FTC Issues Final Rule Protecting Homeowners from Mortgage Scams

Source: Federal Trade Commission

Rule Outlaws Advance Fees and False Claims, Requires Clear Disclosures

Homeowners will be protected by a new Federal Trade Commission rule that bans providers of mortgage foreclosure rescue and loan modification services from collecting fees until homeowners have a written offer from their lender or servicer that they decide is acceptable.

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Going to College, Buy a Home

Source: Caldwell Banker

OLDWELL BANKER REAL ESTATE SURVEY FINDS NEW TREND IN COLLEGE TOWNS: “PARENT INVESTORS” BUYING HOMES VS. SPENDING ON RENT OR DORMS

Coldwell Banker Home Listing Report Released Ranking Affordability of College Towns; Muncie, Ind. Most Affordable College Town; Palo Alto, Calif. Most Expensive

PARSIPPANY, N.J. (Nov. 11, 2010) – Every fall, parents wave goodbye as their college-bound kids pack up their belongings, make the drive down university lane and prepare for football games, mid-terms and freedom. While college living is often associated with dorms and campus housing, Coldwell Banker Real Estate LLC discovered that many parents are opting to purchase a home rather than spend money on rent or dorm fees. According to a recent survey among the Coldwell Banker® network of real estate professionals in college towns, 64 percent see a significant number of “parent investors” buying homes for their kids to live in while attending the university.

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Most Won’t Buy House Due to Economy

Source: FindLaw

In the current tough economic times, is the American dream changing, or fading away? A new survey says right now, most Americans are not interested in purchasing a home. In a demographically balanced national survey of over 1,000 people, FindLaw.comasked people if the current economic situation made them more likely, or less likely to buy a house. Most responded in the negative.

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New FHA Data on Home Mortgages

Source: FHA News Release (September 13, 2010)

FHFA Releases Key Data on Fannie Mae and Freddie Mac Single-Family Mortgages for 2001-2008

In an effort to inform the current discussion on the future of the housing finance system, the Federal Housing Finance Agency (FHFA) today released data on Fannie Mae and Freddie Mac (the Enterprises) that compare the credit quality and performance of the loans they acquired relative to loans financed with private-label mortgage-backed securities.

“Data on the Risk Characteristics and Performance of Single-Family Mortgages Originated from 2001-2008 and Financed in the Secondary Market” documents the differences in single-family, conventional mortgages acquired by the Enterprises versus those financed through the issuance of private-label mortgage-backed and asset-backed securities (private-label MBS) during the recent mortgage lending and house price boom and the ensuing bust.

Key Findings:

• Credit Scores. Eighty-four percent of single-family mortgages acquired by the Enterprises during 2001 to 2008 were made to borrowers with FICO credit scores above 660, while 5 percent were made to borrowers with FICO scores below 620. In contrast, 47 percent of mortgages financed with private-label MBS originated during this period were made to borrowers with FICO scores above 660, while 32 percent were made to borrowers with FICO scores lower than 620.
• Loan-to-Value (LTV) Ratios. Over 82 percent of Enterprise-acquired loans had LTV ratios at origination of 80 percent or less, while two-thirds of mortgages financed with private-label MBS had LTV ratios at or below 80 percent, with that share increasing from 54 percent of 2001 originations to 81 percent of 2008 originations. The pattern of decreasing LTV ratios over time, most pronounced for loans financed with private-label MBS, is consistent with the greater use of second liens to avoid mortgage insurance on low-down payment mortgages, a practice that was increasingly common into 2007 and that contributed to the unusually poor performance of loans with low LTV ratios relative to past experience.
• Loan Payment Type. Eighty-eight percent of Enterprise-acquired mortgages were fixed-rate loans originated between 2001 and 2008 and ranged from 79 percent for 2004 originations to 96 percent for 2001 originations. Mortgages financed with private-label MBS were predominantly adjustable-rate loans. These loans comprised 70 percent of mortgages financed with private-label MBS originated between 2001 and 2008 and ranged from 53 percent of 2008 originations to 75 percent of 2004 originations. Adjustable-rate loans offer borrowers lower initial payments in return for less certainty about future payments. In the data analyzed here, adjustable-rate loans perform worse than fixed-rate loans in part because some originators of adjustable-rate loans evaluated borrower repayment capacity using artificially low rates, called “teaser rates.”
• Performance. Roughly 5 percent of Enterprise-acquired, fixed-rate mortgages and 10 percent of Enterprise-acquired ARMs were over 90 days delinquent at some point before the end of 2009. Roughly 20 percent of fixed-rate mortgages and 30 percent of ARMs financed with private-label MBS were over 90-days delinquent at some point before year-end 2009.

