Ok, I know you're probably not planning on moving this very second, but here's this week's list of interesting-looking listings that have just come on the market. Mind you, they may not actually be my personal listings --- just intriguing properties I've come across this week.
Feeling nosy about the District of Columbia?
Feeling nosy about Virginia?
Feeling nosy about Maryland?
If you know someone who might be interested in this list, please forward it on to him or her. And if there's a listing that you're curious about yourself, just let me know ... and I'll show it to you ... just for the hell of it ... no obligation ... *I promise*. Really. (One of the perks of being the friend of a real estate agent ought to be that you get to freely snoop around other peoples' homes!)
Thursday, December 27, 2007
Top real estate stories of 2007
Top real estate stories of 2007
Downturn, downturn, downturn
Thursday, December 27, 2007
Inman News
"Downturn," "subprime," "foreclosures" and "credit crunch" are the top phrases that come to mind when looking back at the year in real estate news. 2007 will be remembered as the year the subprime mortgage market collapsed, causing a credit crunch whose effect on the broader economy is still to be determined. The credit crunch has caused everyone to wonder whether the housing market will now play a role in tipping the economy into recession in 2008. But even while housing markets were slowing substantially in some parts, a boom in online activity and innovation in real estate was happening this year. 2007 was marked by an explosion in real estate blogging along with some major media interest in a few newer online business models.
Here are our picks for the most memorable real estate stories of 2007:
1. Subprime market implodes; housing downturn worsens. Subprime lenders started going belly up this year as they lost access to funding in an avalanche of delinquencies and foreclosures on loans that were packaged and sold to Wall Street investors. Each week brought more bad news in the mortgage and financial markets as more lenders and securities firms started reporting losses stemming from delinquencies and foreclosures. Congress has held numerous hearings on plans to help relieve some of the fallout from the resulting credit crunch (see #4 below). This story was by far the most important one for real estate in 2007 and will continue to unravel throughout 2008. (See Inman News special report, "Subprime Tsunami.")
2. Blogging runs deeper in real estate's blood. If 2006 was remembered as the year real estate blogging really took off, then 2007 will be known as the year that real estate bloggers went deeper, passing "sport" status and placing the practice officially under the heading of "business plan." Many milestones converged to make this possible: Those who figured out blogging were gaining more and more business from it; ActiveRain, the social network for real estate professionals centered around blogging, saw its membership skyrocket, reaching 62,000 members by year end; and the slower market may have prompted many more agents to try blogging since its low cost of entry means there's not much to lose. Many of real estate's star bloggers came together for the first Bloggers Connect conference in August. (See Inman News special report on blogging.)
3. Foxtons closes shop. Foxtons, a discount real estate brokerage company that operated in New Jersey, New York and Connecticut, put a notice on its Web site on Oct. 2 announcing its intent to file for voluntary Chapter 11 bankruptcy and place its property listing agreements with another brokerage company. The bankruptcy court judge handling the case later allowed the company to auction off about 4,300 listing agreements in New York and New Jersey to the highest bidders, which included Maplewood Homebuilders LLC and Brooklyn-based Fillmore Real Estate. (See initial Inman News story and follow-up article.)
4. Foreclosure problem worsens; Bush announces rescue plan. The Bush administration on Dec. 6 rolled out a much-anticipated agreement with mortgage lenders and loan servicers to refinance or freeze the interest rates on up to 1.2 million subprime adjustable-rate mortgages for five years. The plan aims to help reduce the impact of the housing downturn on the economy and communities affected by foreclosures. The plan has met criticism from consumer advocates who say it won't help enough borrowers and warnings from some in the lending industry who say a rate freeze could discourage investors from financing future loans. The plan has the backing of the American Securitization Forum, which represents companies that issue mortgage-backed securities, as well as investors, loan servicers and rating agencies. (See Inman News story.)
5. Redfin and "60 Minutes" of fame. CBS' well-known "60 Minutes" television news program tackled the issue of real estate commissions, discounters versus full-service companies, and industry competition in a segment, "Chipping Away at Realtors' Six Percent," that aired May 13, 2007. The segment, which focused heavily on Seattle-based discount brokerage company Redfin, caused an uproar within the industry. After spending a lot of time with the show's producers explaining the Justice Department's ongoing antitrust lawsuit, the National Association of Realtors felt it got the "empty chair" treatment by not being shown interviewed in the segment. Many others said the portrayal of traditional broker and agent fees was biased and unfair. The primetime appearance was a clear win for Redfin, which saw an increase in activity in the days following the show. (See Inman News story. Watch an InmanTV analysis of the report here.)
