Secondary Insight

Market Color:  SI hopes everyone enjoyed their Thanksgiving Holiday with family and friends. So after the long Holiday break, we have Tiger Woods potentially in the doghouse after his car crash, Dubai World asking for a six month suspensions of loan payments and for 75 years we have been subjected to watching the Detroit Lions football team play on Thanksgiving day and for most part lose.  Barry Sanders can you come out of retirement?  It is still uncertain what significance the Dubai issue will have in the market, but it has rippled throughout the world markets. Traders are trying to determine whether this is an isolated event, or if this is the beginning to credit turmoil in the emerging markets.  One buried story but is significant to our rates is when the FED will begin to drain the money from the economic swamp.  The Federal Reserve of New York has been testing some measures using reverse repurchase agreements which is one tool to remove money from the system.  Right now, the futures market is pricing in an 86% chance that the Fed keeps rates somewhere between 0% and .25% through March 16th, 2010.  Currently, the Ten Year yield is at 3.24% (3.21% on Friday).  30 year fixed rates are holding from the Friday close at the same level and have moved to the plus side for the Ginny 4% coupon. 

 

Market News:  When will the MBS market return to be a free market?  The housing market is no longer plunging due to Federal Reserve intervention, but continued weakness in the economy is likely to lead the central bank to extend its program of purchasing mortgage-backed securities beyond the March 30th deadline.  SI believes this is predicated on the strength and pace of economic recovery early in the first quarter and whether concrete proposals have been advanced on what to do with Fannie and Freddie.  Unemployment is still high, foreclosures continue to rise, and the Mortgage Bankers Association reports that a record 9.6 percent of borrowers were delinquent on their loan in the third quarter.

 

Meanwhile the covers are being pulled back on the Federal Reserve since Congress has started an investigation on what the Federal Reserve really does.  And predictably, the Federal Reserve Chairman wrote on November 29th that the economy will suffer if the proposals to reign in the Federal Reserve are enacted. He argued that investors must believe the Fed is immune from political pressure in order to push interest rates to near zero without raising fears of inflation, but a House proposal seeking to subject the central bank to broader audit scrutiny would make Congress appear to have an influence on monetary policy decisions. The op-ed preceded this week’s Senate Banking Committee hearing that will debate whether Bernanke should serve a second term as well as proposals to revamp financial regulation. This will be great financial soap opera to watch unfold when these hearings begin.

How would you like the White House looking over your shoulder about the pace of loan modifications or whomever the appointed czar happens to be. It seems the Treasury Department announced today to appoint people to look after the number of completed loan modifications.  And if you are not doing so well in this effort, your company will be subjected to negative publicity because you have not moved fast enough as the Treasury department will publish a list of servicers that are lagging. Guess that is one list a company would not like to find themselves on or not.  Is that a potential blacklist?   And since the majority of loan modifications are not remaining current as well, it presents a catch 22 situation for the large mortgage servicers.  Here is the link to the article on Yahoo.

http://finance.yahoo.com/news/Govt-increases-pressure-on-apf-1285661492.html?x=0&sec=topStories&pos=2&asset=&ccode=

Secondary Insight

Market Color: Wallstreet Journal above the fold headline this morning states 1 in 4 borrowers are under water.   Large chart with the United States in different shades of red depicting which states are worse than others.  And I am sure it is not an electoral map of red Republican states from a recent election.  Article claims 10.7 million households have negative equity according to the Core Logic folks.  And thankfully it says that 24 million owner occupied homes do not have a mortgage.  We need to find them and make sure they get one. Yet at the same time the Shiller report says home prices increases slightly, so perhaps that will lessen the number that are under water.  What is ahead of you today?  In terms of economic news, today and tomorrow are extremely busy as schedules and are compacted into the three-day week (stock markets are open Friday but no data is released). As with yesterday, housing will be today’s focus after the markets begin with a revised look at Q3 GDP.  Analysts from Nomura Global Economics believe a full percentage point will be cut from the advance estimate of GDP, based on downward revisions to personal consumption, non-residential fixed investment, and net exports. “Note, however, that weaker inventory growth in Q3 implies strong growth in Q4. The actual number came in down less than one percent being revised to 2.8% from the 3.5% as reported last month; the decline was due to a growing trade deficit and a smaller gain in consumer spending.   Stocks fell around the world as a report showed Americans spent less than economists forecast and investors speculated banks need to raise more capital. Oil dropped, while two-year U.S. Treasury notes advanced. We have record treasury auctions today and tomorrow and hopefully they will be subscribed to by investors. Right now, the futures market is pricing in an 87% chance that the Fed keeps rates somewhere between 0% and .25% through March 16th, 2010.  Currently, the Ten Year yield is at 3.33% (3.40% yesterday).  30 year fixed rates are holding from yesterday close.

