Archive for the 'Regulation' Category
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.
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Posted in: FHA • Fannie & Freddie • Regulation | Post a Comment »
October 24th, 2009, 1:00 am by Mathew Padilla
The House Financial Services Committee this week approved an amendment that would sunset a deal on how home appraisers are selected. It remains to be seen if Congress will make it law.
A little background: some folks say home appraisers have been pressured to value properties high enough to ensure sales happen. If an appraisal is so low it kills a deal, is a mortgage broker or bank loan officer going to call the same appraiser next time?
In an attempt to solve that conflict, Fannie Mae and Freddie Mac agreed to subject lenders and brokers to a Home Valuation Code of Conduct. In a nutshell, HVCC says anyone directly involved in and earning commission from a loan should not order an appraisal. Brokers, for example, must now hire an appraisal management company, which then hires an appraiser.
 Miller Rep. Gary Miller, R-Diamond Bar, says on his Web site HVCC: “has increased costs to consumers, significantly hindered a consumer’s ability to obtain legitimate and reliable appraisals, and adversely impacted small business professionals who work in the very neighborhoods where these consumers are looking to purchase homes.”
I have heard from consumers that management companies sometimes hire appraisers from far away who don’t know their area well enough to do a competent appraisal. (Of course, I wonder if such consumers are being realistic about how much their homes are worth today.)
Gov. Governor Arnold Schwarzenegger recently signed a bill that requires appraisal management companies to follow a professional code of conduct. The code, among other things, requires appraisers to be knowledgeable of the geographic areas they cover.
By the way, Miller’s amendment is tied to the Consumer Financial Protection Agency Act.
Update: Miller and the National Federation of Mortgage Professionals are doing a Webinar on the topic on Wednesday, October 28th from 1:30pm - 2:00pm. More info HERE.
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Posted in: Appraisals • Regulation | 7 Comments »
October 19th, 2009, 1:00 am by Mathew Padilla
A group of real estate appraisers say home buyers and owners will be better served now that Governor Arnold Schwarzenegger has signed SB 237 into law. (Read about other bills he signed last week HERE and HERE.)
The bill targets appraisal management companies, which have gained market influence since mortgage giants Fannie Mae and Freddie Mac agreed to change how appraisers are selected. Under the home valuation code of conduct (HVCC), anyone directly involved in and compensated from making a loan should not order an appraisal.
In practice, that means mortgage brokers have to hire appraisal management companies, which then select an appraiser on each deal. Lenders can have someone else on their staff order an appraisal or they can also hire an appraisal management company to do it.
Some homeowners have complained that management companies are hiring appraisers from out of town who don’t know the nuisances of the neighborhoods of the homes they are evaluating. The result: appraisals come in too low to make a refinance possible.
Andrew Kaluzny, an independent appraiser in Fullerton and member of the Southern California Chapter of the Appraisal Institute, said now management companies will have to hire appraisers with competency in the geographic area they are assigned to.
Having knowledge of an area is just one of the rules of the Uniform Standards of Professional Appraisal Practice, which appraisal companies must now follow.
“This is a step in the right direction toward clearing up or cleaning up issues with HVCC,” Kaluzny said.
A statement by the Chicago-based Appraisal Institute said:
Significantly, the new law requires appraisal management companies operating in the state to identify, and provide contact information for, all officers and directors who own 10 percent or more of the company, as well as for all individuals who perform management functions. These individuals must submit to criminal background checks and may not have had their licenses or certifications as appraisers or a real estate agents or brokers refused, denied, canceled or revoked in any state.
As an aside, I wonder if homeowners who complain about out-of-town appraisers not valuing their property high enough are being realistic about what their home is worth today.
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Posted in: Appraisals • Regulation | 14 Comments »
October 17th, 2009, 9:29 pm by Mathew Padilla
The Telegraph reports the United Kingdom’s financial regulator the Financial Services Authority will “launch plans to tighten up regulation and crack down on risky lending as part of reforms that will slow house price growth for a generation.” Here’s a clip from the story:
Among the report’s proposals, the financial regulator is expected to call for an end to self-certification mortgages and rule that responsibility for income verification be transferred from mortgage brokers to lenders. The moves are an effort to crack down on mortgage fraud, which has already cost lenders about £400bn due to borrowers lying about their earnings to secure a home loan.
