Is the Housing Market On Its Way Back?

by John Kiernan on October 31, 2012

mortgage recoveryAmidst all of Hurricane Sandy’s destruction, there is actually some good news when it comes to the housing market.  Foreclosures are down in more than 60% of the nation’s largest cities, according to RealtyTrac, and experts are pointing to that as a sign of stabilization in the housing market.

Not only did foreclosure rates fall by more than 25% in major cities such as San Francisco, Detroit, and Los Angeles during the third quarter of the year, but they actually dipped below 2007 levels for 58% of the country’s major metropolitan areas.  That’s undoubtedly good news for the economy in general and those of us who work in fields tied to the housing market, but things aren’t quite so peachy everywhere.

What is Reverse Redlining (And is Morgan Stanley Guilty of It)?

by John Kiernan on October 17, 2012

What do you call a card-carrying member of the American Civil Liberties Union (ACLU) who shows up at your door?  Well, if you’re a Morgan Stanley executive, you might not call him anything given the shock of hearing the words, “You’ve been served.”

morgan stanleyThe renowned advocacy group filed suit against the investment giant in New York district court on Monday on behalf of five Detroit residents, alleging that Morgan Stanley violated federal civil rights laws by engaging in a process known as reverse redlining.

Do You Know Your Mortgage Credit Score?

by John Kiernan on August 22, 2012

mortgage approvalThere’s a new credit score in town, ladies and gentleman, and it’s just for mortgages. The score is formally called the FICO Mortgage Score Powered by CoreLogic, which brings to mind the mouthful of a name change the Anaheim Angels underwent in 2005 when they became the Los Angeles Angels of Anaheim, but that’s a whole other story.

This new score is said to better predict mortgage applicant risk and is obviously looking to capitalize on the recent memory of the housing crisis and the ensuing Great Recession. It supposedly does so by incorporating information that is not typically included in credit scores, such as rent and utility payments and certain public records.

Tips On Getting Home Loans For People With Bad Credit

by Guest on July 9, 2012

Buying a home is not an easy process, especially with the current economic climate. For people with good credit scores, it is however, easier to seal home loan deals compared to those with bad credit. Getting a home loan if you have a bad credit can be almost impossible depending on your credit situation. Fortunately, you can get loans with bad credit provided you are able to convince lenders that you will adhere to the repayment schedule.

Below are some tips on getting home loans for people with bad credit.

Get Screwed During Foreclosure? Time is Running Out to Get Even

by Odysseas Papadimitriou on May 30, 2012

independent foreclosure review programIf your home was foreclosed upon during the Great Recession, not only do you have company – there were 6.6 million foreclosures in 2009 and 2010 alone, according to RealtyTrac – but you may also be entitled to compensation under a government program that will run through July 31 (that’s only two months away, so get a move on!).

The Federal Reserve and the Office of the Comptroller of the Currency are requiring that 27 major lenders let independent consultants review foreclosures that were initiated, pending, or completed between January 1, 2009 and December 31, 2010 because (surprise, surprise) these lenders didn’t always do things by the book.

Mortgage Rates Hit Record Lows

by John Kiernan on May 9, 2012

Record Low Mortgage RatesIt might just be time to buy that home of your dreams or refinance your existing mortgage. According to a Freddie Mac survey released May 3, average rates for a number of fixed and adjustable rate mortgages hit record lows last week, creating a significant savings opportunity for refinancers and prospective homebuyers who’ve recovered sufficiently from the negative effects of the Great Recession.

Ok, but how much savings are we talking here?

Six Important Financial Planning Tips for Retirement

by Guest on October 18, 2011

home-insurance-tipsRetirement is ultimately a function of your bank balance, not your age. Not long ago, I came across some statistics which showed that the majority of the US population will either retire broke or still have to work to have a decent retirement.

I don’t know about you, but this isn’t even close to good enough for me, and definitely is not in alignment with my vision of a happy retirement lifestyle.

Are there many differences between getting a mortgage in 2010 compared to 2011?

by Guest on September 23, 2011

mortgage-refinanceI will bet that if you have had to apply for at least two mortgages in your life the process was not the same for both. This is because the mortgage industry is constantly changing and lenders are always updating their guidelines for mortgage qualification.

