Downs [of the Brookings Institute] expects big changes because of the recession, such as homes being built smaller and being less affordable. He also expects a switch from the more conservative spending and fewer government restrictions of the Reagan and Bush eras to the more liberal government spending and tighter government regulations that the Obama administration has already started to enforce.–”Brookings fellow: Recession is not over yet,” Jacksonville Business Journal

We are about to have new legislation that is aimed at preventing the housing and financial market crashes that we recently experienced from occurring again. Opinions differ on where or not this new legislation adequately addresses these problems while at the same time not unnecessarily stifling financial institutions ability to lend.

Back in February at an Urban Land Institute event, Anthony Downs of the Brookings Institute identified the following as issues that the new financial legislation should address but probably would not due to “political backlash.” When reviewing this new legislation, keeping this points in mind can help you decide how successful lawmakers were in their attempt at reform.

Here are the points that Downs thought were necessary for successful reform of the financial institutions:

• Break up the largest U.S. banks that control much of the nation’s money
• Require that financial institutions have adequate reserves
• Reorganizing securities
• Require that mortgage bankers conform to stricter rules
• Ensure international cooperation on financial regulations

What do you think? Does the new legislation go too far or not far enough in addressing the problems that lead to our current financial difficulties?

Note: For one analysis with some pros and cons, see “The Dodd-Frank Financial Reform Bill is a Valuable Step Forward” Douglas J. Elliott, Brookings Institute.

Photo Courtesy Brookings Institute

Beware of Foreclosure Rescue Scams - Help Is Free!

• There should never be a fee for assistance with or information about the Making Home Affordable Program.
• Beware of any person or organization that asks you to pay an upfront fee in exchange for a counseling service or modification of a delinquent loan. Do not pay - walk away!
• Beware of anyone who says they can “save” your home if you sign or transfer over the deed to your house.  Do not sign over the deed to your property to any organization or individual unless you are working directly with your mortgage company to forgive your debt.
• Never make your mortgage payments to anyone other than your mortgage company without their approval.

The Obama Administration has launched a coordinated effort across federal and state government and the private sector to target mortgage loan modification fraud and foreclosure rescue scams that threaten to hurt American homeowners and prevent them from getting the help they need during these challenging times. Click here for more information.

On February 11th, the Orange County Home Ownership Preservation Collaborative (OC HOPC) is offering a free workshop for anyone who needs help with preventing a foreclosure on their home. This is part of the on-going free foreclosure prevention workshops that OC HOPC is providing in partnership with various organizations. The February 11th workshop is in partnership with the U.S Department of Housing and Urban Development (HUD), City of Santa Ana, National Association of Realtors, California Association of Realtors, Orange County Association of Realtors, and Calvary Church.

HUD-approved housing counselors, legal counselors and lenders will be on-site to help at the workshop. However, only homeowners whose names are on the mortgage can be assisted, so OC HOPC asks that you do not send someone in your place. If you need assistance but can’t make this workshop, you might contact OC HOPE and ask what other help is available or when and where the next workshop will be held.

Here are the details for the upcoming OC HOPC workshop:

When: Thursday, February 11, 2010
Session 1–2:30 to 4:30 pm (English, registration begins at 2:00 pm)
Session 2–5:30 to 7:30 pm (Spanish, registration begins at 5:00 pm)

Where: Calvary Church, 1010 N. Tustin Avenue, Santa Ana

Who: Open to public
RSVP Recommended (www.oc.myhousingforall.org or e-mail myhousingforall@aol.com)

What to Bring:

• Your loan documents and recent mortgage statement
• Your two most current pay stubs
• Your most recent W2s–two-years worth
• Your most recent tax returns–two-years worth
• A list of your monthly expenses

Cost: Free

Again, if you need help with preventing a foreclosure but can’t attend this workshop, contact OC HOPC to see what other help is available.

Here are the most recent Orange County foreclosure numbers from DQNews:

Notice of Defaults (NODs)–This is the first step in the foreclosure process; however, this does not necessarily end in the home being taken back by the lender.

Fourth Quarter 2009 Year-Over-Year Numbers:

• 2009–5,555
• 2008–4,481
• This is a 24.0% year-over-year increase. However, the quarter-to-quarter number of NODs deceased.

Third Quarter 2009 Year-Over-Year Numbers:

• 2009–7,436
• 2008—5,692
• This is a 30.6% year-over-year increase.

Trustee Sales Recorded–This is the last step in the foreclosure process. The home is sold to a new owner at a trustee auction or taken back by the lender in this stage of the foreclosure process.

Fourth Quarter 2009 Year-Over-Year Numbers:

• 2009–2,235
• 2008–2,088
• This is a 7.0% year-over-year increase. In addition, the quarter-to-quarter number of trustee sales is approximately the same.

Third Quarter 2009 Year-Over-Year Numbers:

• 2009–2,238
• 2008—3,997
• This is a 44.0% year-over-year decrease.

Here are the numbers from DQNews:

Notice of Defaults (This is the first step in the foreclosure process; however, this does not necessarily end in the home being taken back by the lender.)

• 2008Q3—5,692
• 2009Q3–7,436
• This is a 30.60% increase.

Trustee Sales Recorded (This is the last step in the foreclosure process. The home is taken back by the lender in this stage of foreclosure.)

• 2008Q3–3,997
• 2009Q3–2,238
• This is a 44.00% decrease.

