The GSE’s pullback because their realize that banks would stop lending.
Mortgage Putback Threat Reduced for Lenders Under New Rules
By Clea Benson – Sep 11, 2012 9:25 AM PT
The U.S. overseer of Fannie Mae and Freddie Mac (FMCC), seeking to reduce the threat that banks will have to buy back flawed mortgages from the two firms, laid out new rules designed to spur lending and ease the housing crunch.
The changes will apply to future loans, not those that are the subject of current bank complaints that the taxpayer-owned companies are being too aggressive in forcing them to buy back loans made at the height of the housing bubble, the Federal Housing Finance Agency said today in a statement.
The new system, which takes effect on Jan. 1, should give banks more certainty about future costs by flagging potentially faulty mortgages earlier, FHFA said. Fannie Mae (FNMA) and Freddie Mac will use data collected on the loans they buy to spot potential defects, and will review samples within three months of purchase instead of waiting until borrowers default.
“Lenders want more certainly about their risk exposure, and the enterprises want to ensure the quality of the loans,” Edward J. DeMarco, FHFA’s acting director, said yesterday in a North Carolina speech where he outlined the changes.
Regulators including FHFA and the Federal Reserve have said that banks are shutting out otherwise eligible borrowers and demanding higher credit scores than necessary because they are afraid Fannie Mae and Freddie Mac will force them to repurchase loans if they become delinquent.
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Proprietary OC Housing News home purchase analysis
2940 ARBORIDGE Ct Fullerton, CA 92835
$1,000,000 …….. Asking Price
$492,000 ………. Purchase Price
7/6/2000 ………. Purchase Date
$508,000 ………. Gross Gain (Loss)
($39,360) ………… Commissions and Costs at 8%
============================================
$468,640 ………. Net Gain (Loss)
============================================
103.3% ………. Gross Percent Change
95.3% ………. Net Percent Change
5.8% ………… Annual Appreciation
Cost of Home Ownership
——————————————————————————
$1,000,000 …….. Asking Price
$200,000 ………… 20% Down Conventional
4.10% …………. Mortgage Interest Rate
30 ……………… Number of Years
$800,000 …….. Mortgage
$192,861 ………. Income Requirement
$3,866 ………… Monthly Mortgage Payment
$867 ………… Property Tax at 1.04%
$0 ………… Mello Roos & Special Taxes
$250 ………… Homeowners Insurance at 0.3%
$0 ………… Private Mortgage Insurance
$0 ………… Homeowners Association Fees
============================================
$4,982 ………. Monthly Cash Outlays
($900) ………. Tax Savings
($1,132) ………. Equity Hidden in Payment
$289 ………….. Lost Income to Down Payment
$270 ………….. Maintenance and Replacement Reserves
============================================
$3,509 ………. Monthly Cost of Ownership
Cash Acquisition Demands
——————————————————————————
$11,500 ………… Furnishing and Move In at 1% + $1,500
$11,500 ………… Closing Costs at 1% + $1,500
$8,000 ………… Interest Points
$200,000 ………… Down Payment
============================================
$231,000 ………. Total Cash Costs
$53,700 ………. Emergency Cash Reserves
============================================
$284,700 ………. Total Savings Needed
The property above is available for sale on the MLS.
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Cost of Ownership Analysis
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$999,000 2941 ARBORIDGE Ct |
0.04 miles 4 bd / 3.5 ba 3,722 Sq. Ft. |
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$999,000 2947 ARBORIDGE Ct |
0.05 miles 4 bd / 3.5 ba 3,722 Sq. Ft. |
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$975,000 2905 ASHCREEK Ln |
0.21 miles 4 bd / 2.5 ba 3,450 Sq. Ft. |
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$618,000 2269 TIMBERCREEK Cir |
0.94 miles 3 bd / 2.5 ba 3,093 Sq. Ft. |
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$855,000 2579 SARATOGA Dr |
1.23 miles 4 bd / 4 ba 3,316 Sq. Ft. |
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$840,000 2434 AGNES Cir |
1.38 miles 4 bd / 4.5 ba 3,632 Sq. Ft. |
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$725,000 2401 ALMIRA Ave |
1.64 miles 4 bd / 2.5 ba 3,822 Sq. Ft. |
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$999,000 1624 TYLER Dr |
1.64 miles 5 bd / 4.5 ba 4,300 Sq. Ft. |
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$799,990 502 South WALNUT Ave |
1.88 miles 4 bd / 4 ba 3,336 Sq. Ft. |
Rep. John Campbell (R-California) introduced to Congress a piece of legislation designed to keep local governments from using eminent domain to seize homes with underwater mortgages.
Titled “The Defending American Taxpayers from Abusive Government Takings Act,” the bill would prohibit Fannie Mae, Freddie Mac, FHA, and the Veterans Administration from purchasing or guaranteeing loans originating in counties where a municipality has seized a mortgage loan through eminent domain in the last decade.
Campbell said the act is intended to protect taxpayers’ investments and preserve the rule of law.
“There is no question that we need to take steps to assist American homeowners in distress,” Campbell said in his introduction of the legislation.
“But these steps must not undermine rule of law, must not engage in corruptive and abusive practices, must protect the American taxpayer, and must not further degrade the housing market,” he continued.
In a release, Campbell’s office points out that widespread use of eminent domain powers to seize mortgage loans may result in Fannie and Freddie losing up to 30 percent in the private-label residential mortgage-backed securities in their portfolios.
As an alternative to the eminent domain program, Campbell and Rep. Gary Peters (D-Michigan) introduced H.R. 5940, “The Preserving American Homeownership Act.” This bill would direct Fannie/Freddie conservator FHFA to establish a program to pilot principal reduction programs for loans owned or guaranteed by the GSEs.
Campbell’s bill has already seen support from the Mortgage Bankers Association (MBA).
“While the problem of underwater borrowers continues to slow the housing recovery, using eminent domain to take those mortgages is not a responsible answer,” said MBA president and CEO David Stevens. “Beyond the obvious legal issues of using eminent domain in such a radical way, the government seizing mortgages would set a precedent that will hurt those communities and borrowers it is most designed to help.”
The Defending American Taxpayers from Abusive Government Takings Act is currently awaiting consideration in the House Committee on Financial Services.