I just wanted to send out a quick note to advise everyone (Realtors, Buyers, Sellers) that when looking to go USDA, it is ALWAYS best to check with us at Texas Mortgage Lender to look up the address for you.
Sometimes even though the property might not be in an eligible county, by having a specific property in mind, we can look it up and give you an answer within a couple minutes.
The National Association of Realtors released Existing Home Sales data this morning.
Think about the materials that go into building and maintaining a home….WOOD, STEEL, PLASTICS, WIRING, PIPING, CONCRETE, GLASS, ELECTRICITY, FURNITURE, CARPETING ,ELECTRONICS, APPLIANCES….LABOR.
How about the commissions earned by Realtors and mortgage originators who help the borrowers close on their home? What about the home sellers? They are either moving into a bigger house, which implies they will be spending to furnish their bigger home, or downsizing, which would imply a lower payment and therefore more disposable income to spend.
The point is, when homes are selling, money moves around the economy more efficiently. The size of the housing market combined with the broad influences it has over the economy make the real estate sector a reliable leading indicator of economic activity. Real estate is one of the first sectors to contract when a recession is looming and one of the first to show signs of recovery when economic activity begins to improve.
A caveat regarding Existing Home Sales: because existing home sales data is only reported at the time of closing, when the deed is transferred to the new owner, this report is considered less “forward looking” than other housing indicators like Pending Home Sales, Housing Starts, and Building Permits. This is because it can take up to three months for a purchase transaction to close. This problem has been more relevant in recent months as lender turn times have slowed and other roadblocks like HVCC, new RESPA rules, and market volatility have delayed closings. Pending Home Sales data helps provide more timely market data because it reports on the number of contracts that have been signed, not actual closing, therefore giving economists and traders a more timely read on the health of housing.
READ HOW THE NAR COMPILES DATA AND GAIN A BETTER UNDERSTANDING OF SEASONAL INFLUENCES
Last month, the NAR reported that Existing Home Sales in August gave back a portion of their their strong July gains. Existing Home Sales, including single-family, townhomes, condominiums and co-ops, declined 2.7 percent to a seasonally adjusted annual rate of 5.10 million units in August from a pace of 5.24 million in July. This was 3.4 percent above the 4.93 million unit level in August 2008. In the previous four months, sales had risen a total of 15.2 percent.
This month the NAR reported the following:
From the NAR press release…
Existing-home sales bounced back strongly in September with first-time buyers driving much of the activity, marking five gains in the past six months, according to the National Association of Realtors®.
Existing-home sales – including single-family, townhomes, condominiums and co-ops – jumped 9.4 percent to a seasonally adjusted annual rate of 5.57 million units in September from a level of 5.10 million in August, and are 9.2 percent higher than the 5.10 million-unit pace in September 2008.
Sales activity is at the highest level in over two years, since it hit 5.73 million in July 2007.
Total housing inventory at the end of September fell 7.5 percent to 3.63 million existing homes available for sale, which represents an 7.8-month supply at the current sales pace, down from an 9.3-month supply in August. Unsold inventory totals are 15.0 percent below a year ago.
“The current housing supply is the lowest we’ve seen in two and a half years,” Yun said. “If we could continue to absorb inventory at this pace, home prices would return to normal, modest appreciation patterns next year.
The national median existing-home price for all housing types was $174,900 in September, which is 8.5 percent lower than September 2008. Distressed properties continue to downwardly distort the median price because they generally sell at a discount relative to traditional homes in the same area.
Single-family home sales rose 9.4 percent to a seasonally adjusted annual rate of 4.89 million in September from a pace of 4.47 million in August, and are 7.7 percent above the 4.54 million-unit level in September 2008.
The median existing single-family home price was $174,900 in September, which is 8.1 percent below a year ago.
Existing condominium and co-op sales jumped 9.7 percent to a seasonally adjusted annual rate of 680,000 units in September from 620,000 in August, and are 9.7 percent above the 561,000-unit pace a year ago. The median existing condo price was $175,100 in September, down 11.7 percent from September 2008.
Regionally, existing-home sales in the Northeast increased 4.4 percent to an annual level of 950,000 in September, and are 11.8 percent higher than September 2008. The median price in the Northeast was $234,700, down 7.0 percent from a year ago.
Existing-home sales in the Midwest jumped 9.6 percent in September to a pace of 1.25 million and are 7.8 percent above a year ago. The median price in the Midwest was $147,600, which is 1.0 percent below September 2008.
