AS WITH THE AFFORDABLE CARE ACT AND RACE TO THE TOP......THESE NEW MORTGAGE RULES SUPPOSEDLY 'CONSUMER' FRIENDLY ARE ACTUALLY CREATING BOUNDARIES FOR HOME-OWNERSHIP FOR THE PEOPLE THE FHA WAS MEANT TO SERVE. ALSO, LOOK AT WHY SOME RULES, LIKE JUMBO LOANS, CAME AND WENT. IT WAS ALL ORCHESTRATED AROUND THOSE TRILLIONS IN PROFIT FROM FRAUD AND REFINANCING OVER AND OVER AND OVER. TAXPAYERS PAID MUCH OF THAT REFINANCING WITH $700,000 LOAN LIMITS!
About Housing
The Office of Housing provides vital public services through its nationally administered programs. It oversees the Federal Housing Administration (FHA), the largest mortgage insurer in the world, as well as regulates housing industry business.
Legislation in the 1960s expressed the social concerns of providing decent and sanitary housing and ensuring that such housing is made available to all. In that sprit, Executive Order 11063, Equal Opportunity in Housing, was issued in 1962 and represented the first major effort by the federal government to combine civil rights with housing. Title VI of the Civil Rights Act of 1964 assured nondiscrimination on federally assisted programs. Equality in housing opportunity was legislated by Title VII of the Civil Rights Act of 1968, the Fair Housing Act, which prohibited discrimination in the sale, financing, or leading of housing. The full protection of the law was expanded by the Fair Housing Amendments of 1988, further prohibiting discrimination based on familial status or handicap.
In 1965, the Housing and Urban Development Act created HUD to succeed the HHFA as a cabinet-level agency.
The 1960s brought a new method of developing low-income housing. The Housing and Urban Development Act of 1965 initiated a new leased housing program to make privately owned housing available to low-income families. The Housing and Community Development Act of 1974 (1974 Act) replaced Section 23 with the Section 8 Leased Housing Assistance Payment Program (Section 8). Title I of the 1974 Act created a new community development block grant (CDBG) program.
The Present
The mission of HUD, to “promote adequate and affordable housing, economic opportunity, and a suitable living environment free from discrimination” continues to focus the department’s initiatives.
'The new rules will help protect consumers and reduce the risk that the economy will crash again because of shoddy lending, Senator Elizabeth Warren, a Democrat of Massachussetts, said yesterday'.
Let's take a look at the new rules from Elizabeth Warren's Consumer Financial Protection Bureau (CFPB) regarding mortgages handled by federally insured Fannie and Freddie. Now, keep in mind that neo-liberals and neo-cons are working to dismantle these two agencies and end the Federal government's involvement in the mortgage industry. That was one of the goals of imploding these agencies with fraud after all! So, new rules for mortgages by the CFPB seem to come just as they will no longer be needed. This is why the article shows how Wells Fargo.....a leader in private mortgage business and SUBPRIME MORTGAGE LOAN FRAUD EXTRAORDINAIRE......is building a structure for handling loans outside these new rules by the CFPB. Keep in mind that Warren is being sold as a darling of the progressives when in fact she is a global corporate and free market supporter.....none of that is progressive.
IT IS A HOAX TO KEEP THE CURRENT FHA FROM DOING THE JOB OF SECURING LOANS FOR LOW-INCOME PEOPLE WHILE TRANSITIONING/CLOSING THIS PUBLIC AGENCY.
Remember, the Federal Housing Agency was started to provide low-cost housing loans to low-income people and worked successfully for the few decades it was independent. No drama, no improper and fraudulent loan activity....simply a well-run Federal agency that helped people become homeowners. THIS IS A GOOD THING WE WANT TO KEEP. It was when it was made into a public private partnership as Freddie and Fannie that it became profit-driven and fraudulent and this was the plan.....to blow up a strong public sector service and send it back to Wall Street. This is what these mortgage reforms are all about! This is not consumer friendly.....it protects the banks.
Wells Fargo Creates Swat Team to Keep Loans In-House: Mortgages
By Dakin Campbell and John Gittelsohn Jan 8, 2014 8:08 AM ET
Wells Fargo Wells Fargo & Co. (WFC), the largest U.S. home lender, has assigned about 400 underwriters to originate mortgages for the bank to hold, with as many as 40 percent of the loans likely to fall outside government guidelines taking effect this week.
The bank is training the group as a way to increase lending without losing control of quality, according to Brad Blackwell, head of portfolio lending for the San Francisco-based lender. The group will review loans including those with terms that prevent them from qualifying for protections provided by the Consumer Financial Protection Bureau, or CFPB, under new rules, he said.
Wells Fargo, responsible for about one in five U.S. mortgages last year, is pushing the initiative to compete for clients seeking non-conventional loans such as those with interest-only payments. That segment will be increasingly sought-after at a time when rising interest rates are curbing borrowing demand and banks are facing the biggest regulatory overhaul since the Great Depression.
“As rates continue to rise and refinancing volume continues to contract, lenders are going to be looking for a way to keep their staffs busy,” said Erin Lantz, director of mortgages at Zillow Inc.
Congress directed the CFPB, formed as part of the 2010 Dodd-Frank Act, to create the qualified mortgage rule after banks were blamed for helping spark the 2008 credit crisis by giving mortgages to people who couldn’t afford them. The regulations provide a measure of legal protection to banks that meet guidelines and expose them to legal liabilities if the loans charge high fees or require total debt payments exceeding 43 percent of the borrower’s income.
‘Sweeping Re-Regulation’ “What you see happening on Jan. 10 is the most sweeping re-regulation of mortgage finance that I’ve seen,” said Pete Mills, senior vice president of residential policy at the Mortgage Bankers Association, whose home loan career started in 1983.
