Wells Fargo will freeze foreclosure sales for the holiday. The lender’s freeze will run the same two week period as that of Fannie Mae and Freddie Mac. It will only postpone sales of home loans that it owns. For other loans that it only services, that are owned by others (“owners” or “ investors”), it will only postpone sales if authorized by the investor.
Bank of America may postpone foreclosure sales on loans it owns or that are owned by investors that give the bank delegated authority to act. Like Wells Fargo, Bank of America will postpone sales of homes whose loans are held by investors only if authorized by the investor.
The Dodd-Frank financial reform, which passed this summer, requires lenders to retain a five percent stake in loans it packages and sells to investors. The goal of this retention is for lenders to have a stake in the future of these loans, making the lenders accountable for the quality of the loans they packaged and sold. Mortgage Bankers Association (“MBA”) is now asking for an exemption that would cover most home loans. Specifically, the MBA is asking that adjustable rate mortgages that have at least three years of initial period payments should qualify for the exemption. The MBA also argues in its letter to federal regulators that without exempting most home loans, “few loans to ordinary customers are likely to be made.
Federal regulators now must define which loans are safe enough to be exempt from the risk retention rules. The rules are expected no later than April 2011.
Joshua D. Carlson, Esq.
With the recent election results and the increase in Republican politicians promising to abolish Fannie Mae and Freddie Mac, the topic of what will replace these government sponsored entities is being discussed now more than ever. Fannie and Freddie have been in a state of uncertainty since the government seizure but a recent Wall Street Journal article appropriately asked what would replace them.
Fannie and Freddie played key roles in the prevalence of 30-year fixed rate mortgages by purchasing these loans from banks who liked to have them off their books. Fannie and Freddie guaranteed the loans the loans they purchased and sold them to investors as securities. According to a recent report by Standard & Poor’s, however, the cost to rescue Fannie and Freddie could reach $280 billion. The cash necessary to keep Fannie and Freddie active does not compare to the projected $400 billion in capitalization that would be required for any entities replacing these two failing entities.
Mortgage investors, industry groups, and academics are currently putting their support behind government insurance for mortgages. Treasury Secretary Geithner supports a limited, but explicit, guarantee. Conversely, Representative Jeb Hensarling (R., Texas), disagrees stating that he did not see the reason for continued government guarantees and the use of 30-year fixed mortgages. Furthermore, Hensarling pointed out that other countries have succeeded in producing high-homeownership rates without government guarantees. Many other Republicans call for complete privatization of the housing-finance industry.
Joshua D. Carlson, Esq.
A joint investigation by every state and the District of Columbia could force mortgage companies to settle allegations that they used flawed documents to foreclose on hundreds of thousands of homeowners. To read the full article please click this link.
At the end of August, Lender Processing Services (LPS) reported that mortgages on 4,947,000 properties nationwide were at least 30 days past due but NOT in foreclosure. Of those, 2,374,000 were 90 or more days delinquent. The good news is that the delinquency rate of loans that are 30 days or more past due have declined one percent since last month and 5.1 percent since this time last year.
Even with the high number of delinquencies, the number of bank-owned properties has fallen steadily over the past year. There are several possible reasons for the lack of bank-owned properties even with the near record-high delinquency rates. First, a portion of the delinquent loans ends up being permanently modified. Second, banks are approving short sales with greater regularity even though the short sale process is still filled with frustration and confusion. Lastly, when foreclosures do occur, more investors are buying properties at foreclosure sales preventing these properties from ending up as REO.
Currently, Fannie Mae and Freddie Mac make up a large majority of foreclosure listings. Fannie and Freddie have already taken back nearly as many homes in the first half of the year as they did all of last year. As of June 2010, they owned more than 191,000 homes which is nearly double the total from 2009.
Joshua D. Carlson, Esq.