Approximately half of all mortgage loans are sold from one lender to another, often because the original lender is not equipped to collect payments, manage escrow accounts, pay taxes and insurance, respond to questions, and prepare payoff statements when the home is sold or refinanced. Some borrowers may receive letters in the mail alerting them of the sale of their loan a few days after closing, while others may not receive a notice for years.
In the mortgage-industry, this is called a “transfer of servicing,” and is a common practice. Borrowers should not be concerned about these changes, as the majority of lenders transfer their servicing rights to loans. Generally, the selling of a mortgage loan from one lender to another is a smooth transition and does not impact the borrower. Every so often though, there is a misstep by either the loan buyer or the loan seller.
Under the National Affordable Housing Act, when a mortgage loan is sold, the borrower is required to receive a “goodbye” letter from their current servicers at least 15 days before their next payment is due. The letter must state the name, address, and telephone number of the new servicer; the date the old company will stop collecting payments; and the date the new company will start accepting them. Under the Helping Families Save Their Homes Act, signed by President Obama on May 20, the new owner of the loan—which may or may not be the servicer—also must notify the borrower of the transfer within 30 days, known as the “hello” letter.
The “hello” letter should outline the same information as the “goodbye” letter sent from the former loan servicing company. Borrowers should be cautious if they receive a “hello” letter without receiving a “goodbye” letter, as they may be the intended victim of a scam by someone who is hoping to unlawfully receive the monthly mortgage payments. Concerned borrowers should contact their current loan servicer to verify if their loan has been transferred. If it hasn’t, authorities should be notified immediately.
In most cases, a mortgage payment sent to the old servicer automatically will be forwarded to the new servicer for a brief amount of time, typically 60 days. However, if payments are not sent to the correct servicer, they could become lost, and the homeowner may incur late fees.
Thursday, August 27, 2009
Wednesday, August 26, 2009
C.A.R. reports July sales up 12 percent, prices declined 19.6 percent
Home sales increased 12 percent in July in California compared with the same period a year ago, while the median price of an existing home declined 19.6 percent, C.A.R. reported yesterday. “The federal tax credit for first-time buyers played a critical role in the purchase decision of many buyers,” said C.A.R. President James Liptak. “Nearly 40 percent of first-time buyers said they would not have purchased a home if the tax credit was not offered. Because the tax credit has helped so many first-time buyers become homeowners, it is critical that Congress extends the credit beyond the Dec. 1 deadline, and includes all buyers, not just first-timers.”
Closed escrow sales of existing, single-family detached homes in California totaled 553,910 in July at a seasonally adjusted annualized rate. Statewide home resale activity increased 12 percent from the revised 494,390 sales pace recorded in July 2008. Sales in July 2009 increased 8.1 percent compared with the previous month. The statewide sales figure represents what the total number of homes sold during 2009 would be if sales maintained the July pace throughout the year. It is adjusted to account for seasonal factors that typically influence home sales.
The median price of an existing, single-family detached home in California during July 2009 was $285,480, a 19.6 percent decrease from the revised $355,000 median for July 2008, C.A.R. reported. The July 2009 median price rose 3.9 percent compared with June’s $274,740 median price.
“July marked the fifth consecutive month of month-to-month increases in the median price,” said C.A.R. Vice President and Chief Economist Leslie Appleton-Young. “This was the largest increase on record for the month of July based on statistics dating back to 1979. The yearly decline in July also was the smallest in the past 19 months.”
Closed escrow sales of existing, single-family detached homes in California totaled 553,910 in July at a seasonally adjusted annualized rate. Statewide home resale activity increased 12 percent from the revised 494,390 sales pace recorded in July 2008. Sales in July 2009 increased 8.1 percent compared with the previous month. The statewide sales figure represents what the total number of homes sold during 2009 would be if sales maintained the July pace throughout the year. It is adjusted to account for seasonal factors that typically influence home sales.
The median price of an existing, single-family detached home in California during July 2009 was $285,480, a 19.6 percent decrease from the revised $355,000 median for July 2008, C.A.R. reported. The July 2009 median price rose 3.9 percent compared with June’s $274,740 median price.
“July marked the fifth consecutive month of month-to-month increases in the median price,” said C.A.R. Vice President and Chief Economist Leslie Appleton-Young. “This was the largest increase on record for the month of July based on statistics dating back to 1979. The yearly decline in July also was the smallest in the past 19 months.”
