Mortgage rates eye of Wall Street storm after S&P downgrade

Hand-wringing experts expected consumer interest rates to rise and the economic world to pretty much end in advance of 2012, but after the smoke cleared, investor confidence in U.S. Treasury bonds revealed the U.S. isn't a deadbeat.

by Broderick Perkins
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Deadline Newsroom - Contrary to overwrought expectations, mortgage rates moved down Monday, Aug. 8, the first business day after Standard & Poors downgraded the United' States credit rating from AAA to AA-plus.

Hand-wringing experts expected consumer interest rates to rise and the economic world to pretty much end in advance of 2012, but after the smoke cleared investor confidence in U.S. Treasury bonds revealed the U.S. isn't a deadbeat.

Erate.com reported the average annual percentage rate (APR) on conforming, 30-year, fixed-rate mortgages (FRMs) was 4.61 in its Aug. 2 report. By midday Aug. 8, the rate was down to 4.49 percent.

Whether mortgage rates will continue to fall due to the downgrade is anyone's guess. Between Wall Street's fear mongering collective and Washington, D.C.'s buck-passing political bullies, few seem to have the economic smarts necessary to come up with real answers to cure the nation's ailing economy.

The mortgage interest rate drop came after Standard & Poors went through with its warned downgrade to the nation's credit rating, as it chastised the nation's legislative branch as a dysfunctional family of ne'er-do-wells.

(See Brookings: "Is This Really The Worst Congress Ever?")

S&P made the move specifically because of legislators' political infighting, including the Tea Party's zero-tolerance for compromise and the failure of both sides to add or insist on revenue enhancing taxes to the shaky federal budget agreement, among several other reasons it had cited far in advance of the actual downgrade.

S&P said the toxic behaviors combined to reduce confidence in Washington's ability to get the budget deficit under control -- let along employment, economic growth and fiscal stability.

It's not something S&P and other raters seemed to consider during the run up to the crash, but so be it. Perhaps S&P and other raters are finally getting their house in order. The jury is still out there.

In any event, the downgrade created a panicked sell-off on Wall Street as the DOW Jones Industrial Average plunged 5.6 percent, falling some 630 points, to about 10,800, the lowest its been since the fall of 2008 and virtually matching the sixth largest one-day decline in DOW history.

The larger Wilshire 5000 lost $1 trillion on paper, falling 891 points, its third largest decline ever.

It wasn't as if any of the companies in either index really experienced any damage from S&P's downgrade, but as investors leaped from the closing windows of opportunity on Wall Street, others flocked to the bond market, pushing prices up and yields down. Mortgage rates are tied to bond yields and often move in lockstep with them.

On Aug. 8, the price of the 30-year U.S. Treasury bond jumped more than 3 points, while the benchmark 10-year note's price rose nearly 2 full points, and the 7-year note was up by more than a point.

The 30-year bond on Monday was yielding 3.69 percent, down from a Friday close at 3.85 percent, as the 10-year Treasury yield dropped from 2.57 percent to 2.36 percent, taking mortgage rates along for the ride.

The flight to the very Treasury bonds S&P downgraded, was nevertheless a flight to quality.

Government bonds typically represent the rate at which investing in them is considered risk-free, and, at $9.3 trillion, Treasury bonds is one of the deepest investment markets offering easy to buy and sell investments.

So, at least on Monday, mortgage interest rates actually benefited from the economic shenanigans that has the nation embroiled in uncertainty and frustration.

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Feds still targeting deceptive mortgage ads

Effective August 19, 2011 a federal truth-in-lending law strengthens bans against deceptive advertising from mortgage lenders, brokers, and servicers; real estate agents and brokers; advertising agencies; home builders; lead generators; rate aggregators; even on- and off-line publications.

by Broderick Perkins
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Deadline Newsroom - A new federal rule targets mortgage advertisers who attempt to pull the wool over consumers' eyes when they shop for a home loan.

Effective August 19, 2011 a federal truth-in-lending law strengthens bans against deceptive advertising offered by mortgage lenders, brokers, and servicers; real estate agents and brokers; advertising agencies; home builders; lead generators; rate aggregators; and others, including on- and off-line publications.

The Federal Trade Commission (FTC) rule does not cover banks, thrifts, federal credit unions, and other entities not regulated by the FTC.

For years, the FTC has been at war with outfits using deceptive mortgage advertisements.

As recently as June this year, the agency sent hundreds of advertisers and media outlets warning letters that some mortgage ads are either potentially deceptive or in violation of the Truth in Lending Act.

The massive missive mailing came following a nationwide review of claims for low monthly mortgage payments or low, low interest rates, without adequate disclosure of other important loan terms.

Some ads claimed rates as low as 1 percent, but failed to disclose adequately:

• That the stated rate was a "payment rate," not the interest rate.

• That the payment rate applied only during the loan's brief initial period.

• The loan’s Annual Percentage Rate (APR), the uniform measure of the cost of credit that enables consumers to shop for and compare mortgage offerings.

