freddie, VA and FHA loans maintain nearly 96% of the mortgage market-share yet they are exempt from most of the financial reform repercussions.
Watch Glen Beck Discuss the Pitfalls of Finance Reform Bill on Fox News
httpv://www.youtube.com/watch?v=IeREpKxIYhY
Read the original mortgage news article > Financial Reform Bill Flawed?
Tags: financial reform bill
21 Jul 10 California Mortgage Brokers Get Criminal Checks Yet Banks Are Exempt
One would think after the recent mortgage debacle and housing crisis that the government would really want to implement mortgage loan reform that closed the “loop holes” to significantly reduce the foreclosures and loan defaults that have been costing U.S. tax-payers billions of dollars each year. California mortgage brokers face closer scrutiny as the state adopts a federal law aimed at curbing the fraud and abuse that helped decimate the housing market. According to Bloomberg, mortgage brokers in the nation’s most populous state will be required by July 31th to have passed criminal-background and credit checks, as well as licensing exams. California, along with about a third of U.S. states, previously didn’t require mortgage sellers to have individual licenses.
That’s about to change as all states by January 1st must implement the national rules, which Congress developed after record mortgage defaults and foreclosures were triggered by rampant lending to people who couldn’t afford to repay their loans or never intended to. Brokers will be assigned identification numbers to enable regulators and borrowers to track their lending histories. “When someone buys 100 shares of stock, they must go through a licensed securities broker,” said Senator Dianne Feinstein, a California Democrat and co-sponsor of the law, the Secure and Fair Enforcement for Mortgage Licensing Act of 2008. “Until recently, some purchased their home — a far more valuable asset — through an independent mortgage broker or lender who may have had a criminal background or no license at all. This lack of accountability enabled unscrupulous brokers to commit fraud at the expense of unsuspecting homebuyers.”
Why Are Banks Exempt?
The 2008 law, dubbed the SAFE Act, doesn’t require testing for mortgage brokers at federally regulated mortgage lenders. That may help companies such as BofA Home Loans, Citi Mortgage and Wells Fargo Home Mortgage increase market share because they face fewer training requirements and costs, said William Emerson, chief executive officer of Quicken Loans Inc., a closely held nonbank lender in Livonia, Michigan. “For large, independent, nonbank lenders, this is certainly an operational challenge,” Emerson, whose company originated $25 billion in mortgages in 2009, said in a telephone interview. “It certainly adds costs.” Bank of America and Wells Fargo together accounted for 46 % of the residential-lending market in the first quarter, according to data compiled by Inside Mortgage Finance Publications in Bethesda, Maryland. Of $320 billion in new mortgages in the quarter, about $184 billion, or 57 %, was originated by lenders whose employees are exempt from the licensing exams, according to Inside Mortgage Finance data. “You see mortgage brokers take the test and fail it and wind up working for banks,” Emerson said. “If you can’t pass a test and work for an independent, why are you qualified to work for a bank?” According to according to Pete Marks from the Conference of State Bank Supervisors, about 71 % of people who took the national broker exams passed on the first try, which was assigned responsibility under the SAFE Act to maintain the licensing system and national registry. Mortgage originators must also pass separate tests in each state they do business.
Increased Protections from Bank Lenders
Bank of America, based in Charlotte, North Carolina, conducts background investigations and credit checks of all hires and provides training in legal compliance and regulations, Terry Francisco, a spokesman, said in an e-mail. Wells Fargo takes similar precautions, said Jason Menke, a spokesman for the San Francisco-based bank.
Borrowers were victimized last year by brokers engaged in fraudulent loan-modification plans, home appraisals and applications for the first-time homebuyer tax credits, the Federal Bureau of Investigation said June 17 in its annual report on mortgage fraud. The top states for fraud in 2009 were California, Florida, Illinois, Michigan and Arizona, based on law enforcement and industry data, according to the bureau. In a law-enforcement crackdown on mortgage fraud announced by the FBI on June 17, mortgage brokers accounted for 169 of the 1,215 defendants charged in the operation; 56 of the 485 arrests; and 46 of the 336 convictions to date. “From homebuyers to lenders, mortgage fraud has had a resounding impact on the nation’s economy,” FBI Director Robert Mueller said in a statement.
Mortgage Fraud Repercussions
According to RealtyTrac Inc, mortgage companies will take-over more than one million homes this year, forecast July 15th. Mortgage defaults soared to 10.1 % and foreclosures reached 4.63 % in the first quarter, both records, the Mortgage Bankers Association said May 19. Median existing-home prices have fallen 22 % to $179,600 since the July 2006 peak, the National Association of Realtors said June 22.
The number of U.S. mortgage brokers shrank to 246,900 in May, less than half of the February 2006 high of 504,400, according to the U.S. Bureau of Labor Statistics. The decline was driven by tighter compliance standards, said David Olson, president of Access Mortgage Research & Consulting, a firm in Columbia, Maryland, that works with residential lenders.
The personal identification number will help weed out brokers with histories of writing home loans that quickly go bad, said Ann Fulmer, vice president of Interthinx Inc., an Agoura Hills, California-based company that sells mortgage-fraud detection software. “One of the things we saw over and over during the boom was that a bad actor would work at a shop for several months, frequently ending up as the ‘top producer,’ and then leave for presumably greener pastures,” Fulmer said in an e-mail. “In actuality, they usually left because their bad loans were about to start blowing up and, if they stayed, they’d be discovered.”
