homesmillbrae.com » Gse

Regulator Claims New Rules Will Loosen Mortgage Lending

Wed, 12 Sep 2012 10:39:51 +0000

Ask any real estate agent, home builder or home buyer what is the biggest barrier to entry in today’s housing market, and the likely answer will be: tight credit.

The lax lending of the latest housing crash is no more, but some claim the pendulum has swung too far in the other direction.

High credit scores and large downpayments are often required to get the lowest mortgage interest rates, and that is knocking many would-be home owners out of the game.

While some argue that we have just returned to the days of responsible lending, banks are clearly more gun shy due to the billions of dollars’ worth of bad loans that they have been forced to repurchase from Fannie Mae and Freddie Mac.

The two mortgage giants have claimed false “representations and warranties” on thousands of loans sold to them by lenders. (Read More: ‘Wind Down of Fannie, Freddie: ‘Positive for Housing’?)

The representations and warranties are basically what the lender tells Fannie and Freddie about the loans and the borrowers.

Through the first half of 2012, lenders have had to repurchase a total of $41.95 billion in mortgages from Fannie and Freddie. (Read More: Fannie Mae COE: ‘Comfortable’ With Decision Not to Slash Mortgage Balances.)

That covers loans made before 2005 and through the second quarter of 2012, according to Inside Mortgage Finance. Actual GSE (Fannie/Freddie) repurchase requests or demands are about double that amount.

Given that, it is no surprise that the banks have tightened lending.

“For the market to reclaim the strength it once had, and to provide a cornerstone for the mortgage market of the future, it is vital we consider ways to improve the representation and warranty model,” said Edward DeMarco, acting director of the Federal Housing Finance Agency (FHFA), Fannie Mae and Freddie Mac’s regulator, in a speech to the American Mortgage Conference in North Carolina Monday night.

To that end, the FHFA has released new guidelines that will go into effect on new loans starting the first of next year. Part of the new “framework,” is relief for lenders from mortgage repurchase obligations on loans where the borrower has made on-time monthly payments for 36 consecutive months. On refinances through the government’s Home Affordable Refinance Program (HARP), that term would be knocked down to 12 months. (Read More: Why Millions of Americans Still Can’t Refinance Their Mortgage.)

The new framework also provides faster and more in-depth monitoring of loans by Fannie Mae and Freddie Mac. Apparently new data-collection systems will allow for that. This is an improvement because usually the loans are reviewed only after they have defaulted.

“To the extent that a lender controls the origination process, they determine whether or not they are delivering a quality loan,” said a source close to the matter. “Their behavior will determine whether they get relief.”

Banks have been asking for more clarity in the whole repurchase process, and the FHFA is promising that new framework. This all covers new loans, however, and does nothing to address the still thousands of bad loans in the system made during the housing boom. (Read More: Big Banks Pushed to Outsource Mortgages.)

“The FHFA is trying to get banks to lend, take more risk when they sell these loans to the GSE’s,” said FBR’s Paul Miller. “There is a huge problem with people with lower FICO scores not getting access to credit, so the GSE’s have come under a lot of criticism.”

Will it work?

“This will have minimal impact,” claimed Miller, who points to still huge put-backs in process on legacy loans from Fannie Mae, Freddie Mac and the FHA. Put-back risk is one of, if not the top reason lenders are not loosening mortgage credit availability.

“Our concern remains that these initial [loan] reviews could cause lenders to further tighten underwriting standards for fear of running afoul of FHFA’s standards,” added Jaret Seiberg of Guggenheim Partners, who said today’s announcement of the standards only adds to his worries of a credit crunch in 2013.

Still the FHFA claims lenders asked for more clarification on quality controls and asked for earlier monitoring of loans, and that is what they’re getting.

“Ultimately, better quality loan originations and underwriting, along with consistent quality control, will help maintain liquidity in the mortgage market while protecting the Enterprises from loans not underwritten to prescribed standards,” DeMarco said.

