Posts Tagged ‘mortgage’

Mortgage Insurers Grapple with High Delinquency Rates

October 25, 2011

Paragon Financial Limited, via Market Watch

The Paragon Report Provides Equity Research on PMI Group & Radian Group

NEW YORK, NY, Oct 25, 2011 (MARKETWIRE via COMTEX) — Mortgage Insurers continue to struggle as the aftermath of the recession and economic slowdown weighs on their recovery. Matthew Howlett, an analyst at Macquarie Group Ltd, argues that Mortgage Insurers probably won’t "be able to handle a sustained increase in delinquencies" that would come with another recession. The Paragon Report examines investing opportunities in the Property & Casualty Insurance Industry and provides equity research on PMI Group, Inc. PMI -14.58% and Radian Group, Inc. RDN -3.34% . Access to the full company reports can be found at:

http://www.paragonreport.com/PMI

http://www.paragonreport.com/RDN

Last month a report released by the Office of the Comptroller of the Currency revealed that the number of homeowners behind on their mortgages rose during the second quarter of 2011. Early-stage delinquencies, which count mortgages that are between 30 and 59 days delinquent, increased 0.4 percent in the second quarter, the report said. More serious delinquencies — mortgages that are 60 or more days delinquent — and delinquent mortgages to bankrupt borrowers also increased slightly in the second quarter after falling for the previous five quarters.

The Paragon Report provides investors with an excellent first step in their due diligence by providing daily trading ideas, and consolidating the public information available on them. For more investment research on the Property & Casualty Insurance industry register with us free at http://www.paragonreport.com and get exclusive access to our numerous stock reports and industry newsletters.

High delinquency rates have plagued Mortgage Insurers. PMI Group said on Saturday that the main subsidiary of the company has been seized by Arizona insurance regulators, and will begin paying only 50 percent of claims. Under a court order obtained by Arizona regulators, "the Arizona Department of Insurance now has full possession, management and control of PMI," the company said in a brief statement.

The seizure of Arizona-based PMI Mortgage Insurance Co comes two months after two PMI units were ordered to stop writing new business due to their failure to meet capital requirements.

The Paragon Report has not been compensated by any of the above-mentioned publicly traded companies. Paragon Report is compensated by other third party organizations for advertising services. We act as an independent research portal and are aware that all investment entails inherent risks. Please view the full disclaimer at http://www.paragonreport.com/disclaimer

SOURCE: Paragon Financial Limited

Copyright 2011 Marketwire, Inc., All rights reserved.

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Wholesale is Part of the Solution … and Ready to Grow Again

October 25, 2011

John Walsh, via Mortgage Professional

The mortgage industry has dealt with sweeping changes over the past few years significantly impacting the mortgage broker and wholesale lending. As a result, the wholesale origination model has been largely redefined. Although many brokers and lenders have left the business, the wholesale channel now has a well-defined regulatory framework with higher-quality and better-skilled mortgage professionals to advise borrowers on their most important financial decision. This is why I believe the mortgage broker will thrive in the coming years.

I see a compelling future for wholesale lending, one that plays a vital role and guarantees that borrowers have access to the most competitive rates and an array of responsible program options. In the absence of wholesale, there is no doubt that consumer choice would be significantly reduced, as the mortgage marketplace would be dominated by a handful of large national lenders. The mortgage broker-to-consumer option helps guarantee healthy competition in the marketplace.
Additionally, mortgage brokers provide borrowers with access to a mortgage professional who will act as their partner, trusted advisor and advocate throughout the lending process. Mortgage brokers are knowledgeable about multiple products from various lenders and can help borrowers navigate the myriad of options to find the loan that is best suited to their needs.

Wholesale lending plays a critical role in ensuring that the mortgage industry does not become too heavily reliant on a select few large lenders, so that borrowers will continue to have plenty of mortgage options for any purchase or refinance transaction. In the coming years, mortgage brokers and lenders need to be committed to ethical behavior, responsible lending, ongoing training and the highest levels of customer service. Together, we must continue to improve, practice responsible lending, and advocate for this important channel and solution for borrowers.

