- Published on
by Kelli Rogers
Both Bank of America and Fannie Mae had to fork out to meet a conciliation agreement with HUD.
The agreement settles allegations that the lender and Fannie Mae violated the Fair Housing Act
by denying a disabled borrower’s loan modification application.
“People with disabilities should not have to answer unnecessary questions about the nature of their
disability when seeking a loan modification,” said Bryan Greene, HUD General Deputy Assistant Secretary
for Fair Housing and Equal Opportunity. “HUD will continue to take action against lenders that subject
persons with disabilities to discriminatory practices.”
According to the complaint, a San Bruno, Calif. woman applied for a loan modification at Bank of America
to make it easier for her to pay her mortgage after her disability caused her to miss several months of work,
citing physical “hardship.”
Upon request of documentation of her medical condition, the woman provided the loan officer with a letter
from her physician, a current medical bill, and a letter from her employer certifying her approved leave of
absence due to her disability. But the bank denied her application, reportedly telling her that she had not
provided sufficient information about the nature of her disability. Fannie Mae reportedly stated that her
doctor’s letters and other documentation were insufficient to show that she was permanently disabled.
Under the terms of the agreement, Bank of America will pay the woman $22,449, which includes $19,349
to cover the approximate closing costs on a refinance loan, and agreed to follow HAMP and Fannie Mae’s
servicing guidelines. Bank of America will also provide fair lending training to its newly-hired employees.
In addition, Fannie Mae will pay the woman $3,400.
Both Bank of America and Fannie Mae had to fork out to meet a conciliation agreement with HUD.
The agreement settles allegations that the lender and Fannie Mae violated the Fair Housing Act
by denying a disabled borrower’s loan modification application.
“People with disabilities should not have to answer unnecessary questions about the nature of their
disability when seeking a loan modification,” said Bryan Greene, HUD General Deputy Assistant Secretary
for Fair Housing and Equal Opportunity. “HUD will continue to take action against lenders that subject
persons with disabilities to discriminatory practices.”
According to the complaint, a San Bruno, Calif. woman applied for a loan modification at Bank of America
to make it easier for her to pay her mortgage after her disability caused her to miss several months of work,
citing physical “hardship.”
Upon request of documentation of her medical condition, the woman provided the loan officer with a letter
from her physician, a current medical bill, and a letter from her employer certifying her approved leave of
absence due to her disability. But the bank denied her application, reportedly telling her that she had not
provided sufficient information about the nature of her disability. Fannie Mae reportedly stated that her
doctor’s letters and other documentation were insufficient to show that she was permanently disabled.
Under the terms of the agreement, Bank of America will pay the woman $22,449, which includes $19,349
to cover the approximate closing costs on a refinance loan, and agreed to follow HAMP and Fannie Mae’s
servicing guidelines. Bank of America will also provide fair lending training to its newly-hired employees.
In addition, Fannie Mae will pay the woman $3,400.
- Published on
Underwriting from one lender to another varies slightly, but these are the basic
guidelines they use and a good example to direct your attention before you pay for a
mortgage credit report.
1.
Start with the basics:
Review the applicant’s name, address, social security number, and date of birth.
What does the applicant’s employment information reveal about his or her earning
potential? A stable employment history indicates that the applicant is likely to
earn the funds necessary to repay the loan. Mismatches of the applicant’s basic
information with other documents or a former address close to the new property
are red flags.
2.
Payment history:
An applicant’s housing obligation payment history is an indicator of how he or
she will handle mortgage payments in the future. Look out for late rent or
mortgage payments. Were these exceptions, or did the applicant frequently make
late payments? To qualify for a loan, applicants should not have more than one
late housing obligation payment in the past 12 months, but some lenders do not
make an exception so you should ask the loan officer before making an
application.
“The lender must verify and document the previous 12 months’
housing history even if the borrower states he/she was living
rent-free.”
Beaware that private mortgages and other housing payments may not show on the
credit report. Always ask for cancelled rent checks, rental ledgers, VORs, VOMs,
copies of money orders, and the like, to ensure good insight into an applicant’s
housing obligation payment history.
3.
Debt-to-income ratio/amount owed vs. credit available for FHA
applicants:
An aggressive lender accepts ratios between 31 percent (front end) and 43
percent (back end). Higher ratios need AUS (automated underwriting systems)
approval. When applying for a loan installment debt with less than ten
payments remaining may be excluded from the ratio, as long as the monthly
payment does not negatively impact the applicant’s ability to make mortgage
payments on time once the loan closes. In addition, an applicant with
installment debt must have at least three months worth of liquid funds. Federal
student loans may be excluded from the ratio if it they are deferred over 12
months after closing.
4.
Credit history:
Does the applicant have a history long enough to allow for predictions about his
or her ability to repay a loan? How frequent are late payments? How high is the
past due amount? Are derogatory items current, or are they from the past? Are
there are signs of improvement in the applicant’s credit history? Take all this
into consideration when evaluating the applicant’s credit history.
“Generally, a borrower is considered to have an acceptable credit history if he/she does not
have late housing or installment debt payments, unless there is major derogatory
credit on his/her revolving accounts.”
5.
Courthouse records section/public records:
Red flag items like bankruptcies and bank liens are listed in this section. To
qualify for a loan, all judgments must be either satisfied or placed into an
agreeable repayment plan. Applicants must provide evidence that payments were
made in accordance with the agreement for a minimum of three months. Mortgage
foreclosures may be acceptable if they happened at least three years ago. The
minimum discharge for bankruptcies is two years. Under certain circumstances,
the minimum requirement for foreclosures and bankruptcies can be reduced, as
stated in the HUD handbook 4155.1.
Instead of solely focusing on a client’s credit score rating,
some lenders look at the bigger picture when assessing the risk of a loan.
