Tag Archives: real estate loans

Foreclosures Up 30% in February

March 31, 2009 jd

hwyfore

Although several major lenders have temporary halted foreclosures, the number of households threatened with losing their homes rose 30 percent in February from last year’s levels. RealtyTrac reported Thursday.

Nationwide, nearly 291,000 homes received at least one foreclosure-related notice last month, up 6 percent from January, according to the Irvine, Calif-based company. While foreclosures are highly concentrated in the Western states and Florida, the problem is spreading to states like Idaho, Illinois and Oregon as the U.S. economy worsens.

“It doesn’t bode well,” for the embattled U.S. housing market, said Rick Sharga, vice president for marketing at RealtyTrac, a foreclosure listing firm. “At least for the foreseeable future, it’s going to continue to be pretty ugly.”

The rise in foreclosure filings came despite temporary halts to foreclosures by Fannie Mae and Freddie Mac, and major banks JPMorgan Chase, Morgan Stanley, Citigroup and Bank of America. Those companies pledged to do so in advance of President Barack Obama’s plan to stem the foreclosure crisis, which was launched last week.

It’s my opinion that the Al-A loans, are now starting to hit home. Al-A loans were the re-wrapped subprime loans that lending institutions came up with when the subprime loans were starting to get a bad name. There is an estimated $600 billion in residential mortgages that are due to fail that were made in 2006-2007 because of the Al-A loans.

Countrywide Sues AIG, AIG Sues Countrywide

March 24, 2009 jd

American International Group also well known as AIG, and Countrywide Financial Corporation have sued each other. Countrywide sued AIG’s United Guaranty Indemnity Company for breach of contract in a dispute over insurance losses for subprime mortgage loans now in default.

In turn, AIG sued Countrywide last week in a California federal court, contending the lender had misrepresented risks tied to more than one billion dollars of mortgage loans that United Guaranty insured.

According to Reuters ”United Guaranty said in its court papers that unlike the traditional use of mortgage insurance, used to facilitate home purchases by responsible borrowers, Countrywide wanted coverage to increase the credit rating of its mortgage-backed securities offerings.

It said Countrywide traded on a long-standing relationship between the two companies to induce it to insure loans it says were too risky and not issued according to proper underwriting standards. It says it has already paid out insurance claims of more than $30 million tied to the Countrywide loans and is exposed to additional claims of “several hundred million dollars more.”

A Bank of America spokeswoman declined to comment on the litigation on Friday. The bank bought Countrywide, once the largest U.S. mortgage lender, for about $4 billion in stock last July as the lender’s risky subprime mortgage loan business began to fail.

An AIG spokesman said Countrywide made misrepresentations and did not follow appropriate underwriting standards, and as a result “exposed us to claims we would not have had to pay out. Now we want the court to order them to make us whole.”

If I had to bet who is going to win this lawsuit, I would place my money with AIG. Having heard much about Countrywide lending practices while we were in a heated real estate and mortgage lending market, I don’t think AIG is going to have much trouble finding problems with the way Countrywide made their subprime loans before the company went belly up. But anyhow, that’s just my opinion based on hearsay.

By the way, can Congress get over the bonus that AIG gave out and get on with the important business of getting this Country back up and running? I think the news media and Congress have spent enough time on this that the CEO’s of large corporations “get it”.

Real Estate

Mortgage Rates Drops to Near-Record Lows

March 23, 2009 jd

Mortgage rates are dropping to near record lows – below 5%. This is in the wake of the Federal Reserve’s decision to buy up Treasury bonds and mortgage securities. Lower rates may help spur home sales, but analysts expect much of the action to come from homeowners seeking to refinance.

If you are in the category of refinancing, expect tighter rules and regulations, meaning you have to have a good credit score, equity in your home and there will be tighter debt to income ratio requirements. Keith Gumbinger of HSH Associates, a publisher of mortgage information, said good interest rates were available to all kinds of borrowers in all kinds of credit circumstances when the market was running flat out five years ago. That’s not the case today. “You must be a much better borrower than you had to be before,” he said. “For some borrowers, you might have to get used to hearing ‘no.’”