The fraudulent behavior is not unlike actions used to push toxic mortgages that became the scourge of the economy and helped plunge the nation into recession, the effects of which are still felt today.

Since 1995, the FTC has busted dozens of mortgage operations for a host of infractions, including:

• Claims for loans with specified terms, when no loans with those terms were available from the advertiser.

• Misrepresentations that rates were fixed for the full term of the loan.

• Misrepresentations about, or failure to adequately disclose, the existence of a prepayment penalty or large balloon payment due at the end of the loan.

• Claims of mortgage payment amounts that failed to include loan fees and closing costs of the kind typically included in loan amounts,

• Failure to disclose adequately that the advertiser, not the consumer’s current lender, was offering the mortgage.

• False or misleading claims that consumers were "pre-approved" for mortgage loans.

The new rules list 19 examples of prohibited deceptive claims including misrepresentations about:

• The existence, nature, or amount of fees or costs to the consumer associated with the mortgage and other products sold in conjunction with the mortgage, including credit insurance and credit disability insurance.

• The terms, amounts, payments, or other requirements relating to taxes or insurance associated with the mortgage.

• The variability of interest, payments, or other terms of the mortgage.

• The type of mortgage offered.

• The source of an advertisement or other commercial communication.

• The consumer's ability or likelihood of obtaining a refinancing or modification of a mortgage or any of its terms.

New rules also address misrepresentations involving pre-payment penalties; interest rate and payment comparisons; affiliation with government agencies and a consumers likelihood or ability to obtain a home loan.

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Consumer watchdog opens amid efforts to defang the new agency

With the Consumer Financial Protection Bureau up and running, its Consumer Response Center is accepting credit card complaints on its website, ConsumerFinance.gov. Struggling homeowners can also get referrals to housing counselors via the Homeowners HOPE Hotline.

by Broderick Perkins
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Deadline Newsroom - Born of the massive Dodd-Frank Wall Street Reform Act, signed into law a year ago, the Consumer Financial Protection Bureau (CFPB) officially opened last week, it's plate full and future clouded by attempts to dilute the agency's power.

Without a director or full staff, the agency created to protect consumers when they sign up for a mortgage, credit card or other financial product, has already laid a strong foundation, a foundation a gang of bankers and Republicans are anxious to undercut.

Dissident Republicans already won the first battle, politically strong-arming the White House into choosing CFPB's creator and champion, Elizabeth Warren, not as it's director, but as a temporary, interim director, Special Advisor to the Secretary of the Treasury on the CFPB.

With a record of being one of the nation's toughest consumer advocates, Warren would have been the best and bravest choice. Unfortunately, President Obama bowed to pressure and nominated Former Ohio attorney general Richard Cordray to run the agency and appease Republicans who threatened to block Warren's nomination and shackle CFPB's progress.

With the CFPB up and running, its Consumer Response Center is accepting credit card complaints on its website, ConsumerFinance.gov. Struggling homeowners can also get referrals to housing counselors via the Homeowners HOPE Hotline.

The nation's first 21st-century consumer protection agency, the CFPB is the first new government agency embedded in social networking, using Facebook, Twitter stream, Flickr and YouTube to get the word in and out.

Over the coming months, the agency will expand its Consumer Response Center to handle complaints about other consumer financial products and services under its jurisdiction. The agency is also contacting large banks to put them on notice to follow the rule of consumer law, to let them know how the agency will supervise them and how it will enforce federal consumer financial laws.

"Above all, this means ensuring that consumers get the information they need to make the financial decisions they believe are best for themselves and their families -- that prices are clear up front, that risks are visible, and that nothing is buried in fine print. In a market that works, consumers should be able to make direct comparisons among products and no provider should be able to build, or feel pressure to build, a business model around unfair, deceptive, or abusive practices," wrote Warren on the bureau's blog.

The CFPB's role is three fold:

• Educate consumers to give them a first line of defense against abusive practices.

• Enforce federal consumer financial laws and supervise banks, credit unions, and other financial companies.

• Examine gathered and analyzed data to better understand consumers, financial services and consumer financial markets.

CFPB reveals some of the agency's initial efforts in "Building the CFPB: A Progress Report."

• The "Know Before You Owe Project" is a process for combining the complex and duplicative Truth in Lending Act and Good Faith Estimate mortgage disclosure forms into a single, useable form.

• CFPB has issued two new studies, the first study examines the variations between the credit scores creditors use and the scores sold to consumers by credit reporting agencies. The second report focuses on how a consumers remittance history could be used to enhance his or her credit score.

Much more is in store, including:

• Rules to implement the Privacy Act and the Freedom of Information Act, in order to establish a process for anyone who wants testimony or records from the CFPB for use in litigation. Also included are confidentiality rules, describing how the CFPB will treat information it obtains.

• Rules similar to those issued by the Federal Trade Commission and Securities and Exchange Commission that outline how CFPB will conduct investigations of federal consumer financial law violations.