Option ARMs Put Recovery at Risk
Option ARMs, which accounted for $750 billion in mortgages issued between 2004 and 2007, according to Inside Mortgage Finance, are at serious risk with at least 50 percent already in default.
Resets on option ARMS have doubled the payments for many holders.
“Everyone’s been focused on subprime, but we’re more concerned about this,” says Todd Jadlos, managing director of LPS Applied Analytics, which analyzes data for the financial industry. “By the time subprime defaults had increased 200 percent, in June and July of 2007, option ARMs had gone up 400 percent. People just didn’t notice because the overall numbers weren’t as high.”
Lenders have stopped offering option ARMS, but there are about 600,000 held by borrowers, three-quarters of whom are paying interest only. When the cap is reached – for most after they have held the loan for five years – they’ll face drastic increases.
Barclays Capital estimates that banks will lose $112 billion on option ARMs. Some banks are aggressively refinancing these loans, Barclays says.
Source: The New York Times, John Leland (08/26/2009)
Resets on option ARMS have doubled the payments for many holders.
“Everyone’s been focused on subprime, but we’re more concerned about this,” says Todd Jadlos, managing director of LPS Applied Analytics, which analyzes data for the financial industry. “By the time subprime defaults had increased 200 percent, in June and July of 2007, option ARMs had gone up 400 percent. People just didn’t notice because the overall numbers weren’t as high.”
Lenders have stopped offering option ARMS, but there are about 600,000 held by borrowers, three-quarters of whom are paying interest only. When the cap is reached – for most after they have held the loan for five years – they’ll face drastic increases.
Barclays Capital estimates that banks will lose $112 billion on option ARMs. Some banks are aggressively refinancing these loans, Barclays says.
Source: The New York Times, John Leland (08/26/2009)
Monday, August 24, 2009
Sunday, August 23, 2009
Thursday, August 20, 2009
Why Rent When Buying is Cheaper?
The foreclosure crisis has knocked down prices so much in some parts of the country that it’s cheaper or only slightly more expensive to own than it is to rent.
BusinessWeek, with help from research firm Reis, calculated ownership costs assuming a fixed-rate, 30-year mortgage for 100 percent of the purchase price with no down payment. The magazine said that had they factored in a 20 percent down payment – what most people must make these days – owning would have been cheaper than renting in most metros.
"It's a great time to buy," says Mollie Carmichael, senior vice-president of John Burns Real Estate Consulting in Irvine, Calif. "If you can own a home for less than the cost to rent, then it's a logical financial proposition."
Here are the top-10 cities where buying is a bargain and the own vs. rent cost ratio for each:
Detroit, 94 percent
Pittsburgh, 97 percent
Rochester, NY, 113 percent
Memphis, 114 percent
Tampa, 115 percent
Cleveland, Tenn., 119 percent
Dayton, Ohio, 119 percent
Columbia, S.C., 123 percent
Orlando, 124 percent
Dallas-Fort Worth, 124 percent
Source: Business Week, Prashant Gopal (08/20/2009)
BusinessWeek, with help from research firm Reis, calculated ownership costs assuming a fixed-rate, 30-year mortgage for 100 percent of the purchase price with no down payment. The magazine said that had they factored in a 20 percent down payment – what most people must make these days – owning would have been cheaper than renting in most metros.
"It's a great time to buy," says Mollie Carmichael, senior vice-president of John Burns Real Estate Consulting in Irvine, Calif. "If you can own a home for less than the cost to rent, then it's a logical financial proposition."
Here are the top-10 cities where buying is a bargain and the own vs. rent cost ratio for each:
Detroit, 94 percent
Pittsburgh, 97 percent
Rochester, NY, 113 percent
Memphis, 114 percent
Tampa, 115 percent
Cleveland, Tenn., 119 percent
Dayton, Ohio, 119 percent
Columbia, S.C., 123 percent
Orlando, 124 percent
Dallas-Fort Worth, 124 percent
Source: Business Week, Prashant Gopal (08/20/2009)
Tuesday, August 18, 2009
Study: Americans Still Want to Be Home Owners
Despite all of the bad news in the media about homeownership and mortgages, most Americans still believe buying a home is a great investment, according to a new study commissioned by Bankrate.com.
Among the findings from the study:
92 percent say that a home is a good investment for the future.
48 percent worry about losing or being unable to afford their homes.
