Vexing Prognostication from Fannie

WASHINGTON, D.C. — Fannie Mae's latest national housing survey finds that most Americans believe the housing market has reached bottom, but they are more cautious about owning a home. 


Seventy percent of Americans think it is a good time to buy a house, compared with 64 percent in a similar survey conducted in January 2010. But 33 percent — up from 30 percent — of all respondents said they would be more likely to rent their next home if they were to move.

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Fannie Mae Implements Modification Plan for Second Liens

Excerpts from Fannie’s Press Release - Tuesday, 9/21/10 6:12 PM:

“The Second Lien Modification Program (2MP), announced on September 21, 2010... is designed to work in tandem with the Home Affordable Modification Program (HAMP) to create a comprehensive solution to help borrowers achieve greater affordability by lowering payments on both first lien and second lien mortgage loans.”

“All Fannie Mae-approved servicers must participate in 2MP for all eligible Fannie Mae second lien mortgages, and are required to do so no later than January 1, 2011.”

So?!  What does a HAMP modification feature have to do with selling real estate?  Why concern ourselves with workout plans for second mortgages?  Good questions.

The answers lie in the way government works.  Government solutions usually have strings attached and the strings tend to wind in and around anything within reach.  In this instance the tentacles of control may hold a benefit to RE sales. To put this context let’s look at federal activity over the past 26 months:

Jul 2008	FDIC	Intervenes in IndyMac’s insolvency and  inherits Indy’s large portfolio of non- performing mortgages loans.
Aug 2008	FDIC	Introduces loan modification program “for  troubled Indymac borrowers who are  currently behind on their mortgage  payments.”
Oct 2008	Bush Admin	The Emergency Economic Stabilization  Act enacted in response to the sub-prime  mortgage crisis, TARP fund created.
Nov 2008	FDIC	“Mod in a Box” program announced,  based on the IndyMac loan modification  model.
Feb 2009	Obama Admin	Making Home Affordable program  (HAMP) announced, codifying the FDIC’s Mod in a Box model as mandatory for  mortgage servicers under EESA/TARP.
Mar 2009	GSEs	MI Companies delegate authority to  GSEs for approval of loan modifications  under HAMP.
May 2009	HUD	FHA implements Home Affordable  Modification Program.
Nov 2009	US Treasury	Home Affordable Foreclosure Alternatives  (HAFA) program announced, establishing  standard requirements for short sales  and deeds-in-lieu of foreclosure.
Nov 2009	GSEs	MI Companies directed to delegate short  sale approval authority to GSEs.
Sep 2010	Fannie	Second Lien Modification Program (2MP)  announced as enhancement to HAMP.

OK, so much for the history lesson.  What’s the point? 

Simply put – within the Bank-Bailout/HAMP/HAFA arena – one program affects another.  IndyMac’s insolvency leads to Mod in a Box.  Mod in a Box becomes HAMP.  HAMP leads to HAFA, MI delegation to GSEs, and now mandatory reductions of subordinate liens during mortgage modification. 

The US Treasury Department is the hammer and TARP is the anvil upon which financial institutions are drawn into mandatory concessions.  For better or for worse, that’s what is happening.

It doesn’t exist today, but recent history would seem to indicate that in the near future subordinate lienholders will be required to accept short payoffs.  HAFA already includes provision for payment of $3000 to subordinate lienholders.  What’s missing is a mechanism to require subordinate lienholders to accept short payoffs.   Coming soon...

Your thoughts? 

Email me at: croberts@pafirstsettlement.com

2MP News Release

2MP Announcement

BOA Rolling Out New Short Sale Approval Process

Bank of America Home Loans improves short sale process for homeowners and real estate professionals

As part of Bank of America Home Loans’ commitment to successful homeownership, our first priority is to keep owners in their homes through loan modifications or other remedies. Unfortunately, sometimes these solutions do not work and a “short sale” is deemed to be the best course for the homeowner. A short sale allows a borrower to sell the home for less than the total amount due on the mortgage loan secured by the home. It helps the borrower avoid foreclosure and reduces some of the lender’s loss by avoiding or minimizing foreclosure activities. The borrower does not receive any of the proceeds of the short sale.

High unemployment levels, declining home values and other factors facing some families have doubled short sales in the last year. The result: the slowing of an already time-consuming and intensive process in which participation from multiple parties is typically required.

We clearly recognize the need to improve the short sale process for both our customers and the real estate professionals who are critical to a successful transaction. In response to the rise in short sale volume, we have updated training, enhanced our technology and established a dedicated team of short sale professionals that is available to help customers and real estate professionals navigate the process.

We are also piloting a cooperative short sale program that includes proactive outreach to customers who have been unable qualify for a home retention solution, or have fallen out of a workout program, to measure their interest in a short sale. The property will be listed at market value, and Bank of America will work with the customer and agent throughout the marketing period. If an offer is received, we will be in a position to approve the sale within two weeks. This program is currently in a limited pilot stage, and we hope to expand it soon.

Bank of America has taken big steps to shorten response times and improve overall communication. We recently deployed a secure, password-protected internet portal called Equator (formerly known as REOTrans). Bank of America is the first to provide this around-the-clock platform for real estate professionals and homeowners to track the status of short sales. In real-time, homeowners, agents and bank representatives can see and exchange documents, track important dates and deadlines and significantly improve communication between all parties involved.

Below, we have provided some tips for agents and homeowners to help you better understand the short sale process and identify areas in which you can aid in advancing the process as well. In addition, we have included a link to a December 10 webinar sponsored by the National Association of REALTORS® in which Bank of America’s Dave Sunlin outlines the short sale process and recent enhancements.

Bank of America is committed to continually evaluating and improving our processes. As we pursue changes and improvements to ease the short sale process, we appreciate the support and patience of our customers and the real estate professionals we work with daily.

Tips for real estate professionals:

There are many things you can do to help minimize this lengthy process time:

• Advise clients to contact their servicer as early as possible
• Ensure all customer financials are in PDF format
• Help clients complete all documentation accurately and as soon as possible
• Make sure the purchase offer is a legitimate offer and fully executed
• Submit the best possible purchase offer at fair market value
• Provide listing information and comparables to support price

Frequent causes of delay to be aware of:

• A change of buyer or agent at any time may require process to revert to an earlier step; notify client’s servicer immediately if there is any change
• Investor/mortgage insurance approval is needed if the servicer is not fully delegated to approve the short sale
• Release on a second lien must be received prior to issuing an approval letter
• If customer has filed bankruptcy, the trustee must provide a court document that approves the sale of the property

View the December 10 National Association of REALTORS® webinar on short sales Opens in a new browser window..

The Federal Reserve Nixes Yield Spread Premiums

Monday the Federal Reserve announced new rules banning yield spread premiums (YSPs).

The new rules (under Regulation Z) prohibit payments to a lender or broker based on the loan’s interest rate, they do allow for compensation based on a fixed percentage of the loan amount.

Yield spread premiums enabled mortgage brokers and lenders to earn additional fee income as a result of charging borrowers above-market interest rates.

Advocacy groups point to yield spread premiums as among the factors leading to the sub-prime lending morass.  The Federal Reserve’s stated purpose for the rule change (under Regulation Z) “is is to protect consumers in the mortgage market from unfair or abusive lending practices that can arise from certain loan originator compensation practices. 


Links:
Federal Reserve Statement
Article - David Streitlfeld, New York Times
Final Rule