A recent article in the online MReport Daily (“Underwriting Standards Ease as Banks Vie for Business”) repeats the same information I’ve been reading on many other financial sites over the past few months: QM and ATR is not spelling gloom and doom for the residential financing industry. According to the report: Continue reading “Residential Underwriting: Are Standards Easing?”
“We supported former Federal Reserve Chairman Paul Volcker’s simple idea: Don’t let federally insured banks gamble in the securities markets. Taxpayers shouldn’t be forced to stand behind Wall Street trading desks. What we can’t support is the “Volcker Rule” that was first distorted in the 2010 Dodd-Frank law and has now been grinded and twisted into 71 pages of text plus 882 more pages of explanation after three years of agency sausage-making.” ~ December 11, 2013 Wall Street Journal Opinion: ‘The Volcker Ambiguity’ Continue reading “The Volcker Rule: How Complexity Kills Good Ideas”
Well, this bit of news should come as no surprise: In anticipation of the January, 2014 implementation of the CFPB’s Qualified Mortgage (“QM”) Rules, Fannie and Freddie’s overseer, the FHFA, has already signaled its intent to purchase only QM loans in the future. Earlier this year, the CFPB, the mega-agency spawned by the unholy alliance of Chris Dodd and Barney Frank issued its QM guidelines, which if not followed, could summon a host of horribles the likes of which Pandora never imagined. For a discussion of these rules, go to my post here.
In a recent article titled “Enterprises Directed to Limit Purchases to QM Loans” the informative online site The M. Report, carried the following story:
“… beginning January 10, 2014, the GSEs [i.e., Fannie and Freddie] will no longer purchase loans subject to CFPB’s “ability to repay” rule if those loans are not fully amortizing, have terms of longer than 30 years, or include points and fees in excess of 3 percent. Effectively, this excludes interest-only loans, loans with 40-year terms, and those with points and fees exceeding the thresholds established by regulations.”
The Take-Away. So for the balance of 2013, the GSEs will continue to follow their current purchasing guidelines. What does this mean for potential borrowers who won’t be able to make the QM grade next year? If I were an enterprising mortgage broker or Realtor®, I’d be beating the drum to my clients and customers that 2013 may be a pretty good year to get a home purchase loan.
And being the unrepentant critic I am about the unintended consequence of Dodd-Frank, the CFPB, under the guise of “protecting consumers”, is gradually pulling up the ladder to home ownership for many deserving folks who still want their slice of the American Dream. ~PCQ
Introduction. After three years of counseling folks in the throes of making a distressed housing decision, I have to honestly ask myself if loan modification today is a prudent, wise, or productive endeavor. Regrettably, in most – though not all – cases, the answer is an emphatic “No.” Of the many consumer advocates, attorneys, and counselors out there, I may be in the minority. But I suspect that of the many consumers who have gone through the modification process, I am in the majority. Continue reading “The Myth of Lender Modification”
Shill – “…a person who helps a person or organization without disclosing that he or she has a close relationship with that person or organization. “Shill” typically refers to someone who purposely gives onlookers the impression that he or she is an enthusiastic independent customer of a seller (or marketer of ideas) that he or she is secretly working for.” Wikipedia
Introduction. The Fall of 2007 seems like a long time ago. While most people do not mark the season with anything other than falling leaves and back-to-school activities, the third quarter of 2007 was a watershed moment. It represented a period of massive investment downgrades by the credit rating agencies, and marks the tipping point for the financial crisis that was to follow.
Until Q3, 2007, the credit ratings companies had been issuing high grade ratings to investments that, we now know, did not deserve them. Without these ratings, investment banks could not have bought and packaged millions of home loans to sell as securities to large investors. Without investment banks buying their loans, lending banks would not have tossed their underwriting standards out the window. Without banks originating millions of bad loans to purchase homes, real estate values would not have ballooned to stratospheric levels. In short, the rating agencies were enablers of the entire securitization process that set in motion the rise and fall of the American real estate industry.
