|
|
Posts Tagged ‘California’
Monday, October 12th, 2009
 This weekend Gov. Arnold Schwarzenegger signed AB 329 into law in California. The bill finally establishes the Reverse Mortgage Elder Protection Act of 2009. The bill prohibits cross-selling, requires the lender to provide the borrower with no fewer than 10 nonprofit HUD-approved counseling agencies, and requires the lender to provide the borrower with a checklist of issues to discuss with the reverse mortgage counselor. The loan application will be unable to be approved without the signed checklist. However, given that the first two requirements are included in national legislation, the main feature of the bill will be the addition of the checklist to the reverse mortgage counseling process.
The provisions of the bill will be administered by both the California Department of Real Estate and the California Department of Corporations.
The bill can be found at: AB 329
Tags: AB 329, Arnold Schwarzenegger, bill, California, law, reverse mortgage, reverse mortgage counseling, reverse mortgages, Reverse Mortgages Elder Protection Act of 2009
Posted in Consumer News, Industry News | No Comments »
Thursday, August 6th, 2009
 At the end of June, 24% of homeowners were upside down on their mortgages. In other words, 24% of homeowners owed more on their mortgages then their homes were worth. When added to those with no equity remaining in their homes, the percentage climbs to 32%. Nevada, Arizona, California, and Colorado are the biggest offenders with rates of 40%, 37%, 33%, and 31% respectively of homeowners whose homes are worth less than their mortgages. In some of these markets, homeowners are walking away from homes where they may owe twice as much as the home is worth or more. And when the home is worth less than the mortgage, borrowers no longer qualify for some of the programs that might be able to help them, such as a reverse mortgage.
In response, some are urging the government to begin reducing loan balances to help borrowers cope with the problem. Lowering loan payments or rates will only make the mortgages drag out interminably, and still not recoup the home’s equity (unless it appreciates again over time back to levels that are higher than during the time of the boom). If the government reduces the loan balances, borrowers will be inclined to continue to invest in their homes and stay in their residences, rather than walk away. This will reduce foreclosures, hopefully, as well as abandoned properties.
What do you think?
Tags: Arizona, California, Colorado, foreclosure, foreclosures, government, homeowner, homeowners, loan, loans, Mortgage, mortgages, Nevada, reverse mortgage, reverse mortgages
Posted in Consumer News, Industry News | No Comments »
Monday, August 3rd, 2009
 A front page story in the Wall Street Journal this morning highlighted an interesting trend; high-end homeowners are being left behind in the housing market rebound. Stimulus programs, such as the $8,000 new homebuyer tax credit and low mortgage rates, are dependent upon income and home values. The jumbo mortgages necessary to take out a high-cost home have come with higher rates and lenders requiring an increasingly large portion as the down payment (20-30% of the property value). All this comes at a time when prospective buyers have had an even harder time selling their homes, making coming up with money up front difficult. As a result, while the market has begun to turn upwards for many first-time buyers and lower value homes, the market is still stagnant for those in the upper and upper-middle classes.
While it is perhaps unsurprising that stimulus programs might choose to target those with lower incomes, the recession has hit those with higher incomes as well. Many of the people affected by the stock market crash and financial fraud scandals are those who were making upwards of $150,000/year. After losing their jobs and/or the majority of their 401Ks, some members of this group are taking pay cuts in order to land new jobs. As home values decline however, this group also is beginning to have a hard time making mortgage payments and qualifying for relief. Jumbo mortgages are currently the type of mortgages with the highest default rate.
The government should do something to make sure that the upper middle class and upper classes are not completely cut out of the stimulus programs–at least so far as real estate is concerned. Their homes are taking some of the largest hits in a distressed market, to the point where selling is not possible without losing hundreds of thousands of dollars. And in markets such as California, some are extremely upside down on their mortgages. While they may be well off in comparative terms, they could still lose their homes (and many are), could still lose their jobs and source of income (and many have), and they still should be granted some form of relief.
