Archive for June, 2011

Reverse Mortgage Lenders Exiting: Will They Come Back?

June 30, 2011

Zillow Blog

It is no secret that America’s population isn’t getting any younger. In fact, according to a recent Harvard study, the number of people who will be considered “seniors” will increase 35% within the next ten years.

Will these newly-minted seniors be able to take advantage of an FHA reverse mortgage to leverage the equity they have built up in their homes so they can enjoy retirement?

Maybe. Maybe not.

According to at least one HUD official, the FHA insured reverse mortgage is here to stay and has a future as an option for seniors.

But many large lenders who have helped seniors with FHA reverse mortgages in the past, are no longer offering this mortgage product. One large lender who is pulling out even stated in their press release that the FHA reverse mortgage program was designed in a “different economic time” (the reverse mortgage program was originally designed by HUD in 1987).

Reverse Mortgages: What Is Different?

As with the “normal” mortgage market, there have been a substantial number of changes to the FHA reverse mortgage program in the last few years. More recently, at least three of the largest FHA reverse mortgage lenders have decided to discontinue helping seniors get FHA reverse mortgages in part due to reputation risk that a recent HUD opinion may cause.

Why are lenders exiting the reverse mortgage market?

  1. The unpredictability of home values
  2. The difficulty of determining a senior’s abilities to make payments on property taxes and homeowners insurance.

Not many people predicted the dramatic decline in home values – and the new uncertainty of future home values combined with a recent change by HUD in essentially requiring a lender to foreclose on a homeowner with an FHA reverse mortgage should they become delinquent on their property taxes or insurance.

In a recent email after deciding to exit the reverse mortgage business, one Wells Fargo executive articulated the reputation risk lenders hold when property values decline and seniors are having trouble keeping up with even their property taxes and insurance:

“The last straw in our decision was the recent HUD decision to require servicers to initiate foreclosure on the Senior Reverse Mortgage customers [who] could not pay their taxes and insurance,” the email says. “When a product or program creates more reputation risk than value … well … you get the picture.”

Falling property values.  Seniors’ budgets being stretched to the point where they can’t afford to keep up on property taxes and insurance. HUD encouraging foreclosure for homeowners with a FHA insured reverse mortgage if they can’t keep their taxes and insurance current.

It all adds up to lenders exiting the reverse mortgage business.

But probably not forever.

They can always get back in should the environment, trend of property values or HUD guidelines change.

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See Homes That Will Float Your Boat

June 30, 2011

Zillow Blog

Living close to a body of water has its share of real estate perks — water views, waterfront properties, private beaches, and personal boat launches are a few top-of-mind examples. One type of real estate that ultimately takes advantage of water, however, is the floating home.

Perhaps the most popular floating home was the one used in the hit movie, “Sleepless in Seattle,” starring Tom Hanks and Meg Ryan.  Not to be confused with a house boat — which is mobile and can move around — a floating home is permanently attached to a dock, is connected to a sewer system and does not have its own means of propulsion. But, like a house boat, it has incredible water views.

Ranging in size from small (800 sq ft) to large (5,000 sq ft), floating homes aren’t for individuals who are claustrophobic, or easily irritated by disturbances from otters, rowers, and people who poke and nose around in their kayaks. But space isn’t the selling point.

“We’re selling the lifestyle more than anything else because it is so rare and special,” says Rick Miner, a Seattle real estate agent and floating home owner for nearly 16 years.

Miner estimates there are less than 500 floating homes in Seattle and “less than 20 a year go on the market each year.”

Seattle has an abundance of floating homes, as do other locations along the West Coast, such as select areas of California and Oregon.

See Floating Homes for Sale in U.S.:

2369 Fairview Ave E, Slip 6, Seattle, WA 98102 (above)
For Sale: $3,450,000

While mortgages and home insurance differ with these floating homes, price tiers exist just like the standard land-based single-family homes. Depending on the size and location, floating homes range in price from $150,000 to several million. This modern, 3-bedroom, 3.5-bathroom, 3-story home (pictured above) represents the luxury category of floating homes. This “floating penthouse” is priced at $3.45 million and offers 850-sq ft of terraces, a rooftop deck, boat lift and deed parking.