In the South, existing-home sales rose 9.0 percent to an annual level of 2.06 million in September and are 10.8 percent higher than September 2008. The median price in the South was $153,500, down 7.6 percent from a year ago.
Existing-home sales in the West surged 13.0 percent to an annual rate of 1.30 million in September and are 5.7 percent above a year ago. The median price in the West was $219,000, which is 15.0 percent below September 2008.
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Overall, today’s release indicated continued progress in the stabilization of the housing market. However we are troubled by the forward looking statements Yun made regarding the variables that must continue to improve if housing it to undergo further stabilization and recovery.
“We’re getting early indications of price stabilization, but we need a steady supply of qualified buyers to meaningfully bring inventories down and return us to a period of normal, steady price growth and to fully remove consumer fears, which would then revive the broader economy. Without a firm foundation for middle-class wealth recovery, the post-recession economic growth likely will be one of the weakest in U.S. history.”
Given our in-depth involvement in the primary mortgage market, we are not encouraged by Yun’s outlook. Specifically the comment on QUALIFIED BORROWERS. The continual contraction of the labor market and ongoing tightening of lender underwriting guidelines is already having a direct impact on Yun’s recovery assumptions, and we expect these issues to continue to impact the stabilization process.
On a regular basis we are contacted by consumers who complain of higher cost loans and loan denial due to an unexplained drop in their FICO score. We ask the same question each time we hear these outcrys: Did your credit card limits fall? The answer is almost always YES, my credit card limit was cut. Next we ask, have you missed a payment on your car loan or even a credit card? If the answer is yes…credit scores have been drastically effected, which has resulted in outright loan denial or a higher mortgage rate.
Adding to our relatively negative outlook is the soon to expire first time home buyer tax credit. Yun says the tax credit has played a role in the stabilization so far:
“Much of the momentum is from people responding to the first-time buyer tax credit, which is freeing many sellers to make a trade and buy another home,” he said. “We are hopeful the tax credit will be extended and possibly expanded to more buyers, at least through the middle of next year, because the rising sales momentum needs to continue for a few additional quarters until we reach a point of a self-sustaining recovery.”
We could go on and on about the industry, lender, and borrower specific problems limiting the housing recovery, however we believe the general big picture economic environment is providing enough roadblocks to recovery on its own. Thus, we will continue to state that until the labor market stabilizes and jobs start being created, the housing market will undergo a slow, frustrating recovery process (for mortgage and real estate professionals especially).
Consumers: Have you found the loan qualification process difficult?
Mortgage and Real Estate Professionals: Are you turning down more applicants? Are less deals closing? Are lending regs still tightening?
Are we being too bearish here?
Via Richard Vetstein (Vetstein Law Group, P.C.)
Originally posted on the Massachusetts Real Estate Law Blog
Under revised guidelines which were to be effective October 1, 2009 but now delayed until November 2, 2009, the Federal Housing Administration (FHA) is implementing a new stricter approval process for condominiums to be eligible for FHA financing. Like the Fannie Mae regulations issued earlier in the year, the new FHA guidelines will surely slow down condominium mortgage financing, and negatively impact first time home buyers for condominium units.
For those who don’t know, FHA is a government program designed to help more people buy homes, and more borrowers will qualify with FHA financing than with conventional. It is a low down payment (3.5% down) program and the credit standards are much looser. The mortgage rates are typically better, as well.
To obtain a FHA mortgage on a condominium, the project must be FHA approved. Prior to these changes, there were two ways a condominium could be FHA approved: (1) full project approval, and (2) “spot” approval. Full project approval means that FHA has already done the approval on the entire condominium. Spot approvals were performed on non-FHA approved projects on a loan by loan basis, and were a way to make FHA loans available to home buyers in well run condo projects even if they haven’t gone through the full approval process.
No More Spot Approvals
Under the new guidelines, the popular spot approval process will no longer be available and will be replaced with something called a Direct Endorsement Lender Review and Approval Process (DELRA). FHA claims the DELRA process is more uniform and streamlined that the former spot loan approval process. Also, full project approvals expire every two years, so condominiums will have to re-certify every 2 years.
New Project Eligibility Guidelines
Under the new project eligibility requirements, all condominiums (consisting of 2 or more units) must meet the following requirements:
Buried in the fine print is a requirement for an affirmative action-type housing plan. For both new construction and conversions, if the developer intends to market 5 or more units within the next 12 months with FHA mortgage insurance (that would be most), an Affirmative Fair Housing Marketing Plan (AFHMP) or a Voluntary Affirmative Marketing Agreement (VAMA) must be in place. An affirmative fair housing marketing plan requires that the racial, socioeconomic, and ethnic composition of the condominium residents closely mirror that of the neighboring area, to the greatest extent possible. Most new condominiums don’t have these in place.
