Welcome to the "Z" Team! Douglas and Bud Zeller

The continual monthly bailout of Freddie Mac and Fannie Mae with unimaginable sums of money from the government is disturbing to taxpayers, but encouraged by Russia and China, the holders of huge portions of their bonds, since those countries do not want to suffer losses on their mortgage-related holdings. If they did, they would consider those losses financial warfare and retaliate.

For the homebuyer and the multiple listing service (MLS) market, support of the government as the lender of last resort must continue until the home prices in California stabilize for at least a two-year period and insolvent homeownership due to negative equities no longer exists. This means loan balance cramdowns or massive strategical defaults, and the sooner the medicine is taken by the lenders, the more quickly the MLS market place will recover for agents and homeowners.

Until then, the mortgage-backed bond market will not be attractive for anyone other than the Federal Reserve investment and treasury guarantees, implicit or actual.  [For more information on the future of Fannie Mae, see the February 2010 first tuesday article, The fate of our Fannie and Freddie]

These GSEs will eventually be dismantled and the government guarantees will be differently directed to keep the mortgage market viable until Wall Street gets its collective act together and fully returns to the mortgage-backed bond market. Wall Street was most adept at floating these bonds in the past, and they went way beyond the limits of government guarantees in the risky mortgages they were able to fund, package and resell to bond investors around the world.

This Wall Street Bankers are destined to do again — they only need some time to find their comfort zone. They figured out how to sell government-guaranteed mortgage-backed bonds without a hitch in early 2010 after the Feds quit purchasing all of the mortgage-backed bonds for over a year at the height of the financial liquidity crisis.

Thus both Freddie and Fannie will eventually be unnecessary since the private sector has demonstrated they can supply all the mortgage money homebuyers and apartment buyers need to do deals. Watch for a quiet fade into the past as their disappearance is exploited only by pundits and political types.

Re: “Freddie Mac seeks more aid amid loss” from the Wall Street Journal

Re: “Fannie Mae narrows loss, but asks for more aid” from CNNMoney.com

first tuesday take:  By Kelli Galippo

Copyright © 2010 by first tuesday Realty Publications, Inc. Readers are encouraged to reprint or distribute this information with proper credit given to the first tuesday Journal Online

Since the start of the housing downturn, the number of Web sites and foreclosure-prevention companies claiming to offer help to struggling borrowers has greatly increased. While some of the businesses are legitimate, others are fraudulent and offer services that consumers may be eligible to receive “free of charge”.

KEEP THIS IN MIND

• This month, Fannie Mae – the government-sponsored entity that helps set lending standards for most mortgages—started a Web site, KnowYourOptions.com. The site contains elements distinguishing it from those aiming to prevent foreclosure. All of the information on the site is available in Spanish or English.

• KnowYourOptions.com provides video explanations of what users might accomplish in each of the tabbed section of the site. In the “Take Action” section, for example,” struggling homeowners are advised that the first step to take in seeking help with their mortgage is to contact their mortgage company.

• Other features of the site include contact information for mortgage companies and loan counselors, calculators to determine if the borrower is eligible for assistance, and information on commencing short sales or deeds-in-lieu of foreclosure.

• Another helpful Web site for consumers is Hope LoanPort, which allows struggling homeowners and housing counselors to submit financial documents to mortgage companies and track the status of their efforts to avoid foreclosure. Hope LoanPort was created by Hope Now, a consortium of 12 mortgage companies and 250 counseling agencies. 

To read the full story, please click here: http://www.nytimes.com/2010/08/22/realestate/22mort.html?_r=1&ref=realestate

Part of the financial reform bill signed into law by President Obama includes the creation of a Consumer Financial Protection Bureau, which will write new rules and monitor problems and abuses in areas such as residential real estate settlements, credit scores, “truth in lending,” and equal credit opportunity. 

KEEP THIS IN MIND

• Before the Bureau can begin implementing new laws to assist consumers, the president must nominate a director for the Bureau and the Senate must confirm the nominee. While this may take time, mortgage industry leaders say some of the core changes promised by the legislation either already are in effect or should be soon.

• Treasury Secretary Timothy F. Geithner has until Sept. 19 to designate a transfer date when key legal and regulator authorities shift from agencies such as the Federal Trade Commission and the Dept. of Housing and Urban Development (HUD), to the new consumer bureau. Once that takes place, the Bureau will begin implementing the new laws.

• One of the earliest and most widely anticipated changes expected to take effect impact home appraisals. By law, the agency must create new interim rules on appraisal accuracy and independence to replace the Home Valuation Code of Conduct (HVCC) rules imposed by Fannie Mae and Freddie Mac in 2009. Many in the real estate industry, as well as home buyers and sellers, report HVCC standards led to low home valuations that, in some instances, derailed home sales transactions.

• A national hotline system also will be developed that will allow aggrieved mortgage borrowers and others to issue complaints and alert the Bureau to unfair and deceptive practices.

• Rules requiring mortgage loan officers to verify mortgage applicants possess the ability to repay the loans they’re seeking also is high on the list.

To read the full story, please click here:

http://www.latimes.com/business/realestate/la-fi-0801-harney-20100801,0,821975.story   

There is an increasing amount of opposition to the new home appraisal rules as many mortgage brokers and real estate agents are serving up criticism that the Home Valuation Code of Conduct (HVCC) guidelines adopted in 2009 are resulting in inaccurate and low-ball appraisals.

The main argument amongst critics is that the new rules have undesirable affects where appraisers are now being overextended, underpaid and forced to churn out appraisals in a hurried fashion. Conversely, many mortgage lenders, including J.P. Morgan and CitiGroup, have vested interests in the appraisal management companies that now play the role of divvying up appraisal assignments, so they naturally are against revamping the current appraisal guidelines.

Implemented last spring by Fannie Mae and Freddie Mac, the Code of Conduct bans mortgage brokers and loan officers from selecting appraisers to valuate homes in the deals which they are brokering. The purpose is to prevent the inflated and sometimes fraudulent appraisals which were partly responsible for an artificial surge in home prices during the past decade.

According to a recent article by Jessica Holzer in the Wall Street Journal , realtors and mortgage brokers have succeeded in inserting language into a House-passed financial-regulation bill that would end the new protocols. The measure would direct federal regulators to come up with an improved set of rules.

Under the new system, appraisal management companies now solicit out appraisal assignments for a fraction of the cost of what the work used to pay - in some cases less than half of the industry’s former compensation rate. As a result, many appraisals end up in the hands of the lowest bidder, and the work is being done by appraisers who have limited industry experience or are lacking of knowledge as it pertains to a specific real estate market and neighborhoods.

“More and more people are leaving the appraisal business than ever before because appraisals are now going out to the lowest bidders, commanding lower pay and fees,” says Bill Schettler, Vice President of Sales at Total Mortage Services, LLC.

Mr. Schettler, who worked six years as an appraiser himself, added, “Unfortunately, because of what the appraisal management companies are paying, many people are no longer able to make a living in the industry and there are more inexperienced people now doing the job. What is happening now is that appraisers have to travel further and further to cover more territory, so they can’t be as familiar with the homes as they were before”

National Association of Mortgage Brokers CEO Roy DeLoach told the Journal that out-of-town appraisers hired by vendors are diminishing homeowner equity through home valuations that aren’t credible: “It’s basically hollowing out the equity in communities whether you intend to sell or not.”