2764 Westlake Ave N, Apt G, Seattle, WA 98109 (above)
For Sale: $825,000

A downside to floating communities is the fact that the homes don’t come with a driveway or garage close to your house. However, shops, grocery stores, and restaurants are usually a short walk away as is the case for this 1-bedroom floating home (pictured above) for sale on Seattle’s Westlake real estate market.

2321 Fairview Ave E, Slip 3, Seattle, WA 98102 (above)
For Sale: $549,000

Another one of the joys of living on the water is the opportunity to take your own boat to waterfront restaurants, an option for the new homeowners of this 2-bedroom home (pictured above), which is located on Lake Union, in the heart of Seattle. Like most floating home communities, this home has close neighbors and close proximity to city destinations.

2394 Mariner Square Dr, B-12, Alameda, CA 94501 (above)
For Sale: $485,000

Some are even close to public transportation, as is noted in the property listing for a floating home on the Alameda real estate market for $485,000 (pictured above). The 1,000-sq ft home is right across from Jack London Square with 2 bedrooms, 1.5 bathrooms, and spacious upper deck.

11666 N Island Cove Ln, Portland, OR 97217 (above)
For Sale: $169,000

Located in Hayden Island near Portland, OR, this 2-bedroom, 1-bathroom home (pictured above) was built in 2007 and features hardwood and radiant-heat floors, surround sound, walk-in closets and a den all for $169,000. In price and structure, this is a rare find on both the Hayden Island real estate and Portland real estate markets.

2023 N Jantzen Ave, Portland, OR 97217 (above)
For Sale: $433,000

This 3,000-sq ft Portland home on Hayden Island (above) has a gas fireplace in the living room, a slip for a 50-foot boat, sweeping river views and an upper master suite that offers 735 sq ft of space, including a sunroom.

17809 NE Marine Dr, Portland, OR 97230
For Sale: $895,000

Who says floating homes are small? The listing description for this humongous, 4,200-sq ft floating home on Portland’s Columbia River claims it is “completely still, no movement” since it is built on a concrete slab that can “hold up 2 million pounds.” Containing 5 bedrooms and 4.5 baths, this floating home also has a 17-foot swim spa off the master deck.

18525 NE Marine Dr, SLIP D2, Portland, OR 97230
For Sale: $599,900

Gorgeous, modern floating home with green features, including Energy Star appliances. Smartly designed with three levels of decks to enjoy the Columbia River. The home features hardwood floors, has 2,436 sq ft, with 4 bedrooms and 3 bathrooms. Home comes with ownership of both sides of the dock and has room (12′x40′) for a boat.

2394 Mariner Square Dr, #b-16, Alameda, CA 94501 (above)
For Sale: $520,000

As previously mentioned, mortgage loans and home insurance for floating homes are different than your standard Fannie Mae-type mortgages. Floating home communities, especially those of a “higher-end” nature — like this home on the Alameda real estate market for $520,000 — “are going to require people to have 20 percent down minimum,” Miner explained.

But, many floating home owners — like Miner — believe the different insurance and mortgage requirements to buy a floating home are worth it.

“Once you have it [a floating home], you may never leave it,” Miner said.

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Dome Homes Dot the Landscape

June 30, 2011

Yahoo! Real Estate

While dome homes may be odd-looking to some people, to a growing set of home buyers, they are now the only way to go.

According to Dennis Johnson of Natural Space Domes in Minnesota, the housing crisis and recent devastating tornadoes have increased awareness and interest in building, or buying dome homes.

“We’ve had domes go through hurricanes,” Johnson said. “The three domes by New Orleans, had no damage around them at all even though the trees were decimated. [A] fourth one had shingles torn off, but no structural damage to the dome.”

Missouri’s Romain Morgan is a believer. In 2004, Morgan’s Halfway, MO, dome home withstood a tornado that swept over her home and left nary a trace of destruction. “I had no damage,” Morgan reported. “Just one piece of trim on a side window was torn off. I had a realtor ask me how much I would take for my house. I said ‘nothing.’ I won’t sell it. The feeling of security is incredible.”

