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November 7th, 2009, 1:00 am by Mathew Padilla
The latest foreclosure figures from First American CoreLogic show a growing divergence in what’s happening to problematic mortgages in Orange County.
The ratio of bank-owned houses and condos, known as REO, against all outstanding first mortgages declined for the 13th straight month to just 0.26% in September — the lowest in 26 months. That sounds like a good thing for the housing market and economy.
But the number of bad loans in limbo continues to escalate.
In fact, the proportion of 90-day late loans has increased each month for more than three years (beginning in April 2006) and hit 6.96% in September.
The chart below shows REOs, 90-day lates, and properties with some kind of foreclosure filing. (Note: 90-day lates include the other two categories.)
 - click to enlarge
The chart reflects a number of trends. For one thing, more troubled properties are selling at auctions, known as trustee’s sales, and thus are not going back to the bank as REO.
Sam Khater, senior economist with First American CoreLogic, said in an email:
The reason REOs have declined is that flow of distressed properties into REO has been artificially restricted due to local, state and GSE foreclosure moratoria, loan modifications and servicer backlogs. This has led to a drop in the supply of REO properties, while at the same time sales (including REO sales) increased due to the artificially low rates and first-time homebuyer tax credits, which further depleted the supply of REOs. This dynamic has led to the rapid improvement in home prices over the last six to eight months.
However, the mortgage distress is high and rising as is evident by the 90+ day category, which means the pending supply is building up due to high levels of negative equity and rising unemployment. So we have a situation where at the back end (ie REOs) it appears as if it’s getting better, but it’s really a mirage as we know that the pending supply pipeline default (ie 90+ day DQs) is looming larger.
Yup, at some point, we should see more short sales and foreclosures. Maybe early next year?
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Posted in: Defaults & Foreclosures | 3 Comments »
November 6th, 2009, 1:00 am by Mathew Padilla
 Randy Johnson, president of Independence Mortgage Co. in Newport Beach, author of “How to Save Thousands of Dollars on Your Home Mortgage” and a mortgage broker since 1983, answers questions…
Debra in Irvine asks:
Q. My husband and I are retired (ages 75 and 68). We have a home in the desert and a small condo in Orange County. Due to the cost of supporting two homes (we do not want to sell the O.C. condo; there is no mortgage on it), we are thinking about refinancing our desert home with a five-year interest-only loan at 4.4%. Refinancing would give us an additional $600 each month for the next five years. At that time, we will probably sell our home (and the condo also) since mortgage rates will be much higher and purchase a smaller home in Orange County with the funds from the sales. But what if after five years we decide we are not anxious to sell? We are concerned we might be forced to sell if rates for a new loan are much higher in five years. We are not quite sure if we are making a wise move with this new interest-only loan. We would appreciate your thoughts on this matter.
A. In my discussions with clients, my objective is to help them find a comfortable balance between risk and cost. Getting a five-year interest-only loan, while it has a lower payment than a 30-year fixed rate loan, seems inappropriate because of the higher risk you clearly see. Do you really want to have to refinance when you are 80 and 73?
Some loan officers just don’t listen to the client’s concerns. They are taught to “push” programs the company thinks that customers might want. An interest-only loan appeals to people who focus on getting a lower payment, even if for a shorter period of time. In your case, I think taking a longer term view would leave you risk-free and more comfortable.
Dooski in Anaheim Hills asks
Q. How many times can you do a modification on your home loan? And why are companies like BofA not abiding by Obama’s law of ‘if your mortgage is more than 31% of your income, the lender is supposed to lower it if you qualify,’ which we do and they aren’t modifying?!? How can they get away with that?
A. In my view, the entire industry has been incredibly unresponsive in doing loan modifications. That hurts millions of people and puts the housing recovery in jeopardy. This may be due in part to the fact that your “lender” just may collect payments for the ultimate lender. He may not have any power to modify loans. But it is clear that not enough modifications are being done and those that are being done fall short of real help.
The big lenders talk about the number of people they hire to do loan modifications; they say they are doing them by the tens of thousands. But it is hard to find borrowers who have been helped. Perhaps they look at participation in the government’s modification programs as “optional.”