Before the housing bubble burst you could get a mortgage on a ‘Stated Income’. This simply meant you told the lender what your income was and they gave you a loan based on that income (these were one of the types of loans that contributed highly to the housing bubble). After the bubble burst and the recession hit, lenders and banks tightened the reigns. They required more documentation proving income, assets and other factors to be sure you would not default on your loan.

Mistakes to Avoid When Purchasing a House

by Guest on August 31, 2011

HouseholdBuying a house is a big (and exciting) step. But regardless of whether you’re a first-time home buyer or have bought before, there are some mistakes to avoid when purchasing a house. Here are a few to watch out for.

Getting in over your head

If there’s one mistake you want to avoid for sure when purchasing a house, it’s getting in over your head. You don’t want to buy more house than you can comfortably afford based on your current situation — not on some improved situation that you think you’ll probably be in down the road.

Fed Rules Promote Accurate Underwriting, Not Gender Inequity

by Odysseas Papadimitriou on March 2, 2011

HouseholdThere has recently been a great deal of talk about rules proposed by the Federal Reserve that seek to require credit card companies to consider the merits of applicants based on individual rather than household income. These rules, critics contend, stand to significantly affect stay-at-home mothers by preventing them from establishing credit history in their own names, which would be extremely important to garnering a loan, renting or buying a property, and/or landing a job in the case of divorce or the death of a spouse.

Given that 2010 Census figures show men to be the sole breadwinners in 28.2% of couples with children under the age of 18 and women to be the only earners in about 4% of such families, roughly 7.3 million women and 963,000 men would face a difficult time garnering access to credit if the claims made by the rules’ detractors prove to have merit.

5 Reasons You Should Only Pay Cash For Rental Properties

by Guest on April 14, 2010

rental-apartmentThis is a guest post written by Erik Folgate, an editor at Money Crashers.

Yes, you read the title right. You’re probably thinking that it’s ridiculous to suggest that you pay cash for a rental property (which I’m defining as a property you buy for the purpose of renting it out), because it’s unrealistic to think that someone has enough cash to pay for a rental property outright.

To Foreclose or Not To Foreclose

by Odysseas Papadimitriou on January 13, 2010

foreclosureA recent article in the San Francisco Chronicle offered an interesting opinion by Brent T. White, a law professor at the University of Arizona.  He advises homeowners to allow their home’s to go into foreclosure when they find that their home is worth less than what they owe on their home loan.  His argument is that foreclosure is a smarter economic decision and that it is only the social stigma of losing one’s home that is keeping homeowner’s paying their bills when it would be in their best interest to cut their losses and run.

I agree with White that there are times when it is in a homeowner’s best interest to simply walk away from their loan.  However, I also feel that he grossly misrepresents the repercussions of a foreclosure. White’s suggestion completely downplays that, in most cases, creditors can still legally pursue you.  He also suggests that one’s credit score after going into foreclosure is likely to recover in two years.  The truth, however, is that you will have bad credit for the next 5 to 7 years, which means limited access to credit and increased costs on anything that relies on your credit history (e.g. renting an apartment).  Finally, White’s suggestions ignores the human cost of this stressful process.  Going through foreclosure creates a great deal of anxiety.  It is not something you can simply do without feeling the effect on your own well being.

The Mortgage Relief Plan is a Failure

by Brian Johnson on January 12, 2010

failureOur government suffers from a naivete with some of its plans to resuscitate the economy which consumers simply cannot afford.  To be more specific, the current administration needs to come to terms with the fact that business practices are dictated by laws and potential for profit.  Businesses cannot, and should not, be counted on to change their policies out of the goodness of their hearts.

Last March, the Obama administration put into place its Mortgage Relief Plan to help homeowners stay out of foreclosure by urging banks to institute loan modifications for borrowers.  Renegotiation of their loans would allow borrowers to make payments on a more affordable rate, allowing them, in theory, to keep homes that would otherwise go into foreclosure.  Since its launch last March, the plan has provided permanent loan modifications to only 4% of those who have attempted to sign up.  Lenders like Bank of America have helped only .06% of the people who’ve requested a modification.