6. Trulia and Zillow get booted from Prudential Real Estate convention. To the dismay of some of the company's brokers, Prudential Real Estate barred two of the biggest names in online real estate -- Trulia and Zillow -- from exhibiting at the company's annual convention in San Diego in March. Both companies had booked booths at the show and flew executives to Southern California to rub elbows with Prudential brokers, only to be told at the last minute they were not welcome. Trulia co-founder Sami Inkinen reported the incident on the company's blog, saying they were told that their business model was in direct competition with a partnership between Prudential Real Estate Affiliates and Yahoo! Inc. (See Inman News story.)
7. Realogy goes private. An affiliate of private equity firm Apollo Management LP in April completed the purchase of Realogy Corp., about a year after Realogy was formed as an independent publicly traded company that broke off from Cendant Corp. Realogy owns real estate franchise brands Coldwell Banker, Century 21, ERA, Sotheby's, Better Homes & Gardens and Coldwell Banker Commercial. The transaction was valued at about $8.5 billion. (See Inman News story.)
8. Well-known real estate writer dies. Beloved real estate advice columnist Robert Bruss passed away on Sept. 26, leaving a legacy behind that won't soon be replaced. For more than 20 years Bruss wrote weekly real estate columns that appeared in hundreds of newspapers across the country answering complicated real estate questions submitted by his loyal readers. He was the most prolific writer in the industry, a consumer advocate who wrote from experience and expertise honed from his years of real estate investing, teaching and attorney work. His columns were syndicated by Inman News, and the staff here considered him a close friend and mentor. (See Inman News story.)
9. NAR's Gateway project announced. The National Association of Realtors in May revealed a somewhat vague plan to develop a massive national property information database. An advisory group charged with conceptualizing the project said in November that the database would be accessible to varying degrees by consumers, agents, brokers, appraisers and government agencies. This so-called Gateway system could include information on all types of properties, including for-sale-by-owner and agent-represented active for-sale listings. The group has been careful not to call the project a national MLS. NAR's group says industry participants are demanding such a system to expand property information that is at their disposal. The project could hit one snag as NAR's current agreement with Move Inc., which operates Realtor.com, would prevent consumer access to such a database and would have to be restructured. (See Inman News story.)
10. FHA goes modern. FHA modernization was a hot topic throughout 2007 as lawmakers volleyed back and forth on how to bring FHA loan programs more in line with market prices so that more borrowers would be able to use them. Senate lawmakers in December passed legislation that would reduce but not eliminate down-payment requirements, allow for a smaller increase in the maximum-size mortgage eligible for FHA backing, and place a one-year moratorium on a plan to introduce risk-based pricing. The bill would allow the Federal Housing Administration to guarantee loans of $417,000 or more in high-cost areas, the conforming loan limit for loans eligible for repurchase by Fannie Mae and Freddie Mac. The Bush administration supports the modest increases in FHA loan limits put forward by the Senate, advocating raising limits from $362,000 in high-cost areas to $417,000, and from $200,000 in lower-cost areas to $271,000. (See Inman News story.)
Downturn, downturn, downturn
Thursday, December 27, 2007
Inman News
"Downturn," "subprime," "foreclosures" and "credit crunch" are the top phrases that come to mind when looking back at the year in real estate news. 2007 will be remembered as the year the subprime mortgage market collapsed, causing a credit crunch whose effect on the broader economy is still to be determined. The credit crunch has caused everyone to wonder whether the housing market will now play a role in tipping the economy into recession in 2008. But even while housing markets were slowing substantially in some parts, a boom in online activity and innovation in real estate was happening this year. 2007 was marked by an explosion in real estate blogging along with some major media interest in a few newer online business models.
Here are our picks for the most memorable real estate stories of 2007:
1. Subprime market implodes; housing downturn worsens. Subprime lenders started going belly up this year as they lost access to funding in an avalanche of delinquencies and foreclosures on loans that were packaged and sold to Wall Street investors. Each week brought more bad news in the mortgage and financial markets as more lenders and securities firms started reporting losses stemming from delinquencies and foreclosures. Congress has held numerous hearings on plans to help relieve some of the fallout from the resulting credit crunch (see #4 below). This story was by far the most important one for real estate in 2007 and will continue to unravel throughout 2008. (See Inman News special report, "Subprime Tsunami.")