Market News: The National Association of Realtors reports that sales of existing homes soared 10.1 percent in October to an annual rate of 6.1 million — the highest level since February 2007. Analysts had expected only a 2.3 percent gain for the month, but the popularity of a government-financed credit of up to $8,000 for first-time home buyers pushed sales to their lofty heights. Total sales climbed 23.5 percent from October 2008, with the gains strongest in the Midwest and weakest in the West. Moody’s Economy.com senior director Celia Chen cautions that the housing market still “needs help,” noting that robust sales of existing residences may be slowing the pace of new-home construction.

On the future interest rate outlook ,Federal Reserve chairman Ben Bernanke’s diagnosis of a weak US economy and labor market signaled that the central bank’s extended period of low borrowing costs may get even longer.  Bernanke said that “significant economic challenges remain”, with lending constrained and the jobless rate above 10 per cent.  Who knows how long this will last, but as they say, you must shoot the ducks while they are flying or something like that if you are from Oregon.

Attached is the link for the article above that appeared on Bloomberg about improving home prices.  Some helpful information that is needed to try and stabilize this issue, however, we have a long way to go SI is afraid to say with the option ARMs and ARM resets between now and 2012.

http://www.bloomberg.com/apps/news?pid=20601103&sid=aqWBkfXFr3zw

Secondary Insight

Market Color:  Another new week shortened by the Thanksgiving Holiday. Thank goodness.  Plan accordingly for your locks as the lock window will be shortened on Wednesday and the senior traders are sure to take advantage of the long weekend.   While the dollar strengthened at the end of last week, it is weaker today, gold continues its upward march and the equity market has recovered from its three day slide and is posting triple digit green numbers. This short week has a busy calendar. Several auctions to take place, but given the recent activity SI thinks they will be reasonably subscribed to by investors. Today’s report for sales of existing U.S. homes increased more than forecast in October to the highest level since February 2007, spurred in part by a tax credit that lured first-time buyers. Tomorrow is another revision to the third quarter GDP, Consumer Confidence, and minutes from the FOMC.  Wednesday is Personal Income, Durable Goods and Jobless Claims which has been a key report to look out for.  If it goes below 500,000 that is viewed as positive for the economy.  Right now, the futures market is pricing in an 87% chance that the Fed keeps rates somewhere between 0% and .25% through March 16th, 2010.  Currently, the Ten Year yield is at 3.40% (3.34% on Friday).   30 year fixed rate mortgages are holding on to positive side with rates about the same as the Friday close.  However the market opened up negative and most investors have not repriced, so it may appear that pricing is worse from the Friday close.    Market News: How long will the FED continue to support the MBS market.  We know it will be through the the first quarter, but some are calling for it to continue dependent upon the timing of what the government is going to do with Fannie and Freddie.  One Fed President says the central bank should have the option to buy mortgage-backed securities and agency bonds beyond March, St. Louis Fed President James Bullard told reporters after a speech in which he called for the continued independence of the Fed in setting monetary policy. On Nov. 4, policymakers reiterated plans to complete $1.25 trillion in MBS purchases by March and buy $175 billion of agency debt. However, Bullard said that keeping the asset purchase program active would give the central bank more flexibility to respond to potential setbacks in the economy. Our mortgage rates are at an all time low dependent upon the continued purchase of the MBS paper by the FED and Treasury.  When will rates increase is related to inflation, the value of the dollar, strength of any economic recovery, and the commodity bubble that is beginning to develop.  A number of comments by the Bill Gross commentary SI sent out on Friday that talks about the carry-trade occurring with a depressed dollar for commodities and some say look out if the dollar somehow strengthens will cause a giant sucking sound when those investors are caught on the short side of the dollar play.  SI suggests to watch the value of the dollar to determine how long the tight rope can be walked to keep rates low by the FED.  If it continues to fall, imagine what the price of gold will rise to. Then look out.    The blame game continues in the mortgage mess.   The Ohio Attorney General Richard Cordray has filed a lawsuit against Standard & Poor’s (S&P), Moody’s and Fitch, claiming the agencies inflated ratings of mortgage-backed securities in exchange for fees from securities issuers. The firms misled institutional investors, including Ohio pension funds, in regard to bond risk, Cordray says.”The rating agencies assured our employee pension funds that many of these mortgage-backed securities had the highest credit ratings and the lowest risk. But they sold their professional objectivity and integrity to the highest bidder,” Cordray said in a press statement issued Friday. S&P and Moody’s deny the charges, saying the claims are without merit, according to a New York Times article. Fitch declined to comment for the NYT piece, saying the company had not received Cordray’s complaint.  Frankly, SI thinks these agencies bear some responsibility for this mess.  Never could understand how these agencies could rate a MBS filled with 580 FICO 100% NO Doc loans as triple AAA.   Pretty neat trick and then peddle that around the world as gold plated investments.   Reverse market has really trailed off as home prices in some parts of the country continue to erode and fears of an ongoing recession linger. At the same time, new government underwriting guidelines that took effect earlier this fall could further put the brakes on home equity conversion mortgages. Generation Mortgage Chairman Jeff Lewis notes that for those still able to obtain such a loan, “they may not receive enough reverse mortgage proceeds to pay off an existing mortgage or to handle another financial issue.”   Product News:  Flagstar requires evidence of liquidation when a borrower’s funds to close are coming from a “401(k), IRA or other acceptable retirement account, regardless of documentation required by Total Scorecard. Loans will not be cleared-to-close until acceptable evidence of liquidation is provided. Document liquidation with the following: a copy of the distribution check and evidence of deposit to the borrower’s bank account or a copy of the retirement account showing withdrawal and evidence of deposit to the borrower’s bank account.