The Home Affordable Modification Program had the goal of helping 3 million to 4 million homeowners but a review of the program by the government’s General Accounting Office (http://www.gao.gov/new.items/d1016.pdf - see page 92) showed as of September 25 for loans not owned or guaranteed by Fannie Mae or Freddie Mac only 209,000 modifications had been started and only 1,080 borrowers had successfully completed the program. (Editor’s note: Treasury reported that through September all participating lenders and servicers had 487,081 trial and permanent modifications underway, or roughly 16% off all eligible loans 60 days or more past due.)
We would sincerely like to hear stories from anyone who has actually been helped by a modification. Tell us your story. In the meantime, I would keep calling BofA.
That’s it. If you want Johnson to answer a question, email it to Mathew Padilla at mapadilla(at)ocregister.com. Include your name or nickname and the city you live in — that information will be published with your question. Johnson will answer up to three questions each week, so keep checking back for a response.
Read prior questions and answers by clicking on the headlines below…
Find out more about: MORTGAGE ANSWERS | MORTGAGE RATES | FORECLOSURES | HOME PRICES | INVENTORY | RENTS | FED |
Posted in: Mortgage Answers | 20 Comments »
November 5th, 2009, 8:23 am by Mathew Padilla
Federal Housing Administration insured loans have accounted for about 25% of purchase home loans in Orange County over much of this year, after the loan limit was raised to nearly $730,000 in high-cost areas like this county. FHA’s market share has also grown nationwide.
With FHA’s insurance pool covering many more loans and much bigger loans, some critics are worried a taxpayer bailout may be necessary someday soon.
The release of an independent audit by Integrated Financial Engineering (IFE) was supposed to end the speculation. But the Washington Post reported yesterday that FHA abruptly delayed the audit’s release, citing “problems with the accuracy of some of the study’s economic models.”
FHA Commissioner David H. Stevens said the delay was related to economic scenario tests that the agency requested “above and beyond” what was originally to be included in the audit so that the FHA could “better understand a broader range of risk scenarios.”
“Based on these results, we raised questions about the accuracy of IFE’s modeling, and IFE therefore advised us that we should not treat the report as final,” Stevens said. “IFE is now running additional tests to ensure that the final report is accurate.”
Delaying the report right before it was supposed to be released is bad timing. And I wonder what the auditor thought of FHA’s ability to withstand those “risk scenarios” Stevens is talking about.
IFE said it will address the issues and finish the report as soon as possible.
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Posted in: Bailout Buzz • FHA | 15 Comments »
November 4th, 2009, 3:50 pm by Mathew Padilla
The Federal Reserve today left a key short-term interest rate unchanged at near zero percent and said again it will wind down purchases of mortgage securities through March. Here’s how some market watchers reacted to the statement:
Jeff Atlman, partner with WestCal Mortgage Corp. in Tustin
“I think it was the right move on the Fed’s part. With inflation being benign and the economy at a crossroad where we are not sure if it can sustain a long-term recovery, they really have limited options. They will continue to purchase mortgage-backed securities and at some point the economy has to show a lifeline of its own. I personally have always said that Washington must realize that our economy will not turn around until jobs return and the housing market turns around. The brains in Washington D.C. are placing laws into effect that are actually hurting consumers (HVCC law, MDIA law etc.). Extending the homebuyer credit would be a positive, but they need to add an incentive to the people who are responsible homeowners and offer them a fixed tax credit as well, such as $6,000 or $6,500.”
Jack Kyser, founding economist of The Kyser Center for Economic Research, LAEDC
“This decision wasn’t unexpected. Our reading of the local economy is that it has hit bottom, but there isn’t much upward momentum yet. Small-to-medium sized businesses complain that they can’t get bank loans. They are also concerned about potential costs imposed by healthcare reform. So it is still tough out there, and keeping rates low is a good decision.”
Jeff Lazerson, a mortgage broker and founder of Mortgage Grader in Laguna Niguel
“We should consider ourselves lucky if inflation pressures force the Fed to raise rates by 4th quarter of 2010. Banksters are being scrooges when it comes to small business lending as well as commercial and residential property lending. We will be stuck in double digit unemployment for some time. The good news here is that Federal Reserve Chairman Ben Bernanke is learning the game of posturing. He didn’t say anything to upset the markets.”
