Loan Think

Now that Fannie Mae and Freddie Mac are going to buy refinanced mortgages with loan-to-value ratios of up to 125%, what will become of these loans? We’re told lenders can sell them for cash to the GSEs and that perhaps the GSEs will securitize them and sell the bonds to the Federal Reserve. GSE officials told National Mortgage News’ Brian Collins that in some cases the lender can hold the mortgage and receive a guarantee from the GSE. All this is being done under the auspices of the Obama Administration’s ‘Making Home Affordable’ program...

For years I wandered around the self-help section of bookstores looking for a magic pill. Ever find yourself doing that? Well I don't believe there is a magic pill per se but there are things that do work and others that don't.

Dan Phillips, former CEO of FirstPlus Financial, give me a call: apparently the 125% LTV market is back! And guess who's driving it? That's right: Fannie Mae and Freddie Mac. Late this past week, the Obama administration loosened eligibility standards on the Making Home Affordable program, which allows "at risk" consumers to refi into GSE-backed loans. When the program was first introduced the LTV cap was 105%. Now it's 125% - based on current appraisals. All kidding aside, I hope the program does, in fact, save some borrowers from foreclosure - especially given Friday's unemployment report, which revealed that U.S. companies shed 467,000 positions in June, driving the jobless rate to a 26-year high of 9.5%. If laid-off workers looking for full-time jobs (but working part time) are factored into the numbers, the unemployment rate is really 16.5%. Mortgage servicers can ponder what might happen to their delinquencies in the months ahead if the White House's "shovel ready" works projects don't start hiring soon. Meanwhile, financial service companies soon will begin reporting second-quarter earnings, which will give us clues (hopefully) as to whether the nation will see an economic turnaround in the second half - or whether that's just wishful thinking on the part of economists who are working under the belief that "this thing has to turn around soon." As for FirstPlus, that publicly traded firm collapsed in the late 1990s. The "private sector" high LTV loan that blossomed last decade was based on two government-backed mortgage programs: Title I and 203(k). The original idea behind the programs was to give borrowers money to fix up their homes in the hope that once the repairs/upgrades were done, the house would be worth, say, 100% of the loan amount or even better. It was a nice little grassroots idea that allowed inner city urban pioneers to buy beat up old row houses and fix them. The problem with the program: investors began to use it. And once the private sector got involved, well, you can read a book or two about it. Question: Which investment banking firm (among others) was backing FirstPlus? Answer: Bear Stearns, which is now the property of JPMorgan Chase...

Here are a few more details about the Obama Administration’s proposed Consumer Financial Protection Agency and how it affects loan brokers: the CFPA can “impose on mortgage brokers a duty of best execution with respect to available mortgage loans and a duty to determine affordability for borrowers.” A Treasury Department white paper on the CFPA plan notes that loan brokers “often advertise their trustworthiness as advisors on difficult mortgage decisions” but notes they often accept “side payments from product providers.” I would assume those side payments are yield spread premiums. As for brokers advertising their skills, I can’t say I’ve seen too many direct mail pieces lately. And in case you missed it: late Tuesday Treasury sent a 152-page legislative proposal on the CFPA to Capitol Hill. Let the games begin...

A common question asked by new reverse mortgage originators is "what is the best way to get started?" It's a question that is to be expected since beginning any new venture requires a plan.

The main (economic) event of the week is this Friday – that’s when the Department of Labor releases its June unemployment report. Residential servicers and loan modification experts know full well the corollary between the unemployment rate and mortgage delinquencies. The jobless rate hit a 25-year high of 9.4% in May, jumping from 8.9% in April. Will the jobless rate cross the 10% threshold? Meanwhile, one mortgage vulture fund investor who’s based in California told us recently that the “bottom-end” of the housing marketing is “smoking” in the state. Specifically, he said homes that sell for $500,000 or less are moving quickly, especially near coastal areas. As for the job market in SoCal, he said that his firm recently advertised for a bi-lingual debt collector. Within three days he received 75 applications for the job...

Many businesses are searching for something that will enable them to come through the current tough economic conditions successfully.

TAYLOR, BEAN & WHITAKER OF FLORIDA SETTLE CHARGES THAT IT ALTERED INCOME AND ASSETS TO FUND NONTRADITIONAL LOANS

For years financial analysts have been wringing their hands over the low U.S. savings rate. Well guess what; we are no longer a nation of spendthrifts: the Commerce Department reported that the personal savings rate soared to 6.9% in May -- a 15-year high, while spending rose by a modest 0.3%. This is potentially bad news (believe it or not) because to get the U.S. economy moving again consumers need to spend. Then again, how can you spend if you’ve lost your job or fear losing your job? But there could be a silver lining to this bad news of “savings fever.” All that saved up money might, potentially, be used to for downpayment money on a new house. This might even lead to lower loan-to-value ratios on mortgages. Or am I dreaming?

Thank you for responding over the past two weeks to my request for your personal experience with the use of credit repair in your business. I am still compiling the results. If you have not provided information yet, please take this opportunity to go to the bottom of the article and comment. Thanks in advance.