Be careful when you apply for your refinancing. I have a client who is in the process of refinancing her home. She applied at Countrywide and had me look at what they were going to charge her to refinance. They started out with 2 points or 2 percent of her loan to as part of the cost for refinancing. In addition, they had enough garbage fees that the total refinancing would have cost her $11,000 for a $417,000 loan. I had her shop at two other loan companies, and her costs dropped to about $6,000. Countrywide, when they were made aware of the pricing from the other two mortgage brokers, dropped their cost to refinance to match the other two brokers.

Home buyers and owners who want to refinance should be prepared for a longer process, and for different rates or costs, depending on their credit scores and loan-to-value ratios. Now, there might be three or four different levels for transactions that previously would have been priced equally.

By the way, after April 27, 2009 Countrywide will shed its name that it had since 1969 and will be morph into Bank of America Home Loans. Bank of American acquired Countrywide, once one of the biggest subprime lenders last year. More on Countrywide tomorrow

Real Estate

Fannie Mae Eases Credit To Aid Mortgage Lending

March 18, 2009 jd

foreclosuresign
Fannie Mae announced that in order to help ownership rates among minorities and low-income consumers, they are going to ease the credit requirements on loans it purchases from banks and other lenders.

The action, which will begin as a pilot program involving 24 banks in 15 markets — including the New York metropolitan region — will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans. Fannie Mae officials say they hope to make it a nationwide program by next spring.

Quoting the New York Times:

“In addition, banks, thrift institutions and mortgage companies have been pressing Fannie Mae to help them make more loans to so-called subprime borrowers. These borrowers whose incomes, credit ratings and savings are not good enough to qualify for conventional loans, can only get loans from finance companies that charge much higher interest rates — anywhere from three to four percentage points higher than conventional loans.

”Fannie Mae has expanded home ownership for millions of families in the 1990’s by reducing down payment requirements,” said Franklin D. Raines, Fannie Mae’s chairman and chief executive officer. ”Yet there remain too many borrowers whose credit is just a notch below what our underwriting has required who have been relegated to paying significantly higher mortgage rates in the so-called subprime market.”

In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980’s.

”From the perspective of many people, including me, this is another thrift industry growing up around us,” said Peter Wallison a resident fellow at the American Enterprise Institute. ”If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.”

OH, BY THE WAY, THE DATE OF THIS PUBLICATION WAS SEPTEMBER 30, 1999
Read the article at New York Times

Real Estate

Jon Stewart vs Jim Cramer

March 14, 2009 jd

dragon
It seems bad enough that as I wrote in my blog yesterday, when subprime mortgage loans were showing signs that they were toxic, Wall Street simply re-packaged subprime mortgages into a new costume and called the loans Al-A mortgages. In other words, they took the subprime loans and called it by a different name. Both subprime and Alt-A loans were sold across the financial industry as funds called securitisatins. Insurance firms who bought the re-dressed Alt A securitisatins will be forced sellers since they cannot hold securities below investment grade.

Now, watching Jon Stewart weight into Jim Cramer, it’s obvious that Wall Street has been playing with our 401K and retirement funds. Cramer admitted under stress, that Wall Street is taking our funds and playing the stock market with it by short selling. He also admitted that he did short selling and at one time advised people that it was OK to do so. But now he says that it should be stopped!

I’m the last one to believe in Government intervening in the public sector, but the boys on Wall Street are playing with your money and mine. So where was the oversight of Bernard Madoff, Sir Allen Steward, the repackaging of the subprime loans, the large intuitional short sellers that can sway the market? Are we asking the fox to guard the hen house?

Many people are being forced into foreclosure because they are losing their jobs and can’t afford to make their mortgage payments. You know, people who are saying that the Government should not help people who are defaulting on their mortgage may be right. Maybe Wall Street and the banks should be the ones bailing out the homeowners that have lost their jobs because of their greed.

If you missed the show here is the link

Real Estate

Subprime Foreclosures, Move Over for Alt-A Foreclosures!

March 13, 2009 jd

pick1
Gone are the days when subprime loans were what kept bankers up at night, thanks to explosions in other corners of finance. But, In terms of toxicity, subprime loans had no equal. That is until now. The loans of better heeled people are now beginning to go bad at an alarming rate.Alt-A troubled loans have already brought down some banks, including IndyMac, a California bank. Mooney’s, a rating agency, has recently quadrupled its loss projections on bonds backed by Alt-A loans. It now projects losses for 2006-2007Alt-A securities to top 20%, compared to a historical average of under 1%.