“It would be a mistake to effectively ban self-certification,” said Ray Boulger, senior technical manager at mortgage broker John Charcol. “There would be real consumer detriment.” He argued that certain self-certification mortgages – for example for those self-employed people who would struggle to obtain a mainstream mortgage but have sufficient earnings – were a perfectly valid part of the market, “providing they are appropriately priced”.
In the U.K., “self-certification” means the same as stated-income here. And sounds like industry folks across the Atlantic also use the self-employed example as justification for stated-income, one of the key enablers of the destructive credit bubble (there’s a reason they got the nickname liar loans). Such a rationale suggests self employed folks who use stated income loans are lying to the IRS but not their lender.
Two excellent posts on why stated-income loans should be banned forever are Just Say No To Stated Income and What’s Really Wrong With Stated Income .
Posted in: Regulation | 23 Comments »
October 15th, 2009, 5:12 pm by Mathew Padilla
 Attorney General Jerry Brown said today he will go after companies that violate the state’s new ban on collecting an advance fee for helping someone avoid foreclosure.
Since the foreclosure crisis began, hundreds of companies and law firms in Orange and neighboring counties have promoted their ability to get homeowners loan modifications.
But consumer advocates say many of those companies are taking money and providing little service. Homes proceed to foreclosure while owners wait for help that doesn’t come.
Governor Arnold Schwarzenegger on Sunday signed several bills meant to curb lending abuses, including SB 94, which prohibits anyone from taking an advance fee for help getting a loan modification.
AG Brown said today in a release, “Over the past two years, unscrupulous attorneys and real estate brokers have abused their trusted roles and exploited desperate homeowners seeking to avoid foreclosure. The loophole that allowed this abusive practice to continue has now been closed, and homeowners should avoid any person charging up-front fees for foreclosure relief services.”
Anyone who violates the ban can be fined up to $10,000 and imprisoned for up to one year. Corporations can be fined up to $50,000.
Kevin Stein, an associate director with consumer group the California Reinvestment Coalition in San Francisco, said the bill should deter some companies but it has a loophole.
The bill says fees can be collected after a company performs the service for which it was contracted. In Stein’s view that language is too weak.
“Contracts can be written to say almost anything,” Stein said.
Stein said he once saw a contract that said the service will have been completed when a borrower gets a modification; willingly surrenders ownership of the house; or is foreclosed upon.
He said another bill the governor did not sign went further, saying a borrower could only be charged if a loan mod was granted.
SB 94, authored by state Senator Ron Calderon (D-Montebello), also says before entering into a fee agreement, the company must provide the borrower the following statement:
It is not necessary to pay a third party to arrange for a loan modification or other form of forbearance from your mortgage lender or servicer. You may call your lender directly to ask for a change in your loan terms. Nonprofit housing counseling agencies also offer these and other forms of borrower assistance free of charge. A list of nonprofit housing counseling agencies approved by the United States Department of Housing and Urban Development (HUD) is available from your local HUD office or by visiting www.hud.gov.
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Posted in: Regulation • loan mods | 4 Comments »
October 14th, 2009, 4:57 pm by Mathew Padilla
Governor Arnold Schwarzenegger on Sunday signed seven bills meant to crack down on lending abuses, and thus better protect consumers. So I am writing now about the bills.
The main bill he signed is AB 260, which targets higher-priced loans, the government’s term for subprime. (Higher-priced loans have interest rates 1.5 percentage points or more above rates on similar prime loans.)
Assemblyman Ted Lieu (D-Torrance) sponsored the bill and has also backed bills aimed at helping homeowners avoid foreclosure.
Here’s more on AB 260 from a release by Lieu’s office:
Specific provisions of this bill include: prohibiting the steering of borrowers into higher-priced loans that are more risky than lower-interest, fixed-rate loans for which the borrower had actually qualified; banning negative amortization loans where the loan gets larger the longer the borrower holds the loan; and putting strict caps on prepayment penalties. This bill also enacts a strong fiduciary standard for all mortgage brokers and banks acting as mortgage brokers, and prohibits lenders and brokers from making false or misleading statements relative to the terms of a subprime loan.
