The lenders are complaining that it will increase loan costs and lead to higher mortgage rates. The consumer groups say it will lead to a more financially sound banking system.
House panel concerned premium capture rule could raise mortgage costs
By Jon Prior July 10, 2012 • 12:52pm
A House subcommittee heard renewed concerns Tuesday over a rule forcing mortgage bond securitizers to set aside even more in a cash reserve account than the 5% required under the proposed risk-retention rule.
The premium capture cash reserve account, which was not required under the Dodd-Frank Act, could raise mortgage interest rates lenders charge to borrowers by 1 to 4 percentage points, according to Moody’s Chief Economist Mark Zandi and industry panelists.
“Everything we’ve seen and canvassing of our own members has shown that it would increase mortgage rates substantially,” said Tom Deutsche, executive director of the American Securitization Forum, at the hearing. (Click here for his written testimony.)
Banking regulators continue to finalize the risk-retention rule, which is not expected until next year. In the latest proposal, the agencies require a firm bundling loans into a security to fund a premium capture cash reserve account equal to two possible amounts.
It could be the proceeds from the sale of the bond. Or, the account must equal the par value of all interests in the security.
Kenneth Bentsen, executive vice president of the Securities Industry and Financial Markets Association, gave an example in his testimony. If a security has a pool of loans at par value of $100 and the proceeds from the sale of the bond is $104, the $4 above par value would be put into the premium capture cash reserve account. This, he said, would be in addition to the $5 held back to cover the 5% risk-retention rule. The level of risk retained is then 8.7% rather than the 5% required under Dodd-Frank.
The agencies built in this extra cash reserve account to keep securitizers from dodging the risk-retention rule in the first place. According to a study by Zandi, regulators were concerned securitizers would raise fees rather than improve underwriting guideline in their programs.
Securitizers already charge borrowers a higher rate than is paid to the investor, known as the “excess spread,” in order to cover the costs of originating and servicing the loan and to reserve against future defaults, but they can issue interest-only bonds backed by the spread in order to collect this amount upfront rather than as the loans payoff.
Santa Ana Overview
| Median home price is $266,000. Based on a rental parity value of $408,000, this market is under valued. |
| Monthly payment affordability has been worsening over the last 2 month(s). Momentum suggests worsening affordability. |
| Resale prices on a $/SF basis increased from $205/SF to $206/SF. |
| Resale prices have been falling for 12 month(s). Price momentum suggests falling prices over the next three months. |
| Median rental rates declined $7 last month from $1,703 to $1,695. |
| Rents have been slowly rising for 12 month(s). Price momentum suggests slowly rising rents over the next three months. |
| Market rating = 6 |
Proprietary OC Housing News home purchase analysis 
1311 South ROSS St Santa Ana, CA 92707
$399,900 …….. Asking Price
$375,000 ………. Purchase Price
7/28/2008 ………. Purchase Date
$24,900 ………. Gross Gain (Loss)
($30,000) ………… Commissions and Costs at 8%
============================================
($5,100) ………. Net Gain (Loss)
============================================
6.6% ………. Gross Percent Change
-1.4% ………. Net Percent Change
1.6% ………… Annual Appreciation
Cost of Home Ownership
——————————————————————————
$399,900 …….. Asking Price
$13,997 ………… 3.5% Down FHA Financing
3.80% …………. Mortgage Interest Rate
30 ……………… Number of Years
$385,904 …….. Mortgage
$102,452 ………. Income Requirement
$1,798 ………… Monthly Mortgage Payment
$347 ………… Property Tax at 1.04%
………… Mello Roos & Special Taxes
$100 ………… Homeowners Insurance at 0.3%
$402 ………… Private Mortgage Insurance
………… Homeowners Association Fees
============================================
$2,647 ………. Monthly Cash Outlays
($275) ………. Tax Savings
($576) ………. Equity Hidden in Payment
$18 ………….. Lost Income to Down Payment
$120 ………….. Maintenance and Replacement Reserves
============================================
$1,934 ………. Monthly Cost of Ownership
Cash Acquisition Demands
——————————————————————————
$5,499 ………… Furnishing and Move In at 1% + $1,500
$5,499 ………… Closing Costs at 1% + $1,500
$3,859 ………… Interest Points
$13,997 ………… Down Payment
============================================
$28,854 ………. Total Cash Costs
$29,600 ………. Emergency Cash Reserves
============================================
$58,454 ………. Total Savings Needed
——————————————————————————————————————————————-
This property is available for sale via the MLS.
