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Posts Tagged ‘fannie mae’
Friday, November 6th, 2009
 Fannie Mae announced a plan on Thursday that will allow borrowers facing foreclosure to lease their homes. The program, called Deed for Lease or D4L for short, allows borrowers facing foreclosure to hand their deed to the lender in exchange for paying the market rate rent on the home for at least 12 months.
To qualify for the program, borrowers have to have mortgages insured by Fannie Mae, be unable to qualify for President Obama’s mortgage modification program, and be unsuccessful renegotiating with their lenders. While eligible borrowers would have to voluntarily give up the deeds to their homes, they would be able to stay for at least a year, providing that they paid the market rate rent. Rents would then be renewable on a month-to-month basis. Eligible borrowers must document that the new market rate rent is no greater than 31% of their gross income to qualify for Deed for Lease.
The Deed for Lease program is an extremely interesting and valuable way to keep delinquent borrowers in their homes, or merely to allow time for a transition. The program may be especially valuable for families with children, whom they do not want to remove from their schools in the middle of the year. It will help give families more time to come up with options. It will also help underwater homeowners– especially in areas that have seen property values drop significantly.
Furthermore, since tenants of qualifying borrowers are also eligible for the program, Deed for Lease will help tenants whose landlords face foreclosure. As a result, it appears that, though Fannie Mae provided no estimates for how many borrowers will be eligible for the program, Deed Lease looks to be a promising alternative to severely delinquent borrowers with Fannie Mae loans facing foreclosure–and for their tenants.
More information about the program can be found at www.efanniemae.com.
Tags: borrower, borrowers, D4L, Deed for Lease, fannie mae, foreclosure, homeowner, homeowners, landlord, landlords, lease, Mortgage, mortgage modification, mortgages, tenants
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Wednesday, October 7th, 2009
 In a move that is designed to help the housing industry, the Wall Street Journal reported today that Fannie Mae and Freddie Mac are working on a program to help smaller banks get the short term credit needed to help them make home loans. This would come in the form of Fannie Mae and Freddie Mac making advance commitments to buy home loans that meet a certain criteria. The program builds on a pilot program already underway between Freddie Mac and NattyMac and Provident Lender Associates LP.
While it seems that much of this plan has yet to be announced, any assistance to small banks appears to be welcome. Another column in the Wall Street Journal pointed out that there are over 8,000 mortgage lenders nationwide (not counting reverse mortgage lenders). When one considers that the majority of mortgage loans tend to be completed by the three major banks- Wells Fargo, Bank of America, and JP Morgan Chase. These three lenders alone account for 52% of new home mortgages, up 15% from the 37% market share for the top 3 lenders in 2007. An increase in market share for the top lenders likely doesn’t bode well for the industry though. As a result, it will be interesting to see if the plan with Freddie Mac and Fannie Mae will help revitalize the mortgage industry by helping the smaller lenders.
Tags: Bank of America, fannie mae, Freddie Mac, home loan, home loans, housing industry, J.P. Morgan Chase, lenders, Mortgage, mortgages, NattyMac, Provident Lender Associates LP, reverse mortagages, reverse mortgage, Wall Street Journal, wells fargo
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Wednesday, June 10th, 2009
 The reverse mortgage industry received a pleasant surprise this morning when the Wall Street Journal wrote a big feature on reverse mortgages on the front page of the personal journal section. While much of the article explains what reverse mortgages are and how they work, an interesting piece for lenders is the section on how much money the FHA has lost through reverse mortgages. HUD asked for $800 million taxpayer dollars to boost its loan-loss reserves as housing prices continue to decline. Jeff Lewis, the chairman of Generation Mortgage, mentioned that about 1/3 of the borrowers who might have closed reverse mortgages two years ago would no longer qualify today due to the declining home values. Perhaps in connection with this, the article mentions how sudden pricing changes by Fannie Mae have recently disrupted some reverse mortgage transactions, as borrowers realize they will qualify for less money at closing than they did when they began the application process, sometimes even having a shortfall.
The stresses on the industry are noteworthy, especially as interest in HECMs increases. The number of reverse mortgages being closed has proliferated in recent months, yet housing values do continue to decline. Hopefully these financial considerations will not too greatly imperil the government programs.
Tags: fannie mae, financial considerations, generation mortgage, HECMs, housing prices, HUD, reverse mortgage, reverse mortgage industry, reverse mortgages, Wall Street Jounral, Wall Street Journal, WSJ
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Tuesday, June 9th, 2009
 John Dugan In a story that made headlines yesterday, top US bank regulator John Dugan announced that he is concerned that reverse mortgages could be the next subprime mortgage product to experience rapid growth. Like subprime mortgages, reverse mortgages are complicated loans that appeal to a vulnerable segment of the population. However, Dugan’s concerns are not centered on the 90% of loans secured by Fannie Mae. Rather, he is concerned about proprietary products, sensing an opening for those who wish to prey on seniors.
The Regulator’s remarks were partly to encourage other regulators to set standards for proprietary reverse mortgages. He also encouraged the regulators to be vigilant in cracking down on misleading marketing materials and lenders engaging in cross-selling. Dugan added that the Office of the Comptroller and Currency, where he is the top regulator, is prepared to step in should additional measures be needed.