Yet some consumer groups have been lukewarm on AB 260, saying a key provision was gutted from the bill and that it mostly brings the state in line with federal regulations. In an earlier version, a consumer could sue and, if successful, collect money to pay his attorney’s fees, along with any other judgment he might get.
With that part omitted, lawyers will be less likely to take cases, especially since subprime borrowers are more likely to have lower incomes.
That means the burden is all on state regulators and law enforcement to enforce AB 260, consumer groups say.
Here’s a breakdown of the other six bills from Governor Schwarzenegger’s release:
SB 36 by Senator Ron Calderon (D-Montebello) to establish standardized licensing requirements for all individual loan originators who offer or negotiate residential mortgages.
SB 239 by Senator Fran Pavley (D-Santa Monica) to make it a felony to commit fraud in connection with a mortgage application. This bill makes individuals who engage in mortgage fraud guilty of a public offense punishable by imprisonment in the state prison or in a county jail up to one year. The bill also provides law enforcement with the necessary tools to make it easier to obtain a search warrant for real estate records and documents believed to contain evidence of mortgage fraud.
AB 329 by Assemblymember Mike Feuer (D-Los Angeles) to establish the Reverse Mortgage Elder Protection Act of 2009 to provide senior homeowners with greater consumer protections to ensure that they are fully informed about the consequences of entering into a reverse mortgage agreement. Specifically, the bill requires lenders to provide prospective borrowers with a clear and informative written disclosure statement and a written checklist pertaining to the risks and suitability of a reverse mortgage, prior to borrower attending loan counseling.
SB 237 by Senator Ron Calderon (D-Montebello) to create a registration program for appraisal management companies (AMCs) and prohibits any person or entity from acting in the capacity of an AMC without first obtaining a certificate for registration from the Office of Real Estate Appraisers.
AB 957 by Assemblymember Cathleen Galgiani (D-Livingston) to mandate that buyers of foreclosed homes would have the choice of using a local escrow office to handle the transaction. It also prohibits a seller of residential property from requiring the buyer to use an escrow service company or purchase title insurance chosen by the seller and would also prohibit a seller of residential property from, without good cause, disapproving the use of a title or escrow company chosen by the buyer.
AB 1160 by Assemblymember Paul Fong (D-Cupertino) to require mortgage loan documents to be translated into the language the verbal negotiations were conducted. Mortgage documents would be translated into Spanish, Chinese, Tagalong, Korean and Vietnamese languages.
Read the governor’s release HERE.
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Posted in: Regulation | 5 Comments »
October 7th, 2009, 1:00 am by Mathew Padilla
Officials with the County of Orange want to expand a home-buyer tax credit that they had refused to give out when home loans turned wacky during the housing boom.
Now that first-time home buyers are again using fixed-rate loans — which county officials see as viable long-term financing — the county is eager to dole out certificates used to get a federal tax break.
First-time home buyers who meet income and home valuation requirements, can get a credit for up to 15 percent of their mortgage interest. That’s in addition to a nationwide $8,000 first-time buyer credit that expires on December 1, and the regular mortgage interest deduction.
The county distributed hundreds of mortgage credit certificates up until the market shifted to adjustable-rate loans, especially those with low fixed teaser rates, in 2004. Such loans were seen as too risky for first-time buyers, said Laurie Sachar, an administrative manager in the county’s public finance department.
The county has just $300,000 remaining of the $1.5 million allocation it got from the state in July, Sachar said. The $1.5 million allocation translates to certificates based on a calculation that incorporates borrowers’ loan amounts and income-tax credit used.
Sachar said the county is applying to the state for an additional $14 million allocation to be awarded in December.
Amid fixed-rates under 5 percent, the county is reminding current holders of such certificates that they can refinance and keep their tax credit. However, they must apply for it.
So far 20 cities are participating in the program with the county, according to Anita McCarty, a vice president with Orange-based Urban Futures, which distributes the certificates.
Since the program was reactivated her company has issued five new certificates and re-issued six certificates to folks who refinanced, she said.
With 2,000 to 3,000 homes changing hands each month here, the county’s program impacts less than 1 percent of sales.
Home buyers pay $300 to apply for a new certificate and $275 to keep one they have when refinancing. For more information, contact John McCarty at Urban Futures at 714-283-9334.