• Rules stating procedures state officials should use to notify the CFPB of state actions or enforcement proceedings.

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Applying for a mortgage? Here's what the lender wants

While you aren't guaranteed a home loan any more than you are guaranteed a job, you can improve your chances -- and ease the pain -- if you understand four basic principles lenders follow when you apply for a home loan.

by Broderick Perkins
© 2011 DeadlineNews.Com

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Deadline Newsroom - Landing a mortgage in today's tight credit market can be as tough as trying to find a job in today's economy.

That's no joke.

One in five homebuyers said waiting to hear if they were approved for a mortgage was more stressful than waiting to hear if they got a job, according to a MortgageMatch.com survey earlier this year.

While you aren't guaranteed a home loan any more than you are guaranteed a job, you can improve your chances -- and ease the pain -- if you understand four basic principles lenders follow when you apply for a home loan.

Credit score, down payment, loan-to-value (LTV) ratio and debt-to-Income (DTI) ratio.

Get the full story here: "Four Keys to Getting a Loan Today"

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Reduced conforming loan limit to hit Monterey County hardest

Barring Congressional action, Monterey County will be California's hardest hit county later this year when the conforming loan limit drops nationwide from the $729,950 limit to a maximum $625,500.

by Broderick Perkins
© 2011 DeadlineNews.Com

Unauthorized use of this story is a copyright violation -- a federal crime

Deadline Newsroom - If you plan to buy a California home that will require a big mortgage, move fast -- if you aren't already too late.

Barring Congressional action, Monterey County will be California's hardest hit county later this year when the conforming loan limit drops nationwide from the $729,950 limit to a maximum $625,500.

In Monterey County, the conforming loan limit will fall nearly $247,000 to $483,000, according to the California Association of Realtors (CAR).

Under the new FHA loan limits, after Monterey County the greatest drop in the loan limit would be Merced ($201,450) followed by Riverside ($164,650), San Bernardino ($164,650), Solano ($157,300), and San Diego ($151,250) counties.

Right now, non-conforming or jumbo loans typically carry a mortgage interest rate a quarter percentage point or more than a conforming loan, resulting in a higher down payment and larger monthly payment, according to Marc Mungaray, a loan officer, at Academy Mortgage in Monterey.

That reduces housing affordability and how much the spread could change is "anybody's guess," he says.

"Generally it's a quarter point but it could go up to a full point," Mungaray said.

Approximately 9 percent of home sales could feel the squeeze in Monterey County, CAR projects, 30,000 statewide.

The conforming loan limit determines the maximum size of a mortgage that the Federal Housing Administration (FHA), Fannie Mae, and Freddie Mac government-sponsored enterprises (GSEs) can buy or guarantee. The GSEs back 95 percent of today's mortgages.

"By reducing the conforming loan limit, thousands of California home buyers will be shut out of homeownership," said CAR President Beth L. Peerce.

"The higher mortgage loan limits are critical to providing liquidity in today’s housing market and are essential to our housing recovery. We urge Congress to maintain the current limits and make them permanent to provide homeowners and home buyers with affordable financing and help stabilize local housing markets," Peerce said.

That's not likely given federal legislators' penchant for budget-balancing efforts that include rolling back housing relief provisions put in place even before and after the Great Recession.

The higher conforming loan limits were part of the Housing and Economic Recovery Act (HERA of 2008 to the GSEs to insure, guarantee and buy more mortgages at a time when private funding froze during the financial crisis.

While some say private banks will pick up the slack, others aren't so sure.

On July 13, 2011, Federal Reserve Chairman Ben Bernanke told the U.S. House of Representatives' Financial Services Committee the private market was set to fill the void when the conforming loan limits on government-backed mortgages are set to expire in October, but at a higher cost to homebuyers.

"As far as Fannie Mae and Freddie Mac are concerned, there is a tradeoff there between supporting the higher priced homes and weaning the housing finance system off of unusual limits it was put under during the crisis," Bernanke said.

"I understand the private sector is taking at least a significant number of the jumbo mortgage market but at a higher cost," he added.

However, CAR said, in anticipation of the expiration of current loan limits on Sept. 30, 2011, Bank of America on July 1 stopped accepting conventional and government applications for loan amounts that will exceed the lower loan amounts.

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Housing to take center stage in 2012 election

Even when told that getting rid of the mortgage interest deduction would help ease the federal budget deficit, 65 percent of voters opposed any proposal to abolish the tax provision, with 69 percent of Republicans, 69 percent of Independents and 59 percent of Democrats opposing eliminating the deduction even it would help the federal budget deficit.

by Broderick Perkins
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Deadline Newsroom - Housing-related tax breaks are as American as apple pie and politicians who want to cut the tax perks that come with housing may want to consider another line of work.

Nearly three out of four voters -- 73 percent of both owners and renters -- believe Uncle Sam ought to provide tax benefits to promote homeownership.

The sentiment cut across party lines with 79 percent of Democrats, 71 percent of Republicans and 68 percent of Independents supporting tax perks that come with homeownership.

