The government made some changes to the Landing Act which came into effect in July 2009. These changes will help borrowers to get more information about loan. This Act requires lenders to provide certain disclosures about the mortgage fees. This will give borrowers an idea as how the deal would look like. Now borrowers have more information about their loan choices. But some experts say that this could delay the lending process which is already slow.

The regulations mandate a three-day review period for the loan documents before the loan process can begin in earnest. But the important point is that, if interest rate changes even marginally before the settlement date, a new set of disclosure documents must be given to borrowers, restarting the review process.

Before the law came into practice, lenders could begin the loan-underwriting process on the day they took an application. They could do this by changing borrower’s fees to pay property appraisers. But now, they must wait three days.

When foreclosure crisis came into picture, it was revealed that many borrowers had little idea how much their mortgage could cost them in a given month. So the government felt that there should be some provisions in laws so that a borrower could get enough time to read and grasp the terms of their loan documents. That’s why Congress enacted new laws.

According to the lenders, settling the typical mortgage on a new purchase takes about 45 days — at least two weeks longer than last year, before underwriting rules were severely tightened.

Now, borrowers can lock in interest rates for as long as 60 days, and if they run into trouble, they may extend the “rate lock,” as it is known, for up to three weeks (down from four weeks a year ago). The cost of each further one-week rate-lock extension, however, is one-quarter of a percentage point of the loan size.

If the annual percentage rate on the loan changes by at least an eighth of a percentage point, another mandatory three-day waiting period can be wedged into the latter part of the mortgage process.

Change in the interest rate can be seen by the borrower from the initially quoted rate for many reasons. If their credit score was lower than they first thought, or if they are required to pay mortgage insurance on the loan because their down payment money ran low, for instance, the rate can easily rise by more than one-eighth of a point.

Also, if a borrower’s settlement date is suddenly in jeopardy, he or she can apply for an emergency waiver of the three-day waiting period.

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We are experiencing increasing foreclosures in the nation. According to RealtyTrac’s 2008 U.S. Foreclosure Market Report, a total of 3,157,806 foreclosure filings — default notices, auction sale notices and bank repossessions — were reported on 2,330,483 U.S. properties during the year, an 81 percent increase in total properties from 2007 and a 225 percent increase in total properties from 2006. The report also shows that 1.84 percent of all U.S. housing units (one in 54) received at least one foreclosure filing during the year, up from 1.03 percent in 2007.

There are several issues which help in increasing number of foreclosure. Although Obama’s loan modification initiative has been in place for five months and incentives are being offered to lenders who agree to loan modification proposals, we still experiencing increasing foreclosures.

There are several factors responsible for these increasing number foreclosures. Increasing rate of unemployment is an important one. Reports say that unemployment rate hit 9.5%. It is very hard to keep on mortgage payment after being unemployed. This situation results in poor credit rating of the person. The end of foreclosure moratoriums also contributed in increasing rate of foreclosures. Decline in the prices of homes affects directly to foreclosure growth. Falling home values have dragged more than 20% of American homeowners “underwater”—meaning they owe more on their mortgages than the property is worth. Political pressure on mortgage service providers have also contributed to this problem. These services providers are under pressure to double their efforts. Despite this pressure, experts expect foreclosure rates to rise into next year. “It’s going to keep on getting worse until the unemployment rate peaks, which we think will happen in about the middle of next year,” an expert said.

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Although Obama administration is leaning on mortgage services to step up modifications, there are lots of thing to do. Government’s program is helping only a tiny fraction of struggling homeowners. As of July, only 9 percent of eligible borrowers had seen their mortgage payments reduced with modified loans, the report said.

In a letter to mortgage companies, Treasury Secretary Timothy Geithner and Shaun Donovan, secretary for Housing and Urban Development, wrote, “Much more progress is needed.” “There appears to be substantial variation among servicers in performance and borrower experience, as well as inconsistent results in converting trial modification offers into actual trial modifications.”

Although mortgage services companies are saying that they are working out on more loan modifications, the fact is that they are overwhelmed by the number of homeowners all wanting help at the same time.

Some house owners are facing confusion in understanding difference between loan modification and loan refinancing. A loan modification is different from a traditional mortgage refinancing. When you refinance, you sign a new contract for a new loan. A loan modification involves changing the existing loan by lengthening its term or lowering the interest rate so that you can continue to afford your mortgage payment. Homeowners may be eligible for a loan modification if they have a mortgage payment greater than 31 percent of their monthly gross income and can document that a financial hardship has made the payment unaffordable.