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Posted in: Bailout Buzz • Regulation | 1 Comment »
October 1st, 2009, 7:37 am by Mathew Padilla
Fed Chairman Ben Bernanke told a congressional panel this morning that a council of U.S. regulators, rather than the Federal Reserve alone, should be charged with monitoring threats to the nation’s financial system.
“All federal financial supervisors and regulators — not just the Federal Reserve — should be directed and empowered to take account of risks to the broader financial system as part of their normal oversight responsibilities,” Bernanke said.
The Wall Street Journal has more:
Mr. Bernanke’s view that systemic risk-monitoring should be a group effort could address some fears that the Obama administration’s sweeping plan to rework the nation’s finance rules would give the Fed too much power.
The Obama administration and the Fed have called on Congress to rework financial regulations to better prevent future crises. While the administration wants Congress to approve a bill this year, key proposals that would boost the Fed’s power to regulate the financial system for threats to financial stability have come under fire.
Some market watchers say the Fed should focus more on monetary policy and leave banking regulation to other agencies.
Yet when the Fed cut interest rates after 9/11 the credit bubble expanded, including some very reckless lending. Under Alan Greenspan, the Fed did not act to stop destructive credit behavior even though its loose-money policies were fueling that behavior.
Perhaps the Fed and the regulators should meet in a council format to discuss systemic risks and the impact monetary policy is having on banks and nonbank financial companies.
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Posted in: Fed • Regulation | Post a Comment »
September 24th, 2009, 7:14 am by Mathew Padilla
The Wall Street Journal reports Congressional Democrats have eliminated or eased some ideas in the Obama administration’s plan to reform financial-market oversight in an effort to broaden support. But changes have been on relatively minor points with the most dramatic elements still under consideration. Here are some examples from the story:
- House Financial Services Committee Chairman Barney Frank (D., Mass.) said the plan would no longer require banks to offer customers “plain vanilla” versions of products such as mortgages and credit cards.
- Frank also said a new Consumer Financial Protection Agency, if created, would not regulate real-estate brokers, accountants, retailers and others that aren’t banks or financial-services companies.
- Obama wants complex financial products (derivatives) to be traded on exchanges or electronic markets. Sen. Jack Reed (D., R.I.) introduced a bill to require banks to process only standard contracts through a central clearinghouse.
Sounds like Democrats will keep trying to establish a consumer protection agency on financial products and to increase regulation on the nation’s largest financial companies instead of limiting their size. But it’s far from clear what role the Federal Reserve will play in terms of regulation or how many regulators should exist.
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September 23rd, 2009, 1:00 am by Mathew Padilla
A banking regulator will cancel exemptions to California’s foreclosure moratorium if lenders fail to comply with plans they submitted to the state to help homeowners, said the law’s author and a spokesman for the agency.
The 90-day moratorium, which was enacted in June, has not stopped foreclosures: lenders have seized 2,362 houses and condos over the past three months in Orange County alone.
But that doesn’t mean the logic behind it isn’t working, said Assemblyman Ted Lieu (D-Torrance), who is chiefly responsible for the law.
I spoke to Lieu for a Sunday story for the Register and wanted to share some of his arguments in a separate blog post.
 Ted Lieu Media folks like myself have written about the law as if the moratorium was the point, Lieu said. But the point was to nudge lenders into establishing or improving their loan-mod programs, he said.
“The moratorium was just a hammer,” Lieu said.
Nearly all sizable companies that have applied for moratorium exemptions got them within a week or two, making the process look easy, I told Lieu. (A few companies did not get exemptions, including tax preparer H&R Block, which owns about $700 million in mortgages, though it sold its Option One servicing operation in 2008.)
He countered that the California Department of Corporations is monitoring the performance of lenders and servicers and will rescind exemptions if companies fail to modify loans according to their plan approved by the department.
In my Sunday story I quoted Paul Leonard, a director with the Center for Responsible Lending, a consumer advocate, as saying the final version of the bill was weaker than his group had hoped. Here’s more from the story:
“I think Mr. Lieu is overly optimistic,” Leonard said.
Leonard doesn’t expect the Department of Corporations to rescind many exemptions, because the bill focuses on process rather than total loan modifications. As long as companies say they are adhering to the plan they presented, they will be left alone.