Tags: California, front page, housing, housing market, jumbo mortgage, jumbo mortgages, Mortgage, mortgages, real estate, recession, relief, stimulus programs, underwater, upper class, upper middle class, Wall Street Journal
Posted in Consumer News, Industry News | No Comments »
Wednesday, July 15th, 2009
 A new study by Northwestern’s Kellogg School of Management and the University of Chicago’s Booth School of Business revealed that 26% of borrowers who defaulted on their mortgage payments did so strategically. The study pointed out that one in six borrowers would choose to walk away if their shortfall was over 50% of their home’s equity. This finding is especially intriguing due to the falling housing prices in areas like California and South Florida, where many borrowers have found themselves incredibly upside down on their mortgages. These borrowers generally do not qualify for reverse mortgages even if they are old enough to be eligible, since they do not have enough equity in their homes.
However, it is logical that borrowers would not want to remain in a situation where the amount they owe on their mortgage is becoming increasingly more than their house is worth. And especially given the current state of the economy, some of these borrowers have found their situations change such that they can no longer afford the payments in the first place. With so many homes available at bargain basement prices, it is unsurprising that borrowers might choose to try to walk away to a better situation, regardless of the negative effect it may have on their credit.
Yet this is exactly the situation the government should be remedying. Many programs to help borrowers during the recession have left out those homeowners who are dramatically underwater on their mortgages, but these borrowers (who appear to often come in larger groups as neighborhoods fall dramatically in value) are some of the ones who need the help the most and whose mortgages, through no fault of their own, no longer make financial sense. Rather than simply becoming content to let homeowners walk away and take the hits to their credit or entrap them in their home, the government should work with lenders to establish a solution that helps bail out and reevaluate those whose mortgages are worth far more than their homes. Both sides should be able to win from the situation, rather than the current reality in which the banks, the borrowers, and the communities lose.
Tags: borrowers, California, foreclosure, government, government programs, Mortgage, mortgages, reverse mortgage, reverse mortgages, shortfall, South Florida
Posted in Consumer News, Industry News | No Comments »
Thursday, May 28th, 2009
 In more depressing housing news, the Mortgage Bankers Association announced Thursday that a record 12% of homeowners are behind on their mortgage or in foreclosure. They do not expect the number of foreclosures to crest until the end of next year.
In an interesting twist, the foreclosure rate on prime fixed-rate loans has doubled in the last year. They now comprise the largest share of new foreclosures. The financial crisis has also hit many of those previously thought to be invulnerable: Nearly 6% of fixed-rate mortgages to borrowers with good credit are in the foreclosure process.
The foreclosures also appear to be clustered: 46% are located in California, Florida, Arizona, and Nevada.
We’ve tried to keep much of the blog focused on how to get out of foreclosure for those who are affected by the crisis. Those over the age of 62 can qualify for a reverse mortgage, which can help many avoid foreclosure. There are also many state resources that can assist, such as the one in Illinois discussed here.
If there are any options I’ve left out, please comment with them.
Tags: Arizona, California, financial crisis, Florida, foreclosure, foreclosures, homeowner, homeowners, housing, Mortgage, Mortgage Bankers Association, mortgages, Nevada, prime mortgage, reverse mortgage, reverse mortgages
Posted in Consumer News, Industry News | No Comments »
Monday, May 4th, 2009
 The Wall Street Journal published a fun piece this morning about how a number of towns in CA, Indio, CA in particular, have made it a criminal misdemeanor for lenders not to keep up with foreclosed properties. The law goes after banks that have allowed properties to fall into disrepair, with concerns such as high weeds, algae in pools, and dead grass. Apparently, it has generally been effective. After at first only writing checks to pay the fines, it seems that lenders such as Countrywide, Washington Mutual, and Fannie Mae are coming into compliance.
Reverse mortgages are often a great way to potentially keep people in their homes and help avoid foreclosure, but when foreclosure is unavoidable, it is nice to see a community holding the lenders responsible for picking up the pieces.
At the same time, the Associated Press released an article on the increasingly high number of vacant homes in the Midwest, where vacancy rates in some areas are over 40% empty. Brian Bernardoni, Policy Director for Chicago’s Board of Realtors, was quoted today in the Associated Press as saying that vacant homes hurt a neighborhood’s “curb appeal,” making it that much harder for the neighborhood to recover. However, if lenders take care of vacant and foreclosed homes, preventing them from becoming refuges for squatters and keeping up the outer appearance of the buildings, the neighborhood may not suffer as much damage–in both the short and the long run.
