Lawsuits for nation’s largest banks

Another lawsuit is in the works for the mortgage industry.  I had recently blogged about the Obama administration’s plans to create a Justice Department unit whose main goal and intent was to prevent mortgage fraud by bringing together investigators from across the country aimed at finding out what the causes of residential mortgage backed securities.  They want to know what led to it and how to continue to prevent it.  

Well, New York Attorney General Eric Schneiderman has taken it one step further by suing Bank of America, J.P. Morgan Chase, and Wells Fargo.  His lawsuit accuses the three big banks of deceit and fraud over their use of MERS, the Mortgage Electronic Registration Systems.

He has a few claims here.  (1) That the banks submitted court documents that appeared to provide authorization for foreclosures with false and misleading information. (2) The system stores inaccurate data.  (3) It prevents homeowners from being able to track property transfer information from public records.

Schneiderman said, “Once the mortgages went sour, these same banks brought foreclosure proceedings en masse based on deceptive and fraudulent court submissions, seeking to take homes away from people with little regard for basic legal requirements or the rule of law.”

He’s claiming that over 70 million loans were affected and that the banks saved over $2 billion.  Of course, none of the banks had any comments in response to the lawsuit when it was filed Friday.  More information can be found in this USA Today article.

So the question is, will this affect the mortgage industry and homeowners in the long run?  If anything, I can see a possible settlement by the banks rather than fighting it in court.  It seems to be something that will continuously happen throughout the next few years, banks being sued because of inaccuracies that led to false foreclosures.  Do you see this as something that can drastically change how banks loan money to future homeowners?  To me, it seems like another check mark on a checklist but nothing that would change lending terms as a whole.  Please leave me your comments.  I’d love to hear from you!

Mortgage woes? Tell it to them!

Well, now you have a place to complain, gripe, and deal with all your mortgage issues and woes.  Developed by the Obama administration, the Consumer Financial Protection Bureau is now open for business.  And they want to hear all about your mortgage problems.  This government agency has been mostly dealing with credit card complaints (talk to them about that, too) but now want to hear about mortgages.  

When you get to their page, you can easily submit your complaint, watch a YouTube video from their director, and connect with them via Facebook or Twitter.  According to this Chicago Tribune article, when they initially opened up to hear credit card complaints, they received over 5,000 and were able to resolve over 3,100!  They’re hoping to handle complaints through the end of this year.  

As I mentioned, the easiest way to contact them is via their Web site.  However, they’re also reachable via postal mail at P.O. Box 4503, Iowa City, IA 52244, fax 855-237-2392, or telephone 855-411-2372.  Please be aware that it is not a toll-free number.  But they did mention that they’re hoping for virtually no wait time to speak to a representative.

You can also create an account through the site and visit often to check the status.  You can also view correspondence between CFPB officials and members of Congress as well as recent press releases regarding the bureau.  

I’d love to hear if anyone has submitted a complaint through you and whether they were successful in resolving it or not.  I hope that this is another avenue the government has established to take care of those underwater and remove some of the excess inventory we’re seeing on the market.  Please post your story if you have one in the comments!

My 2012 real estate predictions

Seeing how we’ve gotten to the last week of 2011, I figured now was a perfect time to talk about what real estate looks like next year, in 2012.  Unfortunately, it hasn’t been the greatest housing market we’ve seen.  Home values in 2011 were still low, more people are renting, and others are having a harder time obtaining credit to purchase a house.  Here are some of my predictions for the upcoming year…

1. Disappointment over missed opportunities.  I think a lot of people might be kicking themselves for not taking the time to refinance their current mortgage or purchase an investment property at a rock-bottom price.  I’m not positive as to how long rates will stay low (could be another few years), but it’s best to strike while it’s hot!  And I’m going to admit that they’re not going to get much lower than they already are.  So if you’re in the market to do either of those things, now is the time!

2. I see trouble brewing with the HARP guidelines.  HARP, again, is the Home Affordable Refinance Program that I had written about previously.  This was a chance for homeowners to be able to refinance and get a lower interest rate, even though their house isn’t worth what it once used to be.  Also, the loan has to be owned by Freddie Mac or Fannie Mae.  A lot of these lenders are not requiring appraisals, which is great for homeowners, but I see another problem.  I have a hard time believing these lenders will be okay without an appraisal because they’re going to be liable for it in the future and if the homeowner defaults down the road.

3. A continuation of low home prices.  This is largely due to the amount of foreclosures on the market that are driving down the values of the surrounding homes.  This isn’t going to change in the next year, as the economy is still struggling to rebound and many people are still unemployed and underwater on their mortgages.  Once all the distressed inventory is sold (who knows when that will be?) we’ll be starting to see a shift with home values steadily increasing.