Because dome homes are energy-efficient, easy to build and are able to better withstand hurricanes and tornadoes due to its round, aerodynamic shape, the dome home is becoming more popular — especially in areas that are prone to tornadoes and hurricanes.

The geodesic dome was first made popular by inventor Buckminster Fuller who wanted to revolutionize housing in the 1940s. Lightweight, cost-effective, easy to assemble, and built to withstand even the harshest of weather conditions, domes can be found across the U.S. and a number of companies sell dome kits.

“A bathroom would be a bathroom, and the kitchen would be a kitchen but the dome shell part of it is going to be less cost than a traditional box house,” Johnson said. “The safety factor is a big concern and I think this year a lot of people have been asking questions in regards to tornadoes."

Dome home kits range in cost; the basic frame starts at around $5,000 and the full kit, including siding, ranges more toward $75,000.

Interested in buying a dome home? Here are some for sale in the U.S.:

211 Camino De Lovato, Taos, NM
For Sale: $74,000

A 20-foot diameter dome home in Taos, NM.
Photo: Zillow

This teeny-tiny dome — measuring 20 feet in diameter — sits on a whopping ten acres in Taos, New Mexico. Like many other dome homes, it was built with a kit and an additional kit is also available for sale with the property. Located twenty minutes outside of town, this dome is better suited as a little getaway home rather than a primary residence.

9950 S Warhawk Rd, Conifer, CO
For Sale: $915,000

Interior of dome home in Conifer, CO.
Photo: Zillow

Like the Taos dome, this Conifer home for sale is a monolithic dome. Completely off the grid, this built-green 3-bedroom, 2.5-bath home relies on solar power for utilities. The property includes a little over 38 acres and is surrounded by mountain and forest views.

9157 Hwy 42 S, Coquille, OR
For Sale: $350,000

A three-bedroom dome home in Coquille, OR.
Photo: Zillow

Located on the southern portion of the Oregon Coast, this geodesic dome home sits on over seven acres of land with pasture, nut and fruit trees. The 2,060-square-foot home has 3 bedrooms, 2 bathrooms and includes a private dock and river views. The home is a few minutes from the small town of Bandon, OR as well as nearby parks and beaches.

35 Aprils Way, El Prado, NM
For Sale: $225,000

A two-bedroom dome home in El Prado, NM.
Photo: Zillow

This piece of Taos real estate is a monolithic dome. Like a geodesic dome, monolithic domes are built using kits and can withstand extreme weather. While a geodesic dome is made up of several triangles to craft a dome shape, a monolithic dome is made from a one-piece form — most often concrete. This 2-bed, 2-bath home has 1,017 square feet of living area and sits on nearly one acre of land with views of the surrounding mountains.

29365 Henry White Rd, Albany, LA
For Sale: $265,000

A four-bedroom dome home in Albany, LA.
Photo: Zillow

The only geodesic dome home on the Albany real estate market, this home sits on over two acres and has a wide open floor plan typical of most dome homes with soaring ceilings and large rooms. The 4-bedroom, 2.5 bath home has 3,144 square feet of living space.

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Two Big Banks Exit Reverse-Mortgage Business

June 29, 2011

The New York Times

The nation’s two biggest providers of reverse mortgages are no longer offering the loans, as the economics of the business have come under pressure.

Wells Fargo, the largest provider, said on Thursday that it was leaving the business, following the departure in February of Bank of America [BAC 11.1494 0.3294 (+3.04%) ], the second-largest lender. With the two biggest players gone — together, they accounted for 43 percent of the business, according to Reverse Market Insight — prospective borrowers may find it more difficult to access the mortgages.

Reverse mortgages allow people age 62 and older to tap what may be their biggest asset, their home equity, without having to make any payments. Instead, the bank pays the borrowers, though they continue to be responsible for paying property taxes and homeowner’s insurance.

But the loans have increasingly become a riskier proposition. Banks are not allowed to assess borrowers’ ability to keep up with all their payments, and more borrowers do not have the wherewithal to stay current on their homeowners’ insurance and property taxes, both of which have risen in many parts of the country. At the same time, borrowers have been taking the maximum amount of money available, often using it to pay off any remaining money owed on the home. Yet home prices continue to slide.

