Treasury Gives Fanny, Freddie Blank Check

In light of what many view as the failure of their Foreclosure Alternatives Program (FAP), the U.S. Treasury  announced on Christmas Eve that it was removing  limits on federal financial aid for Fannie Mae and Freddie Mac, the companies which were seized by the government in September 2008 amid mounting mortgage losses. Restrictions had capped aid at $200 billion for each firm: Freddie  has tapped $51 billion and Fannie has used $60 billion to date.

The government said it was removing the caps to “leave no uncertainty about the Treasury’s commitment to support these firms as they continue to play a vital role in the housing market during this current crisis.”

This helps the Marin property owners in at least three ways:

1.  Now that these companies are fully backed, without condition, by the U.S. government, which controls 70% of each firm, the companies can borrow at the most favorable rates. After all, with the Federal security net, there is no risk to a lender. Freddie and Fanny can then make mortgages at lower rates. Ergo, cheaper mortgages for buyers.

2.  The Treasury, by now permitting Freddie and Fannie to retain larger mortgage-asset portfolios, will allow them to provide more significant loan modification assistance to greater numbers of seriously troubled Marin borrowers.

3.  Most important, they will reduce the principal amount owed by borrowers who are delinquent or upside down, something not permitted until now. While some mortgage companies had reduced interest rates to lower payments for delinquent borrowers, none had been willing to reduce the principal owed. Owners who have equity in their home will be less likely to walk away or allow the home to go into default.

What next, Jumbo Loans?

For more details, or if I can help in any way, call Jack now at 415.300.0432

What to Do If Your Mortgage is Sold to Another Investor

Approximately half of all mortgage loans are sold from one lender to another, often because the original lender is not equipped to collect payments, manage escrow accounts, pay taxes and insurance, respond to questions, and prepare payoff statements when the home is sold or refinanced.  Some borrowers may receive letters in the mail alerting them of the sale of their loan a few days after closing, while others may not receive a notice for years.

In the mortgage-industry, this is called a “transfer of servicing,” and is a common practice.  Borrowers should not be concerned about these changes, as the majority of lenders transfer their servicing rights to loans.  Generally, the selling of a mortgage loan from one lender to another is a smooth transition and does not impact the borrower.  Every so often though, there is a misstep by either the loan buyer or the loan seller.

Under the National Affordable Housing Act, when a mortgage loan is sold, the borrower is required to receive a “goodbye” letter from their current servicers at least 15 days before their next payment is due.  The letter must state the name, address, and telephone number of the new servicer; the date the old company will stop collecting payments; and the date the new company will start accepting them.  Under the Helping Families Save Their Homes Act, signed by President Obama on May 20, the new owner of the loan—which may or may not be the servicer—also must notify the borrower of the transfer within 30 days, known as the “hello” letter.

The “hello” letter should outline the same information as the “goodbye” letter sent from the former loan servicing company.  Borrowers should be cautious if they receive a “hello” letter without receiving a “goodbye” letter, as they may be the intended victim of a scam by someone who is hoping to unlawfully receive the monthly mortgage payments.  Concerned borrowers should contact their current loan servicer to verify if their loan has been transferred.  If it hasn’t, authorities should be notified immediately.

In most cases, a mortgage payment sent to the old servicer automatically will be forwarded to the new servicer for a brief amount of time, typically 60 days.  However, if payments are not sent to the correct servicer, they could become lost, and the homeowner may incur late fees.

Top Five Reasons Your House Didn’t Appraise

By Jack@mmsmarin.com

You found just the right house at last. Or you are trying to lock in a low refi rate. You know what the house is worth, but the appraisal comes in well below value: what’s up with that? You are not alone. In today’s tight lending climate, if your house doesn’t appraise, here are the most common reasons.

1. Under the new rules, your lender can no longer select, or even communicate with, the appraiser. They must use an independent – but often bank-owned – appraisal management company (AMC).
2. The appraiser couldn’t find your house. The AMC maximizes profits by selecting the cheapest appraiser, regardless of their location. The appraiser may come from Pleasanton to value your Mill Valley house. And local knowledge, especially in eclectic communities like Marin County, is critical to determining market value.
3. Your lender no longer can perform “value checks,” where appraisers informally pull comps to see if the numbers are likely to work for a client, before the actual appraisal is ordered and paid for.
4. The appraiser was incompetent. AMC requires professional appraisers to cut their fees as much as 50%. Since the best won’t work for less, they hire the new and less skilled appraisers, who may perform less thorough valuations.
5. There aren’t any good comps. With fewer sales, appraisers may need to look in dissimilar areas or go back in time to find similar properties that sold.

Call me if you have a problem. I can likely help you get the numbers up. Jack 415.302.7787