2. Blogging runs deeper in real estate's blood. If 2006 was remembered as the year real estate blogging really took off, then 2007 will be known as the year that real estate bloggers went deeper, passing "sport" status and placing the practice officially under the heading of "business plan." Many milestones converged to make this possible: Those who figured out blogging were gaining more and more business from it; ActiveRain, the social network for real estate professionals centered around blogging, saw its membership skyrocket, reaching 62,000 members by year end; and the slower market may have prompted many more agents to try blogging since its low cost of entry means there's not much to lose. Many of real estate's star bloggers came together for the first Bloggers Connect conference in August. (See Inman News special report on blogging.)
3. Foxtons closes shop. Foxtons, a discount real estate brokerage company that operated in New Jersey, New York and Connecticut, put a notice on its Web site on Oct. 2 announcing its intent to file for voluntary Chapter 11 bankruptcy and place its property listing agreements with another brokerage company. The bankruptcy court judge handling the case later allowed the company to auction off about 4,300 listing agreements in New York and New Jersey to the highest bidders, which included Maplewood Homebuilders LLC and Brooklyn-based Fillmore Real Estate. (See initial Inman News story and follow-up article.)
4. Foreclosure problem worsens; Bush announces rescue plan. The Bush administration on Dec. 6 rolled out a much-anticipated agreement with mortgage lenders and loan servicers to refinance or freeze the interest rates on up to 1.2 million subprime adjustable-rate mortgages for five years. The plan aims to help reduce the impact of the housing downturn on the economy and communities affected by foreclosures. The plan has met criticism from consumer advocates who say it won't help enough borrowers and warnings from some in the lending industry who say a rate freeze could discourage investors from financing future loans. The plan has the backing of the American Securitization Forum, which represents companies that issue mortgage-backed securities, as well as investors, loan servicers and rating agencies. (See Inman News story.)
5. Redfin and "60 Minutes" of fame. CBS' well-known "60 Minutes" television news program tackled the issue of real estate commissions, discounters versus full-service companies, and industry competition in a segment, "Chipping Away at Realtors' Six Percent," that aired May 13, 2007. The segment, which focused heavily on Seattle-based discount brokerage company Redfin, caused an uproar within the industry. After spending a lot of time with the show's producers explaining the Justice Department's ongoing antitrust lawsuit, the National Association of Realtors felt it got the "empty chair" treatment by not being shown interviewed in the segment. Many others said the portrayal of traditional broker and agent fees was biased and unfair. The primetime appearance was a clear win for Redfin, which saw an increase in activity in the days following the show. (See Inman News story. Watch an InmanTV analysis of the report here.)
6. Trulia and Zillow get booted from Prudential Real Estate convention. To the dismay of some of the company's brokers, Prudential Real Estate barred two of the biggest names in online real estate -- Trulia and Zillow -- from exhibiting at the company's annual convention in San Diego in March. Both companies had booked booths at the show and flew executives to Southern California to rub elbows with Prudential brokers, only to be told at the last minute they were not welcome. Trulia co-founder Sami Inkinen reported the incident on the company's blog, saying they were told that their business model was in direct competition with a partnership between Prudential Real Estate Affiliates and Yahoo! Inc. (See Inman News story.)
7. Realogy goes private. An affiliate of private equity firm Apollo Management LP in April completed the purchase of Realogy Corp., about a year after Realogy was formed as an independent publicly traded company that broke off from Cendant Corp. Realogy owns real estate franchise brands Coldwell Banker, Century 21, ERA, Sotheby's, Better Homes & Gardens and Coldwell Banker Commercial. The transaction was valued at about $8.5 billion. (See Inman News story.)
8. Well-known real estate writer dies. Beloved real estate advice columnist Robert Bruss passed away on Sept. 26, leaving a legacy behind that won't soon be replaced. For more than 20 years Bruss wrote weekly real estate columns that appeared in hundreds of newspapers across the country answering complicated real estate questions submitted by his loyal readers. He was the most prolific writer in the industry, a consumer advocate who wrote from experience and expertise honed from his years of real estate investing, teaching and attorney work. His columns were syndicated by Inman News, and the staff here considered him a close friend and mentor. (See Inman News story.)