Companies that retain servicing rights, have the flexibility to evaluate and
identify credit-worthy borrowers who are not readily apparent to large
corporate underwriters.
guidelines they use and a good example to direct your attention before you pay for a
mortgage credit report.
1.
Start with the basics:
Review the applicant’s name, address, social security number, and date of birth.
What does the applicant’s employment information reveal about his or her earning
potential? A stable employment history indicates that the applicant is likely to
earn the funds necessary to repay the loan. Mismatches of the applicant’s basic
information with other documents or a former address close to the new property
are red flags.
2.
Payment history:
An applicant’s housing obligation payment history is an indicator of how he or
she will handle mortgage payments in the future. Look out for late rent or
mortgage payments. Were these exceptions, or did the applicant frequently make
late payments? To qualify for a loan, applicants should not have more than one
late housing obligation payment in the past 12 months, but some lenders do not
make an exception so you should ask the loan officer before making an
application.
“The lender must verify and document the previous 12 months’
housing history even if the borrower states he/she was living
rent-free.”
Beaware that private mortgages and other housing payments may not show on the
credit report. Always ask for cancelled rent checks, rental ledgers, VORs, VOMs,
copies of money orders, and the like, to ensure good insight into an applicant’s
housing obligation payment history.
3.
Debt-to-income ratio/amount owed vs. credit available for FHA
applicants:
An aggressive lender accepts ratios between 31 percent (front end) and 43
percent (back end). Higher ratios need AUS (automated underwriting systems)
approval. When applying for a loan installment debt with less than ten
payments remaining may be excluded from the ratio, as long as the monthly
payment does not negatively impact the applicant’s ability to make mortgage
payments on time once the loan closes. In addition, an applicant with
installment debt must have at least three months worth of liquid funds. Federal
student loans may be excluded from the ratio if it they are deferred over 12
months after closing.
4.
Credit history:
Does the applicant have a history long enough to allow for predictions about his
or her ability to repay a loan? How frequent are late payments? How high is the
past due amount? Are derogatory items current, or are they from the past? Are
there are signs of improvement in the applicant’s credit history? Take all this
into consideration when evaluating the applicant’s credit history.
“Generally, a borrower is considered to have an acceptable credit history if he/she does not
have late housing or installment debt payments, unless there is major derogatory
credit on his/her revolving accounts.”
5.
Courthouse records section/public records:
Red flag items like bankruptcies and bank liens are listed in this section. To
qualify for a loan, all judgments must be either satisfied or placed into an
agreeable repayment plan. Applicants must provide evidence that payments were
made in accordance with the agreement for a minimum of three months. Mortgage
foreclosures may be acceptable if they happened at least three years ago. The
minimum discharge for bankruptcies is two years. Under certain circumstances,
the minimum requirement for foreclosures and bankruptcies can be reduced, as
stated in the HUD handbook 4155.1.
Instead of solely focusing on a client’s credit score rating,
some lenders look at the bigger picture when assessing the risk of a loan.
Companies that retain servicing rights, have the flexibility to evaluate and
identify credit-worthy borrowers who are not readily apparent to large
corporate underwriters.
- Published on
Obtaining credit for a business with no personal credit check and no personal guaranty is very appealing for any business owner. One might say this is the holy grail of owning a business, being able to obtain massive amount of funding using the business itself as collateral.
There are many steps to building an exceptional business credit profile. Each of these steps is essential in obtaining business credit with no personal guaranty. Here are some of the steps we help our clients take when building business credit...
1. Make sure they start by incorporating their business and make sure they obtain a Federal Tax ID#.
2. Insure they setup a business bank account and that the business name on their corporation papers is the same as on their business bank account.
3. Insure they have a business land-line number that is listed with 411.
4. Insure they have the proper businesses licenses for their business that they need. Have them set up a complete credit profile with Dun and Bradstreet
6. Make sure they pay business bills that report to the business credit reporting agencies ahead of the due date. The earlier they are paid, the higher their business credit scores will be.
7. Clients need to build a solid payment history with many accounts being paid as-agreed or early each month. Building excellent business scores means they have many accounts reporting as paid-as-agreed. Then we have them keep using their credit to build a solid profile.
8. Insure they monitor their business credit file. We have them keep an eye on their scores and the accounts that are reporting.
9. We have them establish a minimum 'low 5' bank rating by establishing and using their bank credit.
10. Have clients open a small business credit line that reports on their business credit profile. Credit lines have high limits and reflect positively on their business reports.
11. Insure they establish a diversity of credit using multiple store and Visa, MasterCard, and Amex accounts.
12. Insure they establish a well written business plan as many lenders will want to see this to approve them for funding. (Business plans are required when our clients begin to seek funding for projects in excess of $200,000 or more).
When our clients work with us we do all these steps for them and more. This way our clients get funding and business credit and grow their business.
There are many steps to building an exceptional business credit profile. Each of these steps is essential in obtaining business credit with no personal guaranty. Here are some of the steps we help our clients take when building business credit...
1. Make sure they start by incorporating their business and make sure they obtain a Federal Tax ID#.
2. Insure they setup a business bank account and that the business name on their corporation papers is the same as on their business bank account.
3. Insure they have a business land-line number that is listed with 411.
4. Insure they have the proper businesses licenses for their business that they need. Have them set up a complete credit profile with Dun and Bradstreet
6. Make sure they pay business bills that report to the business credit reporting agencies ahead of the due date. The earlier they are paid, the higher their business credit scores will be.
7. Clients need to build a solid payment history with many accounts being paid as-agreed or early each month. Building excellent business scores means they have many accounts reporting as paid-as-agreed. Then we have them keep using their credit to build a solid profile.
8. Insure they monitor their business credit file. We have them keep an eye on their scores and the accounts that are reporting.