"These results provide an interesting illustration of the public's mindset in a difficult economy," says Julie Bandy, editor in chief at Bankrate. "While nine out of 10 still believe in the American dream of homeownership, nearly half worry about losing their homes.”
Source: Bankrate.com (08/18/2009)
Among the findings from the study:
92 percent say that a home is a good investment for the future.
48 percent worry about losing or being unable to afford their homes.
"These results provide an interesting illustration of the public's mindset in a difficult economy," says Julie Bandy, editor in chief at Bankrate. "While nine out of 10 still believe in the American dream of homeownership, nearly half worry about losing their homes.”
Source: Bankrate.com (08/18/2009)
Monday, August 17, 2009
Greenspan Unsure About Recovery
Former Federal Reserve Chair Alan Greenspan said the economy seems to be improving in some areas, but he was dubious that improvement is sustainable.
“I think we’re going to be OK for the next six months,” he says. "We are getting a recovery in (housing) starts and motor vehicles, but the process doesn't have legs to it."
Greenspan adds that while the decline in construction is reducing inventory, it is unlikely that the percentage of home owners will ever be as high as it was at the peak, and that will result in a reduction of the overall size of the market.
Source: Reuters News, Emily Kaiser (08/17/2009
“I think we’re going to be OK for the next six months,” he says. "We are getting a recovery in (housing) starts and motor vehicles, but the process doesn't have legs to it."
Greenspan adds that while the decline in construction is reducing inventory, it is unlikely that the percentage of home owners will ever be as high as it was at the peak, and that will result in a reduction of the overall size of the market.
Source: Reuters News, Emily Kaiser (08/17/2009
Banks Plan to Keep Lending Tight
Banks tightened standards for all types of loans in the second quarter, the Federal Reserve reported Monday.
About 35 percent of senior loan officials said they tightened standards somewhat and none of the 51 responding banks said they loosened standards for prime mortgages. The rest said their standards for mortgages remained the same or were substantially stronger.
Banks also told the Fed that they expected to maintain strict lending standards until at least the second half of 2010.
“Most banks have woken up to the fact that there is a lot more risk in their loan books than they ever thought possible,” says Joel Conn, president of Lakeshore Capital LLC in Birmingham, Ala. That has caused many banks to reconsider their requirements for future lending, Conn says.
Source: Bloomberg, Craig Torres (08/17/2009)
About 35 percent of senior loan officials said they tightened standards somewhat and none of the 51 responding banks said they loosened standards for prime mortgages. The rest said their standards for mortgages remained the same or were substantially stronger.
Banks also told the Fed that they expected to maintain strict lending standards until at least the second half of 2010.
“Most banks have woken up to the fact that there is a lot more risk in their loan books than they ever thought possible,” says Joel Conn, president of Lakeshore Capital LLC in Birmingham, Ala. That has caused many banks to reconsider their requirements for future lending, Conn says.
Source: Bloomberg, Craig Torres (08/17/2009)
Tuesday, August 11, 2009
Why the Foreclosure Plan Isn't Working
Why can’t mortgage servicers process more than 9 percent of the applications of borrowers eligible for a government retooling of their loans?
Here are five reasons spelled out by CNNMoney.com:
1. Fax machines. Most loan servicers require that applications be faxed. "It's archaic. Given all the problems we've had with lost faxes, it seems unreasonable to use a fax system,” says Michael van Zalingen, director of homeownership services for Neighborhood Housing Services of Chicago.
2. Too many forms. Each servicer has its own form, as does Freddie Mac and Fannie Mae.
3. Outdated info. By the time the multiple forms get through the fax machine, the information is outdated and applicants have to start all over.
4. Green personnel. Servicers are hiring and training staff by the thousands and most of them haven’t been on the job long enough to understand the process.
5. Too complicated to comprehend. Some eligible borrowers are receiving loan modification offers without even applying, but the paperwork is such gobbledygook that they mistake it for trash and throw the offers away.
Source: CNNMoney.com, Tami Lubby (08/11/2009)
Here are five reasons spelled out by CNNMoney.com:
1. Fax machines. Most loan servicers require that applications be faxed. "It's archaic. Given all the problems we've had with lost faxes, it seems unreasonable to use a fax system,” says Michael van Zalingen, director of homeownership services for Neighborhood Housing Services of Chicago.