Flagstar also has in us that the  Verbal VOE must be completed no earlier than 10 days prior to closing, although Flagstar strongly suggests it be done as close to closing as possible. Also, “This requirement is needed in addition to the verbal verification of employment that the Flagstar underwriter performs during the underwrite.” And for self-employed borrowers, Flagstar requests that the VOE must be performed within 30 days of closing.

Secondary Insight

Market Color: Rising dollar and demand for the safest government debt.  That last part seems like an oxymoron. Yet the stock market retreats for the third day in a row as Bond Guru Bill Gross suggests to investors to begin going defensive.  Link below on his commentary if you care to read, but he has an impressive track record that is worth listening to his points of view. He starts his commentary with a quote from Will Rogers who said, “I’m not so concerned about the return on my money as the return of my money”.  Will Rogers always could make a point in a very simple manner.  Earnings report less than expected from Dell seems to have set the pace for the stock market open as well – so with nothing on the economic calendar today and thankfully no bond auctions, nothing great is going to change the current down news cycle for the equity market as we close out the week.  Remember next week’s Thanksgiving Holiday is going to mess with the ebb and flow of the news cycle and with the current rate levels it is hard not to like these levels on locking any applications on your desk. 

http://www.marketwatch.com/story/pimcos-gross-others-say-to-go-more-defensive-2009-11-19

http://www.pimco.com/LeftNav/Featured+Market+Commentary/IO/2009/Dec+Gross+Anything+but+01.htm

 

One of the Federal Reserve Presidents spoke on CNBC yesterday said The Fed’s implementation of an exit strategy, possibly in the middle of next year, will depend greatly on data from coming quarters.  “A lot depends on the nature of the economy, how it evolves over the coming couple of quarters. We will have a lot better sense going into the middle of next year, how well the recovery has taken hold,” he said. “That’s important before we can make any final decisions. At the end of the day, policy is going to be data dependant; it’s going to depend on how the economy’s evolving. We will just have to wait and see.” And that is what we will have to do, wait and see.  Right now, the futures market is pricing in an 86% chance that the Fed keeps rates somewhere between 0% and .25% through March 16th, 2010.  Currently, the Ten Year yield is at 3.34% (3.35% yesterday).  30 year fixed rates opened negative and now are up slightly from yesterday close.