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Posted in: Bailout Buzz • Fed | 36 Comments »
November 4th, 2009, 9:07 am by Mathew Padilla
The Mortgage Bankers Association today reported on the market last week:
- Its refinance application index increased 14.5 percent from the previous week and the purchase application index decreased 1.8 percent from one week earlier. I wonder if uncertainty about the future of the first-time buyer tax credit contributed to the drop in purchase demand. It appears Congress is moving closer to extending the credit into next year.
- The four-week moving average is down 5.0 percent for purchase index and down 5.7 percent for the refinance index.
- The refinance share of mortgage activity increased to 66.1 percent of total applications from 62.3 percent the previous week. The adjustable-rate mortgage share of activity decreased to 6.1 percent from 6.9 percent of total applications from the previous week.
- The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.97 percent from 5.04 percent, with points decreasing to 1.01 from 1.25 (including the origination fee) for 80 percent loan-to-value loans that can be sold to Fannie Mae or Freddie Mac.
Read more from this blog on:
FORECLOSURES | MORTGAGE ANSWERS | MORTGAGE RATES | POLLS | DISTRESSED SALES | AUCTIONS
Posted in: Loan volume • Mortgage Demand • Mortgage rates | Post a Comment »
November 2nd, 2009, 1:00 am by Mathew Padilla
National Mortgage News reports that Home Mortgage Disclosure Act figures for 2008 show that minorities “were big losers in the market contraction last year.”
And with credit still tight, the outlook for minority access to home loans this year and next looks bleak.
But is that a bad thing?
Subprime lending enabled more minorities to become homeowners during the boom, but many of those folks got mortgages they couldn’t afford. The result: record foreclosures.
Mark Fogarty writes:
Lenders made $342 billion in mortgages to minorities last year, out of a total of some $2.1 trillion. That’s just 17% of the total, down from 20% in 2007 and 22.6% in 2006.
With the U.S. having a minority population of 33% in the 2000 Census, much of the progress made toward serving the underserved market in recent years seems to have unraveled.
The vaporizing of the subprime mortgage market, which targeted minorities (for better or for worse) is a major factor in the downturn. The merger of Countrywide Home Loans, Calabasas, Calif., and Bank of America, Charlotte, N.C., last year may have had some impact as well, as Countrywide lost its spot as top lender to minorities last year after many years of holding the lead position.
…
Lending to Hispanics fell by more than half, from $266 billion to $130 billion. African Americans also registered a sharp drop in mortgages last year, from $170 billion in 2007 to $96 billion, a more than 40% drop in dollar terms. Asian mortgage loans dropped to $95 billion from $145 billion in 2007, or approximately a third.
So what do you think of the data. Here’s a two-part survey:
Are minorities underserved by banks?
Should government expand lending programs directed at minorities?
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Posted in: HMDA • Polls | 79 Comments »
October 31st, 2009, 1:00 am by Mathew Padilla
Some companies that advertise help avoiding foreclosure are trying to avoid a ban on advance fees by charging consumers in steps, according to loan brokers and state regulators.
That’s illegal, said Tom Pool, a spokesman for the California Department of Real Estate (DRE).
The bill, dubbed SB 94, clearly prohibits loan modification companies from collecting any money until all services are performed, Pool said. He said the DRE will investigate any consumer complaints related to companies skirting the advance-fee ban.
“We knew folks were going to be looking for ways around the bill, and we are seeing these creative and clever approaches,” Pool said. “We are not buying it.”
Consumers, however, must pay close attention to the loan-modification contract, Pool said. (A loan mod is when a lender changes the terms of a loan to make it more affordable instead of foreclosing on the borrower.)
For example, it could say that all service is complete once an application for a loan mod has been submitted to a lender, regardless of the outcome, he said. A fee could be collected at that time in compliance with SB 94, he said.
“It begs the question, Who is going to sign up for that?” Pool said. “Who is going to spend $3,000 on a crap-shoot.”
There are alternatives to paying a third-party for loan help.
Homeowners can attempt to negotiate their own loan modification or can seek free help from a nonprofit organization approved by the U.S. Department of Housing and Urban Development.
