Foreclosure deal: Closer, but not there yet

States have until the close of the business day to agree to the latest draft deal aimed at relieving homeowners struggling with mortgages bigger than their home’s value.

HUD Headquarters presented a 202 NOFA Broadcast on April 7 to discuss the changes and requirements contained in the FY2010 Section 202 NOFA

It is strongly suggested you make every attempt to view this recorded broadcast as there are many changes contained in the FY 2010 NOFA. In addition, the Denver Multifamily HUB will be offering a workshop on April 29th from 9:00am to 1:00pm to discuss the changes and answer any questions you may have. Please RSVP by close of business on April 25th if you plan to attend. If you have any questions, please email elaine.m.chavez@hud.gov or phone (303) 672-5427.

The State of the Mortgage Industry According to MBA

The Mortgage Bankers Association (MBA) provided its annual
assessment of The State of the Mortgage Industry in a press conference Wednesday
afternoon.  Michael Young, MBA Chairman
said that the states that have been hardest hit by the housing crisis are and
will continue to deal with the aftermath but there are signs that in much of
the nation 2012 will bring a recovering market.

One bright spot, Young said, is that the turmoil in the
single family market has actually helped the multi-family sector; the rental
market has tightened and more lenders have moved into the sector, especially
life insurance companies.  In the
residential market, he said, the one topic that is discussed everywhere is the
lack of financing and what can be done about it.

David H. Stevens, MBA President and CEO said that lack of
financing
can be traced to a single factor, market uncertainty.  Part of it is uncertainty about international
markets and how they might ultimately impact the domestic situation but there
is also a tremendous amount of uncertainty about regulation.  Dodd-Frank, he said, has 300 regulations that
have yet to be fully promulgated and the new Consumer Financial Protection
Bureau (CFPB) and other regulators all have or are considering regulations
about how loans can be provided and serviced. 
There is uncertainty surrounding repurchases as well and while MBA
believes lenders should be held accountable for their mistakes, they should not
be held accountable for the loans performance if it failed solely due to
changing economic circumstances.  For
that reason MBA supports a time limit on the repurchase obligation.

Addressing three areas in particular, he said, would
decrease a lot of the insecurity.  New
regulations regarding Qualified Mortgages (QM) and Qualified Residential
Mortgages (QRM) are eminent and QM will in effect, define what loans get
made.  Mortgages which do not meet QM as
laid out by CRPB will simply not get made because lenders will feel there is
too much liability involved.   MBA supports certain parts of the QM such as
the requirement for full documentation but other parts such as the point and
fee cap lack flexibility and will disproportionately affect the pricing of small
loans.  

Most of all, he said, the proposed regulations are too general.  There needs to be specificity in the
underwriting standards such as in the definition of what constitutions “ability
to repay.”  Without a bright line in the
regulations that enable a safe harbor for lenders, he said, any lending is
going to be restricted on the margins and any loans that fall into the gap
between QM and QRM will see significant price adjustments to reflect the
liability.

While MBA also supports risk retention and much of the
intent of the QRM such as eliminating no-docs and interest only and other
exotic loans, regulators are going beyond the intent of Congress by adding debt
to income and loan-to-value ratios.  The
requirement for a 20 percent down payment will create a dual class system under
QRM, with lower income borrowers, unable to amass the down payment; forced into
FHA loans while there will be a private market for upper income borrowers.  Stevens said MBA will be “very aggressive” in
making sure these changes to QRM are pulled back.

Another area of uncertainty is the 50-state settlement with
servicers
.  Borrowers don’t care about
their servicers until they get into trouble with their mortgages but then the
multiple state and federal laws that govern servicing cause stress for the
borrowers and for servicers and investors as well.  The settlement may provide a framework for
national standards which would remove some of the uncertainty in this area.  In the same vein, Stevens said that President
Obama’s new fraud task force must be careful to avoid redundancy with other
investigations and carefully measure how it impacts borrowers or it could
create trepidation among lenders and further reluctance to lend.  