9. NAR's Gateway project announced. The National Association of Realtors in May revealed a somewhat vague plan to develop a massive national property information database. An advisory group charged with conceptualizing the project said in November that the database would be accessible to varying degrees by consumers, agents, brokers, appraisers and government agencies. This so-called Gateway system could include information on all types of properties, including for-sale-by-owner and agent-represented active for-sale listings. The group has been careful not to call the project a national MLS. NAR's group says industry participants are demanding such a system to expand property information that is at their disposal. The project could hit one snag as NAR's current agreement with Move Inc., which operates Realtor.com, would prevent consumer access to such a database and would have to be restructured. (See Inman News story.)
10. FHA goes modern. FHA modernization was a hot topic throughout 2007 as lawmakers volleyed back and forth on how to bring FHA loan programs more in line with market prices so that more borrowers would be able to use them. Senate lawmakers in December passed legislation that would reduce but not eliminate down-payment requirements, allow for a smaller increase in the maximum-size mortgage eligible for FHA backing, and place a one-year moratorium on a plan to introduce risk-based pricing. The bill would allow the Federal Housing Administration to guarantee loans of $417,000 or more in high-cost areas, the conforming loan limit for loans eligible for repurchase by Fannie Mae and Freddie Mac. The Bush administration supports the modest increases in FHA loan limits put forward by the Senate, advocating raising limits from $362,000 in high-cost areas to $417,000, and from $200,000 in lower-cost areas to $271,000. (See Inman News story.)
Thursday, December 20, 2007
Feeling Nosy about DC? MD? VA?
Ok, I know you're probably not planning on moving this very second, but here's this week's list of interesting-looking listings that have just come on the market. Mind you, they may not actually be my personal listings --- just intriguing properties I've come across this week.
Feeling nosy about the District of Columbia?
Feeling nosy about Virginia?
Feeling nosy about Maryland?
If you know someone who might be interested in this list, please forward it on to him or her. And if there's a listing that you're curious about yourself, just let me know ... and I'll show it to you ... just for the hell of it ... no obligation ... *I promise*. Really. (One of the perks of being the friend of a real estate agent ought to be that you get to freely snoop around other peoples' homes!)
Feeling nosy about the District of Columbia?
Feeling nosy about Virginia?
Feeling nosy about Maryland?
If you know someone who might be interested in this list, please forward it on to him or her. And if there's a listing that you're curious about yourself, just let me know ... and I'll show it to you ... just for the hell of it ... no obligation ... *I promise*. Really. (One of the perks of being the friend of a real estate agent ought to be that you get to freely snoop around other peoples' homes!)
Fed Proposes New Restrictions on Subprime, Alt-A Loans
Sen. Dodd says legislation still needed to rein in abusive practices
Tuesday, December 18, 2007
By Matt CarterInman News
The Federal Reserve proposes imposing some restrictions that currently apply only to very costly loans -- including a ban on most prepayment penalties -- to subprime and some Alt-A loans.
The product of a series of hearings, the proposed changes in how the Fed implements the Truth In Lending Act, or TILA, are intended to protect consumers from unfair or deceptive home mortgage lending and advertising practices.
While the proposed regulations drew a mixed reaction from lenders, Connecticut Democrat Sen. Chris Dodd issued a statement slamming them as "deeply disappointing," and "a clear signal that legislation is necessary to help protect homeowners from abusive and predatory lending practices."
The proposed amendments to Regulation Z, which spells out the Fed's implementation of TILA, would require lenders making "higher-priced" mortgage loans to:
Verify a borrower's ability to repay a loan with an adjustable-rate mortgage after a payment reset, including property taxes, homeowners insurance and other expenses.
Document income and assets, using a borrower's Internal Revenue Service Form W-2, tax returns, payroll receipts, financial institution records, or other third-party documents that provide reasonably reliable evidence of the consumer's income and assets.
Establish escrow accounts for taxes and insurance, which borrowers could opt out of after one year.
The new regulations would also ban prepayment penalties on higher-priced loans unless the consumer's debt-to-income ratio does not exceed 50 percent of verified monthly gross income, and the source of the prepayment funds is not a refinancing by the same lender or its affiliate.
