Nothing has been done so far. I think this is just bluster and pomp.
FHFA “Police” announcing crack down on strategic defaulters, but is it for real?
By Lew Sichelman, United Feature Syndicate 10:22 p.m. CDT, September 13, 2012
Strategic defaulters, beware. The feds are coming for you. And they are not happy.
Not the FBI. The Office of the Inspector General at the Federal Housing Finance Agency.
The OIG may not have the same fearsome “G-man” reputation as its better-known counterparts at the Federal Bureau of Investigation, but it is every bit as much a law enforcement agency, with the same powers to search, seize and arrest. Special OIG agents are even authorized to carry firearms.
The OIG’s mission is to seek administrative sanctions, civil recoveries and criminal prosecutions against anyone who abuses the FHFA’s programs. And it is pursuing its calling with passion, if not vengeance.
The FHFA is the supervisory agency of the two government-sponsored housing enterprises, Fannie Mae and Freddie Mac. Since Fannie and Freddie have been under federal conservatorship since 2008, the FHFA now regulates and all but operates the two companies.
Fannie Mae and Freddie Mac, which work in the secondary mortgage market and touch roughly 80 percent of all home loans in one way or another, are essential cogs in the American housing finance system. They keep the mortgage money flowing by buying loans from primary lenders, holding some in their own portfolios and packaging the rest into securities for sale to investors worldwide.
The Office of the Inspector General is a separate statutory agency within the FHFA that answers only to Congress. Its mission, in large part, is to root out fraud, waste and abuse within the FHFA. The agency has a staff of 130 investigators, auditors, attorneys and prosecutors that it describes as “extremely talented and seasoned.”
And because Fannie and Freddie are on the hook for the $187 billion in taxpayer money that the Treasury has invested so far to keep them afloat — by some estimates, the tab eventually could reach more than $360 billion — the OIG is on the prowl for people who owe it money.
Investigators are searching not only for lenders who have sold materially deficient loans to Fannie and Freddie, but also individuals, including those who reneged on their promises to repay their mortgages. So if you are a “strategic defaulter” who decided it was better to walk away from your obligation than to keep paying for a house that was worth substantially less than you owed, it’s time to start looking over your shoulder.
No one knows for certain how many borrowers fit the rather amorphous strategic defaulter mold. But credit repository Experian estimates that 20 percent of all foreclosures are the result of walkaways, people who could afford to make their payments but who decided not to.
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Proprietary OC Housing News home purchase analysis
6362 TRINETTE Ave Garden Grove, CA 92845
$479,000 …….. Asking Price
$479,000 ………. Purchase Price
10/5/2012 ………. Purchase Date
$0 ………. Gross Gain (Loss)
($38,320) ………… Commissions and Costs at 8%
============================================
($38,320) ………. Net Gain (Loss)
============================================
0.0% ………. Gross Percent Change
-8.0% ………. Net Percent Change
0.0% ………… Annual Appreciation
Cost of Home Ownership
——————————————————————————
$479,000 …….. Asking Price
$16,765 ………… 3.5% Down FHA Financing
3.40% …………. Mortgage Interest Rate
30 ……………… Number of Years
$462,235 …….. Mortgage
$118,696 ………. Income Requirement
$2,050 ………… Monthly Mortgage Payment
$415 ………… Property Tax at 1.04%
$0 ………… Mello Roos & Special Taxes
$120 ………… Homeowners Insurance at 0.3%
$481 ………… Private Mortgage Insurance
$0 ………… Homeowners Association Fees
============================================
$3,066 ………. Monthly Cash Outlays
($302) ………. Tax Savings
($740) ………. Equity Hidden in Payment
$18 ………….. Lost Income to Down Payment
$140 ………….. Maintenance and Replacement Reserves
============================================
$2,182 ………. Monthly Cost of Ownership
Cash Acquisition Demands
——————————————————————————
$6,290 ………… Furnishing and Move In at 1% + $1,500
$6,290 ………… Closing Costs at 1% + $1,500
$4,622 ………… Interest Points
$16,765 ………… Down Payment
============================================
$33,967 ………. Total Cash Costs
$33,400 ………. Emergency Cash Reserves
============================================
$67,367 ………. Total Savings Needed
The property above is available for sale on the MLS.
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C.A.r. Survey Finds Short Sales Less Frustrating, but Still Difficult
The short sale process, while still difficult, is becoming a little less frustrating, according to a Lender Satisfaction Survey conducted by the California Association of Realtors (C.A.R.).
The trade organization reported 64 percent of California Realtors expressed difficulty in closing short sales, an improvement from 77 percent in August 2011 and 70 percent in 2010.
However, the more significant improvement was the drop in Realtors who described the short sale process as “extremely difficult.” More than half (56 percent) of the Realtors surveyed in 2011 said the process was “extremely difficult” compared to about a third (34 percent) in 2012.
The survey is based on Realtors’ most recent short sale transaction.
“While it’s encouraging that lenders and servicers are making headway in improving their short sale processes, they still have more work to do to ensure that not only REALTORS®, but also home sellers and buyers have a better experience when dealing with short sales,” said C.A.R. President LeFrancis Arnold.
Overall satisfaction with lenders during the short sale process improved, with 28 percent expressing satisfaction in 2012, compared to 16 percent in 2011. A smaller share was also dissatisfied, with 59 percent expressing dissatisfaction, down from 75 percent in 2011.
In addition, more than six in ten Realtors said they would not refer buyers to the lender for future home purchases, down from 78 percent in 2011.
Among the main obstacles Realtors faced, a lender’s slow response time to a short sale package was the most cited, with 67 percent of Realtors marking it as an issue, according to the survey.
Poor communication with the lender representative was the second most cited obstacle, with 55 percent of Realtors selecting it as an issue. Half of the Realtors also said repeated requests for documentation hindered them as well.
Other obstacles included a buyer backing out or long negotiations (32 percent), problems with second lien holders (23 percent), and a lender foreclosing on a borrower before the transaction is completed (8 percent).
The GSEs and Bank of America have addressed some of the issues through changes to their short sale process.
“A recent change announced by the Federal Housing Finance Agency (FHFA) to align Fannie Mae and Freddie Mac short sale guidelines will allow lenders and servicers to quickly and more easily qualify borrowers for a short sale, further improving the process,” said Arnold. “C.A.R. has long advocated for a standardized short sale process, and agreeing to a more standardized process may be the best way for banks, servicers, REALTORS®, and homeowners to facilitate the sale of homes that qualify.”
The survey also included a recently developed Lender Performance Index (LPI), which measures how satisfied a Realtor is with a lender.
With 50 as the median, the index stood at 23 in 2012, up from 17 in 2011 and 16 in 2010.