9. We have them establish a minimum 'low 5' bank rating by establishing and using their bank credit.
10. Have clients open a small business credit line that reports on their business credit profile. Credit lines have high limits and reflect positively on their business reports.
11. Insure they establish a diversity of credit using multiple store and Visa, MasterCard, and Amex accounts.
12. Insure they establish a well written business plan as many lenders will want to see this to approve them for funding. (Business plans are required when our clients begin to seek funding for projects in excess of $200,000 or more).
When our clients work with us we do all these steps for them and more. This way our clients get funding and business credit and grow their business.
- Published on
Here's an article I copied from Mortgage News that I believe is misleading to the average reader.
The biggest year-over-year home price increase occurred in six years as values rose 12.1% nationwide in April, according to CoreLogic.
Meanwhile, home prices including distressed sales were up 3.2% on a monthly basis. This represents the 14th straight month where values were higher compared to the previous month.
Home price appreciation was greatest in Nevada, up 24.6% in April from March, the Irvine, Calif.-based data
provider’s home price index report revealed. Other states that had notable increases in home values during this time period were California (19.4%), Arizona (17.3%), Hawaii (17%) and Oregon (15.5%).
CoreLogic said Mississippi and Alabama were the only two states that posted month-over-month home price depreciation,
as they saw values drop by 1.7% and 1.6%, respectively.
However, all 50 states registered home price gains on a yearly basis. Anand Nallathambi, president and CEO of
CoreLogic, said he expects this trend to continue “bolstered by tight supplies and pent-up buyer demand.”
Of the top 100 core based statistical areas measured by population, 94 showed year-over-year increases in April, led
by Los Angeles and Phoenix as both were up 19.2%.
“Increasing demand for new and existing homes, coupled with low inventory, has created a virtuous cycle for
price gains, most clearly seen in the Western states with year-over-year gains of 20% or more,” said Mark Fleming, chief economist for CoreLogic.
So that is the article, but I feel what is omitted is the fact Banks have stepped up their foreclosure processes which should result in more available inventory, but Wall Street investors have been in a land grab for the past year. The intent of the large investment trust is to keep these homes as rentals for the near foreseeable future. With less inventory home prices will slowly increase, rents would continue to rise and then what?
Are we looking at a major selloff down the road because too many properties are in the control of these Wall Street entities? Time will tell, but history has told us before how large money can control the market to their advantage.
The biggest year-over-year home price increase occurred in six years as values rose 12.1% nationwide in April, according to CoreLogic.
Meanwhile, home prices including distressed sales were up 3.2% on a monthly basis. This represents the 14th straight month where values were higher compared to the previous month.
Home price appreciation was greatest in Nevada, up 24.6% in April from March, the Irvine, Calif.-based data
provider’s home price index report revealed. Other states that had notable increases in home values during this time period were California (19.4%), Arizona (17.3%), Hawaii (17%) and Oregon (15.5%).
CoreLogic said Mississippi and Alabama were the only two states that posted month-over-month home price depreciation,
as they saw values drop by 1.7% and 1.6%, respectively.
However, all 50 states registered home price gains on a yearly basis. Anand Nallathambi, president and CEO of
CoreLogic, said he expects this trend to continue “bolstered by tight supplies and pent-up buyer demand.”
Of the top 100 core based statistical areas measured by population, 94 showed year-over-year increases in April, led
by Los Angeles and Phoenix as both were up 19.2%.
“Increasing demand for new and existing homes, coupled with low inventory, has created a virtuous cycle for
price gains, most clearly seen in the Western states with year-over-year gains of 20% or more,” said Mark Fleming, chief economist for CoreLogic.
So that is the article, but I feel what is omitted is the fact Banks have stepped up their foreclosure processes which should result in more available inventory, but Wall Street investors have been in a land grab for the past year. The intent of the large investment trust is to keep these homes as rentals for the near foreseeable future. With less inventory home prices will slowly increase, rents would continue to rise and then what?
Are we looking at a major selloff down the road because too many properties are in the control of these Wall Street entities? Time will tell, but history has told us before how large money can control the market to their advantage.
- Published on
Despite the national negative equity rate falling through the first quarter of 2013, millions of homeowners with mortgages that are not underwater still lack enough equity even if they wanted to move.
According to Zillow, 13 million homeowners—accounting for 25.4% of all homeowners with a mortgage—were
underwater in 1Q13. However, another 18.2% of mortgage borrowers, or 9 million homeowners, while not technically underwater, likely do not have sufficient equity to afford to purchase a new home.
Meanwhile, when including homeowners with less than 20% home equity, the “effective” negative equity rate at the end
of the first quarter was 43.6%, resulting in a total of 22.3 million homeowners. In realistic terms, this means these homeowners don’t have the ability to put a 20% downpayment on a new house, therefore tying them to their current property and contributing to inventory shortages.
“Reaching positive equity, even barely, is an important milestone. But things like real estate agents’ fees and
a downpayment for the next home traditionally come out of the proceeds from the prior home’s sale. Without enough equity, these costs will instead have to come out of a homeowner’s pocket, leaving many still stuck,” said Stan Humphries,
chief economist for Zillow.
A homeowner reaches positive equity when the market value of their home is greater than their outstanding loan
balance. But listing a home for sale and buying a new one generally requires equity of at least 20% to comfortably meet related costs.
Among the 30 largest metropolitans covered by Zillow, the highest negative equity rates was Las Vegas, where 71.5%
of homeowners were in this category, followed by Atlanta (64.1%) and Riverside, Calif. (59.7%).
“Looking at the effective negative equity rate could explain why recent, healthy declines in the number of
underwater borrowers haven’t yet translated into more homes for sale,” Humphries added. “The only cure is patience, as rising home values continue to build equity to the point where more homeowners can realistically sell.”