The trouble is, this is not the only issue keeping credit tight. (Read More: US Home Builders Begin to See Credit Thaw.)

The future existence of Fannie Mae and Freddie Mac themselves are still in question, and banks are also facing new regulations under the Dodd-Frank (learn more) law that could complicate lending further and heighten lenders’ exposure to risk. For the mortgage lending business, it is still an uncertain future.

—By CNBC’s Diana Olick

Questions? Comments? And follow me on Twitter @Diana_Olick

Article source: http://www.cnbc.com/id/48988843?__source=RSS*blog*&par=RSS

Mortgage Bankers Reverse Course on Loan Limits

Fri, 22 Jul 2011 20:46:41 +0000

Page 1 of 3 | Next Page
Show Entire Article

It was barely a few months ago, albeit a few thousand degrees ago, that I moderated a panel of mortgage types from the major banks, including the Mortgage Bankers Association’s new president David Stevens, formerly FHA commissioner.

Stevens and I have been talking housing for many years now, so I’m well aware that he is not exactly the ambivalent type.

When I suggested to the panel that the risk of a double-dip in housing was great and that winding down Fannie Mae and Freddie Mac now could be detrimental to the housing market, Stevens was adamant that housing was well into recovery, and all those home price and mortgage delinquency reports I was citing were backward looking and not indicative of the current state of the market.

Now Stevens is reversing course.

This morning he put out a statement advocating a continuation of the higher loan limits at the GSE’s (Fannie and Freddie) and the FHA for one more year. “The temporary loan limits authorized by Congress have benefited consumers and the housing market during what has been a turbulent period for our nation’s economy,” Stevens said in the statement. “That decline is not over yet.”

The statement was a little dry for me, knowing the source, so I called Stevens for a little elaboration. He stated right from the get-go that he is still bullish about the future of the housing market, which is not exactly saying he feels great about it right now.

Page 1 of 3 | Next Page
Show Entire Article

Terrorism Strikes Norway, With Death Toll Likely to Rise

Broad US Debt Deal Remains Elusive, But Talks Continue

Greek Bailout May Not Be Cure-All That Europe Hopes

GAO Audit Reveals Fed Played Fast and Loose With Loan Rules

For Fundraising, Obama Relies Even More on Wall Street

More Top Stories

Article source: http://www.cnbc.com/id/43859013?__source=RSS*blog*&par=RSS

Distressed Property Sales Drop, Despite Push to Sell

Tue, 21 Jun 2011 18:27:00 +0000

Page 1 of 3 | Next Page
Show Entire Article

The share of distressed sales in May, that is foreclosed properties and short sales (when the property is sold for less than the value of the loan), fell to 31 percent of all sales from 37 percent in April. Investors, who purchase a large share of these distressed properties, also represented a smaller share in May. So what’s going on?

We know there is still a huge supply of bank owned (REO) properties, and we also know that banks are pushing short sales on many more properties than ever before. But they are also pushing REO sales, thanks to new sales incentives from lenders and the GSE’s (Government-Sponsored Enterprises).

“Realtors and mortgage loan officers nationwide are driving mid-to-high end organic, short and distressed sales on the fear that buyers will be unable to qualify for loans once the QRM (Qualified Residential Mortgage) rules are in place requiring 20 percent down,” says mortgage market analyst Mark Hanson, describing new rules being considered for risk retention by banks (part of the banking overhaul legislation passed last summer).

Some bloggers though, writing in to me after the existing home sales report, claimed that Fannie and Freddie are holding on to REOs, trying to game home prices. Fannie strongly disputes that.

Page 1 of 3 | Next Page
Show Entire Article

Bonus Cuts, Pay Raises, Then Layoffs

El-Erian: What’s Weighing Heavily on the Markets

Harrisburg Hoping God Can Help Balance the Books

Money Anxiety Index Latest Indicator of a Double-Dip

U.S. Competitiveness Becoming A Tale of Two Economies

More Top Stories

Article source: http://www.cnbc.com/id/43483088?__source=RSS*blog*&par=RSS