Data on the Risk Characteristics and Performance of Single-Family Mortgages Originated in 2001 - 2008 and Financed in the Secondary Market

Housing Affordability Remains High

Source: U.S. Department of Treasury

WASHINGTON - The U.S. Department of Housing and Urban Development (HUD) and the U.S. Department of the Treasury today released the second edition of the Administration's Housing Scorecard (www.hud.gov/scorecard) showing that, thanks in part to interest rates continuing at all-time lows, home affordability in the U.S. remains near the most attractive levels in 10 years. In addition, for the first time, the report now tracks the impact of HUD's Neighborhood Stabilization Program (NSP), which has spurred local investment and is beginning to make affordably-priced homes available to consumers. The Housing Scorecard is the Administration's comprehensive report on the nation's housing market.

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Monthly Housing Costs Reach $1,000 for Homeowners

Source: BLS

The nation's homeowners paid a median of $1,000 in monthly housing costs in 2009, compared with $808 for renters, according to data released today by the U.S. Census Bureau and the U.S. Department of Housing and Urban Development. However, renters usually paid a higher percentage of their household income on these costs than did owners (31 percent compared with 20 percent).

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Updated American Housing Survey Released

Source: US Census

U.S. Census Bureau Releases Detailed Information on Nation's Housing; Monthly Housing Costs Reach $1,000 for Homeowners

     The nation's homeowners paid a median of $1,000 in monthly housing costs in 2009, compared with $808 for renters, according to data released today by the U.S. Census Bureau and the U.S. Department of Housing and Urban Development. However, renters usually paid a higher percentage of their household income on these costs than did owners (31 percent compared with 20 percent).

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Housing Affordability Continues to Increase

Source: US Department of Treasurey

WASHINGTON - The U.S. Department of Housing and Urban Development (HUD) and the U.S. Department of the Treasury today released the second edition of the Administration's Housing Scorecard (www.hud.gov/scorecard) showing that, thanks in part to interest rates continuing at all-time lows, home affordability in the U.S. remains near the most attractive levels in 10 years. In addition, for the first time, the report now tracks the impact of HUD's Neighborhood Stabilization Program (NSP), which has spurred local investment and is beginning to make affordably-priced homes available to consumers. The Housing Scorecard is the Administration's comprehensive report on the nation's housing market.

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Bankrate Updates Closing Cost Survey

Source: Bankrate

In last year's closing costs survey, Texas was most expensive and New York was second. This year, the order was reversed. In four of the past five years, the two states have occupied the two top spots.Utah, California and Alaska round off the top five most expensive states.

Arkansas was the least expensive state in this year's closing costs survey, followed by North Carolina, Iowa, Montana and Wisconsin. There was no consistency at the bottom of the rankings; in 2009, five completely different states occupied the least-expensive rungs.