 

Market News: Approximately 14 percent of mortgages were delinquent or in foreclosure during the third quarter — a record high, according to the Mortgage Bankers Association, which attributed the gain mainly to rising unemployment. Nationally, the delinquency rate was 9.6 percent and the foreclosure rate was 4.5 percent, with 43.4 percent of foreclosures in California, Nevada, Arizona and Florida alone. According to MBA chief economist Jay Brinkmann, “The outlook is that delinquency rates and foreclosure rates will continue to worsen before they improve.” Is that kind of like it is always the darkest before the dawn.  So there must be a sunrise coming.

 

Republican leaders on the House Financial Services Committee are calling for hearings on the financial health of the ailing Federal Housing Administration reserve fund, which recently reported a sharp drop in its capital ratio to 0.57%. Citing FHA’s deteriorating financial position, Reps. Spencer Bachus (Ala.) and Shelley Capito (W. Va.) are urging committee chairman Barney Frank, D-Mass., to schedule a hearing as soon as possible. “If home prices do not recover, the economic value of the Mutual Mortgage Insurance Fund could fall below zero. We are concerned that such a drop could force HUD to request an appropriation from Congress,” the two Republican lawmakers say in a letter. FHA officials maintain that they have taken corrective actions and the insurance fund is in no imminent danger of running out of cash. If necessary, the agency could raise the FHA upfront premium to keep the fund in the black. However, Reps. Bachus and Capito also have concerns about FHA’s technological and management capacity. “It is incumbent upon our committee to get prompt answers to many of the questions surrounding FHA’s risk management practices and finances,” the Republicans say in a letter to Rep. Frank.

Do you ever feel overwhelmed with reading material?  Pre-internet and e-mail, you read your daily newspaper, maybe 2-3 magazines a week, and the rest of the time was reserved for reading books. Now, you start the day with 100 e-mails, reading secondary insight, blogs, stuff people send you, etc, etc. etc.  You really need to fight to have time for books, but there’s really nothing quite like having a perfect book you can’t wait to pick up and read. SI is currently reading The Great Depression Ahead, and it’s that kind of book, depressing, do not read it.  Try something else.

 

From time to time, news reporters have called the office and wanted comments about various mortgage news.  And invariably, they usually get the quotes wrong. Nothing like being misquoted and wanting the news organization to publish a retraction.  Or the news organization has a particular slant for how they want to present the news.  Recently a Harley Bike Club member told of the story of a Harley biker riding by a zoo in Washington, DC when he sees a little girl leaning into the lion’s cage. Suddenly, the lion grabs her by the cuff of her jacket and tries to pull her inside to slaughter her, under the eyes of her screaming parents. The biker jumps off his Harley, runs to the cage and hits the lion square on the nose with a powerful punch. Whimpering from the pain the lion jumps back letting go of the girl, and the biker brings her to her terrified parents, who thank him endlessly. A reporter has watched the whole event. The reporter addressing the Harley rider says, “Sir, this was the most gallant and brave thing I’ve seen a man do in my whole life.” The Harley rider replies, “Why, it was nothing, really, the lion was behind bars. I just saw this little kid in danger and acted as I felt right.” The reporter says, “Well, I’ll make sure this won’t go unnoticed. I’m a journalist, you know, and tomorrow’s paper will have this story on the front page… So, what do you do for a living and what political affiliation do you have?” The biker replies, “I’m a U.S. Marine and a Republican.” The journalist leaves. The following morning the biker buys the paper to see if it indeed brings news of his actions, and reads, on the front page:

“U.S. MARINE ASSAULTS AFRICAN IMMIGRANT AND STEALS HIS LUNCH”