Click here for the new FHA condominium guidelines. You can look to see whether a condominium is approved on the HUD Homes & Communities website located here. Here is the FHA Condominium Mortgage webpage.
The Impact: More Work For Lenders, Condominium Associations/Managers And Attorneys
I expect FHA lenders will approach condominium association boards and managers, asking for certain information, certifications, and even legal opinions regarding compliance with FHA (and Fannie Mae) legal requirements. If a condominium is not on the FHA-approved list, or has lost its approval, condominium associations should consider applying for approval (or re-approval). Reportedly, FHA/HUD is backlogged a month or more in reviewing submitted applications. Thus, should your condominium need to be submitted for approval, keep in mind the process may take some time. Also keep in mind that the work to compile and complete the application package itself can take weeks, and require the board, its manager, and legal counsel to gather data, documents, and expert opinions required for FHA approval. The package of materials that must be submitted can vary from condominium to condominium, and often requires an updated reserve study and certain legal opinions.
Having issued numerous opinion letters and certifications under the similar Fannie Mae condominium regulations, our office is well equipped to assist lenders and buyers with FHA loan compliance issues. Contact rvetstein@vetsteinlawgroup.com for more information.
ARE YOU FRIKKIN’ KIDDING ME????????
They’re the damn guys that took all of our money and bought out troubled Countrywide and Merrill Lynch! I mean honestly folks- HOW IN THE HELL DO YOU GET BILLIONS OF DOLLARS FROM THE GOVERNMENT and STILL lose money????
Since the Countrywide acquisition, I personally withdrew all my money from B of A and put it elsewhere. If someone’s gonna screw me, at least pay me for it!
Read the article below for more info!
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By IEVA M. AUGSTUMS, AP Business Writer
CHARLOTTE, N.C. – Bank of America Corp. said Friday it lost more than $2.2 billion in the third quarter as loan losses kept rising, providing further evidence that consumers are still struggling to pay their bills.
The nation’s second-largest bank said it wrote down loans on its books by almost $10 billion during the July-September period, up almost $1 billion from the second quarter. The bank also added $2.1 billion to its reserves to cover bad loans, bringing its provision for credit losses to $11.7 billion. The bank’s total allowance for loan and lease losses now totals $35.83 billion.
Bank of America’s results were aided by profit from investment bank Merrill Lynch, including income from bond, stock and currency trading.
Its earnings follow the pattern set earlier this week by Citigroup Inc. and JPMorgan Chase & Co., which also reported more loan losses during the third quarter as consumers struggled to keep up with their credit card and mortgage payments. And on Friday, General Electric Co. reported that its GE Capital business, which includes credit cards, saw an 87 percent drop in profits, although it was also weighed down by commercial real estate losses. Together, the reports depict a financial industry that is still deeply troubled.
Banks have predicted for some time that their loan losses would keep rising. And Bank of America’s CEO Ken Lewis confirmed that this trend continues.
“Based on (the) economic scenario, results in the fourth quarter are expected to continue to be challenging as we close the year,” Lewis said on a conference call with analysts.
Bank of America said it lost $2.24 billion, or 26 cents per share, after accounting for the preferred dividends of $1.24 billion. That compared with earnings of $704 million, or 15 cents per share, a year earlier.
Revenue in the quarter increased 33 percent to $26.04 billion.
The loss was 5 cents more per share than the 21 cents forecast by analysts surveyed by Thomson Reuters Inc. Investors sent Bank of America shares down 90 cents, or 5 percent, to $17.20 in morning trading.
“Obviously, credit costs remain high, and that is our major financial challenge going forward,” Lewis said in a statement accompanying the earnings report. “However, we are heartened by early positive signs, such as the leveling of delinquencies among our credit card numbers.”
During the analyst call, Lewis said the bank believes it may have peaked in total credit losses this quarter, “although the levels going forward will continue to be elevated and certain businesses will still experience higher losses.”
Bank of America is considered particularly vulnerable to unemployment, which climbed last month to 9.8 percent in the U.S. Economists predict the jobless rate will pass 10 percent in the coming months.
The bank’s massive portfolio of credit-card loans could help investors determine where the economy is headed and how well the industry at large will fare, said Doug Dannemiller, senior analyst at Boston-based research firm Aite Group.