Please contact Shevy Akason, #01836707
949.769.1599……
sales@ochousingnews.com…..
We're sorry, but it seems that we're having some problems loading MLS # P827408 from our database. Please check back soon.
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$349,000 1330 South FLOWER St |
0.29 miles 4 bd / 2 ba 1,543 Sq. Ft. |
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$250,000 111 East CUBBON St |
0.48 miles 2 bd / 1.5 ba 2,000 Sq. Ft. |
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$404,900 1029 West GLENWOOD Pl |
0.76 miles 3 bd / 1.75 ba 1,600 Sq. Ft. |
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$270,200 217 South ORANGE Ave |
1.01 miles 5 bd / 3 ba 2,047 Sq. Ft. |
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$387,900 2115 South ROSEWOOD Ave |
1.01 miles 3 bd / 2.75 ba 2,000 Sq. Ft. |
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$449,000 1027 West WALNUT St |
1.09 miles 4 bd / 2 ba 1,749 Sq. Ft. |
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$349,900 1517 RICHLAND Ave |
1.14 miles 4 bd / 2 ba 1,572 Sq. Ft. |
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$599,000 619 East SANTA ANA Blvd |
1.54 miles 5 bd / 2.75 ba 1,951 Sq. Ft. |
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$309,900 2530 South RENE Dr |
1.63 miles 4 bd / 1.75 ba 1,628 Sq. Ft. |
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$425,000 1338 West 9TH St |
1.74 miles 3 bd / 2 ba 1,834 Sq. Ft. |
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Increase in Calls to HOPE Hotline Could Signal Next Foreclosure Wave
A surge in increased calls to the Homeowners HOPE Hotline, which helps distressed homeowners navigate financial challenges, could signal a possible new wave of foreclosures according to a report released by the Homeownership Preservation Foundation (HPF).
The independent nonprofit reported that calls to the hotline from homeowners who are current with their mortgages are up 70 percent this year. Of those counseled, half stated that “mounting instability” to continue payments could cause them to default. More than 75 percent of those current borrowers had credit scores above the subprime threshold when they took out the loan.
However, factors like job reduction and increased credit card spending could have caused those numbers to drop.
Colleen Hernandez, CEO of HPF, said there are a number of issues that could be affecting homeowners who were initially considered “low risk”.
“We are seriously concerned about the rise in homeowners who were classified as low risk when they took out their mortgages, and as a result of a combination of circumstances-job loss, healthcare crisis, and various recession-related issues-have seen their economic situations severely deteriorate,” Hernandez said in a statement. “This could result in the proverbial ‘second shoe to drop’ for the housing crisis, especially considering the limited options available to homeowners who are struggling but not yet delinquent.”
While the Home Affordable Refinance Program (HARP 2.0), a federal program designed to allow homeowners with loans back by Fannie Mae and Freddie Mac to refinance at a lower interest rate, may be an option for some, Hernandez said that only 40 percent of callers appeared to qualify.
“This foreclosure crisis is far from over,” she warned. “As lenders are learning to comply with new service standards set in place by the National Mortgage Settlement and the Consumer Financial Protection Bureau (CFPB), make no mistake that notices of default are once again landing in mailboxes across the country at a rapid clip.”
Hernandez also advised homeowners to not wait until an emergent situation to contact the HOPE hotline.
“If you are running a budget deficit and are nervous about payments on a monthly basis, you’re already in an emergency,” she explained. “It’s best to call the HOPE Hotline and address your housing situation as soon as possible.”