August 26, 2008
Filed under: Mortgage Fraud — admin @ 4:40 pm
CNNMoney.com reports: “Mortgage fraud still soaring: A crackdown on underwriting has failed to halt an explosion of fraudulent home loans.”
“With the housing market in turmoil and lending standards tougher than ever, you’d think that the kind of unscrupulous activity that helped plunge the industry into crisis would be a thing of the past.
You’d be wrong. Mortgage fraud is still soaring, according to a new report from the Mortgage Asset Research Institute (MARI), a division of ChoicePoint. (CPS)”
Read the full article here.
Why is fraud still spiking? The article reports that with the current credit crunch and increased restrictions, fewer and fewer homebuyers are able to qualify for loans without a little innovation. One expert quoted in the article claims that, because mortgage brokers are still paid on commission, we shouldn’t be surprised by these numbers, but offers no solution to the current state of affairs.
August 11, 2008
Filed under: Global Economy, U.S. economy — admin @ 4:04 pm
Ruth Lee
So is inflation a natural occurrence as we have all been led to believe? According to Aaron Krowne of ML-Implode, no…
Just where does inflation come from – outer space, perhaps…?
NOBODY LIKES INFLATION, writes Aaron Krowne of ML-Implode, but inflation is a “fact of life” – a natural disaster, like a hurricane or earthquake.
Right?
Wrong. That is the impression policy makers and politicians have worked very hard for almost a century to create. But it is a bold-faced lie, meant to deflect your attention (and anger) away from the real culprit – them.
Read the full article, The Truth About Inflation.
Filed under: Global Economy — admin @ 3:59 pm
Ruth Lee
This article, by James Quinn, Senior Director of Strategic Planning, The Wharton School, University of Pennsylvania, gives and in-depth rude awakening concerning the economy’s future with regards to the banking industry:
“Last week, bank stocks, which had been falling fast, suddenly soared higher based on earnings reports that were horrific, but not catastrophic. Talking heads were calling a bottom in the financial crisis. The bank with the largest increase in share price was Wells Fargo. Their earnings exceeded analyst expectations and the stock went up 22% in one day. Wells Fargo owns $84 billion of home equity loans, with half of those in the two leading foreclosure states, California and Florida. Coincidently, Wells Fargo decided to extend its charge-off policy in the 2nd quarter from 120 days to 180 days in an effort to give troubled borrowers more time to reach a loan workout. Or, did they reduce their write-offs for the 2nd quarter to beat analysts expectations.
“Many people are still living in houses twelve months after making their last mortgage payment. Their banks have not started foreclosure proceedings. Is this due to incompetence by the banks, or is this a way to avoid writing off the loss? The Financial Accounting Standards Board (FASB), the little-known national agency responsible for establishing standards of financial accounting and reporting, has seemingly joined the cover-up by delaying the implementation of new rules that would have made banks stop hiding toxic waste off their balance sheets. New rules would have made banks put these questionable assets on their balance sheet and require a bigger capital cushion.
“Is anyone surprised that bank regulators, the Treasury and Federal Reserve urged a delay in implementation of new FASB rules. They can manipulate the facts because the average American doesn’t understand or care.”
Read the full article: Is the U.S. Economy Safe? What Banks And The Government Are Not Telling Us About 2009—The Next Shoes You Hear Drop May Be Very Loud Ones
August 5, 2008
Filed under: SFDPA — admin @ 10:42 am
Ruth Lee
In the aftermath of the Housing and Economic Recovery Act of 2008 being both passed and signed into law, companies like Nehemiah and Ameridream are not going down without a fight. After ten years of seeking a regulatory or legislative remedy to the risks associated with SFDPA, FHA saw passage of its removal went with barely a whimper – drowned out by the many larger issues, such as bailouts and community reinvestment funds. Less than one week from passage, new legislation is introduced to reinstate SFDPA for consumers. I don’t anticipate that we have heard the last of the debate of SFDPA… but this is a fight for the lobbyists. With the ban going into effect October 1st, 2008, they will have a very short window to remedy the loss of SFDPA without any landmark legislation to tie it to. That will mean convincing Congress to actually accomplish something without a strong political impetus… which is like herding turtles. With the huge distraction of the coming election, it seems doubtful that any meaningful legislation will get passed, much less a “loosening” of FHA regulations.