“As unemployment rates are in the 10 percent range, the results on consumer lending aren’t going to improve until that number gets lower,” Dannemiller said.
The bank has about 53 million consumer and small business customers, making it vulnerable to delinquencies and defaults, yet also ready to thrive when the economy recovers.
Bank of America’s global card services unit loss widened significantly to $1.04 billion from $167 million a year ago.
The loss in the bank’s home loans and insurance division grew to $1.6 billion from $54 million a year ago, as credit costs continued to rise.
The bank, which being investigated by federal authorities for its Merrill acquisition, has received $45 billion in bailout funds as part of the Treasury Departments $700 billion financial rescue package. It’s not known when it will repay the government.
Lewis, who is retiring at year’s end, has agreed to give up his salary and other compensation for 2009.
(end of article)
Call Us NOW to get a LOWER RATE.
By Amy Hoak, MarketWatch
CHICAGO (MarketWatch) — Lured by low mortgage rates, many homeowners have been rushing to refinance. Interest is gaining for good reason: Eligible borrowers can lock in rates that haven’t been this attractive in decades.
“With interest rates hovering around 5% for conforming loan amounts, homeowners should begin to seriously consider refinancing into a new fixed-rate mortgage, especially if they currently have an adjustable-rate mortgage,” said Lisa Weaver, president of Columbia, Mo.-based Certitude Financial Group. And don’t drag your feet, either, she said.
Rates on jumbo mortgages are still high, she said, but the national average rate on a 30-year fixed-rate conforming mortgage is the lowest in at least 37 years, according to Freddie Mac. The conforming loan limit in 2009 is $417,000 for most areas of the continental U.S., although in designated high-cost markets it will be up to $625,500.
Given the volatility in the mortgage market this year, Greg Gwizdz, national retail sales manager for Wells Fargo Home Mortgage, also advises homeowners to be proactive. It’s possible that rates will be low for a while, but in this turbulent economy, it’s not best to gamble that tomorrow will bring a better deal.
“Don’t sit back and say I’m going to wait for something to happen and for rates to go even lower,” he said. If you’re able to refinance into a mortgage that will be better for your finances, don’t pass up the opportunity, Gwizdz said.
Below are other points to consider:
1. Have an idea of home’s value
Prior to starting the refinancing process, call a real-estate agent or look online at sites including Zillow.com to get an estimate of what your home could be worth, said Scott Everett, founder and president of Dallas-based Supreme Lending. If you’re “drastically upside down” on your mortgage, meaning that you owe a lot more than your home is now worth, the possibility of refinancing might end right there.
“If you owe $250,000 and the house is worth $250,000, it [refinancing] is worth discussing,” he said. But if you owe $250,000 and “the house is worth $150,000 and you’re in Southern California, then you probably won’t be able to do it,” he said. Many Southern California markets have experienced a drop in home prices.
To get a better idea on a home’s value, borrowers might ask their mortgage firm if the appraiser it works with could give a ballpark estimate before starting the process, said David Adamo, CEO of Luxury Mortgage, in Stamford, Conn. But that’s still just an estimate until an appraiser comes out to your home, he pointed out.
2. Get ready for a thorough screening process
It’s not impossible to get a mortgage in today’s environment. But lending standards are likely a lot stricter than they were the last time you applied for a mortgage, so expect a thorough and frank discussion of your finances with a mortgage banker or broker before the application is even filled out.
Lenders are asking would-be borrowers to document income and assets thoroughly. In general, many also want FICO credit scores of 660 or 680 for conventional conforming mortgages; requirements are lower for loans backed by the Federal Housing Administration, Gwizdz said.
Those who might have a particularly tough time getting a mortgage today are self-employed homeowners who don’t have two years of income documentation — even if they have the income to support the mortgage, Adamo said. The availability of stated-income mortgages, which don’t require borrowers to fully document their income, is limited, he added.
3. Know what you’ll be saving
The old rule of thumb was that your rate should drop two percentage points for a refinance to be worth it, but that doesn’t always apply anymore, Adamo said. If you can recoup closing costs of the new mortgage in the first 12 months — and can save three-quarters of a percentage point on your interest rate every year thereafter — it’s probably economically justifiable to refinance, he said.
In any case, have a conversation about what rate would make refinancing worthwhile, and be prepared to take action. Borrowers also need to consider how long they want to stay in the property to determine which mortgage makes the most sense for their situation, Weaver said.