Unlike the loose lending practices of the last decade, most lenders now approve borrowers only after fully documenting their incomes and assets. At a time when government-backed loans account for 90 percent of the market, non-qualified mortgages can’t be insured by the Federal Housing Administration or sold to Fannie Mae or Freddie Mac, the government-controlled enterprises that package home loans into bonds.
Changing Structure Wells Fargo wants to give its clients more loans that can’t be sold to the government-backed firms. The bank is confident the new underwriting group, which will make both qualified and non-qualified mortgages, will allow it to originate debt that doesn’t meet the CFPB’s safe harbor, said Blackwell. Non-qualified mortgages could be about 5 percent of the bank’s total mortgage production, he said.
The approach represents a change for the bank, which long made loans with the intention of selling them all.
“In the early days of our history, we were a mortgage bank: our primary responsibility was to originate and sell,” Blackwell said. “Today we are originating for our portfolio. These are loans that we will hold for their lifetime.”
Wells Fargo added $14.5 billion in nonconforming mortgages in the six months ended September, bringing the total held by the bank to $72.4 billion, according to a bank presentation.
Bank of the West, a subsidiary of BNP Paribas SA (BNP), also plans to offer non-qualified mortgages to its clients regardless of amount, according to Stew Larsen, executive vice president of the mortgage banking division based in Omaha, Nebraska. The rules are an opportunity for banks that have capacity to hold loans on their balance sheets to take market share from mortgage companies that lack that capability, he said.
Potential Expansion Non-qualified mortgages have the potential to be a $400 billion a year market, starting with the most creditworthy borrowers and broadening as home values and the wider economy improve, according to Raj Date, who stepped down as deputy director of the CFPB a year ago to found Fenway Summer LLC, which plans to offer non-conforming loans in 2014.
Lenders are responding to mortgage volumes that are forecast to plunge 33 percent this year to $1.17 trillion from 2013, according to the Mortgage Bankers Association. Rates on 30-year mortgages averaged 4.53 percent last week, up from 3.35 percent in early May, according to Freddie Mac.
The rate increased when the Federal Reserve signaled plans to reduce $85 billion in monthly bond purchases and already has diminished the refinancing that accounted for two-thirds all home loans in the last two years.
Refinancing Declines Declines in refinancing have led the largest lenders to start cutting jobs. JPMorgan (JPM) Chase & Co. said it may dismiss 15,000 employees, Wells Fargo cut more than 6,200 positions and Bank of America Corp. (BAC) eliminated at least 3,400 mortgage-related workers. Citigroup Inc. (C) also said it’s looking to trim staff.
Banks are being cautious about testing the limits of the new rules as they continue settling disputes arising from the last decade’s lending spree.
JPMorgan, which agreed to pay $5.1 billion in October to resolve claims by Fannie Mae and Freddie Mac about debt sold to the financing companies, has no plans to expand or discontinue products after Jan. 10, including non-qualified mortgages for borrowers with a high-net worth, according to Amy Bonitatibus, a spokeswoman for the New York-based bank.
Bank of America will continue providing interest-only loans to “preferred customers in a very conservative manner,” according to bank spokesman Terry Francisco.
Citigroup Offering Citigroup will offer some loans such as adjustable-rate mortgages and those too large to qualify for agency guidelines, according to Mark Rodgers, a bank spokesman. The loans will only be made when they are “appropriate and suitable” for borrowers, he said.
The new rules will help protect consumers and reduce the risk that the economy will crash again because of shoddy lending, Senator Elizabeth Warren, a Democrat of Massachussetts, said yesterday.
“The rules will reshape the mortgage market for the better,” Warren, who first proposed creating the CFPB, said during a floor speech. “They will give people a better chance to buy homes and a better chance to keep those homes, and they will force mortgage lenders and servicers to compete by offering better rates and customer service, not by tricking and trapping people. ”
Initial Reluctance While lenders initially will be reluctant to extend non-qualified mortgages to borrowers with lower incomes, limited assets or low credit scores, they will probably stretch the rules as they seek to expand business, just as they began offering loans to subprime borrowers in the last decade, according to Richard Eckert, an MLV & Co. analyst who worked as a risk management analyst at the Federal Home Loan Bank of San Francisco in the 1990s.
“Just like back in the early 2000s, to keep the party rolling they slipped into subprime,” he said. “People that were high and mighty and were going to take the high road a year ago when quarterly loan originations were $400 billion and now seeing those dry up to as little as $150 billion, I think they are taking a real hard look at what they may have passed up.”
Even as it cuts mortgage jobs, Wells Fargo has selected between 300 and 400 underwriters who will execute different policies and report to separate bosses than peers who check over loans the bank sells to investors, Blackwell said in a telephone interview.
Separate Groups “We have separated the underwriting group into a separate team that only underwrites loans” for the bank’s own balance sheet, he said. “We found it impossible to achieve our objectives” with the two groups together, he said.
The underwriters will be located in six locations around the country and the training of the group and policy writing will be completed by the end of the year, Blackwell said.
This may lead to faster closing times and fewer mistakes, according to Joseph Morford, an RBC Capital Markets analyst based in San Francisco. That should build trust with the company’s financial advisers and private bankers, who are expected to refer wealthy customers, he wrote in a Dec. 23 note to clients.
“The brokers should feel more comfortable that their customers will be handled appropriately, which over time should lead to more mortgage referrals,” Morford wrote after meeting with David Carroll, head of Wells Fargo’s wealth and retirement unit.
Already, the new policy has “allowed us to do more volume with better service and better quality,” Blackwell said.