As a result, Dugan’s comments should not be viewed in such a negative light. His point was that by acting early, regulators can hopefully prevent the next subprime crisis. His comments are in line with much of the state legislation that we have seen in recent months. Therefore, rather than scare people away from reverse mortgages, the Regulator’s fears should help skew prospective borrowers towards the FHA products, and otherwise help ensure that the proprietary market is regulated so that all reverse mortgage borrowers are protected.
Tags: borrower, borrowers, Dugan, fannie mae, FHA, John Dugan, OCC, Proprietary revese mortgage, regulation, regulator, regulators, reverse mortgage, reverse mortgages, state legislation, subprime, subprime mortgage
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Tuesday, June 2nd, 2009
 Fannie Mae announced yesterday that it will no longer buy CMT based reverse mortgages beginning September 1, 2009. This means that CMT based reverse mortgages are therefore much less likely to be offered starting on that date. While on the surface this might look problematic, most lenders and borrowers are already using LIBOR based products, which currently have lower interest rates than the CMT based products.
Fannie Mae said the reasoning behind the discontinuation of CMTs was to help standardize and simplify the HECM product offerings, build liquidity for the product, and move the market towards securitization. However, another likely factor is that the CMT is based on the US treasury bond, which has been plummeting in value recently due to the recession. The LIBOR, on the other hand, is based on the London Inter-Bank Offered Rate, which is an international index. As a result, it is arguably a more stable rate in the current economic climate, dependent on the international situation as opposed to only on the US.
Lenders will be able to continue to obtain pricing and commitments for CMT based HECMs from Fannie Mae until August 31, 2009.
Tags: CMT, fannie mae, hecm, HECMs, LIBOR, reverse mortgage, reverse mortgages
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Monday, June 1st, 2009
 A recent New York Times article focuses on Fannie Mae’s HomeSaver Advance Program, a now-deemphasized program that gave borrowers up to 15,000 in unsecured personal loans to cover missed mortgage payments. However, 70% of the borrowers who took out these loans defaulted. This instance helps highlight the importance of financial counseling. The article closes with the example of a New York City program that makes foreclosure avoidance loans available to borrowers who have undergone counseling. This program has given out 15 loans so far, none of which have defaulted.
Reverse mortgage counseling has come under fire recently, and several states have been debating whether to pass legislation requiring counseling before all reverse mortgage transactions. It is often argued that counseling is necessary in order to ensure that the senior borrower understands the reverse mortgage transaction, but if one looks closely, it appears that counseling has the potential to do a lot more than that. As counselors at the NRMLA Orlando Road Show explained, the purpose of counseling is partly to make sure that the borrower will still have enough money to live on after the reverse mortgage. The financial counseling portion of the reverse mortgage counseling process is perhaps underestimated, but it articles such as the one referenced above help show that financial counseling may be another way to help homeowners avoid foreclosure–and ensure that the steps they take in the short term will not penalize them in the long run.
Tags: borrowers, counseling, counselors, fannie mae, financial counseling, foreclosure, foreclosure avoidance loans, foreclosure prevention, foreclosures, homeowners, HomeSaver Advance Program, legislation, loan, loans, Mortgage, mortgages, New York Times, NRMLA, reverse mortgage, reverse mortgages
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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
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Friday, April 24th, 2009
Let’s take a step back and look at the correlation between interest rates and the amount of money someone is able to receive for their loan. The amount of money a borrower is able to receive for their loan is dependent on two factors: age and interest rate. The older one is, the more they can receive for their home. The lower the interest rate, the more they can receive for their home. The graph is below:
What this means is that the higher the margin, the lower the interest rate needs to be in order to ensure the borrower is able to receive the maximum amount for their home.
However, in the wake of Fannie Mae’s price hikes, lenders have increased the margins on their reverse mortgage products. Products that allow borrowers to receive the maximum amount of money for their home are not being offered as frequently. Some banks are even charging lenders a fee in order to offer products such as the LIBOR 250, which still gives borrowers the principal limit. This means that consumers will likely be able to receive a smaller percentage of their home’s value in the future– especially for younger borrowers.
For example, the current difference between a 63 year old homeowner receiving the LIBOR 300, which is the lowest product Wells Fargo offers, and the LIBOR 275, which many other lenders are offering, is 3.1% of the home’s value.
- For a $500,000 home, this amounts to $15,500.
- For a $100,000 home, this is $3,100.
It is not an insignificant figure.
To do the calculations, a reverse mortgage calculator is recommended.
Tags: age, calculate, CMT, fannie mae, hecm, interest, interst rate, LIBOR, limits, margins, rate, rates, reverse mortgage, reverse mortgage calculator, reverse mortgages
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Wednesday, December 10th, 2008
The Fannie Mae Homekeeper is a very old type of non-FHA reverse mortgage that never really caught on because of the low percentage of equity that it made available and because of its high interest rate. The only customers who benefited from it were those above the age of 80 with a home value between $300,000 and $450,000.
The final nail in the Homekeeper’s coffin came when the FHA increased the limits on the HECM reverse mortgage to $417,000. The Homekeeper is now fully obsolete.
Lenders have begun to discontinue the program including the large wholesale lender JB Nutter who announced it is discontinuing the program effective December 22, 2008.
Tags: fannie mae, hecm, homekeeper, JB Nutter, reverse mortgage
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