Even when told that getting rid of the mortgage interest deduction would help ease the federal budget deficit, 65 percent of voters opposed any proposal to abolish the tax provision, with 69 percent of Republicans, 69 percent of Independents and 59 percent of Democrats opposing eliminating the deduction even it would help the federal budget deficit.

Legislators who vote to eliminate the mortgage interest deduction are more likely to be voted out of office than those who support the deduction, according to a recent National Association of Home Builders (NAHB) poll by Lake Research Partners and Public Opinion Strategies.

Fifty-eight percent of voters residing in House GOP freshmen districts, 58 percent in the House swing districts, 56 percent in Senate toss-up race districts and 54 percent of voters living in presidential swing states said that they would be less likely to vote for a candidate for Congress who proposed to eliminate the mortgage interest deduction.

"Despite the current housing downturn, Americans still see homeownership as a core value and a key building block of being in the middle class and creating strong jobs in their communities," said Celinda Lake, president of Lake Research Partners.

"The bottom line: The bipartisan consensus outside the Beltway is that owning a home remains an essential part of the American Dream and voters would strongly oppose any efforts by lawmakers to increase barriers to homeownership," Lake said.

Pollsters surveyed 2,000 likely 2012 voters from May 3 through May 9 to assess the public's attitude following he Great Recession and efforts to scuttle the mortgage interest deduction and create "Qualified Residential Mortgage" standards that could price even excellent-credit consumers out of the housing market.

The NAHB also found:

• Seventy-six percent of respondents in key U. S. Senate races, 75 percent of voters in swing U.S. House of Representative districts, 75 percent among presidential swing states and 71 percent of voters residing in GOP House freshmen districts support federal government tax incentives to encourage homeownership.

• Seventy-one percent of voters oppose proposals to eliminate the mortgage interest deduction, and 63 percent oppose efforts to reduce it. A majority are also against eliminating the deduction for interest paid on home equity loans, ending the deduction for interest paid on a second home, limiting the deduction for those earning more than $250,000 per year or capping the deduction for home owners with mortgages over $500,000.

• By a more than two-to-one margin (57 percent to 26 percent), voters said they would be less likely to vote for a candidate who supports eliminating the mortgage interest deduction, including 63 percent of Republicans, 56 percent of Independents, 55 percent of Democrats and 61 percent of Tea Party supporters saying they would be less likely to support a candidate who favored killing the deduction.

• Among voters who are aware of proposals under consideration by Washington policymakers to raise the down payment requirements for a home loan, 92 percent believe it will make it more difficult to buy a home.

• Six federal agencies are proposing a national standard to require a minimum 20 percent down payment, which would be opposed by households most likely to be affected – mortgage holders and renters ages 18 to 54. Among voters in these age groups, 59 percent of renters and 58 percent of those holding a mortgage oppose adding that obstacle to buying a home.

"The polling found that there is a significant disconnect between Washington policy makers and the nation's electorate when it comes to the mortgage interest deduction, the importance of homeownership and the need to keep housing a national priority," said Neil Newhouse, a partner and co-founder of Public Opinion Strategies.


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ACORN shellacking just plain nuts

Known for results-oriented, boots-on-the ground, in-your-face, confrontational indignation that brought the Ameriquest and Household International subprime predators to their knees -- before "subprime" was a household word -- ACORN would be in our corner right now, if it still existed.

by Broderick Perkins
© 2011 DeadlineNews.Com

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Deadline Newsroom - Largely unfounded and often rabid charges that smacked of McCarthyism, led to the demise of one of the nation's staunchest supporters of community development and fair housing.

Given the banking industry's continued betrayal of its customer base and persistent collusion with the still largely self-regulated financial industry, we could really use a champion like the Association of Community Organizations for Reform Now (ACORN), now.

You can bet if ACORN was alive today, it would be dug in at the corporate headquarters of the nation's largest banks for shoving homeowners over the cliff and then tossing boulders after them to keep them down.

ACORN would have sent troops to Wall Street to face off against financial giants and greedy speculators who made billions feeding on the hopes and American Dreams of homeowners.

Known for results-oriented, boots-on-the ground, in-your-face, confrontational indignation that brought the Ameriquest and Household International subprime predators to their knees -- before "subprime" was a household word -- ACORN would be in our corner right now.

Phoenix not rising

Instead, the now bankrupt ACORN finds no vindication in the release last week of the U.S. Government Accountability Office report "ACORN: Federal Funding and Monitoring". Like other studies the GAO report reveals there was little to substantiate the vast majority of charges that drove ACORN into the ground.

ACORN's admitted infractions and isolated failures were small potatoes compared to surreptitious "Inside Job" infractions conducted by an unbridled financial infrastructure of perpetuators responsible for spawning the worst recession since the Great Depression.

Charges against ACORN, related to voter registration fraud, voting fraud and federal funding violations, among others, began largely after ACORN spearheaded many efforts to register voters for the historic 2008 presidential election which catapulted Barack Obama into the role of the nation's first African American president.