The Seattle-based real estate information provider is predicting that the negative equity rate will decline to
23.5% in a year. If this happens, 1.4 million homeowners nationwide will move into positive equity.
Zillow said the majority of these newly freed positive equity homeowners are anticipated to come from Los Angeles,
Riverside and Phoenix, consisting of 94,642, 74,693 and 51,580 homeowners, respectively.
According to Zillow, 13 million homeowners—accounting for 25.4% of all homeowners with a mortgage—were
underwater in 1Q13. However, another 18.2% of mortgage borrowers, or 9 million homeowners, while not technically underwater, likely do not have sufficient equity to afford to purchase a new home.
Meanwhile, when including homeowners with less than 20% home equity, the “effective” negative equity rate at the end
of the first quarter was 43.6%, resulting in a total of 22.3 million homeowners. In realistic terms, this means these homeowners don’t have the ability to put a 20% downpayment on a new house, therefore tying them to their current property and contributing to inventory shortages.
“Reaching positive equity, even barely, is an important milestone. But things like real estate agents’ fees and
a downpayment for the next home traditionally come out of the proceeds from the prior home’s sale. Without enough equity, these costs will instead have to come out of a homeowner’s pocket, leaving many still stuck,” said Stan Humphries,
chief economist for Zillow.
A homeowner reaches positive equity when the market value of their home is greater than their outstanding loan
balance. But listing a home for sale and buying a new one generally requires equity of at least 20% to comfortably meet related costs.
Among the 30 largest metropolitans covered by Zillow, the highest negative equity rates was Las Vegas, where 71.5%
of homeowners were in this category, followed by Atlanta (64.1%) and Riverside, Calif. (59.7%).
“Looking at the effective negative equity rate could explain why recent, healthy declines in the number of
underwater borrowers haven’t yet translated into more homes for sale,” Humphries added. “The only cure is patience, as rising home values continue to build equity to the point where more homeowners can realistically sell.”
The Seattle-based real estate information provider is predicting that the negative equity rate will decline to
23.5% in a year. If this happens, 1.4 million homeowners nationwide will move into positive equity.
Zillow said the majority of these newly freed positive equity homeowners are anticipated to come from Los Angeles,
Riverside and Phoenix, consisting of 94,642, 74,693 and 51,580 homeowners, respectively.
- Published on
The Obama administration has extended its signature loan modification program for
two years to help more families avoid foreclosure.
Launched in 2009, the Home Affordable Modification Program has assisted 1.6
million struggling borrowers through loan modifications, principal reductions,
short sales and deed-in-lieu transactions.
“The housing market is gaining steam, but many homeowners are still
struggling,” said Treasury Secretary Jacob Lew.
The HAMP program forced servicers to significantly reduce monthly mortgage
payments by 20% or more so borrowers have a better chance of remaining in their
homes. This reduced redefault rates. Before HAMP, most modifications actually
increased the borrower’s monthly payments.
“Extending the program for two years will benefit many additional families
while maintaining clear standards and accountability for an important part of
the mortgage industry,” said HUD Secretary Shaun Donovan.
The HAMP program was due to expire at the end of this year. Earlier this
year, consumer groups and legal aid attorneys urged the Treasury secretary
extends the program that continues to provide modifications for around 15,000
delinquent homeowners a month.
“The foreclosure crisis is not yet over and we ask that the Treasury
Department prevent the HAMP program from ending in just nine months,” according
to a joint letter signed by 40 groups.
The letter points out that HAMP modifications provide deeper payment relief
and perform better than proprietary modifications. And HAMP mods also facilitate
principal reductions on non-Fannie Mae and Freddie Mac loans.
The Treasury Department uses the monies from the Troubled Asset Relief
Program to fund the HAMP program.
two years to help more families avoid foreclosure.
Launched in 2009, the Home Affordable Modification Program has assisted 1.6
million struggling borrowers through loan modifications, principal reductions,
short sales and deed-in-lieu transactions.
“The housing market is gaining steam, but many homeowners are still
struggling,” said Treasury Secretary Jacob Lew.
The HAMP program forced servicers to significantly reduce monthly mortgage
payments by 20% or more so borrowers have a better chance of remaining in their
homes. This reduced redefault rates. Before HAMP, most modifications actually
increased the borrower’s monthly payments.
“Extending the program for two years will benefit many additional families
while maintaining clear standards and accountability for an important part of
the mortgage industry,” said HUD Secretary Shaun Donovan.
The HAMP program was due to expire at the end of this year. Earlier this
year, consumer groups and legal aid attorneys urged the Treasury secretary
extends the program that continues to provide modifications for around 15,000
delinquent homeowners a month.
“The foreclosure crisis is not yet over and we ask that the Treasury
Department prevent the HAMP program from ending in just nine months,” according
to a joint letter signed by 40 groups.
The letter points out that HAMP modifications provide deeper payment relief
and perform better than proprietary modifications. And HAMP mods also facilitate
principal reductions on non-Fannie Mae and Freddie Mac loans.
The Treasury Department uses the monies from the Troubled Asset Relief
Program to fund the HAMP program.
- Published on
by Rick Roque
They are young, tech-savvy, debt-burdened, and cash-strapped. The entire American housing market economy depends on their participation, but the credit markets see them with apprehension. They are the elusive first-time home buyers; the missing, yet uncertain element in a full-blown recovery of the real estate market in the United States.
A generally accepted assumption of real estate macroeconomics estimates that 40 percent of housing market participants must be first-time home buyers so that the market can be efficient and beneficial for the overall economy. In early 2013, U.S. News and World Report cited statistics that placed the percentage of first-time home buyers at just 35 percent. An updated article, however, puts that estimate closer to 40 percent.