Secondary Insight

Market Color:  Stronger dollar and weak economic news today weakens the stock market this AM.  The inverse relationship with dollar and commodities is on full display today.  As the dollar improved commodity prices quickly fell.  And one can conjecture the stock market has an inverted relationship as well with the dollar.  Now, investors are starting to wonder whether the dollar’s decline has run its course and that other markets have gotten a little overheated considering the challenges the economy still faces, like high unemployment.”There might be a little fear out there about dollar strengthening, as well as some natural profit-taking opportunities,” said Dan Cook, senior market analyst at IG Markets Inc. in Chicago. “We’ve been on an amazing run.”  Now SI might argue, what do they see that should mean the dollar will strengthen?  Are we getting control of our deficit?   SI certainly would like to see a return to the days when we could say.. as sound as a dollar.   The latest data on the economy gave investors little incentive to hold on to stocks. A private forecast of economic activity rose less than expected in October, signaling slow growth next year. The Conference Board said its index of leading economic indicators, which forecasts activity over the next six months, rose 0.3 percent last month, less than the 0.5 percent gain economists anticipated. The index climbed 1 percent in September.

There was also disappointing news on housing. The Mortgage Bankers Association said more than 14 percent of American homeowners with a mortgage were either behind on their payments or in foreclosure at the end of September. The industry group’s quarterly report fed fears that a nascent recovery in the housing market could be upended by a continuing surge in loan defaults, especially as unemployment keeps rising.  A report from the Labor Department said the number of newly laid-off workers seeking unemployment insurance was unchanged last week at 505,000, in line with expectations. But the figure remains above the level that would indicate the economy is adding jobs.  So in summary has the stock market crested and will it catch severe cold.  May be premature, but the evidence is mounting for the W shaped recession SI forecasted earlier and that means rates will have to remain somewhat low for sometime. Our only issue is the higher unemployment and the continual pull back of investor guides making a very small space for eligible borrowers with a job to qualify. Right now, the futures market is pricing in an 86% chance that the Fed keeps rates somewhere between 0% and .25% through March 16th, 2010.  Currently, the Ten Year yield is at 3.35% (3.33% yesterday).  30 year fixed rate mortgages are just barely in positive green numbers so pricing should be about the same from yesterday close.

Market News: So how do all of you feel about international residential underwriting guides being set for every country. According to Comptroller of the Currency John Dugan, speaking at an international banking seminar in Tokyo, he said lenders at a minimum should be required to verify the income and assets of borrowers, demand a significant down payment and ensure that borrowers have the ability to pay mortgages — including those that reset to higher payments later. However, the underwriting standards should not be the same for every country, Dugan added. Gosh SI is glad he added that last part.  Can you imagine using lending standards for Norway? Or Poland, or Valenzuela.  Well you get the picture.

Despite the tax credit extension, some are saying the housing slump may worsen next year and not get better.  And based upon the number of resets SI showed at the product seminar for 5 year ARMs and recast of negative amortized loans, SI would agree and it will continue through 2012.  Here is the article link on CNBC  http://www.cnbc.com/id/34018204

And speaking of the tax credit.  Question is will it really help? The nation’s homebuilders may have to wait until next year to start reaping the rewards of the recently enacted $6,500 tax credit for repeat buyers, an industry consultant has warned. While builders who work in the move-up market can anticipate a boost in sales, Southern California real estate consultant John Burns says the burning question is: Will the tax break be enough to motivate buyers to enter the market during the normally slow holiday season? Under the rules, buyers must sign contracts by the end of April and must close on their new digs by the end of June. That gives buyers who are looking at newly built homes plenty of time to shop, but not necessarily enough time to get their choices built. The typical construction cycle is 90 days, so buyers who haven’t found a model they like by the end of March may be cutting it close, possibly too close. That’s why consultants like Mr. Burns and others are advising builders to start a few homes on speculation. Right now, John Burns Real Estate Consulting’s November survey of 265 building company executives is finding “cooling traffic and sales in many locations, particularly those with no spec inventory.”