At the time, the operation was also grappling with an internal $1 million embezzlement case it admittedly handled poorly.

During investigations into these matters, a new scandal surfaced when "hidden camera" videos purportedly revealed ACORN volunteers and employees offering tax advice on a proposed prostitution business.

ACORN blames "Republicans" and "conservative activists" for leading the charge to strip federal funding from what was perhaps the nation's largest grassroots community organization of low- and moderate-income people, often African-Americans.

At its height, ACORN boasted nearly a half million member families organized into more than 1,200 neighborhood chapters in about 75 cities across the nation. For 40 years, ACORN broke down barriers of discrimination and prejudice..

The controversy, stemming from nearly 50 federal state and local investigations, cost ACORN and its affiliates federal funding (more than $50 million from 2005 through 2009) and cast a shadow over its private fund-raising efforts.

Beating the charges

ACORN was first cleared of wrong doing in 2009, by the Congressional Research Service in an investigation requested by the U.S. House of Representatives Financial Service Committee.

The report "CRS: Association of Community Organizations for Reform Now (ACORN) " not only exonerated ACORN, but also questioned the constitutionality of the legislation used to withdraw ACORN's funding. Without due process, legislation that inflicts "attainder," a type of punishment, could be considered unconstitutional, the report said.

The CRS report also questioned the impunity of those performing "evidence-gathering" dirty-tricks in hidden-camera stings used to bring additional charges.

At about the same time, U.S. District Judge Nina Gershon likewise argued Congress violated the Constitution by illegally targeting the group and attempted to block U.S. officials from enforcing the funding ban.

Months later, in March 2010, she upheld that order saying it was "unmistakable that Congress determined ACORN's guilt before defunding it." She also said Congress damaged ACORN's reputation and its ability to raise funds in the process. Not only were federal funds cut, but major contributors, the Ford and Mott Foundations, cut off funding to ACORN.

The Second U.S. Circuit Court of Appeals later disagreed with the Gershon ruling, forcing ACORN to take its federal funding case to the Supreme Court.

Meanwhile, by March, 2010, both Brooklyn, NY prosecutors and an independent investigation by the California Attorney General's Office cleared ACORN of criminal wrong doing over the hidden camera videos, after determining the videos were heavily edited, manipulated and distorted to meet then tricksters' agenda.

Except for millions of dollars in lost federal funding and ACORN's demise, little proof of wrong doing has come from the dozens of investigations.

John Atlas' "Seeds of Change, The Story of ACORN, America's Most Controversial Anti-Poverty Community Organizing Group" (Vanderbilt University Press, $27.95) documents ACORN's rise and untimely fall.

Final chapter

The final ironic ACORN chapter is the latest exoneration by the GAO. The report says:

• Of 22 investigations of alleged election and voter registration fraud, most were closed without prosecution.

• One of eight investigations of alleged voter registration fraud resulted in guilty pleas and seven were closed without action due to lack of evidence.

• The Federal Election Commission (FEC) reported five closed matters – one resolved, one dismissed and the others dropped after FEC "found no reason to believe the violations occurred."

In March, this year, in one of the ACORN website's final blog entries by outgoing CEO Bertha Lewis "Vindication Doesn't Pay The Bills", Lewis writes:

"ACORN has faced a series of well-orchestrated, relentless, well-funded right wing attacks that are unprecedented since the McCarthy era. Our effective work empowering African American and low-income voters made us a target. The videos were a manufactured, sensational story that led to rush to judgment and an unconstitutional act by Congress. For ACORN as a national organization, our vindication on the facts doesn't necessarily pay the bills. I know that ACORN's dedicated community members will continue to speak out for justice and organize in their communities."

We can only hope.

Post mortem: On June 20, 2011, the U.S. Supreme Court refused, without comment, to review Acorn v. U.S., the advocacy group's attempt to revive its lawsuit claiming that Congress had acted unconstitutionally when it denied ACORN federal funds.

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Broderick Perkins, an award-winning consumer journalist, parlayed 30 years of old-school journalism into a digital real estate news service, the San Jose, CA-based DeadlineNews Group, including DeadlineNews.Com, a real estate news and consulting service and Web site, and the Deadline Newsroom, DeadlineNews.Com's news back shop.

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Perkins was the first Examiner to cover three beats for the Examiner.com news service:
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Uncle Sam outs lenders' poor mortgage modification performance

In its latest "Making Home Affordable Housing Scorecard," the Treasury says the Bank of America, JPMorgan Chase, Ocwen Loan Servicing, and Wells Fargo need “substantial” improvement in their Home Affordable Modification Program (HAMP) efforts.

by Broderick Perkins
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Deadline Newsroom - The U.S. Treasury is outing mortgage servicers who fail to meet federal mortgage modification program guidelines and is withholding financial incentives for the worst performers.

In its latest "Making Home Affordable Housing Scorecard," the Treasury says the Bank of America, JPMorgan Chase, Ocwen Loan Servicing, and Wells Fargo need “substantial” improvement in their Home Affordable Modification Program (HAMP) efforts.