Has the participation level of first-time home buyers really increased five percent in just a few months? Probably not. What is changing, however, is the profiling of these newcomers to the housing market. Real estate and marketing analytics firm Doorsteps recently issued new information on first-time home buyers and their reasons for approaching the housing market with caution.
The Young Millennials
Generation X made it through the dot-com bubble, the housing bubble and the Great Recession. Many of them were first, second and even third-time home buyers during the housing bonanza of the early 21st century. The time is nigh for Generation Y to take their turn as the great hope of the housing economy.
Married couples and single females in their early 30s are the most likely candidates to buy their first home under current market conditions. Their average income is a respectable $62,800 per year, but many of them are saddled with about $30,000 in student loan debt. Only about 11 percent of single millennial males are in the market for a new home.
It is clear that Generation Y cares about location, but young house hunters are not too crazy about long commutes. More than 15 percent are not willing to compromise when it comes to driving a long distance to get to work. It is important to remember that Generation X and Generation Y have both migrated from the suburbs in the last few years to be closer to urban centers that present work opportunities.
Financing and Down Payment
Good news for mortgage lenders: Millennials are in the market for a mortgage. The bad news is that most do not qualify. The issues of Qualified Mortgage (QM) and Qualified Residential Mortgage (QRM) are still wild cards at this time for first-time home buyers. More than 76 percent of millennials expect to tap into savings when it comes to down payments, and they are willing to sacrifice vacations and entertainment expenses to accomplish this.
Banks with heavy real estate-owned (REO) portfolios should also take note that only 35 percent of the new first-time home buyers will shun a foreclosed home. The great majority will consider purchasing distressed and REO properties.
Not part of this article is my own observation the Real Estate Investment Trust, Hedge Funds and small private investors are purchasing as much housing inventory as possible because this segment of the market will rent, if they can not buy at this time, rather than move in with mom and dad.
They are young, tech-savvy, debt-burdened, and cash-strapped. The entire American housing market economy depends on their participation, but the credit markets see them with apprehension. They are the elusive first-time home buyers; the missing, yet uncertain element in a full-blown recovery of the real estate market in the United States.
A generally accepted assumption of real estate macroeconomics estimates that 40 percent of housing market participants must be first-time home buyers so that the market can be efficient and beneficial for the overall economy. In early 2013, U.S. News and World Report cited statistics that placed the percentage of first-time home buyers at just 35 percent. An updated article, however, puts that estimate closer to 40 percent.
Has the participation level of first-time home buyers really increased five percent in just a few months? Probably not. What is changing, however, is the profiling of these newcomers to the housing market. Real estate and marketing analytics firm Doorsteps recently issued new information on first-time home buyers and their reasons for approaching the housing market with caution.
The Young Millennials
Generation X made it through the dot-com bubble, the housing bubble and the Great Recession. Many of them were first, second and even third-time home buyers during the housing bonanza of the early 21st century. The time is nigh for Generation Y to take their turn as the great hope of the housing economy.
Married couples and single females in their early 30s are the most likely candidates to buy their first home under current market conditions. Their average income is a respectable $62,800 per year, but many of them are saddled with about $30,000 in student loan debt. Only about 11 percent of single millennial males are in the market for a new home.
It is clear that Generation Y cares about location, but young house hunters are not too crazy about long commutes. More than 15 percent are not willing to compromise when it comes to driving a long distance to get to work. It is important to remember that Generation X and Generation Y have both migrated from the suburbs in the last few years to be closer to urban centers that present work opportunities.
Financing and Down Payment
Good news for mortgage lenders: Millennials are in the market for a mortgage. The bad news is that most do not qualify. The issues of Qualified Mortgage (QM) and Qualified Residential Mortgage (QRM) are still wild cards at this time for first-time home buyers. More than 76 percent of millennials expect to tap into savings when it comes to down payments, and they are willing to sacrifice vacations and entertainment expenses to accomplish this.
Banks with heavy real estate-owned (REO) portfolios should also take note that only 35 percent of the new first-time home buyers will shun a foreclosed home. The great majority will consider purchasing distressed and REO properties.
Not part of this article is my own observation the Real Estate Investment Trust, Hedge Funds and small private investors are purchasing as much housing inventory as possible because this segment of the market will rent, if they can not buy at this time, rather than move in with mom and dad.
- Published on
by Diana Aqra | 29 Apr 2013
The mortgage market will likely have a difficult time making its business model work
around the giant student debt bubble growing in the United States, mortgage and
real estate experts say.
The amount of student loan debt issued in the US has nearly tripled from $350 million in 2004 to nearly $1 trillion in 2012, making it very difficult for the mortgage industry to find first-time homebuyers — a critical element of a
functioning housing market.
According to the Household Debt and Credit: Student Debt report by the Federal Reserve in
February, at the end of 4Q12, there were about 39 million borrowers in the US with outstanding student loan debt, of which 17.5% — or 7 million — were delinquent.
These are the people who will have an exceptionally hard time qualifying for or affording a mortgage, industry professionals explained.
“With delinquent student debt, mortgage origination is very difficult,” according the Federal Reserve report. The share of new mortgages being originated for borrowers with student loan debt dropped from roughly 9% in 2005 to 5% in 2012,
while the share of new originations for borrowers who were delinquent on their debt dropped from 2% to nearly zero.
“Rising student loan debt will increase the overall debt obligations of the newest generations of first time home buyers, leaving less for a mortgage payment,” said Mark Fleming, Chief Economist at CoreLogic, a real estate research and
analysis group.
Fleming was part of a mortgage industry panel held in February called Supporting Homeownership, in which industry experts debated the most pressing issues facing the future of homeownership. In a press release by Radian Guaranty — the host of the panel and one of the largest US private mortgage insurers — Fleming said, “Based on historical norms, we have a net deficit of homebuyers now, with underwriting standards becoming very tough and student debts serving as a
major obstacle.”