What are the “rating agencies” anyway, and how did they get so much power? How is it that they had the ability to make and break markets, when their entire business model was based upon a huge conflict of interest? And why is anyone giving them any credence today, when they were, together with the big investment banks, the shills in the crowd, giving inflated ratings to junk, so investors would buy them? Lastly, how have they escaped liability for their misdeeds? Or have they? Continue reading “Credit Rating Agencies – The Shills in the Crowd”
Having counseled approximately two hundred Oregon homeowners drowning in negative equity, I have discovered that many, if not most, believe that somehow their lenders can literally swoop down and take not only their home, but all of their bank accounts, savings, retirement funds, and/or daily wages. In truth, the only real power most banks have over a borrower, is the ability to negatively impact their credit, and by extension, their future ability to borrow. On the other hand, one’s credit is a composite of many different data points, not simply a single “black mark” from one distressed property event. To that extent, a credit rating can be strengthened over time, and like a muscle, it builds up through consistent and prudent use over time. In today’s rental marketplace (which is populated by many former homeowners coming out of a distressed property transaction), a credit score impacted by a single distressed housing event has little or no bearing on whether a landlord will rent a home or apartment to them. In an effort to provide some peace of mind, listed below are certain “rights” that all home owners have under Oregon law. These rights cannot be taken away – they can only be voluntarily given away.
The following Bill of Rights assumes the following facts: (a) The home was used and occupied as a principal residence. A “principal residence” or “primary residence” in my vernacular, is the residence you occupy most of the time, and hold out to the city, state and federal governments (e.g. the post office, DMV, utility companies, etc.) as your “home.” A second home is not, by definition, a “primary residence.” (b) There is only one loan on the property and all of the borrowed funds were used to acquire the home. Second trust deeds can sometimes be problematic. If you have a second trust deed as well as a first, all is not lost – it just requires a little more planning, and some smart negotiations with the bank.
Caveat: This summary is not meant to be legal advice, as each person’s factual situation is different. No attorney-client relationship is sought or created by this post.– PCQ
Although there is an abundance of useful information on the Internet, it can become confusing to many. So I thought I’d post some of the most common questions I receive. It is my hope that perhaps those folks who are worried about a possible foreclosure of their home, will read this post and find that the information is generally not all bad. While foreclosure can be unpleasant, and a serious hit to one’s credit score, the actual legal outcome of a completed nonjudicial foreclosure of a primary residence in Oregon is not as bad as some people fear. In short, knowledge can be very enabling. It also makes for a better night’s rest. – PCQ
QUESTION: How do lenders foreclose property in Oregon?
ANSWER: If the property is the borrower’s primary residence, the foreclosure process is almost always done nonjudicially. This is a foreclosure that is initiated by recording on the public record a “Notice of Default” (“NOD”) – rather than the filing a lawsuit in court. Immediately after recording the NOD, the borrower is sent a Notice of Sale which contains much the same information contained in the NOD. It identifies the foreclosing entity, the amount of the arrearages, the foreclosure sale date, and the borrower’s right to “cure” the default by paying the arrearages.
QUESTION: How long does this process take?
ANSWER: The Notice of Sale must precede the scheduled auction date by not less than 120 days. This does not count the time prior to the filing of the NOD, which can involve several months of borrower nonpayment before the NOD gets filed.
QUESTION: How many months of nonpayment normally occur before the bank commences the foreclosure?