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MIND YOU, SOME OF THESE RULES ARE FINE. WE NEVER BELIEVED A LAW WAS NEEDED TO REQUIRE A BANK TO CHECK PERSONAL QUALIFICATIONS LIKE INCOME AND EMPLOYMENT.....THAT WAS FRAUD. THE 45% OF MONTHLY INCOME WOULD NOT BE BAD IF PRICES FOR HOMES WERE NOT SO HIGH FOR EXAMPLE IN CITIES.
Keep in mind the mortgage crisis was created by Wall Street and it is these same requirements in this bill placed on homeowners that was needed on banks to stop the next crisis......20% capital on hand in the banks has never happened and they are now leveraged with derivative debt beyond the $600 trillion of last economic crash. So, Wall Street and the Consumer Financial Protection Bureau is placing the requirements needed for banks in these mortgage rules for consumers.
Let's look at jumbo mortgage loans for example.
The first thing our neo-liberal Obama and Congress did when they were elected in 2008 was to extend Federal protection FHA for loans to a whopping $700, 000. Keep in mind the FHA is a low-income agency.
They did this so affluent homeowners could qualify for all the mortgage write-downs and low-interest refinancing that was supposedly helping main street keep their homes. Most of the money spent in this Federal program went to these $700,000 homeowners while main street went into foreclosure by the tens of millions. So, we now have a Federal agency insuring home loans for hundreds of thousands of dollars-----JUMBO MORTGAGES. Why end that now? Because these five years of Obama's term has moved those tens of millions of foreclosed homes and refinanced those high-end mortgages all that is needed and now they are ready to handle the mortgage market in a way most profitable.
How will new mortgage rules affect you?
By Polyana da Costa • Bankrate.com Highlights
The home loan industry will soon have to adapt to new mortgage rules that will offer borrowers much needed protection against lender abuses and reckless lending standards. But the changes may not please all borrowers.
Some of the new mortgage rules the Consumer Financial Protection Bureau has issued this year will influence qualification requirements and the types of mortgages that borrowers get. The new standards go into effect next year -- but expect lenders to start adjusting to the new policies in coming months.
The gist of one of the main rules is simple: Lenders will be required to ensure that borrowers have the ability to repay their mortgages. In return, lenders will be protected from borrower lawsuits so long as they issue "safe" mortgages that follow guidelines.
These safe mortgages are what the CFPB calls "qualified mortgages." As defined by the CFPB, only 12.8 percent of new mortgages in 2012 didn't meet the "qualified mortgage" standard, according to real estate data provider CoreLogic.
The new mortgage rules won't affect the majority of people seeking to buy a home or refinance their home loans, because lenders have already tightened their lending standards since the financial crisis.
But certain groups of borrowers will notice a difference, analysts say. This is especially true for borrowers seeking larger mortgages. Self-employed borrowers also may need to jump through additional hoops to get a home loan.
"There are all sorts of ways to prove income, but what's no longer at the table is just asserting that you make X dollars per year," says Julia Gordon, director of housing finance and policy for the Center for American Progress and former manager of single-family policy at the Federal Housing Finance Agency.
What will change for jumbo loans?Mortgage professionals in high-cost areas say they worry that the new rules may create obstacles for some borrowers seeking large loans to buy or refinance a home. That's partly because a mortgage that falls outside of the conforming and Federal Housing Administration loan limits (which vary between $417,000 and $729,750) will not be considered a qualified mortgage if the borrower's debt payments exceed 43 percent of monthly income.
About 9 percent of jumbo loans issued in 2012 went to borrowers with debt-to-income ratios higher than 43 percent, CoreLogic data show.
"A 45 percent debt ratio seems to be slightly more common than a 43 percent ratio these days, so lenders will most likely reduce their max ratios for nonagency loans," says Matt Hackett, operations manager for Equity Now in New York City.
Interest-only loans will be harder to findBorrowers who rely on interest-only loans will see changes, because loans that don't require borrowers to pay principal during an initial period are not considered a qualified mortgage under the CFPB's rules.
These loans were widely available during the housing boom and contributed to the crisis, as many homeowners couldn't handle the larger payments once the initial interest-only period expired. Most lenders have stopped offering interest-only loans, but they are still popular for jumbo mortgages and in high-cost areas.
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Bank of America Loan Modification Plan Requirements Explained Posted by admin On April - 27 - 2011
What does it take to get approved for a Bank of America loan modification? What are the requirements for approval that homeowners need to meet in order to get a lower mortgage payment? These are questions that most borrowers need answers to – and it is important to know the answers before you send in your application. Here is some helpful information on the specific requirements used for the loan modification plan.
Bank of America Loan Modification Requirements:
The government has mandated that every homeowner who asks to be reviewed for this program must be given the chance and during the review process their home cannot be foreclosed.
IT WAS A DELIBERATE MOVE TO COVER WHAT WERE ILLEGAL REFINANCING ABOVE AMOUNTS SET BY THE FHA CREATING HUNDREDS OF BILLIONS OF DOLLARS IN PROFIT. SEE WHY THIS NEW MORTGAGE RULE NOW FORBIDS THIS! THE DEAL IS DONE!
So, we hear in the press that Jumbo Mortgages will not be included in Obama's bailout and then we see that indeed, jumbo loans are what was intended for bailout. Think about the states committing these crimes all for billions in bank profits and the fact that most of them are neo-liberal.
Three Options for Refinancing a Jumbo Home Loan With Reduced Income [Aug 5, 2009.]
For homeowners with home loan amounts of $417,000 or less, the Obama Administration's Home Affordable Refinance Program can help get that tough refinance done. This so-called "conforming loan limit" is acting as a sort of dividing line between those who are eligible for government mortgage refinance assistance and those who aren't.