Housing Market, still not out of the woods yet

Market Color: Housing statistics carry new meaning as this meltdown has started with housing and will end with housing.  I heard that said someplace before. This morning the Housing starts statistic sank 11% for October sales.  Analysts point to the expiration of the tax credit and no decision for extension, but SI would conjecture buyer concerns about employment probably has more to do with this as well as seasonality. Foreclosure filings exceeded 300,000 for an eighth straight month in October as rising joblessness made it tougher for homeowners to pay their bills as reported by RealtyTrac last week. Yet take heart, Fannie Mae said this morning that Home sales are likely to increase by 11 percent in 2010 as the economy shows more signs of improvement, according to Fannie Mae’s newest economic and housing forecast. However, even with the end of the three-year housing slump, median home prices are likely to fall by less than 1 percent next year. Consumer prices increased more than the experts predicted yet one so called expert, Joseph Lavorna, an economist with Deutsche Bank said “I don’t see anything in the report that suggests there’s any real inflation flare-up,” The Fed is comfortably on hold.” And you know what an expert is right?  An ex spurt!  Therefore the day starts off in red numbers for stock and bond markets. Right now, the futures market is pricing in an 81% chance that the Fed keeps rates somewhere between 0% and .25% through March 16th, 2010.  Currently, the Ten Year yield is at 3.33% (3.38% yesterday).  30 year fixed rates are worse by about .25% but is starting to relax to off .125%.

 

Market News:  Federal Reserve Board chairman Ben Bernanke said Monday that the central bank will continue to support the mortgage market while bank lending remains constrained. “We continue to encourage banks to raise additional capital to support their lending. And we continue to facilitate securitizing through our Term Asset-Backed Securities Loan Facility (TALF) and to support home lending through our purchases of mortgage-backed securities,” the Fed chief told the Economic Club of New York. The Fed has purchased more than $800 billion in agency MBS and it recently extended its MBS purchase program through March 31. (The effort was originally slated to expire at yearend 2009.) The Fed chairman noted that banks have tightened their lending standards more than the central bank had expected. “Unfortunately, reduced bank lending may well slow the recovery,” Mr. Bernanke said. A Fed survey of senior loan officers in October found that 25% of banks had tightened their underwriting standards on prime single-family loans, a slightly higher percentage than reported in the July survey.

 

Can you guess who is becoming the largest landowner in the United States.  And no it is not China although we are in debt up to our eyebrows to them, and perhaps they just might become our owners if we default on our exploding debt, but the FDIC is becoming the largest landowner due to the high number of banks being closed. And if you remember the early 90’s and the Resolutions Trust Corporation, the FDIC is coming in a close second to that time period in history. What state does the FDIC hold the most properties, It is Georgia with 411 then Florida with 210 followed by California with 169 properties. 

 

Wall Street yesterday printed an article with the headline, “Ten Questions on the Volatile Housing Market” Some of questions with there answers were, When will the housing market bottom out?; What signals in my local market should I watch for that things are improving?; If I lose my home through foreclosure, how long to repair my credit?  and so on.  Here is the link and hopefully you may find it helpful for borrowers and real estate agents on some of these questions many are asking today.  Occasionally the links with Wall Street Journal do not let you read the entire article as they want you to subscribe to the paper.  If that happens and you want to read the entire article, let Marshelle know and we can send you a copy on a word document.

http://online.wsj.com/article/SB125841123967851223.html

Stocks Continue to Rise

Market Color: Apparently the question if the current market rally in the equities still has legs has been answered.  Despite the hand wringing and wall of worry about debt, unemployment rates and the declining value of the dollar, a favorable retails sales report for October empowers the stock market to rally further.  The stock market gains come as investors await an afternoon speech by Federal Reserve Chairman Ben Bernanke on the economy. The Commerce Department said retail sales rose 1.4 percent in October, easily surpassing the 0.8 percent increase forecast by economists polled by Thomson Reuters. It was a sharp rebound following the 2.3 percent drop in September. Excluding the gain from autos, however, sales rose just 0.2 percent, half of what economists predicted.  The weak dollar continues to juice the price of gold and other commodities including oil which then translates to increased share pricing of companies associated with energy and material companies.   Two reports tomorrow.  October PPI and Industrial Production.   If inflation continues to be considered benign, and production up, it will favorably impact the stock market and bonds and somehow continues to help improve our mortgage pricing.  Despite the increase in retail sales, apparently our taxpayer investment in GM has not paid any dividends as of yet.  Government Motors lost 1.1 Billion dollars in the third quarter despite the cash for clunkers program.  Right now, the futures market is pricing in an 81% chance that the Fed keeps rates somewhere between 0% and .25% through March 16th, 2010.  Currently, the Ten Year yield is at 3.39% (3.46% on Friday).  30 year fixed rate mortgages are up .25% from the Friday close.     Market News:   It seems that HUD will give some slack with the upcoming changes with RESPA.  Whether they say what they mean and do what they say we will find out.  HUD announced that it will “exercise restraint” early next year when enforcing new Real Estate Settlement Procedures Act rules taking effect on Jan. 1. From January through April, staffers will grant some leeway to FHA-insured lenders that are putting forth an honest effort toward compliance. HUD is urging other regulators to take a similar approach with non-FHA lenders, originators and settlement service providers that also demonstrate a good-faith effort at implementing the new guidelines.
We understand that experian has announced a new service that will allow mortgage lenders to estimate an applicant’s verified income and credit score. Income Insight also will help rate the creditworthiness of potential borrowers by providing a better snapshot of their total financial situation, including existing debt-to-income ratios. Experian also has updated its Income View tool to check for discrepancies in an applicant’s stated income, Social Security number, filing status, name or address, designed to help eliminate fraud.  Corporate will have to take a closer look and see if this is valuable tool to use to limit risk.
Product News:  BofA effective tomorrow will implement the following policy for transactions where the subject property was recently listed for sale.   It applies to government and conventional loans. Rate and Term Refinances For rate and term refinances of properties recently listed for sale, the listing agreement must be cancelled at least one day prior to the date the application is taken.

