Peak Housing

let's take a look

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The Mortgage Fraud Scandal Biggest in Human History

L. Randall Wray, Benzinga

We have long known that lender fraud was rampant during the real estate boom. The FBI began warning of an “epidemic” of mortgage fraud as early as 2004. We know that mortgage originators invented “low doc” and “no doc” loans, encouraged borrowers to take out “liar loans”, and promoted “NINJA loans” (no income, no job, no assets, no problem!). All of these schemes were fraudulent from the get-go

Read more:http://www.businessinsider.com/mortgage-fraud-scandal-2010-10

foreclosures just keep coming

let's take a look

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APNewsBreak: BofA delays foreclosures in 23 states

By ALAN ZIBEL (AP) – 31 minutes ago

WASHINGTON — Bank of America says it is delaying foreclosures in 23 states as it examines whether it rushed the foreclosure process for thousands of homeowners without reading the documents.

Bank of America is not yet able to estimate how many homeowners cases will be affected, a spokesman for the nation's largest bank says.

A bank official acknowledged in a legal proceeding in February that she signed up to 8,000 foreclosure documents a month and typically didn't read them. The Associated Press obtained the document Friday.

The executive's admission adds the nation's largest bank to a growing list of mortgage companies whose employees signed documents in foreclosure cases without verifying the information in them.

http://www.google.com/hostednews/ap/article/ALeqM5jKkgz2hAAZZAeRlJNBmM31MPUnhgD9IJ4SP00?docId=D9IJ4SP00

FHA Tightens Credit Score Requirement

NEW YORK (CNNMoney.com) -- The once wide-open doorway to homeownership closed a teensy bit more this week when a key government agency announced a proposal to no longer allow mortgages for borrowers with very low credit scores.

The Department of Housing and Urban Development said that it intends to require borrowers to have scores of at least 500 to qualify for FHA-insured loans. The agency has not required a minimum score before.

The practical impact of this move will be extremely limited; during the second quarter of 2010, no FHA-insured loans were issued to borrowers with sub-500 scores. And, in fact, less than 1% of borrowers were below 580; most loans went to borrowers with scores above 620

http://money.cnn.com/2010/07/16/real_estate/tighter_FHA_requirements/index.htm?source=cnn_bin&hpt=Sbin

Borrow at 3% Lend at 6% Golf at 4:00pm

let us take a look

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.................With millions of homeowners losing their homes to foreclosure during this recession, megabank JPMorgan Chase plans to argue against the Obama administration's latest weapon in its fight to stem the problem -- principal cuts for struggling borrowers -- by citing the sanctity of contracts and the borrower's "promise to repay."

In testimony to be delivered Tuesday afternoon, David Lowman, chief executive officer for home lending at the "Too Big To Fail" behemoth, will fight back against the program which calls for lenders and investors to decrease the outstanding debt owed on a home mortgage. While his competitors at Bank of America, Wells Fargo and Citigroup plan to dance around the issue -- judging from their prepared remarks -- Lowman cut right to it: borrowers don't deserve it.

"Like all loans, mortgage contracts are based on a promise to repay money borrowed," Lowman's prepared remarks read. "Importantly, there is no provision in the mortgage contract, express or implied, that the lender will restore equity or reduce the repayment amount if the value of the collateral -- be it a home, a car or a stock market investment -- depreciates.

http://www.huffingtonpost.com/2010/04/12/jpmorgan-chase-argues-aga_n_534898.html

New rules for mortgage 2010

Let's take a look:

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New mortgage rules curb closing-cost surprises

Buying a home should be a joyful experience, but all too often, the mortgage settlement process leaves consumers confused, angry and paying more than they anticipated.

The reason? Closing costs and fees that are significantly higher than the lender's original estimates. Borrowers find themselves faced with two unappealing choices: Pony up or walk away and start searching for another house.

Now, after years of wrestling with different factions of the mortgage industry, the Department of Housing and Urban Development has adopted rules designed to prevent last-minute closing surprises. The rules, which took effect Jan. 1, will reduce closing shocks and save home buyers money, says Timothy Dwyer, CEO of Entitle Direct Group, a title insurance company. In addition, he says, "You'll be better informed and educated."

The biggest change involves the good faith estimate, the form lenders give consumers when they apply for a mortgage. The good faith estimate isn't new, but in the past, the document wasn't particularly helpful to consumers, says Sylvia Alayon, vice president of operations at the Consumer Mortgage Audit Center. What has changed:

http://www.usatoday.com/money/economy/housing/2010-01-17-closing-cost-rules_N.htm

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Reverse Mortgage Abuse

Reverse Mortgage Abuse. Apparently the same incentives in the mortgage market have lead to abuse in the reverse mortgage market as well. Let us take a look.

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Oct. 6 (Bloomberg) -- Reverse mortgages may be the next subprime crisis, according to the National Consumer Law Center.

Some of the same U.S. lenders that helped drive the real estate boom with loans to home buyers who couldn’t afford the payments are now targeting seniors, the center said. Brokers, who are given financial incentives to sell the loans, may be making misleading claims to potential customers, according to a report titled "Subprime Revisited,’’ that was released today by the Boston-based NCLC.

“This market is designed to serve seniors, so when we find abuses cropping up and migrating from the subprime market to the senior market, that sounds an especially loud warning bell,” said Rick Jurgens, an advocate at the National Consumer Law Center, who contributed to the report.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aBbWil.iMQW0

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Mortgage Relief?

Let us take a look at an article about the Making Homes Affordable program.......

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"I am writing again to express my frustration that foreclosure filings continue to outpace loan modifications,'' Merkley wrote. "I believe that the Making Home Affordable program has more potential to help troubled homeowners.''

And today, Merkley pressed a Treasury official during a Senate hearing.

"To date ... we have spent, out the door, $288 billion to the banks, $76 billion to the auto industry, and ... $270,000 according to (the independent General Accountability Office) for our homeowners,'' Merkley told Assistant Treasury Secretary Herbert M. Allison.

Allison said the agency is improving and that the start-up problems have been addressed.

http://www.oregonlive.com/politics/index.ssf/2009/09/merkley_demands_answers_on_mor.html

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My comment:

Apparently, the banks and wallstreet have been bailed out while mainstreet has been left behind. My question is: Suppose the homeowner 'affordable' plan had been utilized to a greater degree? Might this only paper over a problem? Delay it? My guess is, for the most part, yes.

In other words, if you can't afford the house wouldn't it be better to cut your losses and adjust your expenses below your income now? Plans like this, with a price tag in the billions, while probably well intentioned don't work out for the benefit of many.