Buyers in the market to buy a home, be aware that the U.S. Treasury Department is considering a new mortgage fee to fund the backstops it gives for loans purchased through Fannie Mae and Freddie Mac.
Analysts say the fee may be up to 1.5 percent of the borrower's mortgage, which would be a big increase from the current 0.25 percent that both Fannie and Freddie currently charge mortgage borrowers. Plus, it remains to be seen if this new charge would be in addition to that current charge!
So a buyer who needs and FHA mortgage for $300,000 could see an additional fee of up to $4,500 ... and the additional cost would just keep rising with the size of the loan. Talk about a reversal from the recently-expired homebuyer credit!
Additionally banks continue to significantly tighten their mortgage lending standards. On June 1, Fannie Mae put into effect the Loan Quality Initiative (LQI), which requires lenders to pull two credit reports along with additional verification checks on potential borrowers. Normally one credit report is pulled upon application, but now another credit report is being pulled just prior to closing.
That means even if you are initially approved for a loan, it can still be put on hold or cancelled altogether if your credit score changes or you take actions that change your perceived risk profile before the mortgage actually closes. And it's worth noting that this initiative is mandatory — affecting practically every mortgage lender now has to do this!
What does it mean to you? Looking to buy? Do it soon...Looking to sell?...Also, do it soon!
So, who out there thinks this will help home values?
Showing posts with label fannie mae. Show all posts
Showing posts with label fannie mae. Show all posts
2/3/10
The next chapter in the book entitled: The housing crisis..what they DON"T want you to know!
Here are a few interesting charts and accompanying analysis from a blog called ZeroHedge and a guy writing under the name ‘Tyler Durden’ (anyone see Brad Pitt in The Fight Club?), released yesterday, (along with my comments).
Everything that the government has done so far, with a few minor detours, has been almost exclusively focused on maintaining home prices high, by tweaking either the supply or the demand side of the housing equation. As the bulk of consumer net wealth is concentrated in the housing sector, and a wealthy and confident consumer, much more so than the banking system, is critical to the recovery of America’s economy, the Administration will do everything in its power to achieve its goal of artificially manipulating the housing market...the continued pursuit of such flawed policies by the Fed and President Obama merely pulls the market ever further away from its equilibrium, thereby making the anticipated second dip so much more likely and not that far off in the distant future...After being extended once by the Obama Administration, the tax credit will expire at the end of April—putting downward pressure on demand for existing home sales. That prospect will make it more difficult to clear out the next wave of foreclosures, prompting another down leg in US house prices.
I have blogged about the "shadow" inventory before...it is spoken about amongst real estate agents and mortgage professionals...but they don't report about it in depth on CNBC, MSNBC or the like...take a look at the chart below:
In Florida, almost 49% of all homes with mortgages are in a "negative equity" position...on top of that, about 1 in 4 Florida homeowners with a mortgage is 30 or more days delinquent.
I don't know the actual (or make believe) lender figures...but common sense tells me that someone who is unemployed, upside-down on their mortgage and is behind on their mortgage payments, is NOT going to ravage their IRA or borrow from their mother-in-law to pay all of the banks penalty fees, late fees, interest fees and lawyer fees to get caught up with the bank ...but that's just my opinion.
In a recent post, I spoke about one of the major roadblocks to a housing recover being the "real" unemployment rate. And this issue is a driving factor in the "strategic default" wave. A record 15 million Americans are unemployed and another 9 million are underemployed. However, just as significant is the roughly 10 million households in a negative home equity position of worse than -20%, for whom strategic default - failing to pay when one could - is a very real option.
Now for the elephant in the room: Interest rates...this was one prong of the two pronged lightening rod for the housing crisis blame...the other being lax lending standards. "They" blame artifcially low mortgage rates as the first major contributing factor. Then WHY is no one saying the same thing now? The Fed is buying MBS in the open market in an effort to KEEP the mortgage rates (artificially) low. Aggressive central banks’ rate cuts along with large amounts of agency MBS purchases by the Federal Reserve have lowered mortgage rates by over 100 bps since the height of the financial crisis.