Sometimes you could be better off refinancing even if you don’t get a better rate, Gwizdz pointed out. If you have an adjustable-rate mortgage that resets in a year, but can get a fixed-rate mortgage at the same rate, it’s probably a good idea to refinance now if you plan on being in the home for years to come, he said.
He also cautions people about refinancing into mortgage terms that extend the life of the loan; doing so may bring monthly payments down, but will probably make the loan more expensive in the long term. “However, for homeowners that must have the lowest payment possible, it may be the right choice when combined with a lower fixed-rate product,” Ms. Weaver said.
4. Don’t count on cashing out
Tapping home equity through a cash-out refinance is much more difficult these days, due to stringent credit standards and loan-to-value requirements, Weaver said.
According to Freddie Mac, the share of refinances with a cash-out component was 63% over the first three quarters of 2008, the lowest level since 2004. Cash-out refinance mortgages have loan amounts at least 5% higher than the paid-off mortgage balances.
“The combination of declining home values and tighter underwriting standards have reduced the amount of equity that can be extracted by homeowners this year,” Frank Nothaft, Freddie Mac’s chief economist said in a news release.
Amy Hoak is a MarketWatch reporter based in Chicago.
In the current credit squeeze, if you have less than a 20 percent down payment, there’s pretty much only one major source of mortgage financing available: the Federal Housing Administration, the Depression-era home loan insurance agency that still offers 3 percent down, 30-year, fixed-rate mortgages with consumer-friendly credit standards, even on jumbo loans in high-cost areas of California and the East Coast.
But there is a potentially troublesome problem looming for the FHA: New loan volume is exploding — tripling in the past 12 months alone — and Congress has handed the agency the responsibility for almost all the government’s efforts to keep economically distressed homeowners out of foreclosure by refinancing their unaffordable loans.
The FHA says it needs to hire more staff and upgrade its technology to be able to handle the crush of new business, but it complains that Congress hasn’t appropriated the necessary funds — $65 million — to do the job fast enough. Capitol Hill appropriations committee staff dispute some of that, but the specifics of the arguments over dollar amounts aren’t the issue.
The real question is this: Can a government agency whose market share dropped below 3 percent during the heyday of the subprime boom now properly handle explosive volume rocketing it to an estimated market share of 30 percent this year? Are both the agency and Congress — which controls the purse strings — up to the task?
Mortgage industry, home building and real estate experts worry about the possible consequences of shifting too heavy a share of the mortgage market too quickly to an agency that may be inadequately staffed or funded. Howard Glaser, who served during the Clinton administration as acting general counsel for HUD, the parent department for the FHA, worries that loading on too much business without properly funding staff and technology upgrades raises the odds of breakdowns.
“FHA is assuming the risks of a mortgage market abandoned by private investors — without the risk management tools,” he said. “My fear is that next year at this time, we will be debating an FHA bailout.”
Steve O’Connor, senior vice president of the Mortgage Bankers Association, agreed there’s danger lurking in the massive increases in business going to the FHA. “You just can’t expect to fit that amount down the same size pipe — you’ve got to expand the size of the pipe” by funding additional staff and technology, he said. “It’s a very serious concern.”
Other industry groups, including the National Association of Home Builders and the National Association of Realtors voice similar worries. Dick Gaylord, president of the Realtors, said “if [the FHA] is truly going to serve its growing constituency,” it will need more money and people.
The FHA — for years the forgotten federally controlled stepchild of an industry dominated by Fannie Mae, Freddie Mac and the Wall Street mortgage bond machines — is now insuring more than 140,000 new loans a month, according to agency statistics. It has $400 billion in outstanding loans in its insurance portfolio and runs its home mortgage business with 937 employees in offices spread around the country. The agency wants authorization to add 160 employees immediately.
Though historically a resource for first-time buyers, minorities and people with imperfect credit, the FHA increasingly is the go-to place for people who have above-average credit backgrounds but lack — or choose not to use — large amounts of down-payment cash. In August, according to agency data, approximately 23 percent of new FHA home purchasers had FICO credit scores above 720 — far beyond the proportion of prior years. In the same month, just 12 percent had FICO scores below 600.
With mortgage limits extending into the jumbo category, the agency is attracting large numbers of customers from high-cost areas of the country, especially California and the mid-Atlantic states. One of 10 new borrowers in August was from California.
To some mortgage lenders and loan officers, the FHA is now the main game in town. “Nothing competes with them,” said Paul Skeens, chief executive of Colonial Mortgage Group in Waldorf.
