Tag Archives: Mortgage loan

The Value Of A Competent Title Company: Avoid Problems In Closing

21 Jan


Consumer protection agency wants to know about snags that arise in real estate closings

By , Published: January 9 | Updated: Friday, January 10, 9:40 AM

The federal government has a question for consumers who have bought or refinanced homes, a question that’s certain to generate more than an earful or replies: Were there any problems when you went to close the deal?

Any last-minute glitches or surprises that delayed the settlement, required unexpected negotiations or, worst of all, blew up the sale or refi? Did you get your settlement sheet in advance so that you could review the documents intelligently? Were there any errors or discrepancies that popped up — charges that were considerably higher than you had expected, loan-related fees or an interest rate that differed from what you thought you had signed up for? Was the whole process pleasant? Was it “empowering”?

Wow. Talk about stirring up hornets. The Consumer Financial Protection Bureau, which has broad regulatory powers in the real estate settlement arena, wants to know whether there are common problems that need to be fixed. If so, it may make what it euphemistically calls “interventions” in order to right what seems to be wrong.

The bureau also wants to hear from realty professionals, lenders, title insurance and escrow agents, lawyers and others who play roles in closings on homes — the people who produce, bless and witness the signings of mounds and pounds of paper associated with the settling of America’s home transactions.

From industry accounts, the vast majority of closings are successful. The National Association of Realtors estimates that roughly 10 to 12 percent of all pending sales don’t close, for various reasons. But conversations with agents suggest that a much higher percentage of settlements experience problems that arise just before or during the event, snags that either delay or complicate the process.

Though eleventh-hour delays can occur because of issues related to title insurance and other factors, a disproportionate number appear to be related to the mortgage. Late in the game, the lender might inform the borrower: Sorry, but we’ve encountered some underwriting red flags in your application that you’ll need to resolve before we can proceed. Or oops, we didn’t get all the loan documents to the closing agent in time. Or worst of all, we’ve changed our mind. We simply cannot do this loan and we sincerely regret that we’re telling you this on the day before your scheduled closing.

Gary Kassan, an agent with Pinnacle Estate Properties in Valencia, Calif., says that he routinely gets buyers preapproved by lenders but that in at least 20 percent of purchases, problems that threaten to delay or disrupt closings pop up after the preapproval. In early January, Kassan was waiting for a lender to agree to close on a deal that had originally been scheduled for late December. The problem: underwriters’ questions about the borrower’s income that arose late in the process.

“I want to ask all these [loan officers] ‘Why didn’t you bring this up earlier, before you gave [my client] a preapproval letter?’ ”

Cindy Westfall, an agent with Premiere Property Group in the Portland, Ore., area, has had two recent sales knocked off track by underwriting issues just before the closing; one of them caused the entire sale to blow up, forcing her buyers to start their home search all over again. “My clients were very stressed” by the entire experience, she said in an interview.

Rhonda Masotta, an agent with Bright Realty in Sarasota, Fla., almost found herself in the same situation: Last year, she was sitting at a table for her buyer’s closing on a $1.25 million home. The only thing missing was one essential item: confirmation that the bank committed to do the loan had wired the money needed to complete the transaction.

“We all waited for hours,” but there was no word from the bank, Masotta said. The closing was rescheduled for the following day, but then came the bad news: The bank had decided to back out of the deal. That’s usually a death sentence on a home sale, but Masotta and her colleagues on both sides of the transaction opted for an emergency rescue attempt and found a bank willing to underwrite and fund the loan on an expedited basis later the same day.

That’s not the way closings are supposed to work, but stuff happens.

If you want to share your experiences with the Consumer Financial Protection Bureau, e-mail your account by Feb. 7. Detailed instructions for submitting comments — and postings of comments made to date — are online in the Jan. 3 Federal Register, at www.federalregister.

Ken Harney’s e-mail address is kenharney@earthlink.net.

Clarification of Mortgage Rules Comes From CFPB

20 Sep

The Consumer Financial Protection Bureau (CFPB) this month finalized amendments and clarifications to its January 2013 mortgage rules to help the industry comply and to better protect consumers.

In January of this year the CFPB introduced the Ability-to-Repay rule, requiring lenders to make a “reasonable, good-faith determination” that prospective borrowers have the ability to repay their loans.


On June 24, 2013, the CFPB proposed several amendments and clarifications to the mortgage rules adopted in the final rule, which is intended to clarify interpretive issues and facilitate compliance. One of the Bureau’s modifications is to clarify what servicer actives are prohibited in the first 120 days of delinquency. This rule prohibits servicers from making the “first notice or filing” under state law during the first 120 days a borrower is delinquent.