It's not really a surprise, then, that many holders of jumbo home loans (loans above $417,000) are feeling a sense of hopelessness about refinancing their home loan. This hopelessness can set in especially hard for borrowers suffering from reduced income due to unemployment or cut hours.
But before giving up, consider these three options for refinancing a jumbo home loan:
1. Jumbo Loans May Qualify for the Home Affordable Modification Program
Although it's true that the Home Affordable Refinance Program does not apply to jumbo loans, the Obama Administration's Home Affordable Modification Program does contain eligibility for certain jumbo mortgages. Check out the details of the program here.
Borrowers who are paying more than 31 percent of their income to housing expense (mortgage, taxes, insurance) may qualify for this modification program--even for jumbo home loans.
2. Get a Co-Signer
Not the most appealing option in the universe, sure, but tough times call for tough measures. If Mom and Dad are sitting on a paid off house, have ample retirement savings, and don't want to see their children (or grandchildren) suffer the impact of a foreclosure, co-signing may be the best option available.
Especially in the case of reduced income, Mom and Dad's income can make a difficult refi possible.
3. Contact (Harass) the Bank Repeatedly
Not to put it bluntly, but borrowers whose debt-to-income ratios have been skewed for the worse by reduced income have to work a lot harder for a jumbo loan refinance than the rest of America. Part of this hard work entails contacting a lender directly and trying to work out a plan that respects borrower circumstances.
But don't just base such arguments on an emotional appeal. If good credit history is there, if unemployment is the reason why a refi is temporarily impossible, if job leads are coming down the pike, mention all that and more. Develop a personal relationship with the lender if at all possible.
And use numbers to make it clear that a foreclosure is in no one's best interests. Here are some foreclosure cost figures that help make the point that refinancing is the best option for both the borrower and the bank.
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FHA loan limit back up to $729,750
Tuesday November 22, 2011 11:30 AM By Ellen Yan
Home loan borrowers will once again be able to get federally guaranteed loans of up to $729,750 on Long Island -- but only from the Federal Housing Administration.
The new law that funds five federal departments, including the Department of Housing and Urban Development, did not extend the higher limit, which had expired Oct. 1, to loans guaranteed by mortgage finance giants Fannie Mae and Freddie Mac.
President Barack Obama on Friday signed the measure after the final congressional vote on Thursday. The Federal Housing Administration extension expires Dec. 31, 2013.
Republicans in the House had stripped the extension for Fannie and Freddie, which are overseen by the Federal Housing Finance Agency.
The report from House and Senate negotiators on the bill cited the two agencies' "questionable business practices" and "extravagant management bonuses."
The finance agency's acting director, Edward J. DeMarco, had defended millions of dollars in pay for Fannie and Freddie executives, saying "competent executives" were needed during these challenging times.
But congressional negotiators said they allowed the extension for FHA loans because it is subject to "greater congressional scrutiny."
The federally guaranteed loan limit was raised from $625,500 in 2008 as a temporary measure to give the housing market a boost. Federally guaranteed loans are less risky for investors, and when lenders sell these loans on Wall Street, this frees up capital for the lenders to lend again.
But as the loan limit was due to expire Oct. 1, supporters called for another extension because the housing market was still weak, while opponents saw it as a subsidy for the rich to buy expensive homes. Anything over the limit is considered a "jumbo loan," which usually carries higher interest rates and down payments.
Rep. Gary Ackerman (D-Roslyn Heights), who helped lead the charge to extend the limits, fired back at Republicans in a Friday statement: "By not fully restoring the loan limits, they have deprived a large portion of the housing market of its main source of liquidity in the middle of the most catastrophic housing crisis since the Great Depression."
He said he would push legislation to give Fannie and Freddie the higher loan limits.
_______________________________________________
Requiring 20% down for a FHA loan????? REALLY????
SHOUT OUT TO THE FEDERAL AGENCIES BELOW THAT WE DO NOT WANT THESE DOWN-PAYMENT REQUIREMENTS!
What caused so many people with low-income loans to default was the fact that when families sign these loans they expect to have 30 years to pay them. So, they know they will have to grow in income to meet these loans. What they did not know was that Wall Street was blowing up the market and a crash would bring the conditions of long-term unemployment, lost retirements/savings from fraud that we have yet to have justice! So, where some people were playing the loose lending and flipping houses.....most people were simply ordinary people feeling sure that in 30 years they could pay for those houses. STATISTICS SHOW THAT WITH FHA LOANS IN THE PAST....THIS IS TRUE.
So, requiring this high of a down-payment is not necessary, it is simply to keep most people out of the home-ownership arena. Keep in mind that 80% of Americans are now at poverty line.
FHA down payment - Wikipedia
A borrower's down payment may come from a number of sources. The 3.5% requirement can be satisfied with the borrower using their own cash or receiving a gift from a family member, their employer, labor union, or government entity.
Below you see that historically a 31% of income has been recommended, not required. This new rule now requires a 45% of income and that is a huge jump for an agency created to help low-income people.
FHA Qualifying Ratio Explained
Also known as debt to income ratio, the FHA permissible qualifying ratio is simply expressed as the fraction of your gross monthly income that goes toward your monthly recurring expenses. The FHA permissible qualifying ratio is divided into two main categories:
About Housing
The Office of Housing provides vital public services through its nationally administered programs. It oversees the Federal Housing Administration (FHA), the largest mortgage insurer in the world, as well as regulates housing industry business.