Fannie Mae and Freddie Mac, both now in federal conservatorship, have steadily added fees to the point where “they just aren’t competing with FHA on down payments or costs,” Skeens said. In 2001 and 2002, Skeens’ firm did just one-quarter of 1 percent of its volume in the FHA. Now it’s 60 percent.
“The last thing we need right now, with the shape the housing market is in,” he said, “is for FHA not to function well.”
By Kenneth R. Harney
This is the main reason you NEED to have an FHA EXPERT (such as us of course) working with you.
Can you imagine being 2 weeks into the process and your part-time Loan Officer calling and saying, “Hi Bob… um, we have a little issue?”
In our information age, you need what you want, and you need it NOW- but not so fast, Charlie.
What we see (and later save), day in and day out, is inexperienced Loan Officers wanting to get the “deal” in faster than they can ask your name, only to realize that they forgot to ask you that one “deal-killer” of a question at the beginning, and now everyone is out of time, and money- but has plenty of frustration.
So to ease everyone’s minds, we are here to help and want you to know that we have our fingers on the markets, the economy, rates, and guidelines; but most importantly, we are here to GIVE YOU CORRECT AND INFORMED ADVICE ON ALL FHA LOANS.
So with that being said, here’s the scoop on the new change in FHA guidelines:
As of October 1, 2008, all Up Front Mortgage Insurance Premiums (UFMIP) for purchases and full-credit qualifying refinances will be 1.75%.
For streamline refinances, UFMIP will be 1.50%.
For all FHASecure, you are looking at 3%.
As for the MONTHLY mortgage insurance premiums, as they have had some slight changes as well, but nothing too major.
Here is the link directly to HUD Memo detailing these changes:
As always, we’re here to help and welcome any questions you may have!
After the Bush Administration’s $700 billion financial rescue proposal went down in flames during a House vote on Sept. 29, a slightly revamped version has risen from the ashes and went to the Senate Floor for an evening vote on Oct. 1.
The measure passed easily, with 74 in favor and 25 against.
Key among the changes is an amendment that would lift the cap on FDIC-insured bank deposits from $100,000 to $250,000. The limit would revert to $100,000 at the end of 2009 unless extended by Congress.
Other amendments include a tax relief package that would provide business tax breaks for the use of renewable fuels such as wind and solar power; shield approximately 26 million Americans from the alternative minimum tax (AMT); grant tax relief to victims of natural disasters; and grant a series of extensions for various state and local tax programs.
Versions of the tax relief package have previously been approved by both the House and Senate, and some have speculated that attaching it to the rescue plan will sweeten the bitter pill the House may have to swallow when the bill comes back around for a second vote.
“Adding tax relief that creates jobs, supports families and secures a new energy future for the country make this bill a lot fairer and a lot better for hardworking, taxpaying Americans,” said Sen. Max Baucus, chairman of the Senate Finance Committee.
In a press briefing Wednesday, White House Spokesman Tony Fratto suggested that sentiment on the Hill regarding the bill might have changed in recent days as the failure of the House vote brought into sharp relief the ways in which the credit squeeze is affecting everyday Americans.
Fratto indicated that members of Congress are “starting to hear other public officials and business groups to express more clearly just the strains that they are dealing with in this current environment and the urgency for addressing it.”
Indeed, 50 business trade groups wrote a joint letter to Congress urging them to pass the bill in order to “to prevent a meltdown” of the country’s capital markets.
Remarking on the partisanship that divided the House earlier this week, Fratto added, “I don’t think it’s a conservative thing or a liberal thing. We’re talking about the U.S. economy. This isn’t about free markets or socialism. This is a debate about frozen markets. And you can’t have a free market when you have a frozen market.”
Going into the vote, Senate Majority Leader Harry Reid indicated that the legislation had broad support from Senators on both sides of aisle and suggested that with the improvements made to the Administration’s proposal, the Senate would pass the legislation and the House of Representatives would follow suit soon after.
“I believe that this legislative package will ensure that the needs of Main Street are not forgotten,” Reid said.
Speaking from the Floor, Senate Republican Leader Mitch McConnell said that after “extensive consultation,” he and Reid “believe that we have crafted a way to go forward and to get us back on track. This is the only way to get the right kind of solution for the American people.”
McConnell acknowledged that “no one is happy with the situation that we’re in, but it’s a situation that we have. And the American people didn’t send us here just to do easy things. They expect us to rise to big challenges and to put aside differences and to work on their behalf.”