“We are on new ground here,” said Franklin Codel, head of national consumer lending at Wells Fargo [WFC 27.80 0.31 (+1.13%) ]. “With house prices falling, you reach a crossover point where they owe more than the house is worth and it creates risk for us as mortgage servicers and for HUD.” He was referring to the Department of Housing and Urban Development, whose Federal Housing Administration arm insures the vast majority of these loans through its Home Equity Conversion Mortgage program.

As a result, banks are seeing a rise in what are known as technical defaults, when homeowners fall behind on their taxes or homeowner’s insurance, both of which are required to avoid foreclosure. According to Reverse Market Insight, about 4 to 5 percent of active reverse mortgages, or 25,000 to 30,000 borrowers, are in default on at least one of those items.

Bank of America, meanwhile, said that declining home values made fewer people eligible for reverse mortgages. So it decided to redeploy at least half of those working on the mortgages to its loan modification division, which has been criticized for failing to help enough homeowners on the brink of foreclosure.

For Wells Fargo, however, the inability to assess borrowers’ financial health was the biggest factor for exiting the business. Anyone over the age of 62 with enough home equity can take out a reverse mortgage, regardless of their other income. The amount of money received is determined by the borrower’s age, the amount of equity in the home and prevailing interest rates.

“We are not allowed, as an originator, to decline anyone,” added Mr. Codel of Wells Fargo. We “worked closely with HUD to find an alternative solution and we were unable to find one with them, which led to this outcome.”

Reverse mortgage borrowers are required to pay premiums for mortgage insurance, which protects the lender if the homes are ultimately sold for less than the mortgage value, since the government is required to pay the difference to the lender. The premium rates were increased last October to account for declining home values (though one sizable upfront mortgage premium was eliminated to make the loans more attractive to certain borrowers).

But lenders are responsible for making tax and insurance payments on behalf of delinquent borrowers until they submit an insurance claim to HUD, at which point the agency would be responsible since it provided the insurance against default.

In January, HUD sent a letter to lenders and reverse mortgage counselors that provided guidance on how to report delinquent loans to the agency, and what steps the lenders could take to get borrowers back on track, like establishing a realistic repayment plan that could be completed in two years or less, or getting a HUD-approved mortgage counselor involved to help come up with a solution. If one cannot be reached, the lenders must begin foreclosure proceedings.

Both Wells Fargo and Bank of America have said they have not foreclosed on any borrowers to date.

The National Reverse Mortgage Lenders Association, the industry group, said it has been working with HUD to come up with procedures that would allow lenders to assess a prospective borrower’s income and expenses, or at least require homeowners to set aside money to pay for taxes and insurance. A spokeswoman for HUD said the guidance is still being drafted.

As it stands now, borrowers are required to see a HUD-approved lender before they can apply for a reverse mortgage. As part of that process, consumers are educated on the nuts and bolts of how the loans work and what their responsibilities are, including that they need to be able to continue to pay taxes, insurance and keep the property in good repair.

“We don’t tell consumers what decision to make, but we do try to give them the tools to make a decision,” said Sue Hunt, director of reverse mortgage counseling at CredAbility, a nonprofit consumer credit counseling agency. She added that their sessions last about an hour and 15 minutes, on average. The counselors also look at the consumer’s budget to see if it is sustainable with the mortgage, as well as what circumstances might arise that could throw the borrower off track.

“Outside factors are affecting people who thought five or six years ago that they were in pretty good shape,” she added. “The world has changed a bit around them.”

In days past, the borrower would get the reverse mortgage, and equity would continue to build, experts said, which would provide borrowers with more options — like refinancing — should they fall on hard times. Declining home values have changed that calculus for both bankers and consumers. Borrowers have not been able to pull out as much money. At the same time, the government has also tightened its withdrawal limits.

There were a total of more than 50,000 reverse mortgages, totaling $12.66 billion, made industry wide since last October, according to HUD.

Both Wells Fargo and Bank of America will continue to service their existing reverse mortgages. And the reverse mortgage association has said it will work with its members to ensure that senior citizens who need the loans can get them, though some experts said that less competition could increase certain fees.