Scott Syphax, president and CEO of The Nehemiah Corporation of America, one of the largest and oldest players in SFDPA, issued a response to passage and signature of the omnibus bill:
“As he signed the housing bill into law this morning, President Bush conceded with Congress that hard working Americans who have not been able to save a downpayment are not worthy of homeownership. We hope that Congress and President Bush wake up with a clear conscious tomorrow, knowing that millions of Americans will awake to a law that leaves them with zero alternatives for attaining homeownership. Nehemiah has fought to keep seller-funded downpayment assistance (SF-DPA) programs alive, recognizing that along with the rest of the industry, we have helped put more than one million deserving American families in homes. Recent research by Zelman & Associates reports that 10-25% of potential homebuyers will have no way of securing homeownership without SF-DPA, which will also undoubtedly have far-reaching implications for the real estate industry at large. In the wake of the Housing Bill, we at Nehemiah want to send a clear message: Nehemiah will continue to serve as a catalyst for economic empowerment and wealth creation through homeownership. We will continue to fight for the rights of potential homeowners across this country. We are willing to use every resource at our disposal to reinstate seller-funded downpayment assistance by taking the fight back to the current Administration, or taking it to the next Administration if need be.”
Filed under: GSE Bailout, Paulson's Blueprint — admin @ 10:40 am
Ruth Lee
More doom and gloom? Money and Markets ran a comprehensive article last week outlining the future of Washington Mutual, Wachovia and the economy’s general direction:
“Much of our nation’s financial structure is collapsing, and our government’s only response is phony money, bogus bailouts and a litany of false promises.
Ben Bernanke, Henry Paulson, the FDIC and the U.S. Congress say they can do it all.”
Washington Mutual in a Death Spiral?
“Washington Mutual, America’s largest savings and loan, is unfortunately, also one of the nation’s largest subprime lenders. A direct consequence: It appears to be in a death spiral, losing $3.3 billion in the second quarter … admitting to losses of as much as $19 billion this year … and probably on its way to losses of an estimated $26 billion.
That estimated loss is over four times its total market value as of Friday’s close … twelve times its yearly earnings in the best of times. Can it get a new capital infusion to stave off failure?”
Click here to read the full article.
August 1, 2008
Filed under: HOPE for Homeowners — admin @ 2:51 pm
Ruth Lee
What’s a housing relief package without relief for the homeowner? So enter a new FHA program authorizing FHA to insure up to $300B of 30 year fixed rate loans at refinance. The program isolates distressed borrowers and would require lenders to write down qualified mortgages to 85% of the current appraised value and qualified borrowers would get a new FHA 30 year fixed mortgage at 90% of appraised value. Borrowers will have to share 50% of all future appreciation with FHA. The program will not go into effect until October 1st with a loan limit of $550,440 nationwide.
As a quick comment, isn’t it interesting that the federal government will use the Treasury window to bail out large banks with no hand in their future pocket to assist in recouping loss to the taxpayer? However, for the actual taxpayer, it is a different story.
Filed under: FHA — admin @ 2:41 pm
Ruth Lee
Having sought either a regulatory or legislative remedy for concerns surrounding seller funded down payment assistance (SFDPA), Congress has responded. After 10 years of proposed rules, comments and inaction, the omnibus Housing and Economic Recovery Act of 2008 legislates an end to SFDPA programs, such as those provided by Nehemiah and Ameridream.
Unfortunately, the value of this program to originators across the country is reflected in the almost 40% of current FHA-insured production using SFDPA. While the Housing legislation does increase statutory loan limits for FHA insuring, it also increases the mandatory down payment from 3% to 3.5%.
Rather than addressing the risks with enhanced risk-based premiums or closer underwriting scrutiny, the elimination of SFDPA programs will significantly impact buyer access to funding for home purchases. While both a FHA commissioned study and a GAO study offer clear guidance on the empirical data on default risks related to loans with SFDPA, it is unclear that this data is unfavorable solely due to SFDPA and not due to a myriad of contributing factors. Interestingly enough, the revision comes after a profound change in the underwriting standards of FHA, making historical comparison sketchy at best. With new standards requiring minimum FICOs, which was uncommon 12 months ago, the caliber of the new FHA borrower is different… or would have been if they had been able to obtain a loan.
With continued pressure on housing prices and a smaller market of eligible borrowers, the removal of SFDPA can only exacerbate the issue.