Legislation in the 1960s expressed the social concerns of providing decent and sanitary housing and ensuring that such housing is made available to all. In that sprit, Executive Order 11063, Equal Opportunity in Housing, was issued in 1962 and represented the first major effort by the federal government to combine civil rights with housing. Title VI of the Civil Rights Act of 1964 assured nondiscrimination on federally assisted programs. Equality in housing opportunity was legislated by Title VII of the Civil Rights Act of 1968, the Fair Housing Act, which prohibited discrimination in the sale, financing, or leading of housing. The full protection of the law was expanded by the Fair Housing Amendments of 1988, further prohibiting discrimination based on familial status or handicap.
In 1965, the Housing and Urban Development Act created HUD to succeed the HHFA as a cabinet-level agency.
The 1960s brought a new method of developing low-income housing. The Housing and Urban Development Act of 1965 initiated a new leased housing program to make privately owned housing available to low-income families. The Housing and Community Development Act of 1974 (1974 Act) replaced Section 23 with the Section 8 Leased Housing Assistance Payment Program (Section 8). Title I of the 1974 Act created a new community development block grant (CDBG) program.
The Present
The mission of HUD, to “promote adequate and affordable housing, economic opportunity, and a suitable living environment free from discrimination” continues to focus the department’s initiatives.
'The new rules will help protect consumers and reduce the risk that the economy will crash again because of shoddy lending, Senator Elizabeth Warren, a Democrat of Massachussetts, said yesterday'.
Let's take a look at the new rules from Elizabeth Warren's Consumer Financial Protection Bureau (CFPB) regarding mortgages handled by federally insured Fannie and Freddie. Now, keep in mind that neo-liberals and neo-cons are working to dismantle these two agencies and end the Federal government's involvement in the mortgage industry. That was one of the goals of imploding these agencies with fraud after all! So, new rules for mortgages by the CFPB seem to come just as they will no longer be needed. This is why the article shows how Wells Fargo.....a leader in private mortgage business and SUBPRIME MORTGAGE LOAN FRAUD EXTRAORDINAIRE......is building a structure for handling loans outside these new rules by the CFPB. Keep in mind that Warren is being sold as a darling of the progressives when in fact she is a global corporate and free market supporter.....none of that is progressive.
IT IS A HOAX TO KEEP THE CURRENT FHA FROM DOING THE JOB OF SECURING LOANS FOR LOW-INCOME PEOPLE WHILE TRANSITIONING/CLOSING THIS PUBLIC AGENCY.
Remember, the Federal Housing Agency was started to provide low-cost housing loans to low-income people and worked successfully for the few decades it was independent. No drama, no improper and fraudulent loan activity....simply a well-run Federal agency that helped people become homeowners. THIS IS A GOOD THING WE WANT TO KEEP. It was when it was made into a public private partnership as Freddie and Fannie that it became profit-driven and fraudulent and this was the plan.....to blow up a strong public sector service and send it back to Wall Street. This is what these mortgage reforms are all about! This is not consumer friendly.....it protects the banks.
Wells Fargo Creates Swat Team to Keep Loans In-House: Mortgages
By Dakin Campbell and John Gittelsohn Jan 8, 2014 8:08 AM ET
Wells Fargo Wells Fargo & Co. (WFC), the largest U.S. home lender, has assigned about 400 underwriters to originate mortgages for the bank to hold, with as many as 40 percent of the loans likely to fall outside government guidelines taking effect this week.
The bank is training the group as a way to increase lending without losing control of quality, according to Brad Blackwell, head of portfolio lending for the San Francisco-based lender. The group will review loans including those with terms that prevent them from qualifying for protections provided by the Consumer Financial Protection Bureau, or CFPB, under new rules, he said.
Wells Fargo, responsible for about one in five U.S. mortgages last year, is pushing the initiative to compete for clients seeking non-conventional loans such as those with interest-only payments. That segment will be increasingly sought-after at a time when rising interest rates are curbing borrowing demand and banks are facing the biggest regulatory overhaul since the Great Depression.
“As rates continue to rise and refinancing volume continues to contract, lenders are going to be looking for a way to keep their staffs busy,” said Erin Lantz, director of mortgages at Zillow Inc.
Congress directed the CFPB, formed as part of the 2010 Dodd-Frank Act, to create the qualified mortgage rule after banks were blamed for helping spark the 2008 credit crisis by giving mortgages to people who couldn’t afford them. The regulations provide a measure of legal protection to banks that meet guidelines and expose them to legal liabilities if the loans charge high fees or require total debt payments exceeding 43 percent of the borrower’s income.
‘Sweeping Re-Regulation’ “What you see happening on Jan. 10 is the most sweeping re-regulation of mortgage finance that I’ve seen,” said Pete Mills, senior vice president of residential policy at the Mortgage Bankers Association, whose home loan career started in 1983.
Unlike the loose lending practices of the last decade, most lenders now approve borrowers only after fully documenting their incomes and assets. At a time when government-backed loans account for 90 percent of the market, non-qualified mortgages can’t be insured by the Federal Housing Administration or sold to Fannie Mae or Freddie Mac, the government-controlled enterprises that package home loans into bonds.
Changing Structure Wells Fargo wants to give its clients more loans that can’t be sold to the government-backed firms. The bank is confident the new underwriting group, which will make both qualified and non-qualified mortgages, will allow it to originate debt that doesn’t meet the CFPB’s safe harbor, said Blackwell. Non-qualified mortgages could be about 5 percent of the bank’s total mortgage production, he said.
The approach represents a change for the bank, which long made loans with the intention of selling them all.
“In the early days of our history, we were a mortgage bank: our primary responsibility was to originate and sell,” Blackwell said. “Today we are originating for our portfolio. These are loans that we will hold for their lifetime.”
Wells Fargo added $14.5 billion in nonconforming mortgages in the six months ended September, bringing the total held by the bank to $72.4 billion, according to a bank presentation.
