Fannie Mae and Freddie Mac encouraged to investigate loans from WaMu

Washington Mutual and eAppraiseIT are under investigation by Fannie Mae and Freddie Mac due to prodding by New York State Attorney Andrew Cuomo for allegedly pressuring appraisers to inflate value on properties.

At an investor conference in New York, WaMu said the outlook for the mortgage industry next year is bleaker than many believe, while shares of WaMu and other mortgage companies drop even further.

WaMu shares are down 56% this year and at their lowest point in more than seven years. WaMu, the country's biggest savings and loan, was the 6th largest US home mortgage lender in this year's first nine months.

Mr. Cuomo directed Fannie and Freddie to appoint examiners to look particularly at mortgages acquired from WaMu and any other loans made on the basis of appraisals by First American Corp.'s eAppraiseIT LLC subsidiary. Last week, his office filed a lawsuit against First American, alleging it violated federal and state laws by allowing WaMu to control the selection of appraisers hired to assess collateral for loans.

First American said last week the suit "has no foundation in fact or law."

WaMu said it will continue to ensure its operations comply with all applicable laws. WaMu also said both Freddie and Fannie have confirmed that they are continuing to purchase loans from WaMu "in accordance with their existing contracts."

Mr. Cuomo's staff isn't just looking at WaMu loans. He believes pressure on appraisers and inflated appraisals appear to be a very widespread problem in the industry.

Fannie Mae and Freddie Mac said they will both cooperate with the investigation.

Information Potpourri

Some tidbits of current information!

• GMAC's loss grows to $1.6 billion as mortgage revenues fall. The auto and home lender division partly owned by General Motors continues to drag down the automaker's bottom line.
• Citigroups shares fall 4.9% due to problems with the mortgage and debt market. The combined losses are estimated to by more than $30 billion, and many worry that more losses are in Citigroup's future.
• The new relief bills for homeowners that were being touted in Washington have either stalled or dropped from the radar. So far, only one relief program, the FHASecure program, has been put into action, but with strict regulations. It is feared that the program will not help those homeowners most in need of assistance to keep from losing their homes.
• Did you know of a piggyback credit card scheme that offers those with excellent credit to be paid to open accounts as authorized users for those with not such good credit? Then, the authorized users show an excellent FICO score and can qualify for the mortgage they would not normally be approved for. Industry experts state that much of the current foreclosure mess is due to score-inflation fraud.
• Homeowners that are current on their mortgage are not eligible for any loan modifications. So, even though the homeowner may be acting diligently in foreseeing a future problem in making their payments, the lenders will not even consider them for modification until they are at least two months behind in their payments. Even though recommending someone to stop paying their mortgage sounds like bad advice, lenders are afraid that those that are current on their mortgage will take advantage of the modification system though they do not need it. Loan mods are expected to account for 5 to 10% of all loan activity over the next 12 to 18 months.
  
  Well, despite the bad news, I still say, 'til next time, it's all good!

Winter is nearly here!

I found a great, easy check list to see if your home is prepared for the winter cold. Remember your outrageous gas bills from last winter? These 4 steps can help reduce your heating bills by a few percentage points per month, which can add up to hundreds of dollars, depending on how unending our winter is this year!

• First, make sure that all of your exposed plumbing is adequately wrapped. Though the wrapping itself will not save money on your heating bill, it will keep your pipes from bursting and costing you a lot of money for repairing the significant damage to your home. Heat tape should be applied to all exposed pipes, and exterior faucets should be drained and their water source turned off.

• The proper insulation is the key to energy savings. Determining the type of insulation to use depends on a number of things. What type of home, how old is your home, how high are your ceilings, do you have a basement, and what type of heating/cooling system you use. The higher the R-value of the insulation you use, the greater the insulating power.
  

• Caulk those windows and doors! If you're very ambitious, install weatherstripping on all doors and windows after you caulk them to cut drafts down drastically!
  

• Don't forget to change the filter on your furnace. Many thermostats are now programmed to tell you when the filter has 500 or more hours of use on it. When the thermostat is flashing "filter", don't ignore it. Check the filter - it may or may not need changing. If it looks gray, then change it. Filters are relatively inexpensive and help your heating/cooling system work much more efficiently.
  

So, 'til next time, it's all good!

So, let's talk about the other victims of the subprime meltdown....

Not to be forgotten in the midst of the mortgage slowdown are all the brokers, loan officers, processors, and administrative staff that have lost their jobs and are now, ironically, struggling to pay their own house payments!

Since August 2007, scores of lenders have down sized their staffing or disappeared altogether.
Countrywide's Full Spectrum Division laid off 6 employees from it's Troy office; the staff was only 16 total to begin with.