ANSWER: There really is no “normal.” Much depends on the lender and their backlog at any point in time. Certain lenders had less problems with their foreclosures than others. There seems to be a direct relationship between the size of the lender and their foreclosure delays. That is, the larger the lender, the larger their backlog, and the longer their delay in filing NODs. I would expect a delay of at least five months, although eight, nine, ten or more months is not unusual. In all cases, borrowers should read their mail from the bank. While most of it contains the standard payment demands, normally, when the lender warns that they will accelerate the indebtedness in the next 30 days, it signals the final stage of letter writing, and one would expect the NOD to be filed soon. Continue reading “Oregon Foreclosure FAQs”
The opinions expressed below are mine alone and do not necessarily reflect the opinions of PMAR, its officers, directors, employees or members. If anyone should feel that any statements of fact are incorrect, you are invited to discuss with me. – PCQ
Oregon’s Trust Deed Foreclosure Law. It is widely known that during the credit/housing boom, lenders frequently sold their loans between one another. When the ownership of a loan is transferred, it is necessary to execute, in recordable form, an “Assignment of Trust Deed.” ORS 86.735(1) governs what must occur before a trust deed may be foreclosed in Oregon; all such assignments must be placed on the public record. This is not a new law and it is not significantly different from the laws of many other states. Oregon’s law has been on the books for decades. Continue reading “Why People Are So Angry At the Lending and Servicing Industries – Part Two”
Her: “Honey, is that you?”
Her: “Another bad day at the Firm?”
Him: “Bad? Hellish!”
Her: “Is that alcohol on your breath? Have you been drinking at Lucifer’s Lounge with the other associates again?”
Him: “Yeh, it’s Friday, and we just go to shoot the breeze. Everyone’s pretty stressed out these days. This job isn’t cracked up to be what I thought it was.”
Her: “What do you mean? I remember how happy you were to be selected to work for the Firm. You said they did legal work for Big Banks. That sounds pretty impressive to me. And they do throw great parties!”
Him: “Well, no one ever told me that I’d be supervising a bunch of secretaries and paralegals, teaching them the fine art of speed signing. And whenever I go to court these days, I’m getting my head handed to me on a platter. I can see how those judges are looking at me…like some sort of demon. First, it was Rinegard-Guirma; then Burgett; then Allman; then Ibanez; then McCoy; and now Agard. Hell, some of these cases the banks are losing have been brought by pro se’ litigants without any attorney. How’d you like to lose a case to someone representing themselves? I’m starting to feel like a violist on the Titanic. I don’t see how the Big Banks are going to survive these decisions. And if they do, their reputation will be in tatters. Everyone is saying MERS is just circling the drain. Pretty soon there will be nothing left of them besides a bunch of electrons wandering around in cyberspace…come to think of it, that’s all they are right now.” Continue reading “A Bad Day At The (Foreclosure) Mill”
As of Friday, October 8, 2010, the nation’s largest lender, Bank of America, halted all foreclosures nation-wide. In a news release by Associated Press, a BofA spokesman said: “Our ongoing assessment shows the basis for our past foreclosure decisions is accurate.” I’m not quite sure what this means. While the “basis” for the foreclosure decisions may have been correct – that is, the borrowers were in default – the processing used to conduct the foreclosures appears seriously flawed. If Machiavelli was right, and the ends do justify the means, then the banks have nothing to worry about; the halt will only be temporary. But I’m betting that the American public, especially those who have received the run around for months from lenders offering loan modifications in name only, have run out of patience. When the dust settles on this debacle, the Little Big Horn will look like a mere skirmish in comparison.
Commercial Real Estate Outlook. For a good economic overview of the latest data on the commercial real estate industry, nationally and locally, the National Association of REALTORS has published its Commercial Real Estate Outlook, May 2010
FHA’s 90-Day Rule. HUD has recently announced that FHA is waving its prohibiting against using its insured mortgage program to purchase properties that were being sold within 90 days following their acquisition. Before the waiver – and subject to certain exceptions – a mortgage was not eligible for FHA insurance if the purchase contract was signed within 90 days of the time the seller had acquired it. The concern was flipping, which didn’t carry the negative connotations it does today. But now, HUD describes its waiver rationale in the Public Register (Friday, May 21, 2010) as follows:
During this period of high foreclosures, FHA seeks to encourage investors that specialize in acquiring and renovating properties to renovate foreclosed and abandoned homes with the objective of increasing the availability of affordable homes for first-time and other purchasers and helping to stabilize real estate prices as well as neighborhoods and communities where foreclosure activity has been high.