Changes in consumers’ debt profile and life events
Fleming added in a separate emailed statement that despite mortgage affordability [low interest rates], debt burdens “will reduce the amount of housing purchased and potentially delay the decision to buy a home.”
The 2012 Annual Profile of Home Buyers and Sellers by the National Association of Realtors reflected that, on average, people are waiting until they are 42 years old to buy their first home, up from 39 years old in 2010. More debt means
“significant changes to lifecycle events,” according to Mark Kantrowitz, the creator of FinAid.org, publisher of FastWeb.com, and author of several financial aid and planning publications. This means that there is a low likelihood for
borrowers in their 20s and 30s (who make up about 66% of all student loans outstanding) to buy a home anytime soon.
For the roughly seven million borrowers who have already defaulted (90-days or more past due) on their loans, the prospect of buying a home in the near future is even bleaker. According to RealtyPin.com, a home buyers’ website, it could take years before a defaulted student loan clears from a borrower's history.
Little Relief for Student Debt
There could be hope for rising student debt in the US if there were practical relief options for borrowers, but there simply isn't, according to Kantrowitz. When the student loan industry consolidated in 2011, and the Federal government became
the “direct” lender of all student loans, competition plummeted, he said. The number of non-bank student lenders dropped from 60 before the financial crisis to six in its aftermath, he mentioned.
Now, the six select government-contracted lenders (who service 85% of all student loans) have little reason to offer serious refinancing or principal forgiveness because they have a great deal of "control and flexibility,” over the market, he added.
Instead, the real fix for the student debt problem would be early financial planning and counseling for borrowers before they take out loans, Kantrowitz said. Although there has been a great deal of improvement in loan disclosures and financial aid education at the college level, he said, there is still room for a great deal of improvement in overall financial planning for younger generations.
Although CoreLogic’s Fleming explained that “the mortgage market is well prepared to address these first time home buyer constraints with existing first time home buyer loan products and counseling programs,” it seems more likely that the mortgage industry may just have to wait until student debtors make room in their lives for a mortgage.
With the cost of college remaining high and the majority of youth still desiring higher education, debt industries may have to come up with more creative ways to achieve both affordable education and homeownership.
The mortgage market will likely have a difficult time making its business model work
around the giant student debt bubble growing in the United States, mortgage and
real estate experts say.
The amount of student loan debt issued in the US has nearly tripled from $350 million in 2004 to nearly $1 trillion in 2012, making it very difficult for the mortgage industry to find first-time homebuyers — a critical element of a
functioning housing market.
According to the Household Debt and Credit: Student Debt report by the Federal Reserve in
February, at the end of 4Q12, there were about 39 million borrowers in the US with outstanding student loan debt, of which 17.5% — or 7 million — were delinquent.
These are the people who will have an exceptionally hard time qualifying for or affording a mortgage, industry professionals explained.
“With delinquent student debt, mortgage origination is very difficult,” according the Federal Reserve report. The share of new mortgages being originated for borrowers with student loan debt dropped from roughly 9% in 2005 to 5% in 2012,
while the share of new originations for borrowers who were delinquent on their debt dropped from 2% to nearly zero.
“Rising student loan debt will increase the overall debt obligations of the newest generations of first time home buyers, leaving less for a mortgage payment,” said Mark Fleming, Chief Economist at CoreLogic, a real estate research and
analysis group.
Fleming was part of a mortgage industry panel held in February called Supporting Homeownership, in which industry experts debated the most pressing issues facing the future of homeownership. In a press release by Radian Guaranty — the host of the panel and one of the largest US private mortgage insurers — Fleming said, “Based on historical norms, we have a net deficit of homebuyers now, with underwriting standards becoming very tough and student debts serving as a
major obstacle.”
Changes in consumers’ debt profile and life events
Fleming added in a separate emailed statement that despite mortgage affordability [low interest rates], debt burdens “will reduce the amount of housing purchased and potentially delay the decision to buy a home.”
The 2012 Annual Profile of Home Buyers and Sellers by the National Association of Realtors reflected that, on average, people are waiting until they are 42 years old to buy their first home, up from 39 years old in 2010. More debt means
“significant changes to lifecycle events,” according to Mark Kantrowitz, the creator of FinAid.org, publisher of FastWeb.com, and author of several financial aid and planning publications. This means that there is a low likelihood for
borrowers in their 20s and 30s (who make up about 66% of all student loans outstanding) to buy a home anytime soon.
For the roughly seven million borrowers who have already defaulted (90-days or more past due) on their loans, the prospect of buying a home in the near future is even bleaker. According to RealtyPin.com, a home buyers’ website, it could take years before a defaulted student loan clears from a borrower's history.
Little Relief for Student Debt
There could be hope for rising student debt in the US if there were practical relief options for borrowers, but there simply isn't, according to Kantrowitz. When the student loan industry consolidated in 2011, and the Federal government became
the “direct” lender of all student loans, competition plummeted, he said. The number of non-bank student lenders dropped from 60 before the financial crisis to six in its aftermath, he mentioned.
Now, the six select government-contracted lenders (who service 85% of all student loans) have little reason to offer serious refinancing or principal forgiveness because they have a great deal of "control and flexibility,” over the market, he added.
Instead, the real fix for the student debt problem would be early financial planning and counseling for borrowers before they take out loans, Kantrowitz said. Although there has been a great deal of improvement in loan disclosures and financial aid education at the college level, he said, there is still room for a great deal of improvement in overall financial planning for younger generations.
Although CoreLogic’s Fleming explained that “the mortgage market is well prepared to address these first time home buyer constraints with existing first time home buyer loan products and counseling programs,” it seems more likely that the mortgage industry may just have to wait until student debtors make room in their lives for a mortgage.