Noting that the “tendency to be the most partisan” is heightened during the period right before an election, McConnell said, “We’re in the process of setting that aside, rising to the challenge, both Democrats and Republicans, and doing what’s right for the American people.”
Speaking of the election, Sens. Barack Obama, John McCain and Joe Biden all flew back to Washington, D.C. from the presidential campaign trail to cast their votes in favor of the bailout package.
Following the vote, Senators were hopeful that revised bill could now be passed successfully in the House when it hits the Floor again on Friday.
“This vote tonight, I think, was the turning point,” Baucus said.
Broker Newswire
Issue Date: Mortgage Law Central – October 13, 2008
WASHINGTON — The Department of Housing and Urban Development launched a program Wednesday to help underwater borrowers refinance their mortgages, but its details appeared to pose fresh challenges for servicers and lenders.
The agency said borrowers with payment- and debt-to-income ratios over a certain threshold must complete a three-month trial period in a new loan before the Federal Housing Administration would insure it. Some analysts said that stipulation could cause problems.
“Some folks thought the credit ratios would have been a little more liberal, particularly in light of the Federal Deposit Insurance Corp.’s experience with the IndyMac portfolio,” said Brian Chappelle, a partner at Potomac Partners LLC and former HUD official.
The Hope for Homeowners program allows borrowers to take out FHA-insured mortgages, relieving the owners of the old mortgage of a delinquent loan in exchange for writing its value down to 90% of the current home value and waiving any prepayment or late payment fees. The FHA in turn will pay off the old loan and give second lien holders a share in the possible future appreciation of the home’s value.
Though the program was created by a bill passed in July, it left most of the details to HUD and an oversight board of federal regulators.
Under those details, which were released Wednesday, the borrower’s payment-to-income ratio cannot exceed 31%, and the debt-to income ratio cannot exceed 43%, for the FHA to insure a new mortgage immediately. Borrowers with higher ratios — up to 38% for payments and 50% for debt — may still participate, but the FHA would require the three-month trial.
Rod Dubitsky, the head of Credit Suisse Group’s asset-backed securities research division, said the requirement that servicers try a payment plan before turning the borrower over to an FHA-insured loan left room for the original servicer and the new lender to clash over decision-making authority.
“There’s a ‘he said, she said’ potential from the borrower’s standpoint,” he said. The setup “requires the servicer and the FHA lender to work hand in glove.”
Observers said the FHA’s underwriting procedures for the program are also strict. New lenders must obtain two year’s worth of tax returns on the borrower from the Internal Revenue Service, among other things.
The eligibility requirements released Wednesday also dictated that loans be originated before this year. Borrowers must have made at least six payments and must not be able to make more. Borrowers are banned from participation if the mortgage is not on their primary residence or if they own a second home. The new loans cannot exceed $550,440.
At a press conference announcing the details, HUD Secretary Steve Preston said it was open to improvments. “We will continue to listen to the industry as they adopt the program and experience homeowner needs.”
HUD officials and observers said they were hoping that the passage of a bailout bill for the financial industry would make the program more efficient.
Under the existing program, lenders considering making new loans to struggling borrowers would not have any up-front financial incentive. They would only be able to share in the possible future appreciation of the borrower’s home. The bailout bill, which the Senate was expected to pass Wednesday, would authorize the FHA to pay the new lender up front instead. The bill also would encourage servicers to use the program for eligible loans purchased by Treasury as part of its proposed facility to buy $700 billion of troubled mortgage assets.
FHA Commissioner Brian Montgomery would not comment specifically on the fate of the two changes to the plan that are in the bailout bill, but he said HUD was still making improvements to the plan.
“We’re kind of flying the plane and fixing it at the same time,” he said. “Our work doesn’t end today. A good bit of it does, but this product is out there for the next three years, so as we go forward we’ll adjust as we need to.”
By Emily Flitter
Power and gas retailers
*Reliant Energy is waiving late fees indefinitely and will be working with its customers on flexible payment terms and extensions to meet their needs, said communications director Pat Hammond.
Reliant, which has about 1.8 million customers in Texas, also has suspended its credit and collection activity and has stopped disconnecting customers for non-payment.
“We realize that Hurricane Ike has created a lot of difficult financial hardships for people, and we want to do what we can to work with our customers during this difficult time,” said Hammond.
“We ask customers to call us and work out a payment with us,” she said.
*Green Mountain Energy is waiving late fees for customers who call in and let the company know they were affected by Ike, according to a statement from the company.
