Appraisers squash sales

New York Attorney General Andrew Cuomo’s lawsuit against Washington Mutual has led to new appraisal rules for loans guaranteed by Fannie and Freddie. The new rules created a new middleman--the Appraisal Management Company--who assigns appraisers. What is your guess as to which appraiser is selected? Might it be that the jobs are handed out on the basis of the cheapest appraiser and the fastest turn-around time? Does that sound like a government quality improvement program?

"The increase in sales is less than expected because poor appraisals are stalling transactions. Pending home sales indicated much stronger activity, but some contracts are falling through from faulty valuations that keep buyers from getting a loan. Lenders are using appraisers who may not be familiar with a neighborhood, or who compare traditional homes with distressed and discounted sales." National Association of Realtors

Condo Boards Take on Lenders

Attorneys for condo boards claim some banks are intentionally slowing the foreclosure process to keep from forking out condo dues. In Florida, lenders are on the hook for as much as six months of late condo dues once they take title.

"It's become common practice to delay foreclosure," said Eric Glazer, a condo-association lawyer in Hallandale Beach, which is between Fort Lauderdale and Miami. "Banks are forcing the associations to take them the distance."

Last year, a unit in Miami Beach's Bath Club held by Wells Fargo & Co. racked up $32,000 in unpaid condo dues. The board attached a lien on a unit and filed to foreclose in December 2007. The unit sold in July at a foreclosure auction for $438,000; the condo association took its $32,000 and gave the balance to Wells Fargo.

The condo board that governs the Grand Condominium in downtown Miami has taken back 20 units in the 810-unit luxury development and collects a total of $25,000 a month in rent. The banks that hold the defaulted mortgages will eventually file to foreclose on the units. But meantime, the condo association uses the money to pay for building services. "I've had some units for over 16 months and I haven't heard one word from the bank," says Brendon Grubb, the general manager of the building.

With empty pockets, more condo associations are forced to raise homeowner dues. "We call it the downward spiral. How many of those owners are actually going to be able to pay an additional assessment?" says Kristy Phillips, a condo-association attorney in Hallandale Beach. "They're picking up the pieces for the banks." -Wall Street Journal, 6/18/09

How much simpler it would be to drop the interest rates on loans? What are the banks going to do when the next wave of foreclosures hit in the fall when the Alt-A's reset?

Loan Redoes Get Tangled in Thicket of Red Tape

"Getting a mortgage modified can take months, slowed by thin staffing and mountains of paperwork. With so many loans bundled and sold to investors, it's sometimes hard to figure out who even owns them. The new federal program requires borrowers to meet slightly different requirements than bank programs do, meaning banks need to navigate two procedures.
...[For one borrower] The interest rate on her $412,000 mortgage rose to 9.943%, and by last year, she couldn't afford her $4,735 monthly payment. It took her 10 months of working with Chase to get a lower rate. She was recently approved for a trial modification program that will cut her payments by nearly 40% to $2,937. "This has been the most grueling 10 months of my life," she says." Wall Street Journal , 6/17/09
A page one story. As if this travesty is news.
Is there anyone who seriously thinks that 10 months is acceptable? The borrower hasn't changed. The property hasn't changed. The bank hasn't changed. How long can it take to write a note to the borrower? "Dear Borrower, Your new monthly payment is $2,937. Have a nice day." How long did that take? 20 seconds. Banks can't find enough people to work. No wonder--they take 10 months and billions of TARP money to do 20 seconds worth of work.
And don't forget. This is only a "trial." Perhaps Chase should be on trial? They are trying.

Relief for Commercial Real Estate Debt?

Your Treasurey is working on changes that will enable commercial real estate borrowers to more easily restructure debt. How? Lower the interest rate! -Wall Street Journal, 6/10/09
Why just commercial real estate? How about lowering the interest rate for home loans?

Appraisals preventing refi!

"Patti Sanders, an aerospace engineer in Oakdale, Calif., knew prices were down sharply but said she was "flabbergasted" recently when her 3,100-square-foot Victorian home was appraised at $250,000, compared with $635,000 assayed two years earlier. The new estimate prompted a lender to reject her application for a refinancing that would have lowered her mortgage payments about $400 a month." Wall Street Journal, 6/9/09
To be clear--her lender is willing to lower the interest rate on her loan. But won't lower it because the appraised value has dropped. So the lender won't make it easier for her to stay current on the lender's loan. Why are lenders shooting themselves?

Rates up. So house prices have to go lower!

The higher Treasury yields had a further negative impact on mortgage rates, with the 30-year fixed rate increasing by 19 basis points to 5.46% on the week and the 15-year fixed rate by 15 basis points to 5.02%, as indicated by Bankrate.com. “That’s quite a jump,” said Donald Rissmiller, chief economist at New York-based Strategas Research Partners, in a Bloomberg interview. “The more rates go up, the more we need home prices to go down to equalize consumers’ payments. It’s those payments that have brought about a level of stability in housing unit sales.”

Low Mortgage Rates Are Going, Going…

"Ironically, if you were stuck crawling through the refi process when the rates jumped, you may be a victim of new mortgage rules. These were introduced in the last year to prevent another subprime scandal. They have slowed down the loan approval process and have discouraged most lenders from offering rate locks until other steps have been completed. "Lenders are not locking in borrowers' rates until the (home) appraisals are in," says Paul Sapienza, broker at Drew Mortgage in Boston. Until last year you could lock in a rate while you refinanced, or even looked for a new home. "That's over," Mr Sapienza says. " - Brett Arends , The Wall Street Journal

Fed Mortgage Efforts Prove Costly

"The Fed has spent about $2,500 per borrower, by J. P. Morgan's analysis--more than it costs a typical mortgage borrower to refince their debt. Higher fees and adjustments based on a borrower's credit score or home's value have been an impediment to borrowers looking to refinance a mortgage, damping the refinancing wave the Fed hoped for, analysts say." -Liz Rapppaport in the June 1 Wall Street Journal.

The alternative. Don't spend the $2,500. Don't reaudit the loan. Just drop the rate.