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Fed Proposes New Rules for Home Mortgage Lending

Source: Federal Reserve Board of Governors

The Federal Reserve Board on Monday proposed enhanced consumer protections and disclosures for home mortgage transactions.  The proposal includes significant changes to Regulation Z (Truth in Lending) and represents the second phase of the Board's comprehensive review and update of the mortgage lending rules in the regulation.  The proposed changes reflect the results of consumer testing by the Board, which will begin accepting public comment.  The latest proposal would:

• Improve the disclosures consumers receive for reverse mortgages and impose rules for reverse mortgage advertising to ensure advertisements contain accurate and balanced information;
• Prohibit certain unfair practices in the sale of financial products with reverse mortgages; 
• Improve the disclosures that explain a consumer's right to rescind certain mortgage transactions and clarify the responsibilities of the creditor if a consumer exercises the right; and
• Ensure that consumers receive new disclosures when the parties agree to modify the key terms of an existing closed-end mortgage loan.

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Help for Unemployed Homeowners

Source: Findlaw

More Mortgage Aid for Unemployed Homeowners

Homeowners who are unemployed and facing foreclosure have one small reason to be a bit less worried. On August 11, the Obama Administration announced a $3 billion package to aid struggling homeowners. This aid is meant to supplement the "Hardest Hit Fund" originally set into motion last February by the President.

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Report on Loan Modification and Financial Rescue Scams

Source: Financial Crimes Enforcement Network

 

FOR IMMEDIATE RELEASE
June 17, 2010
CONTACT: Steve Hudak,
703-905-3770

FinCEN Analysis: Foreclosure Rescue Scam Reports Increase
Nature of Foreclosure Rescue Scams Shifts

VIENNA, Va. – The Financial Crimes Enforcement Network (FinCEN) today released its first analysis of suspicious activity reports (SARs) containing information about potential foreclosure rescue scams. The report, Loan Modification and Foreclosure Rescue Scams – Evolving Trends and Patterns in Bank Secrecy Act Reporting , involved an analysis of more than 3,500 SARs filed from 2004 through 2009, of which the great majority, 3,000, were filed last year. Additionally, FinCEN today also provided updated guidance to the financial industry concerning new scam techniques that financial professionals should watch for and report.

“The increase in reporting of suspected foreclosure rescue scam activity could mean that there is an increase in fraudulent activity but it also reflects an increase in awareness among financial institutions of the fraud perpetrated,” said FinCEN Director James H. Freis, Jr. “This report emphasizes the importance of including the specific term ‘foreclosure rescue scam’ in the SAR narrative to enable law enforcement to search for and identify fraudulent activity more easily when reviewing SAR information, which assists in focusing investigative resources and ultimately reducing these scams.”

In addition to the increase in reported activity, the analysis shows that the nature of foreclosure rescue scams had shifted during the period examined in the study. Early SARs containing information about loan modification/foreclosure rescue scams identified subjects purporting to be loan modification or foreclosure rescue specialists. These subjects targeted financially troubled homeowners with promises of assistance. The scams involved the homeowners signing quit claim deeds, and resulted in loss of equity in or title to their property. The scammers used straw borrowers, who misrepresented income, employment, or occupancy, or provided other fraudulent information to deceive a new lender into making a new mortgage loan.

The scams described in later SARs and analyzed in this report, reflect an evolution into advance fee schemes, in which purported loan modification or foreclosure rescue specialists promised to arrange modification of a homeowner’s mortgage for more favorable repayment terms. Following receipt of large advance fees, scammers rarely, if ever, provided any service. A variation of the advance fee scam involved phony debt elimination programs in which the homeowners paid advance fees and were given bogus documents, or were instructed to contact their lenders with specious assertions that the original mortgage debt was illegal.

Countrywide to Repay Excessive Fees Charged Homeowners

Source: Federal Trade Commission

Countrywide Will Pay $108 Million for Overcharging Struggling Homeowners; Loan Servicer Inflated Fees, Mishandled Loans of Borrowers in Bankruptcy

Two Countrywide mortgage servicing companies will pay $108 million to settle Federal Trade Commission charges that they collected excessive fees from cash-strapped borrowers who were struggling to keep their homes. The $108 million represents one of the largest judgments imposed in an FTC case, and the largest mortgage servicing case. It will be used to reimburse overcharged homeowners whose loans were serviced by Countrywide before it was acquired by Bank of America in July 2008.