After the story ran, I spoke with Mark Leyes, a spokesman for the Department of Corporations.
“We maintain the law did give us authority to rescind exemptions and we will be looking at that,” Leyes said.
When asked to elaborate, Leyes said his department lacks the manpower to look over the shoulder of every lender and monitor how they perform loan modifications.
But his department will investigate complaints from consumers or consumer groups regarding lenders not modifying loans.
“We take every complaint seriously,” he said.
Leyes declined to speculate on when his department might rescind moratorium exemptions. He said it will depend on when complaints are received and how long it takes to investigate them.
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Posted in: Defaults & Foreclosures • Regulation | 34 Comments »
September 21st, 2009, 5:53 pm by Mathew Padilla
The Federal Deposit Insurance Corp.’s Inspector General released a report today on the regulator’s handling of failed IndyMac Bank, which specialized in stated-income loans to folks with decent credit scores.
The FDIC noted issues at IndyMac as early as 2002, but did not stop the bank’s risk taking, the report says.
“It was not until August 2007 that the FDIC began to understand the implications that the historic collapse of the credit market and housing slowdown could have on IMB and took additional actions to evaluate IMB’s viability,” the report says.
IndyMac’s failure is expected to cost the FDIC’s insurance fund $10.7 billion.
Critics of regulators have long said their failure to recognize and deal with the housing bubble and related loose lending is a key reason why the entire financial system nearly collapsed.
According to the Inspector General’s report, from 2001 to 2003, the FDIC worked with IndyMac’s main regulator, the Office of Thrift Supervision, and became concerned about IndyMac’s business model and its exposure to a potential housing bubble (they still weren’t sure if a bubble actually existed).
FDIC employees spent 8,096 hours in a “back-up capacity” at Indymac, the report says. Yet the FDIC failed to do much about their concerns, accept give the bank a higher risk ranking than OTS wanted.
In January 2002, examiners noted that “non-recession-tested lending programs such as subprime lending and (high loan-to-value) lending may pose the biggest threat to consumer loan portfolio credit quality in a slowing economy.”
The report says FDIC examiners also noted:
- “consumers’ ever-increasing debt load, the expansion of adjustable rate mortgages, and a potential housing bubble;
- “pricing and modeling charge-off risk with respect to the originate-to-sell model of the mortgage business.”
Despite these risks, the FDIC switched to relying on examinations from the OTS from 2004 to mid 2007, a period in which Indymac “continued to rely heavily on volatile funding sources such as brokered deposits and (Federal Home Loan Bank) advances to fund its growth.”
During that period, FDIC had a turnover problem, with five different case managers handling IndyMac.
As has been previously reported, the Office of Thrift Supervision allowed IndyMac to backdate a capital infusion to the first quarter of 2008, even though it was made in the second quarter. Here’s more from the report (bold added):
Further, although there was a noticeable deterioration in IMB in the fourth quarter of 2007 and into 2008, the FDIC did not suggest that OTS take, or itself take, any enforcement action against IMB. Notably, the FDIC’s analysis and conclusions of IMB’s first quarter 2008 financial data were affected by a capital contribution adjustment that was permitted by OTS. Had the capital contribution not been reflected in the first quarter data:
(1) IMB would have been required to request a waiver from the FDIC to continue to receive brokered deposits and
(2) the value of assets pledged as collateral to secure FHLB advances would have been reduced, thereby limiting the amount of FHLB advances and possibly the cost of IMB’s failure.
The report paints FDIC officials as aware of risks but not doing enough about them. That’s a $10 billion mistake.
So far the only banking regulator the Obama administration has suggested dumping is the OTS. But Senator Christopher Dodd (D-Connecticut) reportedly wants to merge four bank agencies into one super-regulator.
If the super regulator turns out to be the FDIC let’s hope they act quicker next time.
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Posted in: Company Watch • FDIC • IndyMac • Regulation | 4 Comments »
September 20th, 2009, 10:11 am by Mathew Padilla
Senator Christopher Dodd (D-Connecticut) will propose merging four bank agencies into one super-regulator, a more drastic step than suggested by President Barack Obama, reports the New York Times.
