FHA officials have acknowledged that the agency is facing serious financial pressures, but the problems may be even more serious than reports to date have indicated. An analysis of loans approved in 2009 and 2010 found that the foreclosure risks are well above average, threatening losses that could exceed $20 billion. That projected loss would be in addition to the $13.5 billion deficit identified in an agency audit citing exposure related to the collapse of the housing market.
The “fiscal cliff” has become a bogeyman for our time – a shapeless monster hiding under beds, lurking in closets, and haunting Congressional hallways, threatening to leap from the shadows and devour the economy in a large, greedy gulp.
Struggling to bolster reserves depleted by loan losses that are threatening the solvency of its insurance fund, the Federal Housing Administration (FHA) is increasing premiums on the low-down-payment home mortgages the agency insures. The increase, equaling one tenth of one percent of the loan amount, is the second the agency has implemented this year in an effort to avoid what would be the first taxpayer bailout in its 78-year history.
“The Hustle” sounds like a 1970s disco dance, but it refers to what the Department of Justice (DOJ) describes as a “particularly brazen” fraud designed by Countrywide Mortgage, for which, Bank of America, which purchased the erstwhile mortgage giant, is being sued.
With the too-close-to-call election still a few days away as this update was being written, and the East Coast struggling to recover from Hurricane Sandy, interest in the current batch of economic reports had dimmed considerably. But the focus on one issue ─ the “fiscal cliff” — has remained laser sharp, and the concern about it is widespread.
Financial industry regulators are becoming increasingly concerned about abuses in the reverse mortgage arena. Consumer advocates have been warning for years that these loans pose huge risks for seniors, because of inadequate and often misleading disclosures and abusive underwriting practices, but federal and state regulators “are documenting new instances of abuse as smaller mortgage brokers, including former subprime lenders, flood the market after the recent exit of big banks and as defaults on the loans hit record rates,” the New York Times reported recently.
The Federal Housing Finance Agency (FHA) has unveiled a plan for revamping Fannie Mae and Freddie Mac with a near-term goal of making them more efficient and a long-term goal of reducing the housing market’s reliance on the federally-supported mortgage financing giants.
Is this recovery for real? We’re not talking about the economic recovery, which remains, by virtually all accounts, really slow. We’re talking about the housing recovery, which, until recently, was almost universally acknowledged to be a dim prospect, if not an unlikely one, at best.
The economy is looking a lot like a seesaw. Manufacturing activity, which had been up, is down; housing, which had been not just down but subterranean, is now ascendant, and other sectors are tilting one way or the other, sliding up some months and down in others, without moving very far in either direction. The resulting picture reflects an economy with sufficient energy to sustain a recovery (albeit, as modest one), but with enough areas of weakness and uncertainty to make additional action by the Federal Reserve likely and probably imminent.
If you can’t say something nice, it’s going to be virtually impossible to talk about what’s happened to the middle class, which “has endured it worst decade in modern history,” according to a Pew Research Center report.
The idea of using a local government’s eminent domain authority to “take” and restructure the mortgages of underwater borrowers is getting more attention from municipal officials, who like the concept, and from the Federal Housing Finance Agency (FHFA), which doesn’t like it at all.
Everyone is jittery about everything. Consumers are jittery about the economy generally and the employment outlook specifically, so they aren’t spending much. Businesses are jittery about the lack of consumer spending, so they aren’t hiring (which is making consumers more jittery) or investing much in equipment either.
Intensifying pressure from the Obama Administration, legislators and housing advocacy groups forced Edward DeMarco, acting director of the Federal Housing Finance Agency, to reconsider his refusal to allow Fannie Mae and Freddie Mac to reduce the principal balances on the loans of struggling homeowners. But it didn’t make him change that unpopular position.
Homeowners struggling to avoid foreclosure, but still current on their loans, may be eligible for relief under a revised short sale program announced recently by the Federal Housing Finance Agency (FHFA).
Local governments have long used eminent domain as a mechanism for taking public property for public purposes. Now some country governments are considering using the same legal strategy to “take” underwater mortgages from lenders in order to help struggling borrowers avoid foreclosure.
“No news” may be “good news” in the eyes of many publicity-shy corporate executives, but “no change” was definitely not the news anyone wanted to hear about the unemployment rate, which remained stubbornly, painfully elevated at 8.2 percent in June as employers added only 80,000 jobs for the month.
The Consumer Financial Protection Bureau (CFPB) is eyeing new regulations for reverse mortgages. A recent CFPB report found that demand for the loans – restricted to borrowers 62 and older – is growing, but the product’s complicated structure and misleading marketing practices related to it are creating a minefield of hidden risks for consumers.
With “appreciation” not found often in sentences with “home prices” these days, many homeowners are building equity the old-fashioned way – they’re paying down mortgage debt. Residential mortgage debt doubled between 2001 and 2007 but has declined by 7 percent since, pushing home equity to the highest level since 2008. Homeowner equity jumped to 41 percent of residential property value in the first quarter the largest in 60 years, according to a Bloomberg News report, based on an analysis of Federal Reserve data.
The Consumer Financial Protection Bureau (CFPB) is going to take a little more time before finalizing the “Qualified Mortgage” rule – establishing the guidelines for determining a borrower’s “ability to repay” a residential mortgage. The original comment period ended in July of last year and the agency was expected to issue a final rule by the end of this month.
Color the May employment report disappointing, with a capital ‘D’. Rising unemployment claims had indicated that all might not be well in the labor market, but no one predicted the dismal numbers the Department of Labor reported: Employers added only 69,000 jobs in May – well below the far from robust gain of 158,000 the consensus forecast had projected. The unemployment rate increased slightly – to 8.2 percent from 8.1 percent – and, adding statistical insult to injury, the lackluster April gain of 115,000 jobs was revised downward to 77,000.
Consumer advocates and many economists have been arguing for some time that short sales represent a viable alternative to foreclosures, benefiting lenders and borrowers alike. It appears that more lenders are beginning to agree.
Financial institutions thought the Attorneys’ General agreement resolving the “robo-signing” mess would corral the potential liability they faced for flawed foreclosure practices. But a pending court decision threatens to open the foreclosure liability box anew.
The betting is heavy but the odds are mixed on whether Edward DeMarco, the head of the Federal Housing Finance Agency (FHFA) will bow to pressure and allow Fannie Mae and Freddie Mac to reduce the principal balance on some mortgages in order to help borrowers avoid foreclosure.
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