2. Too many forms. Each servicer has its own form, as does Freddie Mac and Fannie Mae.
3. Outdated info. By the time the multiple forms get through the fax machine, the information is outdated and applicants have to start all over.
4. Green personnel. Servicers are hiring and training staff by the thousands and most of them haven’t been on the job long enough to understand the process.
5. Too complicated to comprehend. Some eligible borrowers are receiving loan modification offers without even applying, but the paperwork is such gobbledygook that they mistake it for trash and throw the offers away.
Source: CNNMoney.com, Tami Lubby (08/11/2009)
Buyers Rush to Beat Tax Credit Deadline
Real estate professionals report that first-time home buyers are flooding the sale market, pressed to finalize a deal before the federal government's $8,000 tax credit offer expires on Nov. 30.
Because mortgage approvals, residential inspections, and other steps in the buying process typically take about two months, buyers hoping to take advantage of the incentive will need to have a contract by the end of September.
The new flurry of activity now as house-hunters try to meet the deadline is triggering bidding wars and energizing the property market, which historically is slow at the end of summer. As a result, more homes are getting their full asking price.
Source: Chicago Tribune, Kathleen Lynn (08/14/09)
Because mortgage approvals, residential inspections, and other steps in the buying process typically take about two months, buyers hoping to take advantage of the incentive will need to have a contract by the end of September.
The new flurry of activity now as house-hunters try to meet the deadline is triggering bidding wars and energizing the property market, which historically is slow at the end of summer. As a result, more homes are getting their full asking price.
Source: Chicago Tribune, Kathleen Lynn (08/14/09)
Monday, August 10, 2009
Mortgage Giant Freddie Mac Rebounds
Rebounding from a net loss of $9.9 billion in the first three months of the year, Freddie Mac posted $768 million in net income for the 2009 second quarter.
Boasting a net worth of $8.2 billion at the close of the reporting period, the mortgage company will not need a cash infusion from the U.S. Treasury.
Meanwhile, Freddie Mac said its smaller provision for credit losses was "driven by a reduced rate of growth in the company's loan loss reserve due to the recent modest national home price improvements, which the company believes to be largely seasonal."
Source: Housing Wire, Jon Prior (08/10/09)
Boasting a net worth of $8.2 billion at the close of the reporting period, the mortgage company will not need a cash infusion from the U.S. Treasury.
Meanwhile, Freddie Mac said its smaller provision for credit losses was "driven by a reduced rate of growth in the company's loan loss reserve due to the recent modest national home price improvements, which the company believes to be largely seasonal."
Source: Housing Wire, Jon Prior (08/10/09)
Wednesday, August 5, 2009
FHA Drops Lender on Suspicion of Fraud
The FHA's third-biggest lender, Taylor, Bean and Whitaker Mortgage Corp., has been dropped from the agency's loan program due to possible fraud.
An independent auditor found "irregular transactions that raised concerns of fraud," but FHA said the Florida-based firm failed to file a mandatory annual financial report and indicated that there were no outstanding issues related to the audit.
Experts say it could fold as a result; and with less competition in the industry, mortgage rates could rise.
"It's just a question of demand and supply," stated Equity Now Inc. President Michael Moskowitz. "If Taylor Bean goes down, it's a pretty big deal."
Source: Bloomberg David Mildenberg and Jody Shenn (08/05/09)
Banks Express Hope for Fed Short-Sale Effort
The federal government is launching a program to simplify and speed up the short-sale process by providing standardized documentation, cash incentives to lenders, and a $1,500 moving allowance to borrowers. Holders of second liens will get up to $1,000 to relinquish their claims.
Banks say the short-sale process has been taking so long because both their employees and real estate practitioners are learning as they go.
David Sunlin, vice president in charge of short sales at Bank of America, says he hopes the new government plan will help. "About half of short sales never close. We see it as a big lost opportunity, and we need to improve the rate we close them," he says.
Wells Fargo says it has cut its short sale average turnaround time from 90 days to 30 days by preparing a guide from real estate practitioners and putting in place procedures to handle short-sale requests.
[Editor's note: The federal government announced its short sales initiative in May at the annual Washington meetings of the NATIONAL ASSOCIATION OF REALTORS® and the association maintains short-sale resources for practioners.
Source: USA Today, Stephanie Armour (08/05/2009)
Banks say the short-sale process has been taking so long because both their employees and real estate practitioners are learning as they go.