Reporting how individual servicers failed to reach HAMP goals is new and long overdue on the monthly scorecard.

“Beginning this month (June), the Treasury Department is withholding financial incentives for three servicers: Bank of America, NA; JP Morgan Chase Bank, NA; and Wells Fargo Bank, N.A.,” the Treasury reported on the May scorecard.

Get the full story: "Uncle Sam Airs Lenders’ Dirty Laundry In Mortgage Modification Mess"

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'Qualified Residential Mortgage' creating underwriting quandary

Lobbyists have encouraged a majority of legislators on Capital Hill to vote to ease the toughest standards for the proposed "Qualified Residential Mortgage," but even if regulators soften their stand, consumers will still face the hard fact that underwriting standards for today's mortgages already contain tough, QRM-like underwriting rules.

by Broderick Perkins
© 2011 DeadlineNews.Com

Unauthorized use of this story is a copyright violation -- a federal crime

Deadline Newsroom - Overwhelming bipartisan support could loosen the shackles of mandatory regulatory change coming for mortgages, but probably not enough to allow consumers to escape the mortgage money squeeze they already face.

Pounded by powerful lobbying efforts from consumer advocates and minority, housing and real estate industry groups, 280 Representatives from the 433-member U.S. House of Representatives and 44 U.S. Senators from the 100-member U.S. Senate have signed up to oppose the most stringent "Qualified Residential Mortgage" or QRM, according to Christopher J. Bognanno, spokesman for the Washington, D.C. office of Rep. John Campbell (R-CA).

QRMs are low default-risk home loans required under the Mortgage Reform and Anti-Predatory Lending Act provisions in the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Dodd-Frank requires banks and other firms that issue mortgage-backed securities to keep 5 percent of the loans that they bundle and sell as securities. The idea is for banks to retain some of their mortgage based risks.

Perhaps, if banks previously had been required to hold onto some of their securities, Wall Street wouldn't have crashed under the weight of toxic mortgage-based investments the lenders sold

In any event, anything that regulators deem a QRM would be exempt from the 5 percent rule.

Because of the low risk, borrowers who qualify for a QRM will pay less than those who use home loans not designated as a QRM. Some analysts estimate that mortgage rates on non-QRMs could cost as much as three percentage points more than QRM rates, but a QRM won't be easy to land.

According to the proposed definition, QRM borrowers would have to:

• Put at least 20 percent down to buy a home, have at least 25 percent in equity to refinance, have at least 30 percent in equity for a cash-out refinance.

• Have house payments that don't exceed 28 percent of before-tax income, and total monthly debt payments (house, credit cards, auto, student loans) couldn't exceed 36 percent of before-tax income.

• Not have been 60 days delinquent on any debt payments in the last two years.

Rep. Campbell, along with U.S. Rep. Brad Sherman (D-CA), drafted the heavily supported letter that says the current version of the QRM would price creditworthy first-time and minority buyers out of the market.

According to the National Association of Realtors (NAR), 60 percent of recent home buyers made less than a 20 percent down payment. CoreLogic says 39 percent of home buyers in 2010 made a down payment of less than 20 percent. Other studies but the number somewhere in between.

In any event, many of those loans would not have passed muster under QRM rules.

The Center for Responsible Lending says, based on average home prices, it would take 14 years for the typical American family to save enough money for a 20 percent down payment, longer for high cost areas like California.

Blocking so many potential mortgages would stall the already anemic economic recovery, QRM opponents say.

Housing, including shelter owned and rented, fuels, utilities, energy use, insurance, water, sewage, trash collecting, furnishings, upgrades, maintenance and upkeep accounts for more than 40 percent of the Consumer Price Index, according to the U.S. Department of Labor.

The index is a measure of consumer expenditures. Consumer spending is the fuel that keeps the economy cranking.

Given many of the under 20-percent-down mortgages in 2010 were financed with the assistance of private mortgage insurance, legislators say QRMs should be available for less than 20 percent down with a private mortgage insurance requirement. The insurance reduces risk by covering certain losses in case of a default.

"Mortgage insurers have well-established procedures that have been shown to mitigate and cure loan deficiencies," the legislators' letter says.

But even if the QRM down payment was lowered to 10 percent, as some suggest, one in four homebuyers could still be priced out of the market based on the nearly 25 percent of home buyers in 2010 who paid less than 10 percent down, according to CoreLogic.

It may be all moot.

Credit rating agency DBRS says underwriting standards today already simulate QRMs.

According to DBRS, today's prime borrowers often must have an 80 percent loan-to-value ratio, a credit score of 680 to 720, two years worth of W-2 forms and re-verification of employment within 10 days of closing the loan.

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Broderick Perkins, an award-winning consumer journalist, parlayed 30 years of old-school journalism into a digital real estate news service, the San Jose, CA-based DeadlineNews Group, including DeadlineNews.Com, a real estate news and consulting service and Web site, and the Deadline Newsroom, DeadlineNews.Com's news back shop.

