Bank Bail Out - Fannie Mae To Handle REO (Real Estate Owned) Property Sales For Banks
With the amount of listings that Fannie Mae holds in Florida and California, this is not surprising.
Fannie Mae is rethinking how it will handle the tens of thousands of properties being repossessed as the real estate market continues to plummet in Florida and California.
Banks and the FHA are expecting to handle the enormous number of REOs that must be sold.
To that end, Fannie Mae is opening two satellite offices, one in California and another in Fort Lauderdale, Fla., to manage and sell its foreclosed properties in those states, said Marilyn Kornfeld, a spokeswoman for the Washington, D.C.-based company.
Nationwide, Fannie Mae has repossessed more than 54,000 homes as of June, exceeding all of last year’s repossessions.
“Forty-eight percent of our credit losses were from four states: California, Arizona, Nevada, and Florida. These states saw the most dramatic run-up in prices, and are now seeing the most rapid declines,” Fannie Mae CEO Daniel Mudd told investors during a conference call earlier this month.
Home prices have cratered in certain markets since the peak. In California, Riverside was down 40 percent and Modesto and Stockton were down 50 percent
“So, the housing market has returned to earth fast and hard,” Mudd said. Mudd reported that some signs are offering hope of recovery. For example,
Fannie Mae said it hopes its new offices in Florida and California will reduce defaults and better manage the property it has taken in foreclosure.
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Tags: Fannie Mae, Bank Bailout, Emergency Economic Stabilization Act, repossessions, foreclosures, housing recovery, mortgage defaults
Without fanfare, Fannie Mae announced a change to its mortgage guidelines this week. As a result, thousands of American home buyers and homeowners will find it increasingly difficult to buy or sell a home.
In the past, Fannie Mae tightened debt ratio and credit scoring requirements for borrowers. In this revision, Fannie Mae is requiring home equity and downpayments from borrowers. No more ZERO down.
The new underwriting philosophy seems to be: Collateral Is King.
No home equity, No downpayment, => No Deal! (No Mortgage Loan!)
=> No Deal! (No Mortgage Loan!)
As of December 13, 2008, Fannie Mae will enforce the following restrictions onsingle-family residences:
Each one of these bullet points is a 5 percent tightening over the prior guidelines.
Certainly Fannie Mae isn’t the only source for mortgage money. The other major players in mortgage funding — comprising the FHA, the VA, and innumerable portfolio lenders — have not announced similar loan-to-value restrictions - YET.
Since Fannie Mae and Freddie Mac guarantee almost half of the nation’s home loans, they do exert massive influence on mortgage loan policies nationally. Historically, whenever Fannie Mae tightens its credit policies, the other major players tend to follow its lead.
What does this mean to you? In 51 days, your ability to qualify for a conforming mortgage will depend on whether you have a sizable downpayment. These new rules will require more borrowers to have home equity than at any time since 2003.
So, if you have been waiting eagerly for mortgage rates to fall before buying or refinancing your home,
STOP WAITING and BUY NOW!
The only way we'll know how low mortgage interest rates really might fall is after they have risen. No one can reliably predict - Recession, inflation, stagflation, or depression — it’s a big mystery. However, we do know with 100% certainty that Fannie Mae's guidelines will tighten effective December 13, 2008. Don't let this keep you from getting a mortgage.
Fannie Mae has already published its plan. See the details, click on its Web site.
If you’re buying a home or planning to refinance one, start now. If you're lucky and rates fall still more, you can always try to refinance into something less expensive. If you wait and Fannie Mae's guidelines disqualify you for a mortgage, there’s nothing you can do about it.
If you need mortgage money now, get it now, while youcan. Great low rates don’t mean a thing if you can’t qualify for them. The new barriers to loans are rising starting December 13, 2008.
(Images courtesy: FreeRepublic, TheWall Street Journal Online)
Tags: Fannie Mae, Freddie Mac, mortgage guidelines, mortgage money, mortgage, conforming mortgage, no money down, zero downpayment, buy or sell a home, credit policies
Will The Bail-Out Help Home Owners?
Borrowers who took out a mortgage on or before January 1, 2008 can apply if they have made at least six payments on their existing loan and they do not own a second home. If their lender(s) agree to the deal, they can refinance into a 30-year, fixed-rate loan.
They will need to verify that they cannot pay their existing loan without help and that their monthly payments were more than 31 percent of their gross monthly income as of March.
The Congressional Budget Office estimates that the new Hope for Homeowners program could help 400,000 people during its three-year life span.
“But compare that to the fact that we had 300,000 foreclosure filings in the last month alone,” said John Taylor, chief executive of the National Community Reinvestment Coalition, a housing advocacy group. “Have no illusions, this is going to help some homeowners, but it’s not going to solve the foreclosure crisis by any stretch.”
The final participation numbers will depend largely on lenders. The FHA doesn’t make loans directly; it insures loans by private lenders.
In this program, the FHA will insure a loan for only 90 percent of the home’s current value. With home prices plunging, borrowers who have little or no equity left in their homes need the lender to forgive the rest of the debt in order to qualify for the refinancing
Some lenders have resisted doing that in the recent past, preferring instead to lower interest rates or rearrange payment schedules on troubled loans. “Lenders are looking at this as a last resort,” said Guy Cecala, publisher of Inside Mortgage Finance. Of the 369,000 people who refinanced in the past year using a previous version of this program, only 1 percent of them were delinquent, according to the FHA.
Complicating matters is that borrowers who financed their homes using two loans must get both lenders to agree to refinance, even though the second-mortgage lender most likely will not get paid off under this arrangement.
Yesterday, Preston acknowledged that for lenders, the new program “may not be the preferred route in many situations.”
The FHA has received $29.5 million so far to upgrade its technology and hire new staff to handle this program, housing officials said.
Tags: FHA, Hope for Homeowners, refinancing, Emergency Economic Stabilization Act, Bail-Out Bill, Congressional Budget Office, National Community Reinvestment Coalition, short sale
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