David Sunlin, vice president in charge of short sales at Bank of America, says he hopes the new government plan will help. "About half of short sales never close. We see it as a big lost opportunity, and we need to improve the rate we close them," he says.
Wells Fargo says it has cut its short sale average turnaround time from 90 days to 30 days by preparing a guide from real estate practitioners and putting in place procedures to handle short-sale requests.
[Editor's note: The federal government announced its short sales initiative in May at the annual Washington meetings of the NATIONAL ASSOCIATION OF REALTORS® and the association maintains short-sale resources for practioners.
Source: USA Today, Stephanie Armour (08/05/2009)
More Home Owners Underwater as Prices Fall
A report from Equifax and Moody's Economy.com shows that falling prices have left 24 percent of owner-occupied, single-family home owners with mortgage debt greater than the values of the residences.
At the end of this year's second quarter, more than 16 million Americans were in this predicament, an increase from 10 million a year earlier.
Almost 5 percent of owner-occupied dwellings are saddled with mortgage debt worth 150 percent of the property value. Nevada, where 40 percent of owner-occupied homes are "upside-down," is the hardest-hit state, followed by Arizona and California.
Source: Wall Street Journal, Nick Timiraos (08/05/09)
At the end of this year's second quarter, more than 16 million Americans were in this predicament, an increase from 10 million a year earlier.
Almost 5 percent of owner-occupied dwellings are saddled with mortgage debt worth 150 percent of the property value. Nevada, where 40 percent of owner-occupied homes are "upside-down," is the hardest-hit state, followed by Arizona and California.
Source: Wall Street Journal, Nick Timiraos (08/05/09)
Tuesday, August 4, 2009
Feds Scold BoA, Wells Fargo on Loan Modifications
The Treasury Department on Tuesday announced that only 9 percent of eligible home owners had been helped by the federal program to modify home loans and prevent foreclosure.
It scolded banking giants Bank of America and Wells Fargo, both of which received federal bailout money, pointing out that these banks have been among the least willing to assist troubled borrowers.
Bank of American modified 4 percent of eligible loans, and Wells Fargo modified 6 percent.
Big banks that did better included JPMorgan Chase & Co., which modified 20 percent of eligible loans, and Citigroup Inc., which modified 15 percent.
The bank with the best results was Saxon Mortgage Services Inc., which helped about 25 percent of its eligible borrowers.
Source: The Associated Press, Alan Zibel (08/04/2009)
It scolded banking giants Bank of America and Wells Fargo, both of which received federal bailout money, pointing out that these banks have been among the least willing to assist troubled borrowers.
Bank of American modified 4 percent of eligible loans, and Wells Fargo modified 6 percent.
Big banks that did better included JPMorgan Chase & Co., which modified 20 percent of eligible loans, and Citigroup Inc., which modified 15 percent.
The bank with the best results was Saxon Mortgage Services Inc., which helped about 25 percent of its eligible borrowers.
Source: The Associated Press, Alan Zibel (08/04/2009)
Monday, August 3, 2009
Experts Say Now is the Time to Buy
Many investment experts advise it's time to buy. With prices falling, it is a once-in-a-generation chance to load up on property, they say.
How much of an investment portfolio should be devoted to real estate? David Swensen, who manages Yale University's endowment, says 20 percent is a smart number.
One possibility is real estate investment trusts (REITs), which, despite the fact that they are slashing dividends to conserve cash, are still paying average yields of 7.3 percent. That’s double the yield on Treasurys.
Should a home be part of the equation? Michael Kirby, founder of Green Street Advisors, says no.
"You should own a house to provide shelter," says Kirby. "In a way, it's not an investment, and it's not part of your investment portfolio. It's really just a living expense. By owning a house you are prepaying rent."
Source: Forbes (08/03/2009)
How much of an investment portfolio should be devoted to real estate? David Swensen, who manages Yale University's endowment, says 20 percent is a smart number.
One possibility is real estate investment trusts (REITs), which, despite the fact that they are slashing dividends to conserve cash, are still paying average yields of 7.3 percent. That’s double the yield on Treasurys.
Should a home be part of the equation? Michael Kirby, founder of Green Street Advisors, says no.
"You should own a house to provide shelter," says Kirby. "In a way, it's not an investment, and it's not part of your investment portfolio. It's really just a living expense. By owning a house you are prepaying rent."
Source: Forbes (08/03/2009)
Subscribe to:
Posts (Atom)
Posts