 

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U.S. Plan to Expand Mortgage Aid May Boost Spending, Stumpf Says

October 25, 2011

Donal Griffin, via Bloomberg

U.S. regulators’ plan to expand aid to underwater mortgage borrowers may leave consumers with more spending money and boost the economy, said Wells Fargo & Co. (WFC) Chief Executive Officer John Stumpf.

“This could be really helpful,” Stumpf said today at a press club lunch in Atlanta. It may put “more money in people’s pockets. They’ll go out and spend, and get this economy going again.” San Francisco-based Wells Fargo is the nation’s biggest home lender.

Regulators will let qualified borrowers refinance mortgages regardless of how much their houses have dropped in value as the government expands relief efforts for homeowners. The Federal Housing Finance Agency will also enhance the Home Affordable Refinance Program by eliminating or reducing some fees and waiving some risk for lenders, Edward J. DeMarco, the agency’s acting director, said today.

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Strange Houses & Weird Homes

October 20, 2011

A Home Can Be So Much More Than A House

via You Live Where

house507a

This house sure is a doozy, or at least the fall from it is. The archway at the bottom, while sacrificing some stability, is a nice touch. Do you think that the designer of this house likes roofs? As if this house needed to be more top-heavy. My real question is: Where is the electricity coming from to operate that lift? I imagine that it would be a little windy all the way up there. A great little detail that just proves the amazing things people can do with Photoshop these days.

 

 

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Collateral Valuations Need A Green Hue

October 20, 2011

BY BRIAN C. COESTER

REQUIRED READING: Here is the scenario: A homeowner spends $20,000 turning his home from an energy-sucking abode into an efficient, cost-savings oasis. This individual installs solar panels, ultra-efficient appliances, a tank-less water heater, energy-efficient windows and blinds, and paints the roof white. As a result, the property can now reap the rewards of almost no monthly utility bills while helping to improve the environment.
But what happens when the homeowner brings in an appraiser to value all of these new features? Do not be surprised if the appraiser tells the homeowner that the house isn’t worth any more than what it was originally.
This scenario is happening more frequently as homeowners and builders ride the atmospheric green wave to make homes more energy-efficient. There is a big problem here: The mortgage industry has not yet caught up with the green wave. It is going to take the support of both the mortgage and appraisal industries to ensure energy efficiency is valuable to the market and not just to the homeowner.
Admittedly, this is still a relatively new trend. Thus, the cost of building green is relatively high, and to a certain extent, the cost outweighs the short-term benefits. The average cost of installing solar panels on a home is $35,000 – and with an average savings of $1,700 a year, it would take approximately 20 years to recoup the total cost.
Furthermore, due to the lack of comparable sales and unknown actual cost savings by appraisers, it would be relatively difficult to evaluate the home’s energy efficiency. So what needs to be done to green up collateral valuations? There are several considerations that need to be addressed.
First, utility-bill data must be available on multiple listing services (MLS). Appraisers cannot take into account information they do not have. An MLS indicating a home is "green" means nothing to appraisers, thus making it very difficult for them to make adjustments due to unknown information.
In most states, home sellers are required to put 12 months of utility bills in the addendum of the contract. Having this information available for the appraiser on the MLS would enable an apples-to-apples comparison of the subject’s home and comparable. If a home that is "green" has utility bills that total only $1,000 a year versus a typical house that averages $4,000 a year, an appraiser is able to make tangible adjustments and give tangible value to the home.
Next, mortgage-backed securities need to give better pricing to green homes. The U.S. Department of Housing and Urban Development’s (HUD) Energy Efficient Mortgage (EEM) is a step in the right direction, but conventional lenders and the secondary market need to catch on. If lenders are concerned about the qualified residential mortgage requirements and the homeowner’s ability to pay the mortgage on a monthly basis, they should also be concerned with the utility costs.
The principal-and-interest payments on home loans do not change month to month, but utility bills do. Depending on the harshness of the weather, these monthly bills can skyrocket. 
Homeowners will default on their mortgage before they will have their heat or electricity cut off. Having homeowners with lower overall utility costs will make a significant impact on their monthly ability to pay the mortgage. For this reason, homes that are built with green items should get special pricing for being lower-risk. This would give homeowners an incentive to make the green upgrades – not only for a better mortgage product, but also monthly savings and a better environmental footprint.
Go green!
Furthermore, the appraisal industry needs to recognize the benefits of green improvements. The appraisal industry is quick to adapt to what lenders want and require, but it will not make the first move to create the curve. The industry needs to ensure that the market has clearly recognized that there is tangible value in energy-efficient homes before value will be given to them. 
Currently, there are no standards for valuing green homes. This makes it difficult to place a value on the property – after all, what are you comparing it to? Until the appraisers are supported with MLS information on recognized standards for the valuation of green homes and tangible evidence that the mortgage community places weight on green homes, appraisers will not be able to do anything.
Finally, green technology needs to be easily accessible to homeowners. Of course, this is outside of the control of lenders and appraisers, but it needs to be addressed. Energy-efficient technology is still fairly pricey, but over the next two to three years, it is likely that favorable price developments will be witnessed in solar power, solar thermal, geothermal and small wind solutions, as well as energy-efficient household appliances. If the price point is friendlier to the average homeowner’s budget, more homeowners will adopt the green home solution.
None of this will happen overnight, of course, but it is coming down the road. Lenders and appraisers need to recognize that this issue needs to be resolved before tomorrow’s solutions become more commonplace today.
Brian C. Coester is CEO of Coester Appraisal Group, based in Rockville, Md. He can be reached at (888) 485-1999.