Tags: Associated Press, bank, banks, California, Countrywide, fannie mae, foreclosed properties, foreclosure, homes, Indio, Midwest, real estate, reverse mortgage, Wall Street Journal, Washington Mutual
Posted in Consumer News | No Comments »
Friday, April 17th, 2009
 Welcome good news: A BusinessWeek article last week announced that housing sales in some of the markets hardest hit by the financial crisis have rebounded to levels that have surpassed those reached during the housing boom. Cape Coral, FL, Las Vegas, NV and California’s Inland Empire all saw home sales in February reach rates that were 80% higher than those of a year earlier.
As mentioned yesterday, the vast majority of these sales are of foreclosed homes. The ability of first-time buyers to earn up to $8,000 in tax credits coupled with low mortgage rates and bargain prices have lured many into the market.
It’s great to see home sales increase and the number of vacant properties diminish. However, it is even greater to think of all the people who can finally own their home for the first time.
Tags: BusinessWeek, California, Florida, foreclosure, good news, home sales, homes, housing boom, Nevada, reverse mortgage
Posted in Consumer News, Industry News | No Comments »
Thursday, March 26th, 2009
 At the end of yesterday’s post, I added a line on how government involvement in reverse mortgages was a good thing. And then I pressed publish. However, it took only a few moments for me to realize how complex an issue government involvement in reverse mortgages is–everything from government involvement in the financial market to the real estate market to reverse mortgages in particular. A throw away sentence is inadequate to address this issue. Should the government be involved in regulating reverse mortgages or not?
The reverse mortgage market is a particularly interesting one because it contains two sectors. Government insured loans comprise the majority of reverse mortgages. However, a smaller percentage (about 10% and growing) consist of proprietary reverse mortgages–mortgages carried out without the backing of the government.
Recently we have seen the state governments attempt to regulate the proprietary market. In several instances, these regulations extend some of the same protections offered to federally backed loans to proprietary loans. These protections help protect the consumer from fraud and the lender from a lawsuit and should be considered a good thing, for example allowing a reverse mortgage to be cancelled in the 10-30 days immediately after the closing and requiring the lender to notify the borrower of all the fees involved in the transaction. The federal government has a responsibility to help prevent fraud and protect its citizens. In an environment that is as economically predatory as this one, carrying this responsibility into the potentially dangerous world of reverse mortgages makes sense.
However, in some of the other parts of the proposed bills, government involvement is not as intuitive. For example, some of the new recommendations include complex new rules regarding the licensing of reverse mortgage lenders and brokers. While states have generally controlled who practices what in each state (medicine and law are the two largest examples of statewide certification; education is a close third) requiring specific reverse mortgage certification, even from lenders who are otherwise licensed to complete loans and mortgages, may seem a little extraneous. But given that every state does have different laws regarding reverse mortgages, it seems logical that state practitioners should be knowledgable of their state’s requirements.
So what should the state governments stay away from? Fundamentally, if a person chooses to complete a proprietary reverse mortgage, they have chosen to not receive the protections entitled to them in a federally insured HECM. This does not mean they should not be educated to make sure they are making the right decision, nor does it entitle them to be defrauded. However, the market for third party proprietary reverse mortgages is growing, indicating the demand for something outside of the government programs. The government should allow such a program to be executed by third parties, provided it is executed in such a way that protects its citizens and does not defraud.
Tags: Arizona, bill, California, federal, FHA, government, hecm, libertarianism, Minnesota, politics, Proprietary Reverse Mortgage, reverse mortgage, state, Washington
Posted in Consumer News | No Comments »
Wednesday, March 25th, 2009
 The Washington state Capitol, one of the states where a new reverse mortgage bill has been introduced. Last week, we discussed the proposed reverse mortgage bill in Arizona. Today, we would like to highlight three other states where bills regulating proprietary reverse mortgages have been introduced in the last month. The three bills differ dramatically from each other.