Dodd, who heads the Senate Banking Committee, also is at odds with Obama on the Federal Reserve; Dodd wants to diminish the role of the central bank as a systemwide overseer.
The legislation being drafted by Dodd will be the starting point for the Senate’s debate on reshaping oversight of the financial industry. Here’s more from the Times:
For consumers, banks and the markets, Mr. Dodd’s bill is expected to take on the same central role in the debate as Senator Max Baucus’s recent bill is to remaking the health care system.
“We clearly need to put in place an architecture that restores confidence and makes people feel that when they engage in financial activities, from making a bank deposit to buying insurance or investing in stock, that they can have confidence in the system,” Mr. Dodd said in an interview on Friday. “On the other side of this, I don’t want to strangle business.”
Having one regulator for banking will prevent companies from shopping for the easiest regulator. Critics say Countrywide Financial switched to the Office of Thrift Supervision because that agency was the biggest supporter of lenders, giving them room to be as “innovative” as they wanted.
As for the Federal Reserve, critics say its interest rate cuts fueled the housing bubble while the Fed simultaneously neglected to prevent lending abuses. Why expand its oversight powers with such a track record?
What do you think about the plan?
Would we be better off with just one banking regulator?
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Posted in: Polls • Regulation | 8 Comments »
September 15th, 2009, 1:00 am by Mathew Padilla
Assemblyman Ted Lieu (D-Torrance) yesterday said he introduced a bill that, according to a release, “would provide for state-appointed monitors to ensure homeowners have a chance to work out with their lenders a plan to prevent home foreclosure.”
 Ted Lieu Lieu said, “As distressed homeowners continue to be at the mercy of lenders unwilling to modify their loans, it is imperative that we do whatever we can to keep people in their homes.”
I don’t know if the bill, AB 1588, will pass the California Legislature, but Lieu has had some success with related bills since the housing crash began.
He was one of the key sponsors of the 90-day statewide moratorium — most sizable servicers quickly got exemptions by showing they are doing loan mods — and he backed another bill that passed authorizing the Department of Corporations to collect data on servicers, though the Department cannot release data on individual company performance and consumer advocates say that compromise essentially neutered the bill.
Here’s more about AB 1588, which is sponsored by Los Angeles Mayor Antonio Villaraigosa and jointly authored by Lieu, Assembly Speaker Karen Bass and Assemblyman Pedro Nava:
“Any borrower who receives a Notice of Default (NOD) is eligible to participate in a MMW Program administered by the California Housing Finance Authority (CHFA).
The borrower must communicate to the CHFA his or her intention to participate in the plan within 30 days of the NOD.
If a borrower elects to participate, a Monitor is appointed to oversee the loan modification process. The Monitor shall have certain minimum enumerated qualifications.
Once the MMW Program has been initiated, no further steps may be taken to foreclose until the MMW Program has been completed.
The Monitor shall assist the parties in assessing the affordability of any loan modification and analyzing the net present value economic effect on the lender of modification (versus foreclosure).
If the parties are unable to modify the loan bilaterally, the Monitor shall prepare a reasonable loan modification proposal that satisfies the guidelines in the President’s Plan, if such a proposal is feasible.
If the lender rejects the proposal or has acted in bad faith during negotiations as determined by the Monitor, the borrower may seek to enforce the Monitor’s proposed loan modification in an expedited court action.
If the borrower rejects the proposal or has acted in bad faith as determined by the Monitor, the foreclosure process will resume pursuant to existing state law.”
Read the release HERE.
Anyone else got bailout fatigue?
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Posted in: Bailout Buzz • Defaults & Foreclosures • Regulation | 19 Comments »
September 14th, 2009, 2:34 pm by Mathew Padilla
(Update: Eggert quote added.)
President Barack Obama gave a speech today designed to revive momentum for a major overhaul of financial regulation.
He admonished Wall Street players for falling back on pre-crisis behavior, including fat bonuses based on short-term gains.
And he reiterated his ideas for better lending practices. Among other things, he called for the creation of a consumer finance protection agency; a consolidation in bank regulators; and an oversight council to protect the entire system against major risks. (Read more coverage of his speech HERE.)