With the cost of college remaining high and the majority of youth still desiring higher education, debt industries may have to come up with more creative ways to achieve both affordable education and homeownership.
- Published on
Wells Fargo and Citigroup have halted the vast majority of their foreclosure sales in multiple states following the release of new guidance by the Office of the Comptroller of the Currency.
The abrupt slowdown came in response to the OCC's April release of minimum standards for foreclosure sales, which are usually the final act in the foreclosure process.
Within two weeks of the release of the guidance, Wells Fargo, Citi and JPMorgan Chase all but stopped foreclosure sales, which are usually the point of no return in the foreclosure process. JPMorgan has since resumed its normal volume.
The halt is most dramatic with Wells, the nation's largest mortgage originator. The bank's foreclosure sales in five Western states—California, Nevada, Arizona, Oregon and Washington—dropped from as many as 349 a day in April to fewer than 10 a day across the entire region, according to Foreclosure Radar, a California real estate monitoring firm.
"Wells Fargo has temporarily postponed certain foreclosure sales while we study the revised guidance from the OCC," a spokeswoman for the bank wrote in response to questions from American Banker. The bank expects the delay will be brief.
Citi did not immediately respond to a request for comment. JPMorgan acknowledged that it temporarily halted foreclosure sales "out of an abundance of caution," but says it has resumed them after validating that its processes comply with the OCC guidance.
The OCC acknowledged that some banks had drastically cut back on foreclosure sales. It declined to say if its April guidance was the result of new perceived shortcomings in the industry.
"The OCC did not direct a slow down or pausing," agency spokesman Bryan Hubbard says. "However, if servicers are not certain they are meeting these standards, pausing foreclosures is a responsible and productive step."
The significance of the banks' move is hard to gauge. New foreclosure filings continue unabated, searches of court records in California and Florida suggest.
It is not clear what—if any—specific concerns caused the banks to rein in sales. But the banks' steps are an echo of the 2010 foreclosure halt that kicked off several years of wrenching procedural scrutiny of the mortgage servicing industry.
"That [the robo-signing debacle] was the only other time we've had a similar event where a bank slowed down significantly," says Sean O' Toole, Foreclosure Radar's founder.
The OCC guidance is significant because it applies to all OCC-regulated bank servicing, rather than specific consent orders. Most of the requirements—presented in a list of 13 questions banks should ask themselves before selling a home—are remedial. Question No. 1, for example, is "Is the loan's default status accurate?" Question No. 5 asks whether borrowers are protected from foreclosure by bankruptcy. Question No. 7 asks if the borrower is in an "active trial loss mitigation plan," otherwise known as a modification.
"Failure to comply with this guidance may result in unsafe and unsound banking practices, noncompliance with foreclosure related consent orders, as applicable, and/or require rescission of completed foreclosures," the OCC warned.
Neither Wells nor the OCC identified specific areas of concern for the bank. But Wells has faced scrutiny of its foreclosure handling, most recently from New York Attorney General Eric Schneiderman. At a heavily publicized press conference earlier this month, Schneiderman alleged that Wells Fargo has "flagrantly violated" its obligations to homeowners under a 50 state mortgage servicing settlement.
"There have been problems with Wells' servicing for a long time," says Ira Rheingold, executive director of the National Association of Consumer Advocates. "Everybody focuses on Bank of America but Wells has just as much trouble and the OCC is obviously serious about having them comply with the consent orders."
Wells has been the target of intense criticism for several years from consumer advocates, who forced CEO John Stumpf off the stage during a speech in March, protested at his home and urged the OCC to give Wells a failing Community Reinvestment Act grade based on its foreclosure practices.
Wells also has invited criticism from consumer advocates for failing to provide principal reductions and to report data on loan modifications, short sales and foreclosures based on race and income.
Joseph Smith, the independent monitor of the national mortgage settlement, is expected to issue a report in June. Many consumer advocates have criticized the top five mortgage servicers—B of A, JPMorgan Chase, Citi, Wells Fargo and Ally—for claiming to have met 304 different servicing standards and reforms as part of the $25 billion national settlement with 49 state attorneys general and federal regulators.
"It's a safe assumption that they're not meeting all the requirements and this is likely a preview, an early signal of what Joe Smith is going to find," Rheingold says.
The abrupt slowdown came in response to the OCC's April release of minimum standards for foreclosure sales, which are usually the final act in the foreclosure process.
Within two weeks of the release of the guidance, Wells Fargo, Citi and JPMorgan Chase all but stopped foreclosure sales, which are usually the point of no return in the foreclosure process. JPMorgan has since resumed its normal volume.
The halt is most dramatic with Wells, the nation's largest mortgage originator. The bank's foreclosure sales in five Western states—California, Nevada, Arizona, Oregon and Washington—dropped from as many as 349 a day in April to fewer than 10 a day across the entire region, according to Foreclosure Radar, a California real estate monitoring firm.
"Wells Fargo has temporarily postponed certain foreclosure sales while we study the revised guidance from the OCC," a spokeswoman for the bank wrote in response to questions from American Banker. The bank expects the delay will be brief.
Citi did not immediately respond to a request for comment. JPMorgan acknowledged that it temporarily halted foreclosure sales "out of an abundance of caution," but says it has resumed them after validating that its processes comply with the OCC guidance.
The OCC acknowledged that some banks had drastically cut back on foreclosure sales. It declined to say if its April guidance was the result of new perceived shortcomings in the industry.
"The OCC did not direct a slow down or pausing," agency spokesman Bryan Hubbard says. "However, if servicers are not certain they are meeting these standards, pausing foreclosures is a responsible and productive step."
The significance of the banks' move is hard to gauge. New foreclosure filings continue unabated, searches of court records in California and Florida suggest.