Here is what John Walsh, DataQuick president, makes of these numbers:

It may well be that lenders have intentionally slowed down the pace of formal foreclosure proceedings. If so, it’s not out of the goodness of their hearts. It’s because they’ve concluded that flooding the market with cheap foreclosures in this economic environment may not be in their best financial interest. Trying to keep motivated, employed homeowners in their homes might be the most cost-efficient way to stem losses.

He goes on to say:

There’s a batch of truly nasty loans that were made in mid 2006. There’s another batch made in late 2006. These are worse than the mortgages before and after, and it’s taking a long time to process them.

The 2009 fourth quarter number from DataQuick should be out soon. We will see if the Q3 and Q4 numbers tell the same story. I expect that they will.

Update: New numbers from DataQuick have just been released. sw 1-30-10

Here are some of the new regulations that now apply to California real estate:

• Loan officers must register with the state.
• Making inaccurate information during the mortgage application process in now a crime.
• Banks must inform potential borrowers of all their loan products.
• Lenders are not allowed to steer borrowers who qualify for a fixed-rate loan into riskier, higher-priced loans.
• Negative amortization loans are banned in most cases.
• Penalties that are assessed to a borrower when they pay off a loan early are now capped.
• Lenders must give potential customers of a reverse mortgage the following: a list of counseling agencies that deal with reverse mortgages and a list that checks off the potential risks associated with reverse mortgages as well as alternatives to reverse mortgages. Reverse mortgages converts a borrower’s home equity into cash. They are geared to senior citizens. For additional information on reverse mortgages, see the AARP website.

For related information, see Realty World, Arnold CA Blog.

Source: “News laws shield buyers,” The Associated Press as printed in The Orange County Register on January 1, 2010

Recently

Here is a quote from the Padilla’s article that states this different perspective:

Mortgage strategists at Credit Suisse say the slowdown in Fed purchases will not affect MBS spreads to any large degree. “The Fed’s exit from the MBS purchase program will likely be well absorbed by the market,” according to a weekly Credit Suisse “Market Watch” publication. After March 31, the “Fed will likely assume a backstop role for the MBS market to prevent a double dip in housing,” Credit Suisse strategists say.–Matt Padilla, “Treasury mum on halting mortgage-security purchases“

The Fed started this buy-back program in January 2009, and by the end of the program the Fed will have bought $1.25 trillion dollars worth of these securities. The result is that mortgage rates have been kept low, but when the program ends, some, such as Johnson and Gumbinger,  believe that mortgage rates are likely to increase.

As Anna Prior points out in a Wall Street Journal article, rate might not increase that much, but

A one-percentage point rise could add more than $150 to a monthly mortgage payment for a $250,000 30-year fixed-rate loan.

In addition, mortgage industry exec Johnson advised a homeowner whose mortgage rate is about to reset that the end of the buy-back program will

…increase the likelihood that rates will climb. If I were you, I would initiate a refinance right now. (Randy Johnson, “Is it time to refinance?” The Orange County Register, December 13, 2009)

As a mortgage industry exec, Johnson has an interest in advising for refinancing. But the end of the buy-back program and the effect this will have on interest rates is something to put into the mix when considering refinancing.

Note: An upcoming post will provide another viewpoint.

The Orange County Credit Union is offering a free workshop today (September 10) from 7 pm to 8 pm at the Yorba Linda library. If you are unhappy with your current loan, here is a place where you can receive information on your options.

The workshop will cover the following:

• Who is eligible for loan modifications?
• What modifications are the banks willing to make?
• How should you approach the banks for a modification?

For more information, call the Library Information Desk at 714-777-2873, extension 6.

Also, the Orange County Credit Union’s website warns of the following foreclosure scams:

• Phantom help: The con artists claim they can negotiate an agreement with your lender but they require an upfront fee. They may also ask you to start paying your mortgage to them….
• Rent to own: The con artists claim that by giving them the title to your house, they will take over your mortgage payments (or find an investor who will) but allow you to stay and pay a reasonable rent….
• Fake refinancing: The con artists claim that they are refinancing your loan to bring it current and have you sign the “loan papers.”…
• Buyer scouting: The con artists guarantee that they will find a buyer for you, and you will both split the profits when the home sells….

To read more on this, see the Orange County Credit Union website  section on foreclosure scams.

Remember: Free foreclosure prevention and mortgage modification help is available; be wary on anyone who asks you for a fee. If you think that you are a victim of a mortgage scam, contact the Federal Trade Commission, (877)-FTC-HELP, and your state’s attorney general office (California Office of the Attorney General).

GRAPHIC COURTESY THE CITY OF IRVINE

• Contact a Consumer Credit Counseling Services office. Orange County branches are located in Santa Ana (headquarters), Anaheim, Brea, and Costa Mesa. Website: cccsoc.org; Phone: 800-213-2227 (24 hours).
  Consumer Credit Counseling Services in Costa Mesa can be reached at the website or by calling 714-245-1690. The Costa Mesa branch is located at 2701 Harbor Boulevard inside the Costa Mesa Federal Credit Union. English, Spanish, and Vietnamese are spoken at the Costa Mesa branch.
• Attend a free foreclosure prevention workshop at Irvine’s civic center on June 12. At the workshop, individual help will be provided to homeowners. The workshop is made available by the Orange County Home Ownership Preservation Collaborative, the City of Irvine and U.S. Department of Housing and Urban Development (HUD). RSVP suggested. Phone: 714-568-0823 X225.
• See the HUD website, or call 877-HUD-1515. In addition to information on housing, loans and foreclosure, this site has a list of HUD-approved counseling agencies.

GRAPHIC COURTESY THE CITY OF IRVINE