4) Credit guidelines to remain tight.  For the reasons stated above, such as the amount of foreclosures and short sales and unemployment and a bad economy, the lenders won’t be doing anything to release the grip they have on approving people to purchase homes.  They’re struggling enough as it is with all the delinquent loans that they are being extra stringent in awarding new ones.  I don’t see that changing anytime soon.

Do you agree with my predictions?  Are there any that I haven’t mentioned that you believe will happen?  I’d love to hear your comments!  And a very Happy New Year to all my readers!

We can improve the mortgage industry

So now the government wants our help.  But this is going to be a good thing for all those homebuyers out there.  

According to this USA Today article, the Consumer Financial Protection Bureau is looking to get our feedback to help make their mortgage paperwork and disclosures a lot more user friendly.  They want to know suggestions on how to make the expenses easy to understand as well as getting input on what borrowers are looking to see in the paperwork.

For example, right now borrowers are given two documents when applying for a loan: a Truth in Lending form (a disclosure) as well as a Good Faith Estimate which predicts what your closing costs will be.  And the Good Faith Estimate was just regulated last year saying that the total cost could not be more than 10% off what the initial estimate was.  

But they’re still confusing.  According to the article, “They really don’t tell the consumer what they want to know,” says Mike Anderson of the National Association of Mortgage Brokers. For example, a key concern for borrowers is the total amount they’ll need to pay at closing. Yet that figure is absent from the current forms.”  Oftentimes you don’t receive the exact amount you need to bring to closing until 24 hours prior, sometimes as close to 2 hours prior.  This is hard when closing first thing in the morning when you have to get to a bank first.

I think this is a great idea.  They’re asking for our input as borrowers as to what’s important to us, rather than just trust the guys in suits that work there.  So I suggest that everyone goes on the Web site to view the forms and make suggestions.  It will be July 2012 before all the forms are finalized and the bureau said they’d be taking suggestions through at least September of this year.  

I can’t stress enough how great it is that our feedback can go toward implementing something that we’ll continue to use.  If you’re confused about any part of the forms or want to see more, definitely go online to give your input.  It’d be great if they did this with the HUD-1 settlement statement as well.  I have many buyers who are confused by how the statement appears and only get a cursory look with their attorney at closing.

I’m available online for all of your real estate needs.

Mortgage confusion still high

Zillow.com’s Mortgage Marketplace recently conducted a nationwide survey about what adults know about mortgages.  The Chicago Tribune posted a column about the results, and they were pretty surprising to me that a lot of adults don’t know much about mortgages.  So I wanted to post some results here and discuss to make everyone more knowledgeable.

1. 57% of prospective homebuyers don’t know how ARM (adjustable rate mortgages) work.  Most thought that they will always reset at a higher rate.  First of all, a definition.  An adjustable rate mortgage is one where the rate can change after a certain number of years.  For instance, you’ll hear the terms 5-year ARM or 10-year ARM.  That means the rate will reset after that number of years.  So if you lock in at 5% interest for a 5-year ARM, in 5 years, the rate will go up or down (not always up!) depending on what the current market conditions are.  And ARMs also have limits to how much they can go up or down.  The difference between this and a fixed rate loan is that your interest rate will not change on a fixed rate.  So it’s important to discuss ALL conditions with your mortgage broker prior to signing a loan.

2. 33% believe that being prequalified for a loan means you have financing secured.  This is very misleading.  Oftentimes when you go to make an offer or begin looking at homes, your Realtor will want to make sure you’re prequalified for a loan.  That means you’ve spoken to lenders who will talk to you and find out the maximum purchase price you have.  The lenders should pull your credit and get some other documentation from you to know the amount you can spend.  This, however, does not mean the loan is done.  Once you’ve found a home, you will submit your contract to your lender who will go through the underwriting process.  This involves an additional credit report sometimes, paycheck stubs, tax returns, etc.  You’ll also make sure that the title is clear on the home, all prior to you actually signing any closing paperwork.

3. 55% think that mortgage rates are set per day.  In fact, rates can fluctuate all throughout the day, just like the stock market.  It’s important to know this because sometimes your lender will quote you a rate of 5%, for example, and by that afternoon, that rate could be up to 5.125%.  So you’ll want to talk to your lender about “locking in” a certain rate, which you can often do but are given a timeline on it to go under contract on a home for that rate to stick.  And while missing the deadline can mean your rate will go up, it’s also possible that the rate will be lower.

I’d love to know what other mortgage questions you have.  Please always speak to a financial representative prior to signing any paperwork on a loan so you understand the process.  I can be reached  online.