Mortgage Modification Implications
The U.S. Department of Housing and Urban Development, which oversees compliance with the SAFE Act, has proposed that employees handling loan modifications for struggling homeowners also meet the licensing requirements, a policy opposed by banks. Mandating licenses for loan modification advisors would slow hiring and stall efforts to reduce foreclosures, said John Courson, CEO of the Mortgage Bankers Association. “We say this is not originating a new loan, it’s reducing the terms of their loan to get them to affordability,” he said in a telephone interview.
The housing department hasn’t set a deadline for a decision, said Lemar Wooley, a spokesman. It costs $3,000 to $6,000 to train and pay the fees for each new employee to comply with the mortgage-licensing system, said Anthony Hsieh, CEO of LoanDepot.com, an online mortgage originator based in Irvine, California. “The law is supposed to make sure we kick the bad ones out,” said Hsieh. “It could be the opposite — keep the good ones out.”
States with the highest fraud and foreclosure rates are among the last to put the national mortgage-licensing system in place. Nevada, which had the highest foreclosure rate in the first half of this year, goes live Oct. 1. Behind the delay was the state’s multilevel approval process, said Elisabeth Daniels, a spokeswoman for Nevada’s Department of Business and Finance. Florida, where a 2008 Miami Herald investigation found state regulators allowed 10,529 people with criminal backgrounds to work in the mortgage industry, also is scheduled to begin issuing licenses Oct. 1. States including Georgia, Illinois, New Jersey, Ohio and Virginia have already adopted the SAFE Act. Article written by John Gittelsohn for Bloomberg
Tags: California mortgage brokers
08 Jul 10 Wells Fargo Announces Nearly 4000 Layoffs in Consumer Finance Unit
Wells Fargo Announced Thursday that it would no longer originate subprime home loans and were closing their finance division that specialized in those higher risked loans. According to Reuters Wells Fargo was poised to close their consumer finance division that was established a hundred years ago. Even though Wells Fargo has a reputation as a prime mortgage lender that had conservative lending guidelines they had been struggling with delinquencies and loan defaults from their own bad credit home mortgages in addition to mortgage portfolios it acquired from Wachovia Corporation when they recently took them over.
Wells Fargo announced they were closing 638 Wells Fargo Financial offices, which increased its number of retail branches to 6,600 after the Wachovia merger. The bank also has 2,200 Wells Fargo Home Mortgage offices and will eliminate about 2,800 employees from its Wells Fargo Financial unit and will most likely slash another 1,000 jobs in the next year.
According to Dave Kvamme, chief executive of Wells Fargo Financial in Des Moines, “The nonprime real estate business had really declined dramatically over the last 12 to 18 months.” He believed that that Wells waited too long to convert their loan officers from originating subprime loans to FHA mortgage loans too late. As the non-prime home loans contributed to the increased loan defaults that put the company in a position of risk they no longer were comfortable with. Kvamme continued, “The bank has switched from offering subprime mortgages to offering FHA home loans guaranteed by the government.”
Tags: bad credit home mortgages subprime home loans, Consumer Finance Unit, Wachovia Corporation, Wells Fargo, Wells Fargo Home Mortgage
01 Jul 10 FHA and VA Get Exemptions in Finance Reform Bill
According to a report from the American Banker, the Federal Housing Administration and the Department of Veterans Affairs were awarded exemptions in the finance reform bill that passed last week. From a loan origination perspective, VA and FHA lenders would be getting an unfair advantage. The reality is that in today’s mortgage market loan companies are offering FHA or VA or both loan products so will this have a dampening effect? This could pose more of a risk of defaults on FHA and VA home loans. So FHA and VA home loans Former MBA chairman David Kittle thinks FHA is getting a pass from Congress in this bill.
How will the Exemptions Effect the Non Government Mortgage Companies?
Under the final mortgage reform bill, federal banking agencies, the Securities and Exchange Commission, and Federal Housing Finance Agency will draft rules establishing underwriting standards and allowable product features for these fully documented loans. Qualified home loans also have to meet a new and tougher “ability to repay” standard in the bill along with a 3% limit on points and fees and a separate 2% limit on bona fide discount points. Regulators have the flexibility to set risk-retention requirements lower than 5% for residential loans that don’t meet the qualified mortgage test.
Balloon, negative amortization, and most interest-only notes will be excluded from the definition but debt-to-income ratios and verification practices must be defined by regulators and could change. The bill, as expected, gives little boost to a revival of the private-label securitization market. “Time and time again we keep hearing that we need the private sector to jump in, yet all the regulations that are being passed are keeping them out of the game, on the bench, on the sidelines,” said Sylvia Alayon, senior vice president of national operations at due diligence firm Capital Markets Assessment Corp. “We do need the private sector because many loans, like jumbo loans, can never be absorbed by the government agencies, and they represent a significant part of the market.”
Still, mortgage insiders were relieved that the mortgage reform bill will not force them to retain risk on all securitizations, regardless of loan characteristics, as in the initial language they had lobbied against. “It’s nice to win one,” said Lewis Ranieri, co-inventor of the mortgage-backed security. Read the original mortgage reform article online. > FHA Loan Program is Exempt from Risk in Mortgage Reform Bill