Bank of the West, a subsidiary of BNP Paribas SA (BNP), also plans to offer non-qualified mortgages to its clients regardless of amount, according to Stew Larsen, executive vice president of the mortgage banking division based in Omaha, Nebraska. The rules are an opportunity for banks that have capacity to hold loans on their balance sheets to take market share from mortgage companies that lack that capability, he said.
Potential Expansion Non-qualified mortgages have the potential to be a $400 billion a year market, starting with the most creditworthy borrowers and broadening as home values and the wider economy improve, according to Raj Date, who stepped down as deputy director of the CFPB a year ago to found Fenway Summer LLC, which plans to offer non-conforming loans in 2014.
Lenders are responding to mortgage volumes that are forecast to plunge 33 percent this year to $1.17 trillion from 2013, according to the Mortgage Bankers Association. Rates on 30-year mortgages averaged 4.53 percent last week, up from 3.35 percent in early May, according to Freddie Mac.
The rate increased when the Federal Reserve signaled plans to reduce $85 billion in monthly bond purchases and already has diminished the refinancing that accounted for two-thirds all home loans in the last two years.
Refinancing Declines Declines in refinancing have led the largest lenders to start cutting jobs. JPMorgan (JPM) Chase & Co. said it may dismiss 15,000 employees, Wells Fargo cut more than 6,200 positions and Bank of America Corp. (BAC) eliminated at least 3,400 mortgage-related workers. Citigroup Inc. (C) also said it’s looking to trim staff.
Banks are being cautious about testing the limits of the new rules as they continue settling disputes arising from the last decade’s lending spree.
JPMorgan, which agreed to pay $5.1 billion in October to resolve claims by Fannie Mae and Freddie Mac about debt sold to the financing companies, has no plans to expand or discontinue products after Jan. 10, including non-qualified mortgages for borrowers with a high-net worth, according to Amy Bonitatibus, a spokeswoman for the New York-based bank.
Bank of America will continue providing interest-only loans to “preferred customers in a very conservative manner,” according to bank spokesman Terry Francisco.
Citigroup Offering Citigroup will offer some loans such as adjustable-rate mortgages and those too large to qualify for agency guidelines, according to Mark Rodgers, a bank spokesman. The loans will only be made when they are “appropriate and suitable” for borrowers, he said.
The new rules will help protect consumers and reduce the risk that the economy will crash again because of shoddy lending, Senator Elizabeth Warren, a Democrat of Massachussetts, said yesterday.
“The rules will reshape the mortgage market for the better,” Warren, who first proposed creating the CFPB, said during a floor speech. “They will give people a better chance to buy homes and a better chance to keep those homes, and they will force mortgage lenders and servicers to compete by offering better rates and customer service, not by tricking and trapping people. ”
Initial Reluctance While lenders initially will be reluctant to extend non-qualified mortgages to borrowers with lower incomes, limited assets or low credit scores, they will probably stretch the rules as they seek to expand business, just as they began offering loans to subprime borrowers in the last decade, according to Richard Eckert, an MLV & Co. analyst who worked as a risk management analyst at the Federal Home Loan Bank of San Francisco in the 1990s.
“Just like back in the early 2000s, to keep the party rolling they slipped into subprime,” he said. “People that were high and mighty and were going to take the high road a year ago when quarterly loan originations were $400 billion and now seeing those dry up to as little as $150 billion, I think they are taking a real hard look at what they may have passed up.”
Even as it cuts mortgage jobs, Wells Fargo has selected between 300 and 400 underwriters who will execute different policies and report to separate bosses than peers who check over loans the bank sells to investors, Blackwell said in a telephone interview.
Separate Groups “We have separated the underwriting group into a separate team that only underwrites loans” for the bank’s own balance sheet, he said. “We found it impossible to achieve our objectives” with the two groups together, he said.
The underwriters will be located in six locations around the country and the training of the group and policy writing will be completed by the end of the year, Blackwell said.
This may lead to faster closing times and fewer mistakes, according to Joseph Morford, an RBC Capital Markets analyst based in San Francisco. That should build trust with the company’s financial advisers and private bankers, who are expected to refer wealthy customers, he wrote in a Dec. 23 note to clients.
“The brokers should feel more comfortable that their customers will be handled appropriately, which over time should lead to more mortgage referrals,” Morford wrote after meeting with David Carroll, head of Wells Fargo’s wealth and retirement unit.
Already, the new policy has “allowed us to do more volume with better service and better quality,” Blackwell said.
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MIND YOU, SOME OF THESE RULES ARE FINE. WE NEVER BELIEVED A LAW WAS NEEDED TO REQUIRE A BANK TO CHECK PERSONAL QUALIFICATIONS LIKE INCOME AND EMPLOYMENT.....THAT WAS FRAUD. THE 45% OF MONTHLY INCOME WOULD NOT BE BAD IF PRICES FOR HOMES WERE NOT SO HIGH FOR EXAMPLE IN CITIES.
Keep in mind the mortgage crisis was created by Wall Street and it is these same requirements in this bill placed on homeowners that was needed on banks to stop the next crisis......20% capital on hand in the banks has never happened and they are now leveraged with derivative debt beyond the $600 trillion of last economic crash. So, Wall Street and the Consumer Financial Protection Bureau is placing the requirements needed for banks in these mortgage rules for consumers.
Let's look at jumbo mortgage loans for example.
The first thing our neo-liberal Obama and Congress did when they were elected in 2008 was to extend Federal protection FHA for loans to a whopping $700, 000. Keep in mind the FHA is a low-income agency.