Citibank's Gift for the Holidays

by Brian Johnson on December 21, 2009

giftCitibank is suspending foreclosures and evictions for the holiday season.  For 30 days, from December 18th through January 17th, Citibank is offering a reprieve to borrowers whose loans are owned by Citibank Corporation.  The company reports that it will help about 4,000 borrowers who are either scheduled to be evicted, or scheduled to receive notice of eviction during this period.

Citibank deserves to be commended for this act.  In the general state of the American economy as it stands right now, lending institutions are placed in a precarious position where they have to implement tough policies to keep their businesses afloat.  It seems that Americans are increasingly turning to lending institutions as a solution to this recession as well as a scapegoat for this nation’s economic troubles.  All too often we hear that either our economic crisis was the result of banks giving out bad loans (which it was), or that economic recovery depends on lenders lowering the minimum requirements for loan qualification (which it does not).

Did Washington Learn Anything About Bad Loans?

by Odysseas Papadimitriou on December 17, 2009

bad-loansOn December 14, 2009, President Obama met with CEOs of the largest banks to urge them to approve more loans, to lower interest rates, and to curb fees.  The meeting was obviously in response to Federal lawmakers’ feeling that, having bailed out the banks, the nation has a right to expect concessions from its financial institutions.  This feeling is fueled by the belief that America’s banks, having received federal funds, have since failed to adequately return to the business of loaning money.

To put this in perspective, we should remember that one of the large contributors to the current recession was the practice of giving out home loans to people whose incomes and credit histories did not justify those loans.  The assumption was, of course, that any loan was essentially a good investment since the value of the house was expected to appreciate astronomically.

Do Not Wait to Refinance

by Brian Johnson on December 10, 2009

mortgage-refinanceIn order “to provide support to mortgage and housing markets and to foster improved conditions in financial markets more generally,” (according to their own FAQ on the subject) the Federal Reserve Bank has been buying up $1.25 trillion in fixed rate Mortgage-Backed Securities otherwise guaranteed by Fannie Mae, Freddie Mac, and Ginnie Mae.  The result has been a drop in the mortgage rate for 30 year mortgages.  The duration of this program is limited, however, and is set to expire by the end of the first quarter, 2010.

At the end of the Fed’s purchase program next Spring, the market will be ripe for a mortgage rate increase and a reduction in purchasing power for consumers looking for low monthly mortgage payments.  Experts are estimating that when the Fed steps out of its current purchasing position, 30 year mortgage rates are likely to rise to 6% despite government incentives for first time home buyers as well as current homeowners.

Taxpayers paid once for subprime mortgages and soon they will pay again

by Odysseas Papadimitriou on October 28, 2009

Finance AnyoneThe Federal Housing Administration will be the next financial disaster to fall on the shoulders of American taxpayers.  Created in 1934 to help low income and first time buyers get housing loans, the agency was designed to guarantee a relatively small percentage of mortgages, for instance, two percent in 2005.  Since its inception, FHA’s budget and operational infrastructure have followed this low-ratio model, and have been designed to absorb losses without having to ask for money or help from the Federal Government.  However, the GAO is now projecting taxpayer funded subsidies for the FHA of half a billion dollars over the next three years, if no changes are made to the agency’s program.

With the housing and credit markets in dire straights, private lenders are asking for better credit scores and higher down payments.  This means fewer people are able to qualify for conventional loans.  According to the website for Housing and Urban Development (the parent organization for the FHA), the FHA’s restrictions on the kinds of loans it will guarantee are more lenient relative to conventional loans, and as such, the FHA is being called into service more and more frequently in this particular economic climate.  Up by over 1200 percent since 2005, the FHA is now expected to back one quarter of all new U.S. mortgages.

Politicians Forget Their Accountability for the Financial Mess

by Odysseas Papadimitriou on September 23, 2009

HypocrisyOn the anniversary of the collapse of Lehman Brothers, President Obama warned the financial community that there wouldn’t be any more bailouts and that the age of Wall Street greed and reckless mismanagement would have to come to an end.  We completely agree with this position, but we also think that it is hypocritical that some modified version of this sentiment wasn’t delivered to Congress as well.  

Whatever is said about Credit Default Swaps and the other exotic financial products that caused the near total collapse of the global financial system, they were (and still are) legal.  Moreover, they were made legal after 91 years of being illegal by the  Commodity Futures Modernization Act of 2000 which was piggybacked onto a much larger bill, presented at the last minute before Christmas recess, allowed to bypass committees and was passed by Republicans and Democrats alike.  It was this law that created an unregulated $63 Trillion market  and set on its course to blow up in the face of the American taxpayer.   