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According to the Treasury Department report, under the Obama plan, more than 400,000 modification offers have been extended and more than 230,000 trial modifications have begun.

But there is a  huge number of homeowners who are in distress. According to foreclosure data firm RealtyTrac, nearly 2 million foreclosure filings were made during the first six months of this year, ranging from default notices to completed foreclosure sales. There were 3.2 million such filings in all of 2008 and 2.2 million in 2007.

Many homeowners have complained about lenders’ sluggishness or outright refusals to modify loans. Some homeowners were behind in their payments; others were keeping up by going through their savings, but facing a looming bankruptcy.
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A normal foreclosure has the following steps:

1. Default notices sent
2. Auction notices sent
3. Repossession

Key California data points:

- Default notices, which are sent when a borrower has missed several payments, were up 12% in July compared with a year earlier. Notices of default are the first stage of foreclosure.

- Auction notices, in which an auction date is set, were about even with last year’s level. This is the second step in foreclosure. After a default notice is sent, and even after an auction date is set, the borrower and lender can reach a loan modification agreement or sell the property to get out of foreclosure.

- Repossessions were down 40% from a year earlier, even though default notices were up and auction notices were flat. Lenders are delaying the final step in foreclosure. This is what’s creating the growing backlog of defaulted properties.

– Foreclosures scheduled for sale — these are the properties awaiting auction — increased 93% from a year earlier.

The jump in foreclosures scheduled for sale reflects the widespread practice of lenders stalling the final sale of distressed properties. There are more than 124,000 of these properties in California awaiting auction.

More repossessions are coming, however, due to the degree to which so many in California are underwater on their mortgages. The average California home in foreclosure has a loan balance of $425,000 but an estimated value of $237,000, ForeclosureRadar says.

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While landlords were and are still fundamentally motivated by profits and money, the means by which they go about obtaining it have changed a bit since the real estate bubble burst and unemployment levels spiked. Property owners are discovering that they cannot underestimate the bargaining power of their tenants in this economy. Tenants have become more market savvy, and in a climate where it’s slim pickings, tough going, and dog eat dog for all, more people are making demands they wouldn’t have expected themselves to a few years ago.

“I don’t think it’s any secret that the market has definitely had an adjustment over the past almost-year,” said David Wine, a vice chairman of Related. “It would be disingenuous to enter the renewal process underestimating the market knowledge of our customers. In the market that existed a year or two ago, landlords sent out the renewal notice and the resident was either happy to renew or they had to move. The process has become much more complicated.”

“The fear that’s going on among landlords is they don’t know what they’re going to do in the fall and winter,” says Marc Lewis of Century 21 NY Metro. “They can’t find enough bodies.” So to keep the tenants they have now, many are making offers.

A real estate broker at a major New York firm who is also a tenant on the Upper East Side recently received an unsolicited rent reduction of about 20 percent. “I was shocked,” she said. “It clearly said ‘your rent has been decreased.’ I just signed it and sent it back. They have a huge number of vacancies. They’re in tune with not losing tenants, and particularly not losing tenants from this area.”

Having a vacant apartment is a nightmare for landlords. In addition to losing a month or two of rent, to fill it again, the owner may have to pay the broker’s fee or give an additional month away for nothing.

Megan Noetzel, received a May 1 renewal with no reduction for a one-year lease and a very small reduction, less than 5 percent, for a two-year lease. “Given the market,” says Megan, “I knew that I had some leeway.” She wrote her landlord asking for a rent reduction of almost $400. And miraculously… she got it.

Scott Linquist, of New York, NY, was renewing his lease for August 15 when he received a pleasant surprise: a rent reduction he didn’t even ask for. Says Scott, “I love my apartment and I didn’t want to move. But had they not given me a reduction at all, I probably wouldn’t have stayed.”

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Fayetteville, N.C.

Median Home Value: $120,060 – up 13 percent from a year ago, making Fayetteville currently the best real estate market in the country
Property values are up 6.3 percent compared from five years ago
53 percent of homes are increasing in value
95 percent of homes are sold for a gain

Washington D.C.

Median Home Value: $378,900 – down 4.1 percent from a year ago
Home values up since the beginning of 2009
Homes are selling for two percent less than the listing price, excellent in this climate
87 percent sold for a gain

Oklahoma City, Okla.

Median Home Value: $118,700 – up 5 percent from a year ago
Homes are selling for 2 percent less than list price
Property values are up 6 percent compared with five years ago
87 percent of homes sold for a gain

Boulder, Colo.