“There is a certain amount of the business done by Wells and Bank of America that happens because of their bank branches, brand names and large sales forces,” said John K. Lunde, president of Reverse Market Insight. “We would expect something more than half of their volume to be absorbed by the rest of the industry, with something less than half not happening.”

Wells Fargo, which said that reverse mortgages represented 2.2 percent of its retail mortgage business, employs about 1,000 reverse mortgage workers. They are being given a chance to find other positions at the bank. Bank of America said that about half of its 600 workers have been reassigned within the bank. MetLife, the third-largest provider of reverse mortgages, declined to comment on its business.

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The Anatomy of An Appraisal Fee

June 29, 2011

Appraisal Buzz

As the song goes, “…Should I stay or Should I Go?” Many appraisers are thinking about leaving the profession and many have already moved on. How much time does it take to complete a residential appraisal, what are the costs to produce an appraisal and what is an appraiser’s net take-home pay after all those costs? Attached is a spreadsheet that can be used as a tool by residential appraisers to evaluate the Anatomy of an Appraisal, the performance of their business and their net take home pay.

Typically, an appraiser would compare their net take-home pay with the gross salary they could receive in an alternative salaried position (appraisal or non-appraisal) when determining whether to leave their appraisal business. As a result, the spreadsheet provided is a pre-tax estimate of the appraiser’s net take-home pay. Some appraisers could opt to hire a staff appraiser to author appraisals for their business and when doing so, would be required to pay that appraiser an acceptable wage which we estimate as a national average gross wage of $40,000. The fees, salaries and expenses in your local area may vary but the model can be adjusted to reflect your actual expenses, revenues and salaries. Our use of an average $40,000 gross salary is for illustration purposes only and immaterial since we add then deduct the salary with business profits or losses to arrive at net take-home pay. Thus, increasing or decreasing of the $40,000 salary we used has no effect on the net take home pay. Some appraisers for example, despite seeing a decline in fees and revenues continue to pay themselves the same salary so they can keep paying their bills. However, this requires increased capital contributions to their business from savings, draw down their IRA or 401K or increased debt. If fees ultimately fail to recover, then appraisers with unsustainable gross salaries would be required to reduce their salaries and the model can help appraisers evaluate their production costs.

We calculate the average appraisal takes about 12.5 hours to produce, factoring in both actual production time plus the appraiser’s non-productive overhead time. Our model also estimates that a typical USA residential fee appraiser produces a mix of fee work with some at Customary & Reasonable Rates and some AMC fee work well below Customary and Reasonable rates resulting in average annual gross revenues of $70,000, representing a gross hourly rate of $23.40. Sounds great right?

However, after accounting for all expenses and cost of producing the appraisal, we calculate the typical residential appraiser has a net take-home pay of just over $29,000, which after accounting for a typical 60 hour appraiser work week represents effective net take home pay of about $9.70 per hour.

Wow. A few weeks ago I offered a comment on the Buzz (in jest) that I was thinking about a full-time 40 hour job at McDonalds or Wal Mart – but I wouldn’t know what to do with the raise or the extra time off. Although it was joke at the time, having now calculated all the operational costs, I find the joke was on me and other appraisers because those alternative jobs would in fact appear to be a raise.

Hold on, it gets worse.

If the appraiser decided to do exclusively AMC work in my market, taking into account the notably lower AMC fees in my area, the appraiser’s annual gross revenues would decline to $45,000 and after accounting for all expenses, their net take home pay would be negative $3.82 per hour! That’s right, after accounting for business losses, an appraiser who relies exclusively on AMC work would have a negative net take home pay. That means there are likely appraisers out there who are funding their business losses and trying to survive by drawing down IRA, 401k, selling off assets, making capital contributions, going further into debt and taking other drastic steps to survive. Taking into account those business losses, a typical AMC dependent appraiser is in fact suffering an annual economic loss and would certainly seek alternative employment.