Although we don’t expect policymakers to raise the fed funds rate until 2011, mortgage rates have already started to head higher, and could keep climbing towards the end of the first quarter when the Fed’s $1.25 trillion agency MBS purchase program is completed. Those purchases made up almost 50% of all MBS issuance last year, and despite the improvements in the securitization market, their absence will likely have a material impact on rates (See Chart above).
As stated by the writer of the original article: "And there you have it: the best that the government can hope for is to extend and pretend, and to avoid presenting the sad but very simple reality to the American public. Because lack of knowledge is half the battle."
I couldn't have said it better myself!
Thanks for reading...Steve Jackson
Everything that the government has done so far, with a few minor detours, has been almost exclusively focused on maintaining home prices high, by tweaking either the supply or the demand side of the housing equation. As the bulk of consumer net wealth is concentrated in the housing sector, and a wealthy and confident consumer, much more so than the banking system, is critical to the recovery of America’s economy, the Administration will do everything in its power to achieve its goal of artificially manipulating the housing market...the continued pursuit of such flawed policies by the Fed and President Obama merely pulls the market ever further away from its equilibrium, thereby making the anticipated second dip so much more likely and not that far off in the distant future...After being extended once by the Obama Administration, the tax credit will expire at the end of April—putting downward pressure on demand for existing home sales. That prospect will make it more difficult to clear out the next wave of foreclosures, prompting another down leg in US house prices.
I have blogged about the "shadow" inventory before...it is spoken about amongst real estate agents and mortgage professionals...but they don't report about it in depth on CNBC, MSNBC or the like...take a look at the chart below:
In Florida, almost 49% of all homes with mortgages are in a "negative equity" position...on top of that, about 1 in 4 Florida homeowners with a mortgage is 30 or more days delinquent.
I don't know the actual (or make believe) lender figures...but common sense tells me that someone who is unemployed, upside-down on their mortgage and is behind on their mortgage payments, is NOT going to ravage their IRA or borrow from their mother-in-law to pay all of the banks penalty fees, late fees, interest fees and lawyer fees to get caught up with the bank ...but that's just my opinion.
In a recent post, I spoke about one of the major roadblocks to a housing recover being the "real" unemployment rate. And this issue is a driving factor in the "strategic default" wave. A record 15 million Americans are unemployed and another 9 million are underemployed. However, just as significant is the roughly 10 million households in a negative home equity position of worse than -20%, for whom strategic default - failing to pay when one could - is a very real option.
Now for the elephant in the room: Interest rates...this was one prong of the two pronged lightening rod for the housing crisis blame...the other being lax lending standards. "They" blame artifcially low mortgage rates as the first major contributing factor. Then WHY is no one saying the same thing now? The Fed is buying MBS in the open market in an effort to KEEP the mortgage rates (artificially) low. Aggressive central banks’ rate cuts along with large amounts of agency MBS purchases by the Federal Reserve have lowered mortgage rates by over 100 bps since the height of the financial crisis.
As stated by the writer of the original article: "And there you have it: the best that the government can hope for is to extend and pretend, and to avoid presenting the sad but very simple reality to the American public. Because lack of knowledge is half the battle."
I couldn't have said it better myself!
Thanks for reading...Steve Jackson
1/15/10
IRS says "sorry, you can't file for your tax credit"!
NEW YORK (CNNMoney.com) -- Did you purchase a home after Nov. 6? Don't expect your $8,000 homebuyer tax credit any time soon. Since Congress passed the initial tax credit last February... more than 1.4 million buyers have taken advantage of it...But that all changed on Nov. 6...it appears that the IRS has NOT ALLOWED ANYONE TO FILE since November 6th...
Congress extended the credit to include contracts signed by April 30 and closed by June 30. It also made a refund of up to $6,500 available to existing homeowners looking to buy something new. And that marked the start of a new IRS paperwork wrangle. Those homeowners who closed their sale before Nov. 6 use Form 5405 to claim the credit right away. But those closing after that date are in limbo because no form yet exists for them to file! The IRS had been expected to come out with a revised form by early January, but it has yet to release anything.
Also, with the new fraud-prevention regulation attached to the extension/expansion credit, there is no E-filing available for those claiming the extension...adding to the already extended timeframe for the tax credit refund.