Foreclosures down, backlogs up

Well, I’ve got good news and bad news.  And the bad news can even be interpreted as good news for some.  Good news: foreclosure rates across the country are at a 3-year low, according to MSN Real Estate.  Bad news: Courts are so backlogged by the foreclosure filings that it’s taking a year or more for foreclosures to be processed on some homes.  And that can be good news for those underwater on their mortgages, as they can live in their home for even 2 years in some states without being evicted and without a mortgage payment.

RealtyTrac Senior Vice President Rick Sharga says that “This is really all part of the robo-signing paperwork issue.  Almost none of this is related to a decline in distressed properties. ”  It’s just that Courts can’t keep up with all the paperwork.  And Sharga is unsure whether we’ve reached our peak of foreclosures or more filings will occur once the banks and Courts start catching up.  Even new hirings aren’t helping the banks move the process along any quicker.  And that’s also bad news for buyers interested in foreclosure or bank-owned properties.  The waiting process can still take a while for someone to review all the paperwork.

I just mentioned how some homeowners can live in homes for 2 years prior to being evicted.  In some states, like New York and New Jersey, it’s taking the bank an average of 800 days to finalize a foreclosure once the process has started.  And now the government is going to charge lenders for handling foreclosures improperly.  They’ve also passed regulation requiring 14 mortgage servicers to hire more staff and have a single point of contact for a homeowner dealing with a foreclosure or loan modification.

Nevada leads the country with the highest foreclosure rate.  1 in every 35 homes has received a foreclosure filing.  Arizona and California round out the top 3.  And, unfortunately, Illinois also is included in the top 10, along with Colorado, Idaho, Utah, Georgia, Michigan, and Florida.

And analysts say it can take years for all these foreclosed homes to clear the market brining home values up again.  But it could take even longer because of the backlogs in the courts.  Fannie Mae and Freddie Mac even said they’re going to slowly trickle foreclosures into the market instead of releasing them all at once.  While this is beneficial to home values now, it just means it will take even longer for the housing market to stabilize.

What do you think?  Should banks be allowed to control when foreclosures hit the housing market?  Please leave me a comment or visit me online.

Foreclosure delays help underwater owners

It’s good news for those who are underwater on paying their mortgages.  Because of the volume of defaulted mortgages, it’s taking banks and lenders a lot longer to complete the foreclosure process.  On average last year, it was about 12 months from the first missed payment until the bank took over and evicted the homeowners.  These days the average is 17 months that a payment hasn’t been made.

Aside from the volume that’s causing the delay, banks that are trying to do home modifications for borrowers is taking up time as well as incomplete paperwork that courts have ruled in favor of borrowers.

So now experts are saying that these delays might push price points of foreclosed homes up a bit because inventory will be declining.  And this would only be true of foreclosed homes.

Diane Pendley, managing director of Fitch Ratings, a bank researcher, estimates that delinquent borrowers now stay in their homes an average of 19 to 20 months without paying before they’re forced to leave. By year end, the average will rise to 22 to 23 months, the longest on record, she says.  So this is good news for those who are having trouble paying.  It gives them more time to find alternative living or to try to complete a loan modification.

The bad news is this is going to delay the return of a good housing market in that it’s going to take longer to get rid of this inventory since it’s taking longer to process.  This is why credit checks and loans are harder to come by, so this doesn’t happen in the future.

More information can be found in this USA Today article. I can be reached online.

Early 2011 housing trends

I know we’re already into our third month of 2011.  But it’s going to be interesting to see how the year plays out in terms of the housing market.  Will we expect to see many changes?  Or will things stay relatively similar to what we’re experiencing now with sagging prices and high housing inventory? Bankrate.com has come up with a list of some of the most common trends we’ll see in 2011, at least through summer.

1. We’ll see less refinancing of current mortgages.  Some experts say that it’s the higher interest rates that is causing this dip.  But the other side of it is that those homeowners who have equity in their home already took advantage of a refinance within the last two years, as rates steadily dropped.  So there won’t be as many who refinance in 2011.

2. It will still be hard to obtain a mortgage.  And this is just because requirements to get one are tightening up.  Lenders are being very cautious in loaning money.  With Freddie Mac and Fannie Mae requiring some lenders to repurchase sold-off loans and causing them to lose money, they’re less likely to be as easygoing in lending new money unless you have very little risk, such as a high FICO score, solid appraisals on the home, and good income.

3. New homeowners are still unsure about taking that leap and buying that first home.  Yes, interest rates are low.  However, as just stated before, it’s harder and harder to obtain a good rate.  And even though home prices are low, with so much inventory available, buyers are wary about purchasing if they’ll have to sell in the near future and have so much to choose from they often just decide to rent instead.