(Photo courtesy of USPS)

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FDIC Expects Fewer Bank Losses than Originally Estimated

October 20, 2011

Appraiser News Online

The Federal Deposit Insurance Corporation lowered its projections on estimated bank-failure losses in the coming years, the FDIC announced Oct. 11. Bank failures are now estimated to cost the Deposit Insurance Fund $19 billion through 2015 compared to the estimated $23 billion in losses in 2010 alone.

Acting FDIC Chairman Martin J. Gruenberg said the fund is on track to recover and will meet the goals established by Congress, including a requirement that the fund reserve ratio reach 1.35 percent by Sept. 30, 2020.

The Deposit Insurance Fund’s balance has climbed for six consecutive quarters following seven previous quarterly declines, reaching a balance of $3.9 billion in the second quarter of 2011. That’s an increase of nearly $25 billion from its negative balance of $20.9 billion at the close of 2009.

Responding to the FDIC’s announcement, Jim Chessen, chief economist at the American Bankers Association, noted in American Banker Oct. 16 that the data “reaffirms the fact that the banking industry is rapidly returning to health and the losses once expected were overstated.” Chessen reported that the FDIC had set aside $17.7 billion for bank-failure losses in 2011, twice what is estimated to actually be needed for the year.

The American Bankers Association reported that banks pay $13.5 billion in annual premiums to the FDIC, which is well above the yearly costs the agency expected over the next few years and showed that the fund is rebuilding much faster than anticipated.

 

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The Newest Threat to Home Price

October 18, 2011

Janice Revell, Fortune Magazine

FORTUNE — The rancorous debate about how to address our escalating national debt has dominated the conversation in Washington lately. What isn’t getting much attention inside the Beltway — but should — is a looming event that could have major consequences not only for your home’s value but also for the overall economic recovery. Barring last-minute action by Congress, upscale housing is about to take another punch to the solar plexus — just as it’s struggling to stabilize.