It is not clear what—if any—specific concerns caused the banks to rein in sales. But the banks' steps are an echo of the 2010 foreclosure halt that kicked off several years of wrenching procedural scrutiny of the mortgage servicing industry.
"That [the robo-signing debacle] was the only other time we've had a similar event where a bank slowed down significantly," says Sean O' Toole, Foreclosure Radar's founder.
The OCC guidance is significant because it applies to all OCC-regulated bank servicing, rather than specific consent orders. Most of the requirements—presented in a list of 13 questions banks should ask themselves before selling a home—are remedial. Question No. 1, for example, is "Is the loan's default status accurate?" Question No. 5 asks whether borrowers are protected from foreclosure by bankruptcy. Question No. 7 asks if the borrower is in an "active trial loss mitigation plan," otherwise known as a modification.
"Failure to comply with this guidance may result in unsafe and unsound banking practices, noncompliance with foreclosure related consent orders, as applicable, and/or require rescission of completed foreclosures," the OCC warned.
Neither Wells nor the OCC identified specific areas of concern for the bank. But Wells has faced scrutiny of its foreclosure handling, most recently from New York Attorney General Eric Schneiderman. At a heavily publicized press conference earlier this month, Schneiderman alleged that Wells Fargo has "flagrantly violated" its obligations to homeowners under a 50 state mortgage servicing settlement.
"There have been problems with Wells' servicing for a long time," says Ira Rheingold, executive director of the National Association of Consumer Advocates. "Everybody focuses on Bank of America but Wells has just as much trouble and the OCC is obviously serious about having them comply with the consent orders."
Wells has been the target of intense criticism for several years from consumer advocates, who forced CEO John Stumpf off the stage during a speech in March, protested at his home and urged the OCC to give Wells a failing Community Reinvestment Act grade based on its foreclosure practices.
Wells also has invited criticism from consumer advocates for failing to provide principal reductions and to report data on loan modifications, short sales and foreclosures based on race and income.
Joseph Smith, the independent monitor of the national mortgage settlement, is expected to issue a report in June. Many consumer advocates have criticized the top five mortgage servicers—B of A, JPMorgan Chase, Citi, Wells Fargo and Ally—for claiming to have met 304 different servicing standards and reforms as part of the $25 billion national settlement with 49 state attorneys general and federal regulators.
"It's a safe assumption that they're not meeting all the requirements and this is likely a preview, an early signal of what Joe Smith is going to find," Rheingold says.
- Published on
Imagine having the ability to access $50,000, $100,000, even $250,000 for your business.
Now imagine doing this with NO personal credit check and NO personal guarantee.
Your success in business will be determined based on your business credit profile and score.
With a good business credit profile you will have near unlimited borrowing power.
Without having a good business credit profile it will be a difficult path to success without having
access to working capital and funding. This is why almost all Fortune 500 companies use their
business credit to secure funding. It's not that they need the money to operate. Successful
companies use funding as leverage to grow their business.
Business Credit is the best kept secret in business. Over 90% of all business owners know nothing
about business credit or business credit scores. But when you do discover the power of what
business credit can do for you and your business you will be floored at how easy it is to get money
and grow your business.
One of the many benefits of business credit is that you can obtain funding with no personal
credit check. With a strong business credit profile lenders will lend you money based on your
business credit, not your personal credit. This is excellent if you have personal credit issues as you
can still qualify for funding.
Even with exceptional personal credit, business credit gives you DOUBLE the borrowing power.
You can get approved for much higher funding amounts using your business credit than you
would if you used your personal credit to qualify.
Another great benefit of business credit is there is no personal guarantee required for much of the
funding you obtain. This means you can be approved with no personal liability. So if you ever do
default, the creditor can't pursue your personal assets like your home or personal bank accounts.
Business credit adds more value to your business and gives your business credibility. Stakeholders,
partners, lenders, even potential buyers of your business will see more value in your business if
you have a strong business credit profile built.
Most important by having a good business credit profile built you have security. It is much easier
to run your business when working capital is easy to come by. Any business with a $150,000 credit
line available will have a much better chance of growth than if $0 was available.
If your serious about your business than you need to take action to begin building your business profile
and have the ability securing well over $100,000 in business credit within months.
Now imagine doing this with NO personal credit check and NO personal guarantee.
Your success in business will be determined based on your business credit profile and score.
With a good business credit profile you will have near unlimited borrowing power.
Without having a good business credit profile it will be a difficult path to success without having
access to working capital and funding. This is why almost all Fortune 500 companies use their
business credit to secure funding. It's not that they need the money to operate. Successful
companies use funding as leverage to grow their business.
Business Credit is the best kept secret in business. Over 90% of all business owners know nothing
about business credit or business credit scores. But when you do discover the power of what
business credit can do for you and your business you will be floored at how easy it is to get money
and grow your business.
One of the many benefits of business credit is that you can obtain funding with no personal
credit check. With a strong business credit profile lenders will lend you money based on your
business credit, not your personal credit. This is excellent if you have personal credit issues as you
can still qualify for funding.
Even with exceptional personal credit, business credit gives you DOUBLE the borrowing power.
You can get approved for much higher funding amounts using your business credit than you
would if you used your personal credit to qualify.
Another great benefit of business credit is there is no personal guarantee required for much of the
funding you obtain. This means you can be approved with no personal liability. So if you ever do
default, the creditor can't pursue your personal assets like your home or personal bank accounts.
Business credit adds more value to your business and gives your business credibility. Stakeholders,
partners, lenders, even potential buyers of your business will see more value in your business if
you have a strong business credit profile built.
Most important by having a good business credit profile built you have security. It is much easier
to run your business when working capital is easy to come by. Any business with a $150,000 credit
line available will have a much better chance of growth than if $0 was available.
If your serious about your business than you need to take action to begin building your business profile
and have the ability securing well over $100,000 in business credit within months.