The present structure of the mortgage market with 90 percent
of lending having some government involvement through the GSEs or FHA is simply
unsustainable, Stevens said.  The private
sector must be brought back into the market and the major players in the
industry are close to agreement on what the future of the secondary market
should look like.  This is very close to
a model proposed by MBA some years ago which would have the following
characteristics:

  • Transactions would be funded with private
    capital from a broad range of sources.
  • The federal government should have a role in
    promoting stability and liquidity in the core mortgage market. This role should be in the form of an
    explicit credit guarantee on a class of mortgage-backed securities and the
    guarantee would be paid for by risk-based fees.
  • Taxpayers and the system itself should be
    protected through limits on the mortgage products covered, the types of
    activities undertaken, strong risk-based capital requirement, and actuarially
    fair payments into a federal insurance fund.

In answer to a reporter’s question about the chances of
President Obama’s streamlined refinancing program being approved, Stevens said
it would be an uphill climb.  FHA is
legislatively limited to loans with a maximum LTV of 97.5 percent so to go as
high as 140 percent which Steven’s said he expected the legislation to attempt
will require full approval of Congress.

Jay Brinkmann, Senior Vice President and Chief Economists said
he expects jobs to be created at about a 150,000 per month pace in 2012 but
this will be uneven by location and dependent on an individual’s education.  The length of unemployment hit a record high
in November and persons with a high school education or less are remaining
unemployed longer than those with a college degree.

According to Brinkmann, mortgage originations will drop from
$1.26 trillion in 2011 to $992 billion in 2012 with most of the loss coming in
refinancing.  The purchase market will be
largely unchanged or will rise slightly. 
This does not, however, reflect any changes that might be made in the
HARP program or any unforeseen outside events.

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GSE Reform: The Future is Ours to Shape

We are coming to the close of a watershed year in the financial services field. The most far reaching financial legislation since the era of reform under Franklin D. Roosevelt passed; the Dodd-Frank Financial Reform Act and creation of the Consumer Finance Protection Bureau. Every sector of the federal government dealing with the financial services industry will be affected by this far reaching legislation. In addition the Bank for International Settlements (BIS) released its regulations implementing Basel III. These domestic and international acts will, after full implementation, provide the stage for the complete overhaul of the financial services industry not only in America but the World over the next ten years. Still to be decided is the future of the GSE's, Fannie and Freddie. How…(read more)

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Case-Shiller Reports Continued Erosion in Home Prices

Home prices continued to fall in November according to the
S&P/Case-Shiller Home Price Indices released this morning.  Both the 10-City and the 20-City Indices were
down 1.3 percent in November compared to the previous month and for the second
month in a row19 of the cities also saw their prices inch lower.   Phoenix was the only one of the 20 to post a
gain in November.

The year-over-year price declines in November widened from those in October.  The 10-City and 20-City Composites were down
3.6 percent and 3.7 percent respectively from November 2010 to November 2011
compared to the -3.2 percent and -3.4 percent annual rate of change in
October.  Thirteen of the cities in the
larger index also saw a large drop in annual prices than they had in October. 

Atlanta had the worst performance with its annual return down 11.8 percent.  Atlanta’s prices fell 2.5 percent in November
following a 5.0 percent decline in October, 5.9 percent drop in September and
2.4 percent loss in August.  As was the
case in October, only two cities, Detroit and Washington, DC saw an improved
annual rate, but in both cases that annual increase was lower than their
October number.

David Blizer, Chairman of the Index Committee at S&P Indices said,
“Despite continued low interest rates and better real GDP growth in the fourth
quarter, home prices continue to fall. 
Annual rates were little better as 18 cities and both Composites were
negative.  Nationally, home prices are
lower than a year ago.  The trend is down
and there are few, if any signs in the numbers that a turning point is close at
hand.”

The 10-City Composite is now about 1.0 percent above its crisis low reached
in April 2009 and the 20-City is 0.6 percent above the low it reached in March
2011.  Both Composites are close to 33
percent off of their 2006 peak levels. 
As of November average home prices across the U.S. are back to mid-2003
levels.

“It’s not telling us much we don’t know. A lot of people fell into the trap of looking at the upturn in housing starts at the end of the year and mistaking that for a turnaround in the housing market. That’s absolutely premature.” – Andrew Wilkinson, Chief Economic Strategist, Miller Tabak & Co., New York.

 

…(read more)

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