More on loan mods…
Posted in: Crime • loan mods | 1 Comment »
October 30th, 2009, 1:00 am by Mathew Padilla
Randy Johnson, president of Independence Mortgage Co. in Newport Beach, author of “How to Save Thousands of Dollars on Your Home Mortgage” and a mortgage broker since 1983, answers questions…
Ed in Yorba Linda asks:
Q. We have a 740 FICO credit score, more than ample reserves, no consumer debt, very good income-to-debt ratio, can qualify with full documentation and yet we own too many homes (more than 10) to qualify for a loan. We are not interested in hard money loans of short duration. We are long-term, buy-and-hold real estate investors. We can put a 30% down payment on the right property. Any ideas of where we can go for a non-owner-occupied loan?
A. The rule applies to Fannie Mae and Freddie Mac loans, but the entire rest of the mortgage world keys on what they do so it is not likely that you can find another lender who will swim upstream. Not only that, some lenders are still working off the four-property limit that was established early this year and later rescinded. My point is that you have to ask. Jumbo lenders don’t have that restriction, but it’s even worse. The ones I know about are only doing principal residence loans.
You might think about this strategy. The rule applies only to properties with loans on them. If you have 12 rental properties but only eight have loans on them, you can buy two more. If you have enough equity in one property, you can refinance the loan on it and have enough cash to pay off a loan on another property. That leaves you with an opportunity to buy one more. Once I did a big loan on a client’s home and we paid off loans on a half-dozen rental properties.
Mike in Mission Viejo asks:
Q. We bought a home in June 2008 for $400,000 in Mission Viejo. We put $80,000 down; the mortgage being $320,000 at 6% for 30 years, with monthly payments of $1,917. The balance is now $316,070. Although the lender, Wells Fargo, says in a form letter that we can reduce our payment by $142, when I spoke to their rep last month, he indicated that the costs involved wouldn’t make it practical to refinance at this time. My question is: Can we refinance at a lower rate that would reduce our monthly payment without having to pay up-front costs that negate the savings?
A. The answer is a qualified, “Yes.” It depends first on the value of your home. There has obviously been a further decline in the market since you purchased. That would mean you would have to pay mortgage insurance (PMI) because you would be over 80% loan-to-value. That would make it unattractive to refinance.
However both Fannie Mae and Freddie Mac have special programs that allow you to refinance with over 80% LTV without paying PMI. To see if Fannie Mae owns your loan, go HERE to and the Freddie Mac Web site is HERE.
Assuming you loan is owned by one of them, you can reduce the interest rate by over 1%. (Editor’s Note: Rates may have changed since Johnson answered this question.) That is an attractive opportunity because you would earn back your upfront costs in less than two years. That’s a great deal. Don’t rush in and take a no-point deal. It’s much more attractive to pay a point and buy down the rate even further.
That’s it. If you want Johnson to answer a question, email it to Mathew Padilla at mapadilla(at)ocregister.com. Include your name or nickname and the city you live in — that information will be published with your question. Johnson will answer up to three questions each week, so keep checking back for a response.
Read prior questions and answers by clicking on the headlines below…
Find out more about: MORTGAGE ANSWERS | MORTGAGE RATES | FORECLOSURES | HOME PRICES | INVENTORY | RENTS | FED |
Posted in: Mortgage Answers | 8 Comments »
October 29th, 2009, 7:14 am by Mathew Padilla
The Federal Reserve today is buying the last of the $300 billion in government bonds it pledged to purchase to maintain low interest rates and stimulate housing and the economy.
But will mortgage rates go up as a result? Maybe not on loans that can be sold to Fannie Mae and Freddie Mac, because the Fed will continue buying mortgage securities issued by those government controlled companies until the end of March.
What’s your vote? (Note: There are 100 basis points in one percent.)
Will mortgage rates rise now that Fed is ending Treasury purchases?
Posted in: Fed • Mortgage rates • Polls | 4 Comments »
October 28th, 2009, 4:47 pm by Mathew Padilla
The latest from National Mortgage News (note:Orange County is a high cost area):
House and Senate appropriators have agreed to extend the current loan limits for Fannie Mae, Freddie Mac and Federal Housing Administration loans for another year as part of the continuing funding resolution Congress is expected to pass this week. “The CR [continuing resolution] maintains the limits for FHA, GSE … single-family mortgages at $729,750 through the end of calendar year 2010,” according to a statement issued by the chairmen of the appropriations committees. The maximum $729,750 loan limit is due to expire Dec. 31 and it would drop down to $625,500 if it were not extended. “This could result in major disruptions in the mortgage origination market for larger loan sizes as early as November,” the appropriations chairmen said. Earlier in the week, industry trade groups warned Congress that quick action is needed because it is becoming more difficult for lenders to approve mortgages with balances above $625,500 due to uncertainty about an extension.