They did this so affluent homeowners could qualify for all the mortgage write-downs and low-interest refinancing that was supposedly helping main street keep their homes. Most of the money spent in this Federal program went to these $700,000 homeowners while main street went into foreclosure by the tens of millions. So, we now have a Federal agency insuring home loans for hundreds of thousands of dollars-----JUMBO MORTGAGES. Why end that now? Because these five years of Obama's term has moved those tens of millions of foreclosed homes and refinanced those high-end mortgages all that is needed and now they are ready to handle the mortgage market in a way most profitable.
How will new mortgage rules affect you?
By Polyana da Costa • Bankrate.com Highlights
- The mortgage rules are designed to ensure that borrowers can repay.
- Jumbo loans will be harder to qualify for; interest-onlies will be rare.
- Homeowners will get renewed protections when they fall behind on payments.
The home loan industry will soon have to adapt to new mortgage rules that will offer borrowers much needed protection against lender abuses and reckless lending standards. But the changes may not please all borrowers.
Some of the new mortgage rules the Consumer Financial Protection Bureau has issued this year will influence qualification requirements and the types of mortgages that borrowers get. The new standards go into effect next year -- but expect lenders to start adjusting to the new policies in coming months.
The gist of one of the main rules is simple: Lenders will be required to ensure that borrowers have the ability to repay their mortgages. In return, lenders will be protected from borrower lawsuits so long as they issue "safe" mortgages that follow guidelines.
These safe mortgages are what the CFPB calls "qualified mortgages." As defined by the CFPB, only 12.8 percent of new mortgages in 2012 didn't meet the "qualified mortgage" standard, according to real estate data provider CoreLogic.
The new mortgage rules won't affect the majority of people seeking to buy a home or refinance their home loans, because lenders have already tightened their lending standards since the financial crisis.
But certain groups of borrowers will notice a difference, analysts say. This is especially true for borrowers seeking larger mortgages. Self-employed borrowers also may need to jump through additional hoops to get a home loan.
"There are all sorts of ways to prove income, but what's no longer at the table is just asserting that you make X dollars per year," says Julia Gordon, director of housing finance and policy for the Center for American Progress and former manager of single-family policy at the Federal Housing Finance Agency.
What will change for jumbo loans?Mortgage professionals in high-cost areas say they worry that the new rules may create obstacles for some borrowers seeking large loans to buy or refinance a home. That's partly because a mortgage that falls outside of the conforming and Federal Housing Administration loan limits (which vary between $417,000 and $729,750) will not be considered a qualified mortgage if the borrower's debt payments exceed 43 percent of monthly income.
About 9 percent of jumbo loans issued in 2012 went to borrowers with debt-to-income ratios higher than 43 percent, CoreLogic data show.
"A 45 percent debt ratio seems to be slightly more common than a 43 percent ratio these days, so lenders will most likely reduce their max ratios for nonagency loans," says Matt Hackett, operations manager for Equity Now in New York City.
Interest-only loans will be harder to findBorrowers who rely on interest-only loans will see changes, because loans that don't require borrowers to pay principal during an initial period are not considered a qualified mortgage under the CFPB's rules.
These loans were widely available during the housing boom and contributed to the crisis, as many homeowners couldn't handle the larger payments once the initial interest-only period expired. Most lenders have stopped offering interest-only loans, but they are still popular for jumbo mortgages and in high-cost areas.
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Bank of America Loan Modification Plan Requirements Explained Posted by admin On April - 27 - 2011
What does it take to get approved for a Bank of America loan modification? What are the requirements for approval that homeowners need to meet in order to get a lower mortgage payment? These are questions that most borrowers need answers to – and it is important to know the answers before you send in your application. Here is some helpful information on the specific requirements used for the loan modification plan.
Bank of America Loan Modification Requirements:
The government has mandated that every homeowner who asks to be reviewed for this program must be given the chance and during the review process their home cannot be foreclosed.
- for owner occupied homes only – so it will not HAMP Loan Mod Program work for rental property or second homes. Bank of America may have an in house plan that can be used on those types of loans.
- You must be facing a financial hardship situation – this means that due to circumstances out of your control your current mortgage payment is not affordable and you are at risk of default. Loss of home value alone is not a valid reason for a loan modification – some good reasons are loss or reduction in income, increased expenses, medical bills, divorce, military, lack of reserves, high debt
- The plan is only for loans with a balance less than $729,750 and those that were taken out before January 1, 2009. Jumbo loans will not qualify, but you can request a Bank of America in house loan mod if your loan balance is too high.
- Your current mortgage payment must equal more than 31% of your household gross monthly income – this calculation is called debt ratio and it is a big part of the approval requirements.
- Your monthly income, monthly expenses and current bank balances must fit within a standard approval formula that Bank of America uses. This is called the Waterfall Method of Modification-if your income is too high or too low you will not qualify. You may want to Sample Budget-Automatically!
run your own monthly budget through the loan modification software calculator in order to be sure that your figures are acceptable before submitting it for review.
IT WAS A DELIBERATE MOVE TO COVER WHAT WERE ILLEGAL REFINANCING ABOVE AMOUNTS SET BY THE FHA CREATING HUNDREDS OF BILLIONS OF DOLLARS IN PROFIT. SEE WHY THIS NEW MORTGAGE RULE NOW FORBIDS THIS! THE DEAL IS DONE!
So, we hear in the press that Jumbo Mortgages will not be included in Obama's bailout and then we see that indeed, jumbo loans are what was intended for bailout. Think about the states committing these crimes all for billions in bank profits and the fact that most of them are neo-liberal.
Three Options for Refinancing a Jumbo Home Loan With Reduced Income [Aug 5, 2009.]
For homeowners with home loan amounts of $417,000 or less, the Obama Administration's Home Affordable Refinance Program can help get that tough refinance done. This so-called "conforming loan limit" is acting as a sort of dividing line between those who are eligible for government mortgage refinance assistance and those who aren't.