Under the DeadlineNews Group umbrella:

Perkins was the first Examiner to cover three beats for the Examiner.com news service:
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Housing counselors thumbs down on mortgage modification operations

The U.S. Government Accountability Office' (GAO) report, "Troubled Asset Relief Program: Results of Housing Counselors Survey on Borrowers’ Experiences with the Home Affordable Modification Program (HAMP) ," is an unsettling revelation of workplace incompetence that borders on malpractice.

by Broderick Perkins
© 2011 DeadlineNews.Com

Unauthorized use of this story is a copyright violation -- a federal crime

Deadline Newsroom - Housing counselors are wringing their hands after giving a stout vote of no confidence to mortgage modification makers.
That's not surprising.

Work performance conducted by mortgage servicers, if a new survey is any indication, should be enough to get them roundly fired and quickly replaced in today's workplace, but they just continue not to work for their money.

At least government transparency is working.

The U.S. Government Accountability Office' (GAO) report, "Troubled Asset Relief Program: Results of Housing Counselors Survey on Borrowers’ Experiences with the Home Affordable Modification Program (HAMP) ," is an unsettling revelation of workplace incompetence bordering on malpractice.

More than three out of four housing counselors surveyed about their experiences with a $50 billion government sponsored (read taxpayers' money) mortgage modification program, HAMP, said their clients' overall experiences with the program ranged from "negative" to "very negative."

The culprits are both the mortgage servicers for their shoddy work and the government for not enforcing the guidelines.

After Congress established the $700 billion Troubled Asset Relief Program (TARP), $50 billion in TARP funds were allocated in 2009 to help struggling homeowners avoid foreclosure. Unfortunately, during the first two years of the program, more homeowners were denied or canceled from trail modifications than those who received permanent modifications.

Along with others critical of HAMP, GAO's report is its third attempt to study the problematic U.S. Treasury program and make recommendations to improve it.

In the current study, which calls for sanctions against mortgage servicers who don't get the job done, GAO surveyed nearly 400 housing counselors from NeighborWorks' National Foreclosure Mitigation Counseling Program (NFMC).

The survey found:

• Roughly 76 percent of the counselors said borrowers looking for a mortgage modification suffered a "negative" or "very negative" experience.

• Approximately 40 percent of counselors who provided written comments said they experienced difficulties working with servicers.

• Some 39 percent of counselors said mortgage servicers regularly lose sensitive personal financial documents and repeatedly request that homeowners resubmit them. In addition, over 78 percent of the counselors ranked "servicer lost the borrower's documentation" as one of the three highest challenges they face assisting homeowners.

Servicers appear to be passing the buck on the issue.

• One of the most common servicers' reasons for canceling trial modifications is insufficient documentation, but the U.S. Treasury can't determine if borrowers have not submitted the required documentation or if servicers lost or misplaced it.

• A whopping 86 percent of counselors said servicers often miss the mandated 30-day deadline for notifying homeowners that they've been approved or rejected for a modification, and don't get around to the job for several months to as long as seven months.

• Trial modifications are supposed to last only three months, but many drag on for six months or more. HAMP guidelines require that borrowers successfully complete a 90-day trial period, during which they make all the required payments on time before they can become eligible for conversion to a permanent modification. Nearly all of the counselors surveyed (96 percent) said trial periods typically lasted longer than 3 months, and 50 percent of these counselors said that trial periods typically lasted 7 months or more.

Some 60 percent of servicers were found not to be complying with HAMP guidelines, prompting counselors to insist that the Treasury enforce sanctions on servicers that did not comply.

"The Treasury told us that it had asked servicers to rectify issues associated with noncompliance and in some cases had withheld financial incentives, but had not yet finalized consequences for noncompliance," the GAO report said.

Counselors also cited the need for Treasury to require mortgage modification servicers to make more timely decisions (51 percent) and to ensure that servicers worked with borrowers who were not yet 60 days delinquent (41 percent).

Borrowers who are not helped by HAMP may be helped by non-HAMP, or proprietary modifications, which may offer greater flexibility, if they get to them in time.

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Broderick Perkins, an award-winning consumer journalist, parlayed 30 years of old-school journalism into a digital real estate news service, the San Jose, CA-based DeadlineNews Group, including DeadlineNews.Com, a real estate news and consulting service and Web site, and the Deadline Newsroom, DeadlineNews.Com's news back shop.

Under the DeadlineNews Group umbrella:

Perkins was the first Examiner to cover three beats for the Examiner.com news service:
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• National Offbeat News Examiner

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Federal consumer watchdog digging into mortgage disclosures

Your new consumer watchdog agency is asking you, consumers, and mortgage professionals to participate in getting this right. This is a sterling example of social networking at its finest. The agency wants you to take a look at two new mortgage disclosure forms and provide feedback, telling the government exactly what you think. They need all the help they can get.  DVD to the right explains, in vivid detail, why the sky fell and why CFPB was necessary. 

by Broderick Perkins
© 2010 DeadlineNews.Com

Unauthorized use of this story is a copyright violation -- a federal crime

Deadline Newsroom - Chronic confusion about home loans has prompted a new federal consumer agency to attempt what has been impossible -- create mortgage disclosures that clearly explain the true cost of borrowing.