So another year of putting taxpayer dollars at greater risk.
Of course, the housing market might collapse if all the government programs were scaled back at once. No chance of that happening, apparently. The Federal Reserve has already said it’s extending its purchases of mortgage-backed securities until the end of March.
And Bloomberg reports Senate Democrats plan to extend and expand the $8,000 first-time home-buyer tax credit, allowing some folks to get it who already own a home. Senators seek to extend the credit, due to expire Nov. 30, to home purchases under contract by April 30, with borrowers allowed another 60 days to close the sale.
As I have said before, the tax credit may boost sales but it is wasteful, since some people get it who would have bought anyway.
Read more from this blog on:
FORECLOSURES | MORTGAGE ANSWERS | MORTGAGE RATES | POLLS | DISTRESSED SALES | AUCTIONS
Posted in: FHA • Fannie & Freddie • Regulation | Post a Comment »
October 28th, 2009, 12:00 pm by Mathew Padilla
ForeclosureRadar.com reports banks seized 429 houses and condos, which became bank-owned or REO properties, in September in Orange County, a 12% decline from August.
Also, buyers grabbed 277 properties at trustee’s sales (the same auctions where properties reverted to banks as REO) — that total was down 2% from August. And trustee’s sale cancellations fell to 672.
The graph below shows fewer properties becoming REO over the past three months, while properties sold to investors have been increasing or flat. Cancellations dipped the past two months after spiking in July. (The chart tracks new REOs, properties sold to investors, and canceled sales from July ‘07 to September ‘09):
 - click to enlarge
One question the chart raises is what will investors do with these foreclosures? I have seen some foreclosures put up quickly for resale, but not all. (Note: the blog Effective Demand earlier did a similar chart — minus cancellations — by running numbers on ForeclosureRadar and not waiting for an official report.)
Now look at a chart (below) with pre-foreclosure filings. Notices of default, which initiate the foreclosure process, totaled 2,309 in September, a slight increase from August. Lenders have filed more than 2,000 NODS every month since December 2008. That suggests foreclosures should be higher — but, of course, government programs and pressure on lenders to do loan workouts have stalled the foreclosure process. I hear there will be more short sales in the future — when a lender agrees to accept less than debt owed on a property — but short sales are complicated and can take months to complete.
The chart below also shows notices of trustee’s sale (a warning a property will be offered at auction) and those have have totaled more than 1,500 a month for the seven months ending in September.
 - click to enlarge
The latter chart suggests there is still a lot of distress in Orange County housing that will hit the for-sale market eventually as short sales or foreclosures as Obama’s loan modification program fails to help as many borrowers as hoped.
What do you think?
Are more foreclosures and short sales coming?
More from this blog…
Posted in: Defaults & Foreclosures • Polls | 34 Comments »
October 28th, 2009, 7:13 am by Mathew Padilla
The Mortgage Bankers Association reported today its indexes of loan application volume dropped last week even as interest rates dipped slightly (though fees increased).
Its refinance index decreased 16.2 percent from the previous week and the purchase index fell 5.2 percent from one week earlier.
The four week moving average for the overall market index is down 3.1 percent.
Here’s a graph of the purchase index (courtesy: Calculated Risk):
 - click to enlarge
And the average contract interest rate for 30-year fixed-rate mortgages decreased to 5.04 percent from 5.07 percent, with points increasing to 1.25 from 1.13 (including the origination fee) for 80 percent loan-to-value ratio loans that can be sold to Fannie Mae or Freddie Mac.
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Posted in: Loan volume | 6 Comments »
October 27th, 2009, 12:42 pm by Mathew Padilla
James Parsa of Costa Mesa-based the Parsa Law Group gave up his right to practice law in California amid a probe into a prior conviction for having sex with a minor, the California State Bar said last week.