Under the rule, servicers will be allowed to send certain early delinquency notices required under state law to borrowers that may provide beneficial information about legal aid, counseling or other resources.


Another rule the CFPB aims to clarify is the definition of a loan originator.  Under the CFPB’s new rules, persons classified as loan originators are required to meet qualification requirements and are also subject to certain restrictions on compensation practices.


The provisions of the CFPB’s loan originator compensation rules that have not yet gone into effect were scheduled to take effect on January 10, 2014.  The  CFPB has changed the effective date for certain provisions of the rule to January 1, 2014.

“Our mortgage rules were designed to eliminate irresponsible practices and foster a thriving, more sustainable marketplace,” said CFPB Director Richard Cordray. “Today’s rule amends and clarifies parts of our mortgage rules to ensure a smoother implementation process, which is helpful to both businesses and consumers.”

From the NY Times: Avoiding Loan-Modification Hoaxes

25 Feb
By LISA PREVOST      Published: January 10, 2013

HOMEOWNERS wary of being taken in by bogus “loan modification specialists” should not assume that a law office is the safest conduit to their lender. Consumer advocates say a growing number of fraudulent modification services involve lawyers, or people who say they are lawyers.

Increasingly, lawyers are lending “their names, their offices, their credentials” to fraudulent operations that vaunt superior skills in obtaining loan modifications, said Linda Mullenbach, a senior counsel at the Lawyers’ Committee for Civil Rights Under Law in Washington.

Last month, the Lawyers’ Committee filed a lawsuit in Suffolk County, New York, alleging that a series of companies run by Rory M. Alarcon, a lawyer licensed in New York, defrauded 17 homeowners out of tens of thousands of dollars. The suit claims that the companies promised owners loan modifications and lower mortgage payments in return for thousands upfront. “To our knowledge, no one received the services that they were promised,” said Ms. Mullenbach, who works on the panel’s Fair Housing and Fair Lending Project.

Only three of the homeowners suing Mr. Alarcon live in New York; the rest are scattered across nine states. They are claiming losses from $2,500 to $8,000 apiece.

“These are not individuals who are unsophisticated — some have been extremely well educated,” Ms. Mullenbach said. “But they were looking for solutions for how to save their homes.”

Mike Furman, a lawyer who says he is representing Mr. Alarcon, said it would be premature to comment on the lawsuit. The Web site for R.M.A. Legal Network, one of the entities named in the suit, said the firm was no longer accepting new clients.

This is the seventh modification-fraud lawsuit the Lawyers’ Committee has filed in Long Island since 2011. Three of the other lawsuits also involve lawyers, according to Ms. Mullenbach.

While Federal Trade Commission rules and New York state law generally prohibit demanding upfront fees for mortgage relief services, there is a narrow exception for lawyers. They may charge clients in advance for assistance if the service is part of their general practice of law, and not outside of that practice.

Certainly, many lawyers provide legitimate foreclosure-avoidance services. But Ms. Mullenbach advises borrowers that “when you go to a lawyer and his sole business is loan modifications, that’s a real signal.”

She notes that some bogus operations have been quick to change their practices as homeowners get wise to their tactics. Instead of selling loan modification services, they are advertising so-called loan workouts and forensic loan audits. Some are even posing as nonprofit groups.

Services that falsely advertise legal expertise have also been a problem. “We’ve seen an increase in our overall percentage of complaints involving people who are claiming to be attorneys,” said Josh Fuhrman, the senior vice president for government and community relations of the Homeownership Preservation Foundation, which operates a hot line for homeowners.

The Homeownership Preservation Foundation and the Lawyers’ Committee both belong to a coalition of public and private agencies that maintain a national database of loan-modification complaints. Since March 2010, some 28,000 homeowners have reported potential fraud. Their reported monetary losses total around $66 million.

Mr. Fuhrman notes that the counseling services offered through his foundation are free. So are the counseling services from housing agencies certified by the Department of Housing and Urban Development.

“People struggling with their mortgages usually don’t have the resources to pay for what can be done by a nonprofit housing counselor,” he said. That makes high-fee fraud all the more deplorable, he added, calling fraudulent services “the knockout punch” for borrowers on the brink of foreclosure.

A version of this article appeared in print on January 13, 2013, on page RE6 of the New York edition with the headline: Avoiding Modification Hoaxes.

New Low For Mortgage Rates

2 Oct
A percent sign.

A percent sign. (Photo credit: Wikipedia)

The Federal Reserve’s new stimulus has sent mortgage rates plummeting.