The California bill aims to protect seniors from being lied to and/or misinformed, including a lot of regulations surrounding impartial HUD counseling. Some highlights of the California Reverse Mortgage Elder Protection Act of 2009 include requiring lenders to provide prospective borrowers with a list of all approved HUD counselors in the state, requiring lenders to disclose any business relationships or potential conflicts of interest with the counseling agency to the prospective borrower, and allowing the borrower to cancel the reverse mortgage for any reason within the first 30 days. This bill apparently addresses the needs of the state, where seniors have been found to be misinformed or misled regarding reverse mortgages more often than in some of their neighbors.
Minnesota’s new bill addresses the issues of fraud and double dipping. It too seeks to ensure that lenders do not provide reverse mortgages to seniors who do not need them.
One of the key facets of the bill is that it prohibits cross selling involving reverse mortgages. The bill will also require mandatory counseling for proprietary reverse mortgages. There appears to be a lot of skepticism as to whether it is possible to ever really prohibit cross selling. However, it seems valuable to state that lenders cannot also sell annuities or insurance to the borrower if the payments will come from the reverse mortgage. Trust is a crucial aspect of the reverse mortgage program, and double dipping has the potential to undermine that trust.
The Washington bill protects both the lender and the consumer from eachother. The bill appears similar in some ways to the Arizona bill by mandating counseling. It requires basic protections, ensuring that there is a right of recession and that the payments go to the correct party. However, the bill is also notable because it adds provisions for the lender, helping to confirm that the lender can afford to make the payments in the reverse mortgage and that they are held accountable if they do not. The Washington bill appears to be designed to prevent court cases and help provide guidance to the courts in determining disputes. It also is likely to serve as an important step in protecting seniors in the proprietary reverse mortgage market–especially since one only needs to be 60 to qualify for a proprietary reverse mortgage in Washington State.
These bills continue to show the increased interest the states have been taking in regulating the proprietary reverse mortgage market during the recession. Reverse mortgages can help seniors and improve their lives. On the other hand, there also instances where getting a reverse mortgage may prove to not be the right thing for the senior and their family. Taking steps to protect the senior while helping to prevent lawsuits is a good thing. It is valuable that the states have gotten involved in regulating a market that is so at risk for fraud and manipulation.
Tags: Arizona, bill, California, law, lawsuit, Minnesota, Proprietary Reverse Mortgage, reverse mortgage, reverse mortgages, senior, state legislature, Washington
Posted in Consumer News, Industry News | No Comments »
Tuesday, March 24th, 2009
The housing market is on the rise
Although the housing market has been down, it looks like it may be starting to rebound. The Wall Street Journal reported yesterday that housing sales rose 5.1% in February. A similar article a few days earlier reported that sales in California, one of the states hit hardest by the housing crisis, have also improved. According to the California Association of Realtors, homes in California were on the market an average of 6.7 months in January 2009, compared with 16.6 months a year earlier.
While many of the homes that have been spurring the increase in sales nationwide were foreclosed homes, the rejuvinated market should be seen as a positive sign. Mortgage rates (both for mortgages and reverse mortgages) remain low. HECMs are now available to help seniors purchase homes. The increase in home sales are signs that these changes may be working. Although the new HECM for purchase program was not put into effect until after the CA data was collected, it is a positive sign that the market appears ready to support such a program.
While it’s too soon to say the market is on an upswing for good, the rejuvenated market is definitely a step in the right direction and a good sign for lenders, realtors, homeowners, and prospective homeowners alike.
Tags: California, hecm, HECM for purchase, housing, housing market crash, housing sales, real estate, real estate boom, real estate crash, reverse mortgage, Wall Street Journal
Posted in Consumer News, Industry News | No Comments »
|
This weekend Gov. Arnold Schwarzenegger signed AB 329 into law in California. The bill finally establishes the Reverse Mortgage Elder Protection Act of 2009. The bill prohibits cross-selling, requires the lender to provide the borrower with no fewer than 10 nonprofit HUD-approved counseling agencies, and requires the lender to provide the borrower with a checklist of issues to discuss with the reverse mortgage counselor. The loan application will be unable to be approved without the signed checklist. However, given that the first two requirements are included in national legislation, the main feature of the bill will be the addition of the checklist to the reverse mortgage counseling process.