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FDIC Consumer News - Spring 2010: FDIC Offers Money-Saving Tips in the New World of Credit Cards

Spring 2010

New Realities, New Directions for Credit Cardholders

The New Consumer Protections on Credit Cards: An Overview

Using an Agent or Broker to Place a Bank Deposit? Ask These Questions First

Advice for Seniors: Understand the Risks and Costs of Borrowing With a Reverse Mortgage

News Briefs

The Role of Financial Literacy in the Subprime Mortgage Crisis

Source: Federal Reserve Bank of Atlanta

Financial Literacy and Subprime Mortgage Delinquency: Evidence from a Survey Matched to Administrative Data

The exact cause of the massive defaults and foreclosures in the U.S. subprime mortgage market is still unclear. This paper investigates whether a particular aspect of borrowers’ financial literacy—their numerical ability—may have played a role. We measure several aspects of financial literacy and cognitive ability in a survey of subprime mortgage borrowers who took out mortgages in 2006 or 2007 and match these measures to objective data on mortgage characteristics and repayment performance. We find a large and statistically significant negative correlation between numerical ability and various measures of delinquency and default. Foreclosure starts are approximately two-thirds lower in the group with the highest measured level of numerical ability compared with the group with the lowest measured level. The result is robust to controlling for a broad set of sociodemographic variables and not driven by other aspects of cognitive ability or the characteristics of the mortgage contracts. Our results raise the possibility that limitations in certain aspects of financial literacy played an important role in the subprime mortgage crisis.

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Feeling Guilty About a Mortgage Default?

Source: Arizona Legal Studies Discussion Paper

Beyond Guilt in the Housing Crisis: The Morality of Strategic Default

Responding to those who argue that homeowners who strategically default on their mortgages are immoral and socially irresponsible, this article argues that breaching a mortgage contract is not only morally acceptable, it may be the most responsible course of action when necessary to fulfill more important obligations to one’s family.

Mortgage Fraud on Rise

Source: LexisNexis

Mortgage Fraud Continues to Climb According To LexisNexis® Mortgage Asset Research Institute4/26/2010

Incidents of Mortgage Fraud Increase 7 Percent from 2008 to 2009
Florida, New York and California Top List of States with Highest Mortgage Fraud and Misrepresentation Rates

New York, NY – Reported incidents of mortgage fraud and misrepresentation by professionals in the mortgage industry in the U.S. are continuing to climb and increased by 7 percent from 2008 to 2009, according to a new report released today by the Mortgage Asset Research Institute, a LexisNexis® service. While the pace has slowed since the 2007-2008 increase of 26 percent, the continued increase is believed to be attributed to better industry reporting and policing.

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Who Selects Adjustable Rate Mortgages?

Source: Harvard Business School Working Papers

Who Selected Adjustable-Rate Mortgages? Evidence from the 1989-2007 Surveys of Consumer Finances (PDF; 527 KB)

We find evidence that households selecting adjustable-rate mortgages (ARMs) during the recent decade were disproportionately those who were less suspicious or who may have had difficulty understanding complicated ARM features that became commonplace prior to the financial crisis.

OTS on What to Expect When You Apply for a Mortgage Loan

Source: Office of Thrift Supervision

Washington, D.C. — The Office of Thrift Supervision (OTS) issued information today in support of Financial Literacy Month to educate consumers about a new mortgage process required by the Real Estate Settlement Procedures Act and about the impact of a consumer’s credit score on the interest rate of a mortgage loan. What To Expect When You Apply for a Mortgage Loan, issued to commemorate Financial Literacy Month, describes key changes in the mortgage loan process and conveys information about the importance of credit scores in the lending process.

Real Estate Forecasts by City

CBS MoneyWatch provides housing price forecasts by metropolitan area. These are proprietary estimates compiled by a financial services firm. Given these uncertain times the reality may be very different.

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