At issue are the limits for so-called conforming mortgage loans that can be bought or guaranteed by Fannie Mae, Freddie Mac, and the Federal Housing Administration. These mortgages have the implied backing of the U.S. government, which lowers their interest rates and down payment requirements. Back in 2008, at the height of the financial crisis, Congress temporarily hiked the conforming loan limit from $417,000 to $729,750 in affluent areas to boost the flailing housing market.

On Oct. 1, those higher limits are slated to drop back down again in expensive markets nationwide — ranging anywhere from $483,000 in counties like Monterey, Calif., to $625,500 in cities like New York and Washington. As a result, about 1.4 million homes will be pushed out of eligibility for lower-rate conforming loans, according to the National Association of Home Builders. Homeowners looking to buy or refinance those properties will instead have to take out "jumbo" mortgages," which require a much larger down payment — generally 20% to 30%, compared with the typical 10% for conforming loans — and carry interest rates that are typically half to three-quarters of a percentage point higher.

The upshot? More downward pressure on prices in high-end markets. The new loan limits will affect approximately 8% of the total U.S. housing market, according to industry estimates, with particularly significant impact across the Northeast and California, as well as parts of Florida and Illinois. (You can find local market specifics at fhfa.gov.) But everyone should take heed: If expensive homes stop selling, then prices for the houses under them will feel the pressure too.

Indeed, while many experts support the idea of weaning the jumbo mortgage market off government financing, they worry about making the move while the housing sector is still trying to clear excess inventory. "Reducing the conforming loan limits will test whether private lenders are willing and able to step up, but doing so this year may be premature," says Mark Zandi, chief economist at Moody’s Analytics. "The cost to the housing market and economy of a misjudgment would be high."

There’s speculation that President Obama will propose a major housing-related stimulus in the coming weeks as part of a broader economic plan. Whether that involves extending the conforming loan limits is anyone’s guess at this point. But stay tuned: You’ll feel the impact of this high-end housing issue either way.

The Newest Threat to Home Price

October 18, 2011

Janice Revell, Fortune Magazine

FORTUNE — The rancorous debate about how to address our escalating national debt has dominated the conversation in Washington lately. What isn’t getting much attention inside the Beltway — but should — is a looming event that could have major consequences not only for your home’s value but also for the overall economic recovery. Barring last-minute action by Congress, upscale housing is about to take another punch to the solar plexus — just as it’s struggling to stabilize.

At issue are the limits for so-called conforming mortgage loans that can be bought or guaranteed by Fannie Mae, Freddie Mac, and the Federal Housing Administration. These mortgages have the implied backing of the U.S. government, which lowers their interest rates and down payment requirements. Back in 2008, at the height of the financial crisis, Congress temporarily hiked the conforming loan limit from $417,000 to $729,750 in affluent areas to boost the flailing housing market.

On Oct. 1, those higher limits are slated to drop back down again in expensive markets nationwide — ranging anywhere from $483,000 in counties like Monterey, Calif., to $625,500 in cities like New York and Washington. As a result, about 1.4 million homes will be pushed out of eligibility for lower-rate conforming loans, according to the National Association of Home Builders. Homeowners looking to buy or refinance those properties will instead have to take out "jumbo" mortgages," which require a much larger down payment — generally 20% to 30%, compared with the typical 10% for conforming loans — and carry interest rates that are typically half to three-quarters of a percentage point higher.

The upshot? More downward pressure on prices in high-end markets. The new loan limits will affect approximately 8% of the total U.S. housing market, according to industry estimates, with particularly significant impact across the Northeast and California, as well as parts of Florida and Illinois. (You can find local market specifics at fhfa.gov.) But everyone should take heed: If expensive homes stop selling, then prices for the houses under them will feel the pressure too.

Indeed, while many experts support the idea of weaning the jumbo mortgage market off government financing, they worry about making the move while the housing sector is still trying to clear excess inventory. "Reducing the conforming loan limits will test whether private lenders are willing and able to step up, but doing so this year may be premature," says Mark Zandi, chief economist at Moody’s Analytics. "The cost to the housing market and economy of a misjudgment would be high."