Franklin Mortgage Funding in Southfield laid off 120 employees in 2007, Aegis in Troy let 25 people go, Option One in Novi eliminated 30 positions, and American Home Mortgage in Farmington Hills has lost 25 employees.

More layoffs are announced daily, as more lenders face liquidation of their subprime divisions. Lehman Brothers Holding, Inc., closed its subprime division altogether, laying off 1,200 workers at 23 sites. In Scottsdale, 1st National Bank Holding Company closed its wholesale home mortgage unit and cut 541 jobs. Accredited Home Lenders Holding Company added 1,600 more employees to the unemployed roster.

Banking giant HSBC closed a main financing office and cut 600 jobs in August of this year.

All told, more than 40,000 workers have lost their jobs at mortgage lending institutions. A senior analyst with Celent, a Boston-based financial research and consulting firm states "It's far from over. The subprime lending collapse will continue to ripple through the financial sector."

When the market was booming, mortgage lending jobs were often lucrative even to those with little experience. Many that have lost their jobs are returning to the work they did before the housing boom, or enrolling in classes to learn an entirely new trade.

We often forget that it is not just the families losing their homes that are suffering these days!

So, let's try to all be supportive of each other!
And, I still say, 'til next time, it's all good!

U.S. Treasury Secretary Henry Paulson comments on current housing correction

There just is not any good news for those of us in the real estate industry, on any facet, these days.

Last Tuesday, U.S. Treasury Secretary Henry Paulson gave a sobering speech at the Georgetown University Law Center. His gravest point was that the decline in the housing market poses "the most significant current risk to our economy."

He went on to say that the housing correction is not turning around as quickly as it previously may have appeared, and "it now looks like it will continue to adversely impact our economy, our capital markets, and many homeowners for some time yet."

It is not only the subprime borrowers having trouble paying their mortgages, he explained, by many other homeowners are having problems as the prime mortgage rates also increase.

Mr. Paulson has come out in favor of developing a uniform national licensing and monitoring system for mortgage brokers to alleviate future meltdowns. He is skeptical of legislative efforts to complete ban such practices as prepayment penalties. He believes that each homeowner's case has to be judged appropriately.

He also warns about too much government intervention to bail out lenders or property speculators, as such actions tend to lead to repeat offenders, rather than cleaning up the problem. He is encouraging lenders to work with their customers that are in arrears and attempt to rework their loans to an affordable level.

And, I say, if Michigan survived the 1980's, we will come back from this, also!
And, so, 'til next time, it's all good!

Political finger pointing in the mortgage meltdown....

The Democrats and the White House are still bickering over the best way to assist the many homeowners facing foreclosure due to interest rate resets and job loss.

The Democrats, including House Financial Services Committee Chairman Barney Frank, Senator Charles E. Shumer of N.Y., House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid, have proposed a temporary increase in the portfolios of Fannie Mae and Freddie Mac, along with creation of a position that would oversee a limitation on foreclosures.

Republicans, including the President, have fired back at Democrats for not taking action legislatively. They say that they have heard a lot of talk from Congress, but no action and no plans on the table.

Republicans also are not in favor of creating a new position to oversee the foreclosure problem, and believe that Housing and Urban Development Secretary Alphonso Jackson and Treasury Secretary Henry Paulson are doing enough to alleviate the problem by meeting with mortgage counselors, lenders and servicers.

So, the beat goes on....

As always, 'til next time, it's all good!

Updates on the FHASecure Program to assist homeowners whose interest rates are resetting

Here is the latest on the web concerning the FHASecure Program, designed to assist homeowners who can no longer afford their mortgage payments due to an interest rate reset:

• CountryWide has already launched the program and, as of last week, 35 loans have already been originated.
  
• First Horizon National Corp. in Memphis is ramping up to begin their participation in the program.
  
• There are strict rules for the FHASecure program - first being that the mortgage must be 30 days delinquent due solely to the interest rate reset.
  
• Ironically, the FHASecure program cannot be used to refinance an FHA loan.
  
• The homeowner must have made six consecutive payments on time prior to the interest rate reset to qualify.
  
• Homeowner must have 3% equity in home to qualify.
  
• Some lenders may even issue this loan when the homeowner has been or is in bankruptcy.
  

If you cannot qualify for the FHASecure program, try the Neighborhood Assistance Corporation of America based in Boston. To qualify, the homeowners interest rate must be 10% or more and you must have had your mortgage for at least two years.

There will surely be more programs popping up, and I will keep you informed.

So, as always, 'til next time, it's all good!