Appraisers have commonly shared with me two primary reasons for the decision to close their business or leave the profession: 1) Economic considerations and 2) Battle wary and tired of fighting after 17 years of “war”. The war they refer to is the constant battle since 1994 federal policy allowed and required (for the first time since the Great Depression) that Independent and Objective Appraised Value reports be required to compete with advocated values of Broker Price Opinions. Appraisers are also fighting a second War of fees with AMC’s who commonly take 40% to 60% of the overall appraisal fee, reducing fees paid by many (but not all) AMC’s to appraisers well below “Customary & Reasonable” Levels. The third War has always existed (but worsened considerably in 1994 and since) which involves the constant War by clients, borrowers, agent and others constantly wanting to negotiate the appraised value.

Is it any surprise that the huge increase in volume of advocated BPO valuations along with the huge increase in market share of AMC’s since 1994 resulted in a bubble (over valuation of assets) – and an environment where appraisers were forced to compete on the basis of their willingness to hit advocated values and forced to compete with unregulated, agent advocated BPO products? Its been estimated that since 1994, the market share of BPOs in lending transactions has increased from near zero to an approximate 60% market share today compared with a 40% market share for appraisals.

Appraisers are losing the war and as a result, fleeing the profession. An appraisal of the appraisal profession and economic review of the numbers suggests it may be time to get out.

Comments About the Model:

Why include a salary? Most businesses that run a P&L include a market supported salary. Increasing or decreasing the salary for your local market is easy and has no effect on the net take-home pay, as increasing your salary will reduce your net profits while reducing your salary will increase your net profits.

Why such an expensive SUV? That model had lower operating costs and higher re-sale value. Thus, if you use a lower priced car, the maintenance costs may rise and your resale value may decline having the effect of increasing rather than decreasing your annual fully loaded auto costs.

Why loan expense? Above the SUV cost, we needed to account for the car loan interest expense.

Don’t AMC’s have the effect of reducing marketing costs and/or allowing appraisers to produce higher volumes of reports? Maybe. However, in light of the huge difference in fees in my market between AMCs vs Customary and Reasonable, it would be economically advantageous for an appraiser to seek non-AMC work at higher fees and thus they still incur marketing expenses. Also, certainly some appraisers can attain higher rates of production but my experience managing large volumes of appraisers is that these represent valid, sustainable production numbers while maintaining high levels of quality. My sense is that AMCs spend a considerable amount of increased cost and time asking for and chasing down corrections because of their reliance on the lowest fee provider. Conversely, my experience in awarding hundreds of million in appraisal fees that higher fees when coupled with higher quality appraisers, leads to lower overall operating costs and lower loan losses.

My Health Care Costs are higher and I don’t belong to an appraisal organization? Also, the fees are different in my market. Great, adjust the model accordingly to reflect your actual revenues and expenses and find out how much you really are earning on an effective net take-home basis.

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Big four top contenders to replace Fannie, Freddie

June 28, 2011


As the government-sponsored enterprises slowly wind down their massive domination of the mortgage finance markets, the most likely parties to fill the capital hole left behind are the big four banks.

However, how well or how much the big four can cover remain up for discussion.

On Tuesday, speakers tossed ideas back and forth at a panel titled: "Housing Finance Reform Proposals." They gathered in Washington at the annual meeting of the American Securitization Forum, a trade group representing secondary market players.

One speaker wryly referred to the unofficial title of the panel as "life without the GSEs." The future may be murky, and the present is unlikely to change in the near-term, one panelist said.

The evolution of the mortgage finance markets away from government support will become clearer as financial reform under Dodd-Frank begins to take hold. Until then, according to Alfred Pollard, general counsel Federal Housing Finance Agency, the government will continue support Fannie Mae, Freddie Mac and the dozen Federal Home Loan Banks.

"If the enterprises are in conservatorship we are supposed to conserve their assets," Pollard said. "We made a decision that Fannie and Freddie, and home loan banks should stick to their core businesses."

Moderator Christopher DiAngelo, partner at Katten Muchin Rosenman, said Bank of America (BAC: 10.78-0.65%), Citigroup(C: 39.91 -0.20%), JPMorgan Chase(JPM: 39.45 -1.08%) and Wells Fargo(WFC: 27.40-0.18%) hold 70% of the private mortgage origination market. Therefore, they seem the likely option to take market share from the GSEs.

