What Happens if Fannie Mae and Freddie Mac go away?

waving goodbyeDissolving Fannie Mae, Freddie Mac may hurt borrowers
Source: The LA Times

What will the proposed elimination of Fannie Mae and Freddie Mac mean for consumers? In the absence of a government guarantee, experts contend that mortgage rates are likely to rise, and the widespread availability of 30-year mortgages would be jeopardized. Economists at Moody’s Analytics estimate the average mortgage borrower would see interest rates increase by one-half to three-quarters of a percentage point.
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Is the Mortgage Food Fight finally over?

food fightConsumer Watchdog says mortgage servicing still riddled with problems
Source: The Washington Post

Error-prone and even abusive practices still plague the mortgage servicing business, according to a new report from the Consumer Financial Protection Bureau (CFPB). The report indicates that servicers have made a variety of mistakes, including sloppy payment processing, poor communications with consumers, and insufficient programs to ensure compliance with federal laws. Under the 2010 Dodd-Frank law, the CFPB is tasked with oversight of consumer products, including mortgages and credit cards, due to issues that stemmed from the 2007-2009 financial crisis.

Making sense of the story

  • The CFPB has launched investigations into the conduct of banks and other financial firms since many companies continue to violate the terms of the 2012 National Mortgage Settlement.
  • In some instances, homeowners faced extra fees due to the sloppy payment processing of mortgage servicers. Also, some homeowners were not notified that their loans were transferred to another company.
  • Non-bank servicing firms, which are now subject to examinations, reportedly lack formal procedures to address consumer complaints or ensure quality control. The report shows an absence of systems for compliance management.
  • “Deceptive communications to borrowers” about modification requests remains an issue, and services failed to help struggling homeowners find more manageable repayment plans where possible. Applications for loan modifications also took too long to process.
  • New mortgage servicing standards are set to take effect in January 2014 to force servicers to give homeowners easy access to information about their loans, among other things. The CFPB issued the new standards to promote greater transparency.

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FHA Foreclosure Waiting Period now getting shorter.

lawnmowerFHA Trims Waiting Period for Borrowers Who Experienced Foreclosure
The FHA is reducing the amount of time a borrower must wait in order to receive an FHA-insured mortgage, according to a new mortgagee letter from the Dept. of Housing and Urban Development. Currently set at three years, the FHA now allows eligible borrowers to receive an FHA-insured loan in as little as one year. Eligible borrowers include those who experienced unemployment or other severe reduction in income and were unable to make their monthly payments, and ultimately lost their homes to a pre-foreclosure sale, deed-in-lieu, or foreclosure.

FHA is allowing for the consideration of borrowers who have experienced an economic event and can document that:

  • Certain credit impairments were the result of a loss of employment or a significant loss of Household Income beyond the borrower’s control;
  • The borrower has demonstrated full recovery from the event; and,
  • The borrower has completed housing counseling.

The guidance in the mortgagee letter is applicable to purchase money mortgages in all FHA programs, with the exception of Home Equity Conversion Mortgages.

Borrowers who may be otherwise ineligible for an FHA-insured mortgage due to FHA’s waiting period for bankruptcies, foreclosures, deeds-in-lieu, and short sales, as well as delinquencies and/or indications of derogatory credit, including collections and judgments, may be eligible for an FHA-insured mortgage if the borrower:

  • Can document that the delinquencies and/or indications of derogatory credit are the result of an economic event as defined in the mortgagee letter,
  • Has completed satisfactory housing counseling, as described in this ML, and
  • Meets all other HUD requirements.

More info

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Do you ask Mom and Dad for the cash to buy that home?

parent loanAsking Mom and Dad for Cash to buy that Home

Source: Wall Street Journal

Loans from family members could go the extra mile in making a down payment, but financial experts say parental help is most useful when it comes as a gift rather than a loan during the mortgage application process. A family loan may not be viewed favorably by a lender and could lead to disqualification for a mortgage since the loan is considered unsecured debt.  Read the full story.

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What Worries Buyers Most?

worried buyer7 Things That Worry Buyers Most about the Buying/Selling Process
Source: Chicago Agent Magazine

Tight supplies, rising rates and bidding wars have characterized market conditions for many buyers looking to secure the property of their dreams. A new survey conducted by Trulia and Harris Interactive shows that 41 percent of respondents are concerned that mortgage interest rates will rise before they are ready to buy. Finding a suitable home and qualifying for a mortgage were other major concerns. Read the full story

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Watch out for this Mortgage Scam

scam alertPutting borrowers into higher-rate mortgages still occurs, U.S. says

Source: The Los Angeles Times

A lawsuit filed recently by the Consumer Financial Protection Bureau indicates that “upselling” remains a pressing concern due to hidden, backroom ploys. “Upselling” leads mortgage applicants into higher-cost terms that increase the lender’s profits, and this abusive practice was banned by the Federal Reserve Board in 2011. Read the full story

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How do I compete with the All-Cash buyer?

cash buyerHomebuyers are facing competition from all-cash buyers on top of rising home prices and low inventory. Such cash buyers include foreign investors and baby boomers with sufficient equity. Tips to compete with these buyers include getting pre-approved, making a competitive bid, considering properties that might be overpriced, and freeing up additional cash.
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