Median Home Value: $ 318,900 – up 2 percent from a year ago.
Property values are up 2 percent compared with five years ago.
61 percent of homes are increasing in value
85 percent of homes were sold for a gain

Yakima, Wash.

Median Home Value: $131,300 – down 2 percent from a year ago
Property values are up 4.8 percent compared with five years ago
95 percent of homes sold for a gain
Homes are selling for 2 percent less than list price

Jacksonville, N.C.

Median Home Value: $ 139,400 – up 1 percent from a year ago
Property values are up 8 percent compared with five years ago
97 percent of homes sold in June were sold for a gain, the highest percentage in the country
Homes are selling for 1 percent less than list price

Binghamton, N.Y.

Median Home Value: $ 112,300 – up 5 percent from a year ago
Highest 5-year appreciation in the country at 9 percent
Home values are increasing 53 percent

Little Rock, Ark.

Median Home Value: $ 121,600 – up 0.37 percent from a year ago
Property values are up 4 percent compared with five years ago
84 percent of homes sold for a gain

Augusta, Ga.

Median Home Value: $111,900 – up 3 percent from a year ago
Property values are up 5.2 percent compared with five years ago
Homes are selling for 3 percent less than list price
87 percent of homes sold for a gain in June 2009

Milwaukee, Wis.

Median Home Value: $195,000 – up 1.36 percent from a year ago
Property values are up 2 percent compared with five years ago
75 percent of homes sold for a gain in June 2009
Homes selling for 4 percent less than list price

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Unemployment

Foreclosure

Here are some additional tidbits and numbers for California, the good and the bad:

• The Obama stimulus bill will create or save an estimated 396,000 jobs in our state alone

• Thirteen banks have failed (highest number after Georgia, with 21 bank failures)

• The banks that failed in California were: Vineyard, Temecula Valley, Metro Pacific, Mirae, First Bank of Beverly Hills, Alliance, County, 1st Centennial, Downey Savings and Loan Association, PFF Bank and Trust, Security Pacific, First Heritage, and IndyMac.

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Taylor, Bean and Whitaker No Longer Able to Issue FHA Loans

Taylor Bean was known for being less strict than other mortgage lenders. The agency insured mortgages with down payments as low as 3.5 percent, and didn’t have minimum credit-score requirements. “I’ve heard it said it’s good that we have Taylor Bean there because no one else will buy these loans,” said David Lykken, a mortgage expert based out of Austin, Texas. “To say they’re a bottom-feeder may be too strong a statement, but that’s how they’re viewed in a lot of cases.”
On Wednesday, Taylor Bean shut its doors. A press release from TBW reads:

“TAYLOR, BEAN & WHITAKER MORTGAGE CORP. (“TBW”) RECEIVED NOTIFICATION ON AUGUST 4, 2009 FROM THE U.S DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT, FREDDIE MAC AND GINNIE MAE (THE “AGENCIES”) THAT IT WAS BEING TERMINATED AND/OR SUSPENDED AS AN APPROVED SELLER AND/OR SERVICER FOR EACH OF THOSE RESPECTIVE FEDERAL AGENCIES.”

Since then, 2,050 employees have been laid off, and federal authorities have gone in and searched the company, forced it to stop making FHA loans and confirmed that its leaders were under investigation for fraud.

So now what?

• Thousands of borrowers seeking mortgage loans and refinancings in Taylor Bean’s pipeline are suddenly back to square one.

• Cash-strapped borrowers could struggle the most to find a replacement lender offering affordable terms. Taylor Bean was one of the country’s largest FHA (Federal Housing Administration) lenders, trailing only Bank of America and Wells Fargo. It was one of very few handling FHA loans for manufactured homes.

• Hundreds of small banks and brokers that sold their loans to Taylor Bean are suddenly scrambling to find new partners. The removal of a major player could lead to higher prices as well as fewer choices.

• Colonial Bank, a $26 billion Alabama bank with nearly 200 branches in Florida, was relying on Taylor Bean as a lifeline. A planned $300 million infusion of capital from Taylor Bean fizzled last week, raising doubts Colonial will continue.

A word on FHA loans. The Federal Housing Administration does not MAKE the loans, but rather, insures them from private lenders. FHA loans are largely issued to financially-strapped or first-time homebuyers due to their low down payments and initial interest rates. TBW subsisted on insuring such loans; to be suspended from doing FHA loans essentially shut down the business.

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