Others financing options, such as developing a covered bond market or a greater presence of private investor bases, such as from real estate investment trusts, are only going to handle a small portion of the financing, the panel said.

"A covered bond market does not solve a lot of problems," said Nancy Mueller Handal of MetLife Investments, a $45 billion investor in mortgage-backed securities, 80% of which are GSE bonds.

"There is not the investor base to fill the gap that people think. We would have very little room for covered bonds," she added.

Furthermore, investors want a stronger foundation for investments in private-label MBS. Those investors will want vertical risk retention, adequate access to representations and warranties and a third-party arbitrator assigned to deals.

"The pipes are not in place yet," Handal added.

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Upside Down Houses

June 27, 2011


This Upside Down House is build by Daniel Czapiewski, Polish businessman in tiny Polish village of Szymbark. Usually, his company builds homes in 3 weeks but this one took 114 days because the workers were confused with structural design. Its an artistic statement about current state of the world. Apart from this the builders lavished attention on every last detail & after the construction of the house they decorated & fitted it out to the highest specifications.

Upside Down House of  Daniel Czapiewski (8) 1


Upside Down House of  Daniel Czapiewski (8)  2


Upside Down House of  Daniel Czapiewski (8)  3

Upside Down House of  Daniel Czapiewski (8) 4

Upside Down House of  Daniel Czapiewski (8)  5

Upside Down House of  Daniel Czapiewski (8)  6

Upside Down House of  Daniel Czapiewski (8)  7

Upside Down House of  Daniel Czapiewski (8)  8

Norman Johnson’s Upside-Down House

Norman Johnson's Upside-Down House.

It’s Norman Johnson’s Upside-Down House, a way to drive traffic to Sunrise Golf Village. This is one way to get people to walk through your model home. That’s a real car upside-down in the carport, real standard size furniture was fixed from the "floor" inside.

Japanese Upside-Down House

Japanese Upside-Down House

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Banks stand to benefit from higher interest rates: S&P

June 27, 2011


Investors may fret rising interest rates when the government tightens its monetary policies, but Standard & Poor’s said higher rates should help the nation’s banks.

"Financial institutions are exposed to interest-rate risk because of mismatches in the maturity structure and re-pricing terms of their assets and liabilities," S&P said.

"Despite marketplace concerns, we believe interest-rate risk is unlikely to be a problem for most of the U.S. financial institutions we rate, including commercial banks, asset managers and money markets," S&P credit analyst Rodrigo Quintanilla said. He also said the added benefits of increasing rates depends on the speed of the recovery and the strength of the overall economy.

The Federal Open Market Committee voted last week to keep the federal funds rate near zero, citing an economic recovery that is slower than officials expected due to a sagging housing market. While long-term inflation estimates remain stable, the FOMC said the economy is experiencing some inflation tied to higher commodities and import prices.

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The Post-Foreclosure Wait

June 27, 2011

New York Times

Mortgage troubles won’t necessarily shut you out of the housing market forever.

As the economy and real estate market continue to struggle, millions of Americans have lost their homes through foreclosure, short sale (when a property is sold for less than is owed) or a deed in lieu of foreclosure (when the bank takes ownership without foreclosure).

Even if you think you never want to own a home again, clean credit is important. Bad credit can make it more expensive to rent. In some fields, especially financial services, it can make it difficult to find or keep a job.

How quickly your credit score improves depends in part on how the problem is reported, said Sarah Davies, a senior vice president of VantageScore in Stamford, Conn., a credit-scoring company that competes with FICO, the dominant scoring system.

In a short sale where the balance is forgiven and no deficiency is recorded in public records, recovery can be quick. “Simply paying all your debts on time could bring your score up to a reasonable range in nine months,” Ms. Davies said. “Reasonable” may not qualify you for a mortgage, but it will help in other situations.

A foreclosure or bankruptcy can weigh you down for years. FICO has found that it takes three years for a borrower to pull a score back up to a fair-to-middling 680 after a foreclosure, according to Joanne Gaskin, a company director. A borrower who started out with a near-perfect 780 score would take about seven years to climb all the way back.