Freddie Mac’s Primary Mortgage Market Survey showed new record lows in all categories except the 5-year adjustable-rate mortgage (ARM), which did show a decrease from the week before. The GSE reported that the 30-year fixed average fell to 3.40 percent (0.6 point) for the week ending September 27, down from 3.49 percent in the previous week’s survey.

The 15-year fixed also dropped, averaging 2.73 percent (0.6 point) – down from 2.77 percent.

The continuous drops add to an already amount of good news for the housing market.

“Fixed mortgage rates continued to decline this week, largely due to the Federal Reserve’s purchases of mortgage securities, and should support an already improving housing market,” said Frank Nothaft, VP chief economist for Freddie Mac. “For instance, the S&P/Case-Shiller 20-city home price index rose 1.2 percent over the 12 months ending in July, reflecting the largest annual increase since August 2010.”

Nothaft also pointed to new home sales, in particular the strong two-month pace set in July and August.

According to Bankrate’s weekly survey, the 30-year fixed average is down to 3.55 percent from 3.70 percent a week before. The 15-year fixed fell along with it, averaging 2.88 percent (from 2.95 percent previously). The 5/1 ARM also fell, but only slightly – it averaged 2.68 percent for the week, down from 2.69 percent a week ago.

The Effect of Negative Equity on Current Loans

12 Sep

Nationwide, eighteen percent of mortgages are underwater.   Statistics also show that a home with negative equity is more likely to go into default.  For loans that had an LTV greater than 150 percent, 4.4 percent went from being current to delinquent, while for loans with an LTV of 110-120 percent, 2.2 percent became new problem loans.

The delinquency rate for July was 7.03 percent, a yearly drop of 11 percent and a 30 percent decline from the January 2010 peak.  This is a positive trend in an overall negative climate.

Increase in Median Home Prices, Many Borrowers Still Underwater

24 Aug

Median home prices are up 9.4% from the same time last year, the greatest improvement since the beginning of the housing recovery.   This year’s second quarter saw the largest quarterly growth in home prices in nearly seven years, according to FHFA’s purchase-only home price index (HPI).

In addition, a data sample of 12 metro areas across the country showed that the share of distressed sales in the market fell to 29.1 percent, a sharp drop from the first quarter’s 38.3 percent share.

The share of homeowners with underwater mortgages continued its decline in the second quarter, according to the Zillow Negative Equity Report.  About 15.3 million homeowners with a mortgage were underwater, or 30.9 percent, a drop from 15.7 million or 31.4 percent.

Many of these borrowers are taking advantage of the HARP program.  Created in 2009 as part of that year’s economic stimulus program, the Home Affordable Refinance Program (HARP) is a government-backed program for homeowners whose homes have dropped in value since 2009.

HARP allows for unlimited loan-to-value and, more than 3 years after launching, the program is finally building its momentum. Through the first six months of 2012, more than 422,000 U.S. homeowners used HARP.

The pace at which HARP loans are closing is quickening, too.

  • March 2009 – June 2012 : 37,046 HARP loan completions per month, on average
  • January – June 2012 :  70,495 HARP loan completions per month, on average
  • June 2012 : 125,865 HARP loan completions

How News Here and Abroad Impacts Our Home Loan Rates

8 May

News at Home

When our economy is struggling, our Bond Market usually benefits as investors seek a safe haven for their money. Since home loan rates are tied to Mortgage Bonds, our home loan rates are sometimes at their best when our economy is struggling. In a way it makes sense…in times of economic struggle, good home loan rates can help kick start our economy in other areas.

The housing market is one of the main areas in our economy that is still struggling. New Home Sales, Existing Home Sales and Housing Starts all fell in March. And in April, the Fed noted in its statement from their Federal Open Market Committee (FOMC) meeting that the housing market remains “depressed.”

In addition, recent reports in the manufacturing sector were also disappointing, as both the Empire State Manufacturing Index and the Philly Fed Index came in below expectations. The same is true in the labor market, as recent Initial Jobless Claims readings have spiked sharply higher…and well above the 350,000 range seen in recent weeks.

But not all the news has been disappointing: Retail Sales in March rose by 0.8%, as consumers bought all kinds of products across the board. This adds to the increasing trend seen in January and February and is a good sign for our economy, as consumers don’t spend when they aren’t feeling optimistic about their financial situation.

The direction of economic reports here will certainly impact the markets and home loan rates in the weeks and months ahead, and it’s something to watch closely.

