06.15.07
Posted in Education, Money and Finance, Mortgage Problems at 1:22 pm by Jeanne
Did you know that deeding your property back to the Lender instead of allowing foreclosure can cost you! Under Federal Law, Lenders who accept less than the full remaining balance on the loan (including late fees, interest and other chargable items) must file a 1099-C (as opposed to the 1099-S.) The 1099-C shows any concessions made by the Lender, and tells the IRS the concessions are TAXABLE INCOME.
For example, say your Mother took out an exotic loan to help pay medical bills and refinance the house. The loan is an adjustable rate for $312.250. -(125% of the then current value of $250.000.) The loan was at 5% interest two years ago and is now at 9%. She was assured that housing markets would continue to rise.
Now she finds herself unable to make the payments, and the current house value is estimated at $242,000. If the Lender is willing to accept $242,000. for a deed in lieu of foreclosure, knowing that is the best they can do, it must file a 1099-C with the IRS. The IRS will then show that Mother has received TAXABLE INCOME in the amount of $70,250. OUCH! As unfair as it seems, she now has another problem, one bigger than just losing her home.
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05.21.07
Posted in Land Title Technical Stuff, Money and Finance, Mortgage Problems at 1:58 am by Jeanne
I know it’s not a sexy topic, mortgages. But everyday, I see mortgages with almost impossible terms. Fifty years -?, “bad credit okay,” “adjustable rate, “negative am,” “low initial rate,” and WE all know what that means… But do the borrowers on these sub-prime mortgages, aka loser loans, (and I mean loser in more ways than one) know what they are getting into? I believe Closers have responsibility to cover the mortgage note and mortgage deed or deed of trust in detail so that the borrower will get the picture.
I once closed a first mortgage loan at 23%. Yes, 23%. In the early eighties, a gentleman needed to refinance a land contract, or lose his house. With bad credit, he went to the local “Credit and Thrift Company.”
He had no choice, and I had no choice but to explain the terms to him, as a good closer does. It was a terrible closing. He even pulled my phone off the desk and threw it at me. He wanted to kill the messenger. I did what was required and explained it all in a professional manner, but I sure felt sorry for him. He was doomed to lose that house.
That was an isolated insident for me, Thank heaven! But now, I am not so sure it doesn’t happen to you all every day. The news is bad. But I hope you have the integrity to completetly and professionally explain to the consumer What they are signing.
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05.17.07
Posted in Money and Finance, Mortgage Problems at 5:49 pm by Jeanne
The NAR said in April that it no longer expects the median price of an existing home to rise this year, predicting instead a 0.7% decline. The slower recovery, it said, is a result of “tighter lending criteria and fallout from the subprime loan debacle.”
read story
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04.01.07
Posted in Education, Mortgage Problems at 3:45 pm by Jeanne
Background:
Because prevailing mortgage rates have been low over the last several years, the desire for high interest rate mortgage securities is higher than ever. In the steady search for those higher yields, lenders are screaming for securities that contain high yields. This means the market is actively seeking subprime mortgages because they carry interest rates 1-2-3% higher than traditional loans and frequently carry a hefty prepayment penalty as a double-whammy.
Mortgage securities buyers say the lending standards on these “exotic” loans has become so negligent, that it is almost an invitation for borrowers and lenders to commit mortgage fraud and it would appear these subprime exotic loans are playing a significant a role with significant mortgage fraud, leading to skyrocketing delinquency rates.
The Attorney General Report
I suggest you read the Predatory Lending Report,
The study shows that “..the number of home foreclosures soared in 2005 and 2006 at a rate without precedent in the modern era.” The report goes on to say “The most important fact driving the problem of predatory lending is the extraordinary growth of subprime lending over the last decade.”
The proposed legislation that comes out of the report is no more than a request for ethical conduct and common sense. The old fashioned “do unto others Golden Rule.” It merely asks for Lenders to use prudent and appropriate lending practices in helping customers select a loan that is appropriate to their circumstances; and to disclose the potential outcome scenarios of the sub-prime loans. For example (similar to the Truth in Lending Law) is asks for “disclosing the maximum possible payment that could be due during the first seven years of the loan term,, which amount shall be calculated with reference to the maximum interest rate allowable under the loan, assuming no default…” Seems reasonable to me.
The report also suggests that a law be passed so that a loan officer could not use “churning,” which it defines as arranging for a refinance which provides NO BENEFIT TO THE BORROWER (but obviously provides benefit to the loan officer…)
Read the report, it would be good law for all of us in the mortgage and title industries, as well as the public.
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03.23.07
Posted in Industry News, Mortgage Problems at 9:11 am by Jeanne
The Mortgage Bankers Association (MBA) touts that ALTA is working in conjunction with the MBA on Uniform Master Closing Instructions. But ALTA makes no mention of the initiative on its web site, and the MBA has removed the draft from its site. What is that all about?
Having read the MBA draft of Feb 2006, I was VERY concerned about the liability and unreasonable demands the MBA was trying to push onto closers and title companies. For example:
Uniform Closing Instructions Draft by Mortgage Bankers Assoc. Feb 26, 2006
• 32 pages of General Closing Instructions
• 6 pages of Specific Loan Instructions
• 78 Specific Requirements and Indemnities from Closing Agents
• Significant new liability for closing agents
Settlement Agent must immediately contact Lender and postpone Closing or Disbursement of the Loan until Settlement Agent receives permission to proceed if:
o The Property has been conveyed within 6 months preceding Closing
o The new Loan represents an increase of over 25% of a previous Security Instrument recorded in that same time period.
o If any real estate sales commissions are excessive for the market area.
I think many of the draft items are unreasonable! I’d love to hear what YOU know about the Uniform Closing Instructions. It feels like a cover-up to me…
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03.14.07
Posted in Education, Mortgage Problems at 10:21 am by Jeanne
Freddie Mac, the major secondary mortgage market investor announced that it is working closely with customers in the primary market to fight predatory lending and foreclosures. In so doing, it says it has developed higher underwriting standards. Its recent changes to fight predatory lending include:
• FHLMC will refuse to do business with institutions that it identifies as engaging in predatory lending practices;
• FHLMC will refuse to invest in
o high-rate or high-fee mortgages as defined by the Home Ownership and Equity Protection Act of 1994 (HOEPA)
o sub-prime mortgages with prepayment penalty terms of more than three years
• FHLMC is also requiring its lenders to provide complete credit information about borrowers to all credit bureaus and reporting agencies.
• and encourages consumer education through programs such as CreditSmart, and Don’t Borrow Trouble, which are programs designed to help borrowers understand the mortgage origination process, housing finance options, and how to avoid abusive lending practices and foreclosures.
I don’t see this as fighting Predatory lending. I see it as an ad campaign for trying to look like they are making an effort. This is such a minimal effort – kind of like saying “okay, maybe we should meet the law”
I am NOT for Government intervention. But based on the loans appearing in the market, and the crazy predatory advertising I see, there have to be some changes! Many in the mortgage industry and the title industry have dropped their standards to all time lows. That costs all of us. I actually hope the Government will intervene. It seems to be the only way to keep foreclosures from continuing to skyrocket, Lenders and Title Companies from dropping standards to all-time lows. It seems that ethics and morality just don’t seem to matter if companies can make a bigger buck.
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