Only higher-priced mortgage loans on a primary residence -- including home-purchase loans, refinancings and home-equity loans -- would be subject to those provisions in the new regulations. Mortgages on vacation properties, open-end home-equity plans, reverse mortgages, or construction-only loans would be exempt, and loans to investors are, for the most part, not covered by TILA.
Higher-priced loans would be defined as first-lien mortgages with an annual percentage rate (APR) of 3 percent or more above the yield on comparable Treasury notes, or 5 percent for second mortgages.
In addition to extending some provisions of the Home Ownership and Equity Protection Act (HOEPA) to subprime loans, the proposed regulations would also create some additional new requirements for all loans, including:
Written agreements between borrowers and mortgage brokers collecting yield spread premiums, before the consumer applies for the loan or pays any fees.
Prohibitions on coercing appraisers to inflate property valuations.
New requirements for loan servicers, including crediting consumers' loan payments to the date of receipt and providing a schedule of fees to consumers upon request.
Dodd criticized the proposed language requiring lenders to evaluate a borrower's ability to repay a loan difficult to enforce, because regulators would have to show a "pattern and practice" of violations. The Connecticut lawmaker called the language a "significant step backwards" from existing guidance on the topic from regulators.
He said allowing borrowers to opt out of escrow accounts after one year could provide unscrupulous lenders a "tool to 'flip' borrowers into another, wealth-stripping refinance."
While the proposed measures don't go as far as some consumer groups and lawmakers had wanted, they represent a significant departure for the Fed, which has come under fire from critics who say it has failed to use its authority under the Truth in Lending Act to prohibit abusive lending practices during the boom.
Lenders have argued against stricter regulations, saying market forces have put an end to many of the most egregious practices and that new restrictions could worsen the credit crunch.
"There is much to commend and much to worry about in the proposed rules," the American Bankers Association said in a statement on the proposed Regulation Z changes.
While the ABA welcomed "uniform, national standards" that will apply to all lenders and target abuses by unregulated or lightly regulated nonbank lenders, the group warned that "replacing important lending flexibility with rigid formulas might also limit lending to some creditworthy borrowers."
Some consumer groups wanted the Fed to simply lower the thresholds that trigger existing HOEPA requirements. Both first-lien loans with an annual percentage rate (APR) more than 8 percent above the rate on Treasury securities of comparable maturity and second-lien loans with APRs more than 10 percent higher are covered by HOEPA.
Among the most feared provisions of HOEPA are the rights it gives borrowers to sue lenders who violate its requirements, allowing them to recover statutory and actual damages, court costs and attorneys' fees. Borrowers also have up to three years to cancel a loan that is subject to HOEPA if they can show the requirements weren't followed.
A bill introduced Dec. 12 by Sen. Dodd, The Homeownership Preservation and Protection Act, would lower HOEPA thresholds to a range of 6 to 10 percent for first mortgages, and 8 to 12 percent for seconds. Loans in which total points and fees exceed 5 percent would also trigger HOEPA requirements under Dodd's bill.
Opponents have warned that lowering HOEPA thresholds to cover subprime loans could discourage investors from buying mortgage-backed securities on Wall Street, further reducing the flow of investment capital into mortgage lending and increasing the cost of borrowing for home buyers.
"Any federal law that begins with amendments to existing HOEPA likely will be freighted with HOEPA's effects," industry lawyer and lobbyist Donald Lampe told members of the House Financial Services Committee in May. "Hardly anyone … in the secondary market funds or purchases HOEPA loans."
Instead of lowering the threshold for triggering HOEPA requirements, the Fed proposes to create a new class of higher-priced loans that would be subject to new regulations.
Lenders who followed the rule that they verify and document a borrower's ability to repay a loan would be granted "safe harbor" from lawsuits if they had a reasonable basis to believe that borrower would be able to make loan payments for at least seven years.
The proposed definition of a higher-priced loan -- 3 percent above comparable Treasury notes for first mortgages, or 5 percent for seconds -- is already used to collect data under the Home Mortgage Disclosure Act.
The definition is intended to "capture the subprime market, but generally exclude the prime market," staff members of the Fed's Division of Consumer and Community Affairs said in a Dec. 12th memo summarizing the proposed changes. There is no uniform definition of prime and subprime markets, however, the memo noted, and the proposed thresholds "would capture at least the higher-priced portion of the alt-A market."