News from Overseas

Our Bond Market–and therefore home loan rates–also often benefit when the global economy is struggling, as investors overseas see our Bond Market as an ultra safe haven for their money. This has happened throughout recent months as Greece and several other countries in Europe have been facing a debt crisis. What’s more, there is growing and very justified concern about Spain’s ability to pay down debt, meet new budget deficit targets, and avoid a bailout or debt restructuring. And let’s not forget that besides Spain and Greece, we still have France, Portugal, and Ireland to deal with in future months and years.

There will likely be more safe haven trading into the relative safety of the US Dollar and US Bonds (which will benefit Mortgage Bonds, to which home loan rates are tied) as the uncertainty out of Europe escalates. And more bad economic reports here in the United States could increase trading into the safety of our Bonds, just as more good economic news here would likely benefit Stocks at the expense of our Bonds and home loan rates.

Some Promising Numbers

23 Mar

Mortgage rates dropped slightly this week after an uptick of just under ½% in the last two weeks. The recent rate increase, however, immediately impacted activity in the housing market. The Mortgage Bankers Association reported that for the prior week, applications for home purchases declined by 1.0%. The big impact of the rate increase was felt in the refinance index which dropped 9.3%.

The Housing Market Index, which measures the confidence reported by the National Association of Home Builders, is at the highest level since the start of the recession. Home builders are indicating that they are expecting significant growth in new construction in the coming months. Although housing starts dropped slightly after January’s very strong report, the good news is that permits for new construction are continuing to increase which is evidence of the builder’s sentiment on an improving real estate picture.

Existing Home Sales dropped just under 1.0%, however this report comes after January’s upwardly revised jump of 5.7%. Compared to last year, existing home sales are up 8.8%, making us optimistic that housing is on the mend.

Mortgage Delinquency Rate Rises Again

17 Feb

adapted from Housing-Wire 2/15/12

The national mortgage delinquency rate rose during the fourth quarter of 2011, TransUnion reported Tuesday, marking only the second time since the end of 2009 the Chicago-based credit bureau has recorded an increase in its quarterly assessment of past due mortgage payments, possibly a troubling trend in the making.

TransUnion calculates the mortgage delinquency rate as the percentage of borrowers 60 or more days behind on their payments, excluding those that are already in foreclosure.

The rate increased from 5.88 percent at the end of the third quarter to 6.01 percent as of the end of the fourth.

Between the third and fourth quarters of 2011, all but 13 states experienced increases in their mortgage delinquency rates, according to TransUnion’s study.

On a more granular level, 64 percent of metropolitan areas saw increases in mortgage delinquencies during the final three months of last year. The previous three months also had the distinction of increases in 64 percent of metros. That’s up from only 21 percent during the second quarter of 2011.

More intrinsic to the current conditions, home prices continued to deteriorate in the fourth quarter of 2011 and unemployment remained stubbornly high.  This combination leads to more negative equity in homes and reduced real personal income that can affect borrowers’ ability and willingness to pay their mortgages.

When looking at the data year-over-year, more homeowners are now making their mortgage payments on time, as evidenced by the 6 percent drop in the national delinquency rate since the fourth quarter of 2010.

The highest mortgage delinquency rates during the fourth quarter were found in Florida (14.27%), Nevada (12.08%), New Jersey (8.32%), and Arizona (7.50%).

States with the lowest mortgage delinquency rates included North Dakota (1.50%), South Dakota (2.45%), Nebraska (2.57%), and Alaska (2.77%).

TransUnion’s forecast calls for mortgage delinquency rates to drift downward marginally in 2012 as the economic environment begins to modestly improve.

In the meantime, however, the agency says the industry may see a quarter or two more of slightly elevated nonpayment rates as some consumers are not able to, or decide not to, repay their mortgage debt obligations in light of the uncertain economic outlook.

RM Insights 2011 Totals

7 Feb

 Final 2011 rankings were posted for both retail/broker/TPO originators and wholesalers.  Overall endorsements were down -1.8% from November, with the entire decline coming from the TPO/Wholesale side of the industry turning in a -4.4% performance.

Their year end chart focused on the theme of Wells/BofA/FF exits in 2011.

Case numbers issued dipped in December to the lowest level since January 2010, but if we exclude the impact of Wells/BofA/FF it tells a different story. December’s total is right between May and June figures for surviving lenders, raising the question whether higher volumes from Aug-Nov were just the result of applications shifting from the exiting lenders in a one time surge. It would be much more positive for the industry if survivors fill the distribution gaps left by exiting lenders over the next few months and generate higher application volumes.

If you are in the reverse industry, it is well worth subscribing to the (free) newsletter by signing up at http://www.rminsight.net.