The Consumer Financial Protection Agency -- A Step in the Wrong Direction

by Odysseas Papadimitriou on September 16, 2009

Wrong WayAs Chair of the Congressional Oversight Panel, which has been charged with reviewing the current state of financial markets and the regulatory system, Harvard professor Elizabeth Warren has been quite vocal in her support of the administration’s proposal for a Consumer Financial Protection Agency (CFPA).  The CFPA would be the regulatory body that ensures that financial institutions provide clear and simple disclosures, which would ostensibly deter consumers from opting for risky and “exotic” financial products, and would be the eighth agency involved in consumer credit regulation.  While I agree that there has been little effectiveness in the regulatory system as far as consumer financial protection is concerned, this is no reason to create yet another agency.  The CFPA, which was actually conceived by professor Warren several years ago, would separate the regulation that provides consumer financial protection from the regulation that ensures the banks that serve these consumers are solvent, and do not introduce toxic products to the market.  If our hope is for a solid financial system, then it must be understood that these two areas of regulation go hand-in-hand.  Warren is right, “the credit market is broken,” but she herself proves that the CFPA won’t fix it. 

Warren lays out her arguments for the CFPA in two articles that appeared recently in Business Week and in The Baseline Scenario.  While she is spot on in her analysis of the nature of the problems that plague our financial system, her solutions do not address the problems that she identifies.  It’s true, traditional financial products cannot compete with “exotic” products whose terms seem attractive up front, but hide surprises and changes that are revealed only after the consumer has committed.  Further, the more complex these “exotic” financial products become, the less able consumers are to make comparisons.  Right now our financial system lacks a level-playing field, transparent in its operation, which encourages competition, and also engenders product innovation. 

Lenders Need to Become Proactive Instead of Reactive

by Odysseas Papadimitriou on July 21, 2009

home-foreclosureAccording to realtytrac.com, 300,000 homes went into foreclosure last month.  Bloomberg reports that the U.S. delinquency rate rose to 9.4% and foreclosures rose to 1.37%.  According to Moody’s Investor Service, 42 percent of outstanding 2006-vintage subprime loans are at least 60 days delinquent, in foreclosure, or held for sale.  As we all know, the housing crisis and rising unemployment rates have served to make it difficult for many Americans to pay their mortgages on time, and the result is that many of the nation’s home owners are in dire straights.  The problem is bad, and banks need to change the way they modify mortgages if they hope to provide adequate assistance.  They are now concentrating on fixing disasters as they arise rather than preventing them in the first place.

With so many people in financial trouble, mortgage lenders like Bank of America, Wells Fargo, Wachovia, Chase, and Citigroup are finding themselves too understaffed to deal with these excessive defaults.  Given that a bank only has so many resources to extend to their borrowers, the dilemma becomes who to work with first.  Basically, the bank has to perform a kind of triage, like in a hospital, to determine which of their clients demands immediate attention, and which clients can wait.  The lender faces different kinds of repayment problems.  Specifically, they have people who cannot repay and who are defaulting right now, and people who have done everything in their power to repay (tapped into savings, changed their lifestyle, etc.) but who cannot sustain their payments any longer; they have not defaulted yet but soon they will.  According to a survey by ProPublica, it seems that most major lenders have been focusing on borrowers who are most delinquent at the expense of borrowers that are current but will quickly become delinquent unless they get help.

Obama Wrong About the Need for Yet Another Regulatory Agency

by Odysseas Papadimitriou on June 18, 2009

ObamaPresident Obama has come out strongly in favor of overhauling the financial regulatory system by introducing another watchdog agency known as the Consumer Financial Protection Agency.  This agency will be set up to monitor the marketing of mortgages, credit cards and other loan products.  President Obama’s proposal is obviously a response to the dangerous and deceptive practices recently brought to light in these industries.

To be clear, we agree that there were deceptive practices in the lending industry.  The mortgage industry was allowed to operate rife with fraud. Mortgage agents would misrepresent borrowers on applications to get loans for which they otherwise would not have been approved.  The excesses of the credit card industry have been blatant enough to require the federal government to step in and protect consumers.  We acknowledge that the industries have been allowed to ride roughshod over consumer rights without anyone stepping up for the little guy.