Green Mountain also is extending its deferred payment plan.
*CenterPoint Energy’s natural gas customers affected by Ike will not receive late notices and late fees will be waived, said spokeswoman Leticia Lowe.
In addition, the utility will also waive security deposits for customers displaced by the storm, she said.
Banks
*Compass Bank has waived access fees to its network of ATMs in Houston and other cities in Texas where it figures Houstonians fleeing the storm may need quick cash, said Thomas Graham, executive vice president of communications in Houston.
The bank also is allowing its small business and consumer customers to defer their loan payments, such as car and recreational vehicle loans. The deferral is up to 60 days depending on the customer’s individual circumstances.
Customers who need early access to their certificates of deposit can have them without paying early withdrawal fees, he said.
And late payments will be forgiven, he said.
Graham stressed – as did other service providers – the importance of giving notice that a payment will be late.
*Capital One is working with its customers affected by Ike on a case-by-case basis, said spokeswoman Pam Girardo in McLean, Va.
The bank has a hardship policy and some examples of what it can do for its customers include waiving late fees, going-over-credit-limit fees and non-sufficient funds fees, she said.
Capital One will also consider reducing a customer’s minimum payments, deferring payments for a limited time, waiving finance charges and waiving accrued interest.
Customers need to call and discuss the options, said Girardo.
Capital One also waived the ATM fees for all its customers who use a non-Capital One machine and has suspended all of its collection activity in the area.
*Comerica has waived ATM fees for customers who use non-Comerica machines and has expedited its process to boost credit card limits, according to spokeswoman Pamela Cathion.
The bank is also offering to donate up to $100 to a charity or community relief organization designated by a new customer who opens a bank account with at least $2,500.
*Discover makes special payment considerations on a case-by-case basis to cardholders affected by a natural disaster, said spokesman Jon Drummond.
Those provisions include, but are not limited to, allowing them to delay payments, and waving minimum payments, late fees and other charges for specific amounts of time depending on a customer’s need.
*American Express spokeswoman Molly Faust said the company will handle each cardholder’s situation on an individual basis. If you need help, please call the toll-free number on the back of your card, or visit americanexpress.com and click on “Hurricane Response: Assistance for our Customers.”
*Chase is asking its customers facing financial difficulty to contact the bank as soon as possible and it will work with them on an individual basis, according to spokesman Greg Hassell.
Telecom companies
*T-Mobile is topping off pre-paid cell phones that were running low at no charge to make sure people don’t run out of service, and it has suspended collections calls in Houston and Galveston.
*Sprint is waiving roaming fees, call-forwarding, late fees and overage charges for customers who use more minutes or text messages than they’re allowed between Sept. 9 and Oct. 11, said spokeswoman Kristin Wallace. The company is also offering free call-forwarding service and Sprint has suspended collections calls and service disconnections.
*AT&T has suspended all disconnections and collection activities. The company is providing free local and long-distance calling in all of its retail stores, and is offering free Wi-Fi service to anyone at all area Barnes and Noble locations, said spokesman Dan Feldstein.
AT&T will work with customers on their billing on a case-by-case basis. AT&T also offers its customers rollover minutes, allowing them to absorb a month in which their usage is heavier than normal.
*Verizon Wireless is giving one month of free service in the 409 area code and has suspended collections calls in the Greater Houston area, said spokeswoman Gretchen LeJeune.
*Verizon, which provides landline phone service in several cities around Galveston Bay, has suspended collections calls and disconnections, said spokesman Lee Gierczynski.
*Comcast has suspended disconnections and collections, said spokesman Ray Purser.
*Time Warner Cable, which provides cable service for Beaumont and parts of Southeast Texas, has credited customers’ accounts back to Sept. 12 and will extend credits until service is restored, said spokesman Gary Underwood. The company also is not disconnecting customers or making collections calls.
Insurance
*Allstate is offering deferred billing options, according to spokeswoman Kristen Beaman. The company will send affected customers a letter, but those who have been relocated can call their agent or 800-547-8676.
*USAA will waive late fees if customers are a few days behind, according to spokesman Justin Schmitt. The company, which also has a bank and offers financial services, also will offer fixed-rate new vehicle auto loans as low as 5.39 percent for people who lost cars in floodwaters. In addition, it will waive insufficient funds fees on checking and savings accounts.
Some breaks on bills being offered
By L.M. SIXEL, BRAD HEM AND DAVID ELLISON
Copyright 2008 Houston Chronicle