4. Home sellers will deal with the current economy and we won’t see any change anytime soon.  The market time will continue to stay where it’s at, higher than in the past, because of high inventory and low prices.  Best way to get your home sold is to keep it in showing condition and listen to your Realtor on a realistic selling prices.  Homes do continue to sell.  But don’t expect to get any bites by listing it above market value.

What do you think of these trends?  Are you in agreement or disagreement?  Please leave me a comment with your thoughts below or visit me online.

Mortgage myths debunked

With mortgage rates still extremely low, I thought it was important to talk about some common myths people have about mortgages and the lending process.  I don’t want any potential buyers to become dissuaded buying a house because of what they think might be true.

1. 30-year fixed rate mortgages are always the best choice.  Well, they may be for some.  It truly depends on your situation.  If, for example, you know you’re going to move (because of work, etc.) within a few years, an adjustable rate will be even lower and a better choice for you.  If you don’t plan to move for a long time, the 30-year might be best.  And also know that while the mortgage rate adjusts in a certain time frame for an ARM (usually 3, 5, or 7 years) there is a limit to how much the rate can go up (or down) over time and that you can always refinance at any time.

2. You need to pay off your mortgage as soon as possible.  I had talked about this several weeks back when I was discussing which long-term debt should be paid down first.  It’s very likely in this day and age that your mortgage rate is not the highest interest rate you have.  Usually the highest-interest debt should be paid down first.  Plus, mortgage interest is tax deductible, which is a benefit that other types of debt (credit card, for instance) doesn’t have.  As always, if you have extra money to put toward it, by all means, do so.  Just make sure you apply the extra money to the principal only, not the interest.

3. I’ve already chosen a lender and can’t choose a new one in the process of applying.  Until your loan is officially closed, that’s not true.  If you’re not happy with the lender or the rate or the process, you’re free to switch.  I’ve had clients switch lenders 30 days after signing a contract and 15 days before closing.  To make your life easier, provide your new lender with as much information as you can to ensure the process continues going smoothly.  And it’s best to shop around before signing a contract.

4. You don’t want to refinance because your 30-year loan starts all over.  It’s possible that 30 years will begin on the date of your refinance.  But you can work with your lender so that payments can be adjusted.  Since you’re refinancing for a lower rate, there’s still a good chance that your monthly payments will be lower by doing this, and, therefore, you can pay your mortgage off sooner.

5. I can find a better deal online.  I do know some clients who have closed on homes with online lenders that did a great job.  However, I also know some where it didn’t work out at all.  By finding a loan online, there’s no personal service and no one to guide you through the process or assist you if there’s a problem.  If you do go this route, make sure to verify and ask about all specific fees and read the fine print on everything before agreeing to it.

If you have more questions or need the name of a reputable lender, be sure to contact me online.

Be aware of this when applying for a mortgage

With all the extra housing inventory available, it’s a great time for someone looking to invest in real estate to buy a home.  We all know, though, that it’s becoming tougher to obtain a mortgage these days.  Mortgage brokers and banks want solid credit scores and higher down payments.  So if you are making an application for a mortgage, here’s a list of what you want to be aware of during this typical 45-day period to make sure the mortgage goes through.

1. Now is not the time to make any big purchases.  That includes high-ticket items such as cars, appliances, TVs, and furniture for your new home.  A lot of people don’t realize that when you make your purchase, you’re creating more debt for yourself (if you’re charging the item rather than paying cash) and becoming a bigger liability for the bank.  So it’s been known that the mortgage can be pulled in this instance.  Wait until after you sign the closing papers to make the next purchase.

2. It’s not a good time to switch jobs.  When applying for a loan, the lender looks to make sure you have job stability and knows what type of salary and/or bonuses and commissions you receive.  If you switch jobs in the midst of the application, they’re going to have a hard time verifying salary information, which could affect your loan.  Again, wait until after you sign the closing papers to make any career moves.

3. There could be multiple credit checks.  The lender obviously checks your credit at the loan application before they decide if they can pre-approve you.  However, now lenders are often going back to check credit scores again right before closing.  So know that you want to continue making all your payments.  Avoid applying for a new credit card or making a big purchase.  Any upset to your score could affect your mortgage.

4. Have money ready for closing costs.  Don’t take every last penny you have to use toward a down payment.  Closing costs could cost you an additional 3% out of pocket.  You’ll want to check in with your lender within a few days of closing to get a rough estimate of the amount you’ll need to bring to closing.  It’ll most likely have to be in the form of a cashier’s check made out to yourself.  Your lender can give you the exact information.

These tips will help keep the mortgage application going without any hiccups.  Of course, if you have questions or problems along the way, be sure to contact your lender.  They will be able to guide you through the process and give you other tips to make sure there are no problems prior to closing.

I can be reached via my Web site.