Senate Voted Wisely on Cram Down Bill

by Brian Johnson on May 8, 2009

StimulusOn April 30th, the Senate defeated the “cram down” bill that would have allowed bankruptcy judges to adjust mortgages so as to allow those people going through bankruptcy to keep their homes.  The defeat came as some democrats sided with the bill’s opposition, mirroring a general weariness from within the banking community towards this piece of legislation.

The media balked at this defeat with claims that echoed the bill’s sponsor Richard Durbin (D-Illinois) that the banks essentially controlled congress and that senators needed to vote along with the needs of the American people rather than according to the desires of the banking and mortgage lobbies.  The accusation from Durbin, and from the media following the defeat, was that these senators (particularly the 12 democrats who voted against the bill) were essentially bought out.  The media portrayed the senate as under bank control.

A Government of Zero Accountability

by Odysseas Papadimitriou on April 30, 2009

ZeroThe barbarians, so the saying goes, are no longer at the gates.  They’ve stormed through.  In many cases, they were practically let in by negligence of the regulators whose job it was to protect us from greedy swindlers, inventive accountants, and fraudulent lenders.  The gatekeepers themselves, the various federal regulators, have not been punished for failing in their duty to protect America.  They remain, even now, at their posts as the country reels from the damage it has taken from the various scandals and crimes committed against its economy and its taxpayers.  Those whose job it was to police against these crimes have failed us and we wonder why they have not been made accountable.

Why, for instance, didn’t Christopher Cox, the head of the SEC, not resign after the Madoff scandal?  Surely the crime was glaring enough to call his competency into question.  Shouldn’t he have taken some responsibility as the scheme was carried out on his watch?  Cox offered no public apology and was never taken to task for the calamity that resulted from his oversight.  He just stayed in, despite the very real complaints of his critics, until he was replaced by the next administration.

Who is responsible for the CDS Scandal?

by Brian Johnson on April 15, 2009

ScandalHere at Wallet Blog, we have been reporting on the fallout of the CDS scandal by looking not only at the issue as it is affecting us now, but also at who is responsible for allowing unregulated trading of Credit Default Swaps (CDS) to occur in the first place.  We have pointed out that the laws that made Credit Default Swaps illegal, which had been in place for over 90 years, were repealed by congress in its passing of the Commodity Futures Modernization Act in December of 2000.  The repeal of these laws has cost hundreds of billions of dollars in tax payer money, including the $180 billion that taxpayers are paying for the collapse of AIG alone.

Since our reportage, some of our readers have asked us for an explanation as to why there has been no significant mention of congress’s role in the production of the CDS scandal within mainstream media.  Here at Wallet Blog, we too are troubled that the media has, in general, avoided taking lawmakers to task for their votes.  We are equally troubled by the overwhelming number of congressmen and women who voted this bill into law and who are, therefore, responsible for the legislation that is currently devastating the American economy.  In the House of Representatives, the bill passed 291 with only 60 representatives voting no.  In the senate, the bill passed unanimously without a single voice of objection.

Companies that still don't get the role of bonuses

by Odysseas Papadimitriou on April 10, 2009

BonusesFannie Mae and Freddie Mac are planning on paying out $210 million dollars in bonuses despite the fact that both these companies had to be seized by federal regulators so as to prevent dire repercussions across the economy.  Their failure has been one of the central low points to the economic devastation of this past year

James Lockhart, federal regulator for Fannie Mae and Freddie Mac, defended these bonuses for two reasons.  First, he suggests that the bonuses are needed because of the destruction wrought upon the company employees’ savings by the crash of their stock.  The scene for such workers is, of course, tragic, but we wonder if bonuses should go out to those who lost money in the stock market, then don’t we all deserve some of that cash?  The plight of the employees at Fannie Mae and Freddie Mac is hardly unique—it is the plight of every American hurt in this recession.  But of course, the average American doesn’t get government bailouts for the money that they’ve lost in the various markets—we pay for them.  When all is said and done, investment is a gamble.  In other words, the people at Fannie Mae and Freddie Mac gambled their life savings, like so many of us, and lost.  We don’t get a safety net, why should they?

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