And it is not just limited to properties acquired through foreclosure – it includes all properties being resold within the 90-day period after the seller’s prior acquisition.
Personal Bankruptcy Filings Up. Reuters reports that the month of May 2010 marked the second-highest level of personal bankruptcy filings since 2005. To date, the current year’s filings outpaced last year’s by 10%. Through May, 2010 there have been 659,516 bankruptcy – up 5% from a year earlier. California accounts for approximately16% of all filings nationally, followed by Florida at 7% and Michigan at 6%. With its comparatively lower population, Nevada leads the country in filings on a per capita basis.
Little Known Oregon Mortgage Law. While scanning for some piece of information in the mortgage laws the other day, I came upon the following statute that I’d forgotten about years ago – didn’t seem relevant then. It was last amended in 1961. Today, it seems very relevant….
86.040 Improvements on mortgaged lands. No person shall sell, dispose of, remove or damage any building or other improvements upon mortgaged lands. All such improvements are deemed a part of the mortgaged property and are subject to the mortgage lien. When any improvements are removed from the mortgaged premises in violation of this section, the mortgagee[*] may follow and regain possession of such improvements wherever found or may recover the reasonable value thereof from the person removing them. [*PCQ Note: The “mortgagee” is the lender]
86.990 Penalties. Violation of ORS 86.040 is punishable, upon conviction, by a fine not exceeding $500 or imprisonment in the county jail not exceeding six months, or both. [Amended by 1961 c.726 §410]
Fannie Mae Shortens Waiting Period on Short Sales and Deeds-in-Lieu of Foreclosure
In April 2010, Fannie Mae, the giant mortgage purchaser in the secondary market, gave notice that in May it was shortening the required waiting period for borrowers to become eligible for a mortgage loan after undergoing a prior short sale or deed-in-lieu of foreclosure. The waiting period commences on the completion date of that prior event. Depending upon (a) the borrower’s credit, (b) their housing and loan expense ratios (Front End and Closed End LTVs) and (c) the percentage of their loan versus the home value (i.e. the “loan-to-value ratio” or “LTV”) – such as an 80% loan), the waiting period after short sales and deeds-in lieu is now as little as two years. This assumes that – other than the adverse pre-forelcoure event itself – the prospective borrower has little or no other derogatory credit.
Several points in all this: It remains to be seen, but my guess is that over the next few months to a year, this waiting period may continue to shorten, as more and more former owners of distressed housing get back on their feet and want to repurchase another home. They will likely be more prudent buyers, looking for long term value in their homes (no flippers, thank you) and safety in their loan products. If lenders want to lend, they are going to have to find a way to shorten the adverse credit impact of these pre-foreclsure events. Many of the people making up the ranks of distressed homeowners today are those that got caught up in the easy credit boom, and are otherwise good credit risks. For a more detailed explanation, see, FNMA’s Eligibility Matrix.
Niche Marketing – International Clients
For those Realtors thinking of expanding their practice, the National Association of REALTORS (“NAR”) has prepared a state-by-state summary of information on international marketing. NAR reports that U.S. imports and exports of goods and services are each in the $2 trillion range each annually. With trade expansion and cross border immigration, demand for residential and commercial real estate is increasing each year. The Oregon report can be found here. NAR’s reports include statewide data and information on the following topics:
- Population demographics: U.S. born, foreign born, naturalized, and non-U.S. citizen residents
- Main languages spoken in households
- Immigration and naturalization trends
- Non-immigrant visitors to the state
- Foreign direct investment in the U.S. and the specific state
- Value of state exports by type of product
- State exports to specific trading partner countries