Doing nothing could mean a repeat of the current foreclosure tsunami. In Orange County, foreclosures began a rapid rise in late 2007 and hit a record 1,441 homes seized in August 2008 — more than double the monthly record (674 in October 1996) during the housing downturn of the ’90s.
Over the past year foreclosures have moderated partly because of state and federal programs designed to help struggling owners keep their homes.
However, monthly totals generally remain above the record level in the ’90s. For example, there were 9,581 foreclosures from August 2008 to July 2009 — 40 percent higher than a similar period from 1996 to 1997.
Here are some reactions to Obama’s speech and a reader poll:
Kurt Eggert, law professor Chapman University
“President Obama called for financial reform, which is clearly needed after an era of failing banks and bailouts. Obama said that the financial industry should learn its lesson and not expect to be bailed out again if it keeps taking excessive risks. But unfortunately, the lesson the financial industry has learned in the last year is that if it fights off meaningful regulation, it can go back to the risk-taking and deal making of old, secure in the knowledge that it can get bailed out again.
Without meaningful reform, we may be in greater systemic risk than we were before August 2007. With the mergers in the financial industry, there are fewer and larger banks who have every reason to consider themselves ‘too big to fail.’ And so it becomes tempting for them to take excessive risks for short-term profits, relying on the federal government for relief if those risks blow up.
What this speech needed was a greater sense of urgency, a sense that we have a small window for reform. If we fail to fix the regulation of the financial industry now, the next meltdown may well be far worse.”
Kevin Stein, associate director of San Francisco-based consumer advocate the California Reinvestment Coalition
“We think the President largely captures and describes the lending and securization practices that fueled the current crisis. Too many lenders made too many risky loans that people didn’t understand and couldn’t afford, in large part because brokers and lenders knew they weren’t responsible for the consequences. They just passed on the risk to unknowing investors.
But we fear that the solutions proposed are not adequate to address either the magnitude of the current problem, or the potential for the problems to recur. The same people are heading the regulatory agencies that failed us and some, like the Federal Reserve, amazingly are in line to get enhanced authority under regulatory reform. Wall Street’s influence is still clear in the Administration and in Washington. Too big to fail and midnight mergers that circumvented any concern for consumers may still be with us. The President talked about working with industry to craft solutions. But the main problem we face is that the very institutions in a position to do such harm have undue influence with policymakers.
What is needed is more of a voice for consumers and communities. We need regulatory reform to prevent banks from being able to choose their regulator, a Consumer Financial Protection Agency that has broad power to protect consumers and promote community reinvestment, an updated and modernized Community Reinvestment Act (HR1479) to require financial institutions to meet the credit needs of all communities, and judicial modification so that loan servicers are compelled to help homeowners avoid foreclosure in a manner that makes sense for all.”
Jeff Altman, partner in loan brokerage WestCal Mortgage Corp. in Orange
Altman said he is concerned government officials are over regulating. He said the creation of a consumer protection agency will limit choices and needlessly complicate getting a home loan.
Government has done enough with the Mortgage Disclosure Improvement Act (MDIA), implemented by the Federal Reserve in May 2009, Altman said. (MDIA requires creditors give good faith estimates of loan costs within three business days after receiving a consumer’s mortgage application and before any fees are collected, other than a fee for obtaining the consumer’s credit history.)
There were some good points in the Obama speech, such as addressing the problem of companies ’shopping’ for the easiest regulator, Altman said. But while it took years for companies to make such big mistakes that they brought about financial havoc, “Why do we have to repair it in days,” Altman said.
Finally, Altman decried a change, already enacted, in how mortgage giant Fannie Mae accepts loans — it now requires lenders’ loan production staff not order appraisals directly, but, instead, appraisals be ordered by someone else at the company or an appraisal management company, which selects an independent appraiser (Corrected: 3:50 p.m.). Mortgage brokers cannot order appraisals directly but can initiate the appraisal process on the lender’s behalf with an appraisal management company approved by the lender.
The rule, known as HVCC, is meant to protect appraisers from lender pressure to inflate home valuations. But it is resulting in appraisers without knowledge of certain areas valuing properties too low and killing deals, Altman said.
So … what do you think?
Will Obama's plans prevent future housing bubbles and resulting foreclosures?
Posted in: Bailout Buzz • Bank failures • Meltdown • Regulation • industry | 26 Comments »
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