There’s speculation that President Obama will propose a major housing-related stimulus in the coming weeks as part of a broader economic plan. Whether that involves extending the conforming loan limits is anyone’s guess at this point. But stay tuned: You’ll feel the impact of this high-end housing issue either way.

Persevere, Don’t Abandon Your Dream

October 18, 2011

PJ Wade, Yahoo Real Estate

Are you letting global uncertainty extinguish your real estate dreams without full consideration because money is an issue? Sometimes balancing livable compromises against researched options can help you achieve more than you may have believed possible.

Your future should not be entirely defined by what is affordable. When it comes to where you’ll live and how, concentrating on finances alone may short-change you in the long run.

One long-time reader is living proof that adapting your finances to achieve your dreams is a powerful alternative to designing your life around a lack of money.

When two people close to Tina Lowe (identity protected) died prematurely, Lowe promised herself she would not to spend her life sitting at a desk. She wanted to retire at 60 and start enjoying life.

“Friends and family couldn’t understand how I was doing it, but I did it anyway because that is what I wanted to do,” said Lowe, explaining how she achieved home ownership and early retirement without the million dollars that pundits say is essential to a successful future.

Lowe was almost 50 when her 30-year marriage ended, leaving her financially vulnerable. For a few years, Lowe held down two jobs to make ends meet. Eventually, a move to a small, less expensive apartment on the outskirts of town allowed her to quit the part-time weekend job.

Lowe invested time and effort in learning about money. She took advantage of her employer’s shared-contribution program and a loan from a friend to build up her Registered Retirement Savings Plan (RRSP). She also invested time in learning all she could about pensions, indexing, RRSPs, and, later, Tax-Free Savings Accounts (TFSA). From company seminars to reading anything she could find on the principles of investing, Lowe made sure she fully understood how money made money. By the time Lowe left work at 60, her RRSP fund totaled almost C$50,000.

Economic volatility did not shake Lowe’s determination to leave work on schedule. Meticulous planning and appreciation of the rewards of a simple lifestyle maintained her commitment. Creative back-up plans added security.

When Lowe noticed an advertisement for a condominium that could be carried for about what she was paying in rent, she revived the dream of home ownership that had been abandoned in favour of early retirement. Once again Lowes began researching diligently. She learned how condominiums work and what gave them sustainable value. When she discovered that prices increase with the number of amenities, square footage, and the higher in the building you are, she decided to buy at a smaller unit on a lower floor and in a less “lux” building. Lowe bought the location and neighborhood she loved and saved thousands of dollars. Lowe discovered a south-facing, self-contained fifth-floor, 344-square-foot unit with a balcony. Since the small building was free of fancy amenities, monthly maintenance fees remain affordable. The unit increased in value over her pre-construction purchase even before she moved in.

“It will be tight because it has been since day one, but I’m doing it,” said Lowe emphasizing that not smoking or owning a car stretches her income further. “It is important not to let anyone put you down or discourage you. When I first found this place, I had been to [a] real estate seminar and they got me going. Then I had one family member really put me down. Finally, a friend who is an accountant thought it was a good idea and encouraged me, and I thought, ‘I can do this.’ You must use knowledge to survive. It is very tight—I am not going to kid anyone, but I am still very happy I retired at 60.”

Knowledge is power. Take the time to understand which costs may become a challenge in the future. You may decide a part-time job will supplement investment or pension income. Consider housing like co-operatives where contributing skills and “sweat equity” may make the important affordable difference. Perhaps teaming up with friends or relatives will increase your buying power.

Continuing with income-generating projects will be increasingly commonplace, both out of interest and necessity.

Developers realize that they are creating new communities within the subdivision or high-rise they build. Some perceptive developers create work-live options that will provide services for residents while creating income streams for owners.

Churches, legions and other non-profit organizations have become community-builders in a “bricks and mortar” sense of the word by developing housing for their congregations, members and neighbors. Often this housing is below market value.