If you are planning to buy within the timeframe guidelines of the tax credit and are hoping to receive the money quickly...don't count on it!
As always, check with your tax advisor...
Congress extended the credit to include contracts signed by April 30 and closed by June 30. It also made a refund of up to $6,500 available to existing homeowners looking to buy something new. And that marked the start of a new IRS paperwork wrangle. Those homeowners who closed their sale before Nov. 6 use Form 5405 to claim the credit right away. But those closing after that date are in limbo because no form yet exists for them to file! The IRS had been expected to come out with a revised form by early January, but it has yet to release anything.
Also, with the new fraud-prevention regulation attached to the extension/expansion credit, there is no E-filing available for those claiming the extension...adding to the already extended timeframe for the tax credit refund.
If you are planning to buy within the timeframe guidelines of the tax credit and are hoping to receive the money quickly...don't count on it!
As always, check with your tax advisor...
12/28/09
Christmas gift from you and I for Fannie and Freddie!
In an oddly timed move, on Christmas Eve The Treasury announced what essentially amounts to a blank check for the potential bad debt of Fannie Mae and Freddie Mac. Prior, the Treasury had a $200 Billion (each) limit on bailing out the "insolvent" mortgage lenders. At the present time, the two, combined have drawn down a little over $110 billion of the approved $400 billion.
Makes you wonder about the stability and equity of the $6 trillion dollars of loans on their books, doesn't it? If there is almost $300 billion still to go under their "credit-line" but The Treasury lifts all limits...on Christmas Eve no less! That scares me a little bit...as a taxpayer, homeowner and real estate agent...
Makes you wonder about the stability and equity of the $6 trillion dollars of loans on their books, doesn't it? If there is almost $300 billion still to go under their "credit-line" but The Treasury lifts all limits...on Christmas Eve no less! That scares me a little bit...as a taxpayer, homeowner and real estate agent...
12/17/09
The news you WON'T hear...
4 mortgage giants on the ropes
At the same time as the biggest banks are repaying their government loans, four giant mortgage backers remain on government life support. American International Group, Fannie Mae, Freddie Mac, and GMAC, are not only unable to repay the government, they are still in need of infusions. They appear at risk of getting onto a debt merry-go-round, where they have to draw new money from the government just to keep up with their existing government debts. Fannie Mae recently warned, for example, that it could not pay the dividends it owes the Treasury, so “future dividend payments will be effectively funded with equity drawn from the Treasury.” (Sound like a Ponzi scheme to you?)
Both Fannie Mae and Freddie Mac, which buy and resell mortgages, have used $112 billion — including $15 billion for Fannie in November — of a total $400 billion pledge from the Treasury. Now officials are discussing the possibility of increasing that commitment, possibly to $400 billion for each company, by year-end, after which the Treasury would need Congressional approval to extend it. Company and government officials declined to comment. Together, the four have been offered nearly $600 billion, and that lifeline could climb to nearly $1 trillion if the commitment to Fannie and Freddie is doubled, as some predict. What’s more, the companies seem short on persuasive strategies for extricating themselves from the government’s embrace.
At the same time as the biggest banks are repaying their government loans, four giant mortgage backers remain on government life support. American International Group, Fannie Mae, Freddie Mac, and GMAC, are not only unable to repay the government, they are still in need of infusions. They appear at risk of getting onto a debt merry-go-round, where they have to draw new money from the government just to keep up with their existing government debts. Fannie Mae recently warned, for example, that it could not pay the dividends it owes the Treasury, so “future dividend payments will be effectively funded with equity drawn from the Treasury.” (Sound like a Ponzi scheme to you?)
Both Fannie Mae and Freddie Mac, which buy and resell mortgages, have used $112 billion — including $15 billion for Fannie in November — of a total $400 billion pledge from the Treasury. Now officials are discussing the possibility of increasing that commitment, possibly to $400 billion for each company, by year-end, after which the Treasury would need Congressional approval to extend it. Company and government officials declined to comment. Together, the four have been offered nearly $600 billion, and that lifeline could climb to nearly $1 trillion if the commitment to Fannie and Freddie is doubled, as some predict. What’s more, the companies seem short on persuasive strategies for extricating themselves from the government’s embrace.
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