Parsa, whose firm promised to help homeowners avoid foreclosure, was suspended on Oct. 16 (corrected: 5:34 pm). It recently became aware that Parsa pleaded guilty in 2001 to a misdemeanor charge of sex with a child under 18.
The former attorney was not immediately reachable for comment. He resigned on Oct. 21, the Bar said.
The Bar said Parsa did provide evidence that he was working on homeowner cases. But he never reported his conviction to the Bar.
Attorneys and others can no longer accept advance fees from homeowners wanting help negotiating a loan modification. The practice was outlawed on Oct. 11 when Gov. Arnorld Schwarzenegger signed SB 94.
The Bar said two other Orange County lawyers have surrendered their right to practice law :
- Ronald Rodis of Rodis Law Group and America’s Law Group in Newport Beach, resigned from the Bar on Oct. 13.
- Jeffrey Nemerofsky, U.S. Advocacy Law Group and U.S. Financial Products, in Laguna Niguel, resigned Oct. 16.
The Bar also placed Christopher Diener of Irvine-based Home Relief Services LLC on inactive status on Oct. 9, “due to the State Bar Court judge’s finding that he poses a substantial threat of harm to his clients and the public.”
Read more about attorneys HERE.
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Posted in: Crime • loan mods | 34 Comments »
October 26th, 2009, 6:18 pm by Mathew Padilla
In Orange County, banks can make loans up to nearly $730,000 and sell them to government-controlled mortgage giants Fannie Mae and Freddie Mac or get the loans insured by the Federal Housing Administration.
But the bigger limits expire on Dec. 31. The Fannie/Freddie limit used to be $417,000 and the FHA limit was lower than that.
The Mortgage Bankers Association, the National Association of Home Builders and the National Association of Realtors sent congressional leaders a letter asking for extensions. Here’s the letter:
The undersigned organizations strongly urge Congress to enact legislation as soon as possible to extend the current higher loan limits for Fannie Mae, Freddie Mac and the Federal Housing Administration (FHA). The higher limits are a key component of the economic recovery efforts because they help make affordable loans available for a broader spectrum of consumers who want to purchase a home or refinance an existing mortgage. Even though the temporary limits do not expire until the end of this year, obtaining financing is already becoming more difficult and expensive for many borrowers. Therefore, we request Congress extend the limits as soon as possible so as not to jeopardize the fragile recovery.
The impending expiration of the higher loan limits is already having an impact on borrowers’ ability to obtain affordable financing in the following ways:
- Some lenders have stopped underwriting certain loans at the current interest rate because lenders are uncertain whether they will be able to sell the loans, and are unable or unwilling to retain them in their own portfolios. The result is that borrowers are being unnecessarily denied financing because of uncertainty about expiring loan limits.
- Consumers cannot lock in current interest rates beyond 60 days for loans over $625,500. As a result, loans that do not close before year-end will need to be re-underwritten and possibly then declined because of the higher interest rate and resulting mortgage payment.
- Routine activities like mortgage pre-approvals or home purchase contracts are being complicated by the loan limit uncertainty, making shopping difficult for would-be homebuyers.
We also note that an immediate extension of the loan limits is necessary in order to provide sufficient time for FHA, the Federal Housing Finance Agency, and the GSEs to conduct market assessments, provide guidance and implement them. For example, the current loan limits, set by the American Recovery and Reinvestment Act of 2009 (ARRA), did not become fully operational until four months after the law was enacted.
We believe these temporary limits have benefited the mortgage industry and consumers during what has been a turbulent period for our nation’s economy. In light of the continuing weakness in the secondary market, we urge Congress to take action so that the GSEs and FHA can be permitted to continue providing capital to support loans to families across America.
The market for jumbo loans, which are above the limits, is pretty dead, or so I hear. Although some lenders are making jumbo loans and holding them on their books.
However, bigger loans mean putting more taxpayer dollars at risk. At some point, these programs must end or at least be scaled back.
Industry groups are also pleading for an extension of the first-time home buyer tax credit that ends in Nov. 30. The tax is wasteful, since some folks who would have bought anyway get the credit.
More from this blog…
Posted in: Bailout Buzz • FHA • Fannie & Freddie | 17 Comments »
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