Communities involve varying numbers of people, but their strength lies in individual resilience, self-actualization and freedom. Property ownership is one outward symbol of these marks of individuality since no two properties – even condominiums, row houses etc. – are identical.

Over the past 20 years, the national home ownership rate has risen steadily. Although low interest rates, increasing disposable incomes, and stable employment conditions are credited with that improvement, the future still holds potential for growth. The wish for continued control over one’s home and life keeps increasing numbers of Canadians intent on investigating their all their options.

Waiting for great times to return is not a strategy, it’s a tragedy. Put your money to work for you in even the smallest ways. Think before you spend—“What else could I do with that money?—so you keep more of what you earn and continually move dreams closer to reality.

Remember, the impossible may take a little longer, but you can make it happen with perseverance. Today’s Local Market Conditions Report.

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Lawsuit Claims Banks Bilked Veterans During Refinancing Transactions

October 18, 2011

Evan Nemeroff, National Mortgage News

A whistleblower lawsuit filed by two mortgage brokers has been unsealed in Federal District Court in Atlanta claiming that 13 banks and mortgage companies have cheated veterans out of hundreds of millions of dollars.

According to the lawsuit, lenders allegedly hid illegal fees in veterans’ home mortgage refinancing transactions related to the Interest Rate Reduction Refinancing Loans program. This program was created to allow veterans to take advantage of low interest rates and protect them from paying excessive fees and charges in the refinancing transaction.

The lawsuit claims that the lenders repeatedly violated the rules of the IRRRL program by charging veterans unallowable fees and then deliberately concealing this information from the VA to obtain taxpayer-backed guarantees for the loans. The lenders also allegedly falsely certified to the VA, in writing, that they were not charging unallowable fees.

In the lawsuit, the brokers are claiming that the lenders have been fraudulently reporting on HUD-1 statement forms undisclosed attorneys fees and other unallowable fees on the line for the actual cost of title examination and title search. The lawsuit says that lenders are reportedly charging $525 to $1,200 for title examination and title search fees, when the total cost should only amount to $125 to $200.

Lenders are permitted to charge veterans for recording fees and taxes, fees for a credit report and other “reasonable and customary amounts,” according to VA rules, but cannot charge attorneys’ fees or settlement closing fees in refinancing transactions involving VA loans.

“The false statements and fraudulent conduct are blatant,” said Marlan Wilbanks, co-lead counsel in this whistleblower case. “The banks simply reduced the charges for unallowable fees to zero, and then added those fees in the spaces where allowable fees were to be shown. Veterans don’t know what the usual and customary charges for those allowable fees are, and the VA understandably relied upon the banks to comply with VA regulations, rather than digging into every loan transaction. The banks took advantage of that reliance to cheat veterans and taxpayers.”

Since 2001, the VA has guaranteed over 1.1 million IRRRL loans. According to the Office of Inspector General for the Department of Veterans Affairs, the nationwide default rate for IRRRLs is 18% or more, with approximately more than 100,000 loans going into default every year. Nearly half of the VA loans that default result in foreclosure proceedings, costing the VA about $22,000 for each loan and also massive damages for American taxpayers and veterans.

Under the False Claims Act, the lenders would be liable for all damages resulting from those fraudulently induced guarantees of IRRRL loans, as well as penalties of up to $11,000 for each violation of the act.

The defendants in this case include Wells Fargo, Countrywide Home Loans, Bank of America, JPMorgan Chase, Mortgage Investors Corp., PNC Bank, First Tennessee Bank National Association, Irwin Mortgage Corp., SunTrust Mortgage, New Freedom Mortgage Corp., GMAC Mortgage and Citimortgage,

“This is a massive fraud on the American taxpayers and American veterans,” said James Butler Jr., co-lead counsel of the Atlanta law firm Butler, Wooten and Fryhofer. “Knowing they weren’t allowed to charge the fees, the banks and mortgage companies inflated allowable charges to hide these illegal without telling the veterans who were the borrowers or the VA they were doing so.”

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