• Cash Out Refinances On cash out refinances, listing agreements on the subject property must be cancelled six months prior to the application date or the loan is subject to a maximum loan-to-value of 70%. In all circumstances, listing agreements must be cancelled at least one day prior to the loan application.

Bank of America Streamlines Short Sales Process

Bank of America, widely recognized as the most uncooperative lender in short sale negotiations, has recently partnered with California-based Equator (REOTrans) to electronically process short sale transactions.

Bank of America is using the Equator short sale platform to streamline the short sale process through better communication, faster approvals, and quicker sales. Criticized for its lackluster performance under the government’s Making Home Affordable plan, Bank of America is implementing this platform to get more properties sold before they end up in foreclosure.

According to Equator CEO, Chris Saitta, this is the first electronic short sale process for a large national lender such as Bank of America. “Equator’s short sale module automates decision making, handles approvals, provides quick fulfillment, and complies with government programs”, Saitta said.

A short sale is the process where the owner of a distressed property works with the lender to sell the property before it goes into foreclosure. The term short sale was coined because the property is sold for less than the amount owed on the mortgage. The keys to a successful short sale are being accessible, being responsive, communicating, and then performing.

Lenders, such as Bank of America, recently have been leaning more toward short sales versus foreclosure sales because of the steep decline in the real estate market home prices. According to Equator, the number of successful short sales has increased exponentially across the country in the wake of the foreclosure crisis.

In the not so distant past, short sales were extremely difficult if not impossible with some lenders taking months to make a decision. As a result, the homeowner often ended up in foreclosure even though they had a viable offer on their home.

Bank of America has also reduced its strict short sale policy of requiring 10% of the second mortgage balance in a short sale. Now Bank of America will accept 5%. This is another indication that they are getting serious about selling homes before they are foreclosed.

In adopting this short sale platform, Bank of America, will be able to provide access 7 days a week, 24 hours a day to its borrowers. Borrowers can easily enter the necessary information and will receive real-time status updates. David Sunline, Bank of America’s Real Estate Management Executive, says “homeowners considering short sales should contact the bank within five days of getting an offer on the home and expect its cooperation as long as the offer is within the range of other sales in the area and the borrower can demonstrate financial hardship”.

The verdict is still out whether this platform will improve the short sale process through Bank of America, but it is a step in the right direction.

Your Tax Credit Questions??????

I know that a lot of you have a clients who are calling you and asking you about the Tax Credit, and it can be very frustrating sometimes not knowing the answer or not being able to get the answer. I am here to solve that problem. On the comments section below, please leave all your questions on how, what, when, and who may qualify for the tax credit. I will not only research it for you but will call the IRS to make sure we get the right answers for you. So leave all your questions and my staff and I will get you the answers fast. Thank you

Tax Credit: 10 Things to know

Here is a good link to an article that describes the Tax Credit extension.

 

http://www.smartmoney.com/Personal-Finance/Taxes/10-Things-You-Should-Know-About-The-New-Homebuyer-Credit/