The Fed is requesting comment on whether different thresholds, such as 4 percent for first-lien loans, "would better meet the objective of covering the subprime market and excluding the prime market," and on ways to "limit creditor circumvention" of the thresholds.
The lending industry has argued that prepayment penalties can benefit borrowers by allowing lenders to charge lower interest rates.
But critics say many consumers aren't very good at factoring in their potential cost into the price of a loan, which is not included in the annual percentage rate. Studies have shown most borrowers with adjustable-rate mortgage (ARM) loans seek to refinance before their interest rates reset, and prepayment penalties can decrease a borrower's home equity and increase their loan balance when financed into a new loan.
The new tougher restrictions on prepayment penalties "should allow the vast majority of subprime borrowers to refinance their mortgages without paying a prepayment penalty before the first payment increase takes effect," Fed staff members said in a memo to the Board of Governors.
Dodd questioned the adequacy of provisions intended to limit the use of prepayment penalties and yield-spread premiums, which he said are used to put borrowers in more expensive loans than they qualify for.
All in all, the proposal "raises serious questions as to whether the Federal Reserve is the appropriate institution to house consumer protection functions," Dodd said in a statement. "This is a clear signal that legislation is necessary to help protect homeowners from abusive and predatory lending practices."
The House of Representatives on Nov. 15 approved a bill, HR 3915, the Mortgage Reform and Anti-Predatory Lending Act of 2007, which would limit prepayment penalties, set minimum standards for all mortgages that lenders assess a borrower's ability to repay, and expand HOEPA restrictions.
***
Send tips or a Letter to the Editor to matt@inman.com, or call (510) 658-9252, ext. 150.
Copyright 2007 Inman News
Tuesday, December 18, 2007
By Matt CarterInman News
The Federal Reserve proposes imposing some restrictions that currently apply only to very costly loans -- including a ban on most prepayment penalties -- to subprime and some Alt-A loans.
The product of a series of hearings, the proposed changes in how the Fed implements the Truth In Lending Act, or TILA, are intended to protect consumers from unfair or deceptive home mortgage lending and advertising practices.
While the proposed regulations drew a mixed reaction from lenders, Connecticut Democrat Sen. Chris Dodd issued a statement slamming them as "deeply disappointing," and "a clear signal that legislation is necessary to help protect homeowners from abusive and predatory lending practices."
The proposed amendments to Regulation Z, which spells out the Fed's implementation of TILA, would require lenders making "higher-priced" mortgage loans to:
Verify a borrower's ability to repay a loan with an adjustable-rate mortgage after a payment reset, including property taxes, homeowners insurance and other expenses.
Document income and assets, using a borrower's Internal Revenue Service Form W-2, tax returns, payroll receipts, financial institution records, or other third-party documents that provide reasonably reliable evidence of the consumer's income and assets.
Establish escrow accounts for taxes and insurance, which borrowers could opt out of after one year.
The new regulations would also ban prepayment penalties on higher-priced loans unless the consumer's debt-to-income ratio does not exceed 50 percent of verified monthly gross income, and the source of the prepayment funds is not a refinancing by the same lender or its affiliate.
Only higher-priced mortgage loans on a primary residence -- including home-purchase loans, refinancings and home-equity loans -- would be subject to those provisions in the new regulations. Mortgages on vacation properties, open-end home-equity plans, reverse mortgages, or construction-only loans would be exempt, and loans to investors are, for the most part, not covered by TILA.
Higher-priced loans would be defined as first-lien mortgages with an annual percentage rate (APR) of 3 percent or more above the yield on comparable Treasury notes, or 5 percent for second mortgages.
In addition to extending some provisions of the Home Ownership and Equity Protection Act (HOEPA) to subprime loans, the proposed regulations would also create some additional new requirements for all loans, including:
Written agreements between borrowers and mortgage brokers collecting yield spread premiums, before the consumer applies for the loan or pays any fees.
Prohibitions on coercing appraisers to inflate property valuations.
New requirements for loan servicers, including crediting consumers' loan payments to the date of receipt and providing a schedule of fees to consumers upon request.
Dodd criticized the proposed language requiring lenders to evaluate a borrower's ability to repay a loan difficult to enforce, because