The problem is that much of the Alt-A lending came at the tail-end of the credit boom in late 2006 and 2007. By then subprime was already getting a bad name. So Wall Street hit on a ruse. What it did was to take borrowers who in normal times would have been subprime and dressed them up as mid-prime! Many of these loans were doomed from the start. According to the Bank for International Settlements, a staggering 40% of these American mortgages originated in the first quarter of 2007 were interest only or negative amortization loans.

Alt-A mortgages, were offered to borrowers sandwiched between subprime and prime. These loans were supposed to be for people who had reasonable credit standing but unsteady income, such as the self-employed. The lending institutions had very low standards for these loans, using scant documentation and any way to make a loan, such as exotic negative-amortization mortgages, which allow borrowers to pay less than the accrued interest, with the difference added to the loan balance. Like I said before, the main requirements were to put a mirror in front of your face, if the mirror steamed, it meant you were breathing and you had a loan.

Analysts at Goldman Sachs put possible write downs on the $1.3 trillion of total Alt-A debt, including both securitized and un-securitized loans, at $600 billion, almost as much as expected subprime losses.

So, prepare yourself for another wave of foreclosures, this time the Alt-A mortgages, due to poor lending practices by banks and Wall Street.

Real Estate, Travel

Jon Stewart Blasts CNBC

March 9, 2009 jd 1 Comment

: Another picture of a professional dog walker. Possible new occupation for some of the people on CNBC (I’m still in Buenos Aires and I love dogs)

I love comedy. Comedy takes a complex situation and makes it so easy to understand. This was so much so with the Comedy Central’s skid by Jon Stewart taking on the high and mighty prognosticators of stock market trends on CNBC. Those advisors on CNBC are always full of advice of which stocks to buy, interviewing CEO’s of large companies and glowing about their potential outcome. Jon Stewart shows several of these interviews by them. He then shows the outcome shortly afterwards where for all of their wisdom the companies fail. I love the interview shown of Sir Allen Stanford, a billionaire at the time of the interview on CNBC. Shortly after the interview, the FBI stated that they think Sir Stanford is running a Ponzi scheme.

But the most telling part of the program was when they showed Rick Santelli ranting and raving at the Obama Administration for giving a small portion of the bailout money to homeowners facing foreclosure. Wow, what a rant. (By the way, Santelli was supposed to appear on the show, but didn’t show) But Jon Stewart puts it all in perspective when he proceeded to show that these icons of prognosticators had no problem with the present and past Administrations giving billions of bailout funds to banks, General Motors, Chrysler, AGI and other large companies.

You know it’s easy to place the blame on people facing foreclosure because they should have known what they were getting into when they took out a loan to buy a house. But who set the standards for these loans? It wasn’t the Realtors or the mortgage brokers or the homeowners. Yep, it was the banks setting the lending standards, enticing people into buying a home with low interest rates. Once people bought a home, the loan was set to trigger into a higher interest rate. Don’t you think the banks knew some people could not afford the mortgage? In the old days they called that bait and switch. Now who is getting the majority of the bailout funds, hummm, of course, the banks.

I don’t know what CNBC’s qualifications are to hire Rick Stanletlli or any of the other interviewers. Is it that they are highly educated to help people lose their money, or are they poorly trained psychics? So Rick and his cohorts are hired by CNBC to advise people of the best stocks to buy, and they are almost always 100 percent wrong, so why are they picking on people who are losing their homes? Is it because the homeowners are not as educated in financial matters as they are and should have never bought a home? (Or their stock recommendations)

Like Jon Stewart said, “If I had listened to them, I would be a millionaire, that is, if I had started out with $100 million.” Their coding is screwed up so here’s the best i could do here’s the link to the video.

Real Estate, Travel

Trip to a Museum & Bits & Pieces in Buenos Aires

March 7, 2009 jd

Friday I went to the Museo Nacional De Arte Decorativo or National Museum of Decorative Art. First an update of what’s happening here. The peso was propped up Thursday by the Central Bank and state run banks as they heavily intervened in the market to stop the peso from further weakening. The US gained two cents on the peso Friday, its highest value since 2002. When the banks offered $100 million dollars of its reserves, the peso settled at 3.622 pesos to one dollar. It’s the pesos lowest level since November of last year.