The new Consumer Financial Protection Bureau (CFPB) recently released two draft mortgage disclosure forms designed to take some of the hair pulling and teeth gnashing out of learning what your mortgage really costs.

The consumer watchdog agency is asking you, consumers, and mortgage professionals to participate in getting it right. This is a sterling example of social networking at its finest. The agency wants you to take a look at the two forms and provide feedback, telling the government exactly what you think.

"Know Before You Owe," is an example of the new consumer watchdog's effort to put true clarity in "transparency" when it comes to financial disclosure forms.




Mortgage disclosures are a top priority for many reasons.

• Buying a home is the most expensive acquisition or investment most consumers will ever undertake. A home is often a consumer's or family's most valuable asset. You have a right to know what your home truly will cost.

• Ignorance, due to poor disclosures (in addition to outright deception, as well as consumers' own lack of due diligence) gets some of the blame for housing's crash and the worst recession since the Great Depression.

• Consumers have been complaining about mortgage disclosures and the difficulty they have understanding a home loan contract for eons.

"Most consumers have a tough time wading through all the fine print typically found on mortgage documents and other financial disclosure forms," said Norma Garcia, senior staff attorney for Consumers Union, the nonprofit publisher of Consumer Reports.

Among other elements, CFPB's forms include a clear statement, explaining that the borrower is under no obligation to choose a loan product. That helps take away undue influence which has been common in the mortgage lending process.
"This statement will help encourage consumers to shop and compare products, which will have the added benefit of increasing competition among lenders for borrowers' business," Garcia said.

Chronic confusion

A litany of studies reveal just how little consumers know about mortgages.

• Five years ago, just about the time the nation discovered Chicken Little wasn't crying "Wolf!" the AFL-CIO and BankRate.com issued studies that revealed mortgage consumers were confused, concerned and craving more regulatory protection.

The AFL-CIO found 73 percent of adjustable rate mortgage (ARM) holders, didn't have a clue how much their monthly mortgage payment will increase or decrease the next time their rate adjusts. Nearly half, 49 percent, said they weren't very informed about their mortgage's terms and conditions. One in five did not know their current interest rate.

Bankrate.com found more than one in three homeowners didn't even know what kind of mortgage they had, a fixed-rate mortgage (FRM) or an ARM.

• A November 2010, Consumer Reports national poll found that 76 percent of respondents wanted the CFPB to make clearer mortgage and financial disclosures a priority. The majority, 84 percent who had applied for or received a loan or credit card in the past 12 months indicated difficulty with financial disclosures; 31 percent described the disclosures as not clear or easy to understand.

• Early this year a MortgageMatch survey noted the mortgage application process was so excruciating, 21 percent said the ordeal was more stressful than waiting to hear if they got a job. Technical jargon was too much for 21.6 percent of those surveyed and 20.7 percent said it was a challenge to find a lender who was easy to work with. More than 32 percent of survey respondents ranked the application process more challenging than getting the mortgage itself (23 percent) or negotiating the sale price on the home (25.3 percent).

• Finally (but probably not), this month, after years of attempts to overhaul the mortgage industry, not only isn't greater transparency inducing consumers to shop around for mortgages, Zillow Mortgage Marketplace found many home buyers are still miserably in the dark about mortgages.

The Zillow-surveyed group was wrong 46 percent of the time when asking basic questions about mortgage information. More than half, 57 percent of prospective home buyers did not understand how ARMs work. Nearly half, 45 percent, believed they should always buy mortgage discount points. More than one third, 34 percent, did not understand that lender fees vary by lender and are negotiable.

"The draft mortgage disclosure forms prepared by the CFPB will help borrowers compare loans more easily and help eliminate surprises at closing and during the life of the loan. But it's important to remember that consumers need strong protections against shady mortgage practices not just improved disclosure," she added.

For sure.


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© 2010 DeadlineNews.Com

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You are reading a sample of "News that really hits home!" now available from several beats and published in a growing number of locations.

Broderick Perkins, an award-winning consumer journalist, parlayed 30 years of old-school journalism into a digital real estate news service, the San Jose, CA-based DeadlineNews Group, including DeadlineNews.Com, a real estate news and consulting service and Web site, and the Deadline Newsroom, DeadlineNews.Com's news back shop.

Under the DeadlineNews Group umbrella:

Perkins was the first Examiner to cover three beats for the Examiner.com news service:
• National Real Estate Examiner
• National Consumer News Examiner
• National Offbeat News Examiner

Other DeadlineNews Group Feeds are available from DeadlineNews.Com.

DeadlineNews.Com's Editorial Content Is Intellectual Property • Unauthorized Use Is A Federal Crime

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