But if someone has gone through foreclosure and still has a mountain of debt and not enough income, bankruptcy is worth considering, said Tracy Becker, the founder of North Shore Advisory, a credit-restoration company based in Tarrytown, N.Y. Sure, it will be another hard blow to your credit rating — but your credit most likely is already “wrecked,” at least for now, she said.

Bankruptcy can wipe out some debt. “The choices you make for the future about your financial options should be based on how bad your credit is,” Ms. Becker said. With one 30-day-late payment, for instance, “don’t assume your credit is ruined forever,” she said. It’s easier to recover from that than it would be to pull back from a string of late payments.

And what about a future mortgage? Fannie Mae, Freddie Mac and the Federal Housing Administration set guidelines for how long a borrower must wait after a “significant derogatory event.”

There are plenty of asterisks and conditions. But to generalize, the wait is longest after a foreclosure. Extenuating circumstances like a job loss, illness or divorce reduce the wait.

With such circumstances, Fannie and Freddie specify a two-year wait after a short sale, deed in lieu, or discharge or dismissal of bankruptcy, and three years after foreclosure. Without extenuating circumstances, waits can extend to four years after bankruptcy and seven years after foreclosure.

“The key is to avoid the foreclosure,” said Andrew Wilson, a spokesman for Fannie Mae. “That is what will help you be eligible for the shorter period.”

As for F.H.A.-insured loans, they are available three years after a foreclosure, assuming perfect credit afterward, and two years after a bankruptcy is discharged. After a short sale, there’s a three-year wait if the borrower is in default at the time of the sale and there are no extenuating circumstances. If the borrower was on time with all payments for 12 months before the sale, there is no wait specified, meaning that an F.H.A. loan might be available immediately. Among the conditions: A loan isn’t available if the short sale was to “take advantage of declining market conditions,” according to the F.H.A. Home Loan Handbook for lenders.

One caveat: All of this assumes you have income to pay off debts and stay afloat. It’s likely to be a long time before the mortgage market returns to an anyone-can-borrow-anything way of thinking.

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Freddie Mac settles with TBW to clean up mortgage mess

June 27, 2011


Freddie Mac settled with bankrupt mortgage lender Taylor, Bean & Whitaker but will see only a fraction of what it sought, according to a Securities and Exchange Commission filing this week.

TBW, once the 12th largest mortgage lender in the U.S., originated, serviced and sold pools of mortgages to Freddie Mac. It relied on financing vehicles from Colonial Bank and Ocala Funding.

But in 2002, then TBW Chairman Lee Farkas organized a scheme to defraud investors, regulators and Freddie by covering up holes in its financing for the loans.

To do this, Farkas and a group of six other co-conspirators at Colonial and Ocala sold phantom mortgages that were either packed into other securities, already foreclosed on or didn’t exist. TBW, Colonial and Ocala all eventually closed in 2009. Farkas faces a possible life sentence after being convicted in April.

According to the SEC filing, the proposed settlement amounts to roughly $1 billion but would only pay out $45 million to Freddie.

"This estimate is based on the plan of liquidation and disclosure statement filed with the court by TBW, which indicates that general unsecured creditors are likely to receive a distribution of 3.3 to 4.4 cents on the dollar," according to the filing.

Freddie did say it would be entitled to roughly $203 million on deposit in certain TBW bank accounts relating to its mortgages. It already received $150 million of it from the Federal Deposit Insurance Corp. as part of the Colonial Bank failure.

As part of the settlement, Freddie will also be able to sell TBW mortgage servicing rights, subject to a $185 million minimum net sales price. Some of the proceeds will go to other parties with interests in the MSRs.

But the settlement also requires Freddie to pay $61 million to TBW creditors to satisfy their "potential claims" against the government-sponsored enterprise.

Freddie estimates its uncompensated loss exposure to TBW to be roughly $690 million, and the ultimate losses could exceed this amount. Most of the exposure stems from outstanding repurchase claims, which Freddie already adjusted for in its financial statements.

"If the settlement is approved by the court, we will recognize the difference between amounts we would pay to TBW and other creditors and the liability recorded on our balance sheet as a gain," Freddie said.

Freddie expects this gain to come in at less than $250 million.

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