If you think that your credit card interest rate is high, how about the interest rate for commercial construction in Argentina? Argentine President Christina Ferandez complained about “the usurious interest rates” banks are charging private companies for infrastructure works. “Local banks have offered rates of up to 40 or 41 percent” she blasted. Of course Argentina is presently having a 20 percent inflation rate and real estate in Argentina is bought for cash, no low down payment and 30 year mortgage.

Back to the museum, the original structure was built by Mr. Matias Erazyriz and his wife Mrs. Josefina De Alvear. They resided in this huge palace with their two children. The palace was the hub of many major social events until Mrs. Alvear passed away in 1935. The remaining family sold the palace along with the art collection to the Argentine Government shortly thereafter.

The museum is huge, with four floors and a basement that was used for servants, boilers and garage. The museum holds over 4,000 exhibits, some dating back to the 15^th century. It is well worth going to this museum if you happen to be in Buenos Aires. Just the workmanship of the building itself is worth the trip. The museum is located at Av. Del Libertador 1902 in Buenos Aires. Their website is Nacional De Arte Decorativo

So I called the bank again, after paying to rent a computer to get all the information the previous agent wanted. I gave a new agent my card number, social security number and said, now do you want my mother’s name, my address and she cut me off and said “Oh, no you’ve given me enough information.” (Grrr!) She got off the phone for a few minutes, came back and said they were upgrading my card, which was the problem, they were taking care of the problem now and I should be able to use my card in a few hours. So today, I was able to use my card, its fun dealing with a bank, NOT!

Professional Dog Walkers, There are many of Them in Buenos Aires

Prior to traveling abroad, I advised my bank that I was traveling to Buenos Aires. What a surprise when I went to draw out some money and my card was rejected! Calling the international toll free number listed on the back of my card, (which does not work here in Buenos Aires), I was asked for my card number, my social security number, my address, my mother’s name, and then what was the last deposit or what was the last expenditure or my account number. After 10 minutes, having none of that information, I gave up, went on line and got all the information that the agent for the bank requested.

Real Estate

President Obama’s Help For Homeowners

February 18, 2009 jd

: The White House

President Obama will be in Phoenix today, to unveil his “Homeowner Affordability and Stability Plan” to help bring relief to homeowners and bring some order to the housing market.

A portion of his blog reads:

“The President’s strategy for economic recovery is a stool with several legs, as he’s said, and one of them is solving the foreclosure crisis.

“We must stem the spread of foreclosures and falling home values for all Americans, and do everything we can to help responsible homeowners stay in their homes,” he said yesterday as he signed the American Recovery and Reinvestment Act into law

To read the full text and explanation of what is proposed read the White House Blog at The Briefing Room

Real Estate

Rip off a House, go to Jail

February 12, 2009 jd

Just as we get a high when we purchase a new home, it must be an equal low when you are losing your home to foreclosure and for some people it brings out their dark side.

For example, browsing on the Internet, I read where someone was having a “Demolition Sale” on their soon-to-be foreclosed home. According to the article anything and everything in the house was for sale!

Here’s another one from a house that once sold for $630,000 that was published on Voice of Sandiego.org

“The kitchen cabinets were gone from the yellow, 1960s-era four-bedroom, two-bathroom house. So were ceiling fans, blinds, light switches, outlet covers, interior doors, closet doors, the toilet, a vanity, the stove and marble counters. The kitchen walls had jagged lines of marble tile, marking the perimeter where the cabinets once were. Gaps showed in the paint, inside and out, the job stopped in mid-refurbishment. The former owner had stripped the house and taken nearly everything with her.”

According to an article from the California Association of Realtor®

“The report said, in summary, damages intentionally caused by the mortgage holder can be subject to criminal and civil penalties. In fact, removal of fixtures valued more than $100 constitutes a felony in the State of California and can result in a state prison sentence for a year or more.

“Even fixtures totaling less than $100 can result in a misdemeanor and could include county jail up to one year and/or a fine up to $1,000.”

The problem of course is that the foreclosed owner of the house has no assets. So pursuing them would not get the banks any money. However, I think they should pursue them. Why? Because twenty percent of the people foreclosed on do just that, rip the house apart. This hurts you and I, because it reduces the value of the home when it goes back on the market and it lowers the value of your home and everyone else’s too.