It's not really a surprise, then, that many holders of jumbo home loans (loans above $417,000) are feeling a sense of hopelessness about refinancing their home loan. This hopelessness can set in especially hard for borrowers suffering from reduced income due to unemployment or cut hours.
But before giving up, consider these three options for refinancing a jumbo home loan:
1. Jumbo Loans May Qualify for the Home Affordable Modification Program
Although it's true that the Home Affordable Refinance Program does not apply to jumbo loans, the Obama Administration's Home Affordable Modification Program does contain eligibility for certain jumbo mortgages. Check out the details of the program here.
Borrowers who are paying more than 31 percent of their income to housing expense (mortgage, taxes, insurance) may qualify for this modification program--even for jumbo home loans.
2. Get a Co-Signer
Not the most appealing option in the universe, sure, but tough times call for tough measures. If Mom and Dad are sitting on a paid off house, have ample retirement savings, and don't want to see their children (or grandchildren) suffer the impact of a foreclosure, co-signing may be the best option available.
Especially in the case of reduced income, Mom and Dad's income can make a difficult refi possible.
3. Contact (Harass) the Bank Repeatedly
Not to put it bluntly, but borrowers whose debt-to-income ratios have been skewed for the worse by reduced income have to work a lot harder for a jumbo loan refinance than the rest of America. Part of this hard work entails contacting a lender directly and trying to work out a plan that respects borrower circumstances.
But don't just base such arguments on an emotional appeal. If good credit history is there, if unemployment is the reason why a refi is temporarily impossible, if job leads are coming down the pike, mention all that and more. Develop a personal relationship with the lender if at all possible.
And use numbers to make it clear that a foreclosure is in no one's best interests. Here are some foreclosure cost figures that help make the point that refinancing is the best option for both the borrower and the bank.
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FHA loan limit back up to $729,750
Tuesday November 22, 2011 11:30 AM By Ellen Yan
Home loan borrowers will once again be able to get federally guaranteed loans of up to $729,750 on Long Island -- but only from the Federal Housing Administration.
The new law that funds five federal departments, including the Department of Housing and Urban Development, did not extend the higher limit, which had expired Oct. 1, to loans guaranteed by mortgage finance giants Fannie Mae and Freddie Mac.
President Barack Obama on Friday signed the measure after the final congressional vote on Thursday. The Federal Housing Administration extension expires Dec. 31, 2013.
Republicans in the House had stripped the extension for Fannie and Freddie, which are overseen by the Federal Housing Finance Agency.
The report from House and Senate negotiators on the bill cited the two agencies' "questionable business practices" and "extravagant management bonuses."
The finance agency's acting director, Edward J. DeMarco, had defended millions of dollars in pay for Fannie and Freddie executives, saying "competent executives" were needed during these challenging times.
But congressional negotiators said they allowed the extension for FHA loans because it is subject to "greater congressional scrutiny."
The federally guaranteed loan limit was raised from $625,500 in 2008 as a temporary measure to give the housing market a boost. Federally guaranteed loans are less risky for investors, and when lenders sell these loans on Wall Street, this frees up capital for the lenders to lend again.
But as the loan limit was due to expire Oct. 1, supporters called for another extension because the housing market was still weak, while opponents saw it as a subsidy for the rich to buy expensive homes. Anything over the limit is considered a "jumbo loan," which usually carries higher interest rates and down payments.
Rep. Gary Ackerman (D-Roslyn Heights), who helped lead the charge to extend the limits, fired back at Republicans in a Friday statement: "By not fully restoring the loan limits, they have deprived a large portion of the housing market of its main source of liquidity in the middle of the most catastrophic housing crisis since the Great Depression."
He said he would push legislation to give Fannie and Freddie the higher loan limits.
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Requiring 20% down for a FHA loan????? REALLY????
SHOUT OUT TO THE FEDERAL AGENCIES BELOW THAT WE DO NOT WANT THESE DOWN-PAYMENT REQUIREMENTS!
What caused so many people with low-income loans to default was the fact that when families sign these loans they expect to have 30 years to pay them. So, they know they will have to grow in income to meet these loans. What they did not know was that Wall Street was blowing up the market and a crash would bring the conditions of long-term unemployment, lost retirements/savings from fraud that we have yet to have justice! So, where some people were playing the loose lending and flipping houses.....most people were simply ordinary people feeling sure that in 30 years they could pay for those houses. STATISTICS SHOW THAT WITH FHA LOANS IN THE PAST....THIS IS TRUE.
So, requiring this high of a down-payment is not necessary, it is simply to keep most people out of the home-ownership arena. Keep in mind that 80% of Americans are now at poverty line.
FHA down payment - Wikipedia
A borrower's down payment may come from a number of sources. The 3.5% requirement can be satisfied with the borrower using their own cash or receiving a gift from a family member, their employer, labor union, or government entity.
Below you see that historically a 31% of income has been recommended, not required. This new rule now requires a 45% of income and that is a huge jump for an agency created to help low-income people.
FHA Qualifying Ratio Explained
Also known as debt to income ratio, the FHA permissible qualifying ratio is simply expressed as the fraction of your gross monthly income that goes toward your monthly recurring expenses. The FHA permissible qualifying ratio is divided into two main categories:
- Mortgage Payment Expense to Effective Income Ratio: This ratio focuses only on your mortgage payment expense in relation to your gross income. The FHA guidelines recommend a qualifying ratio of 31 percent for your total mortgage payment expense to effective income. The FHA sets a higher ratio of 33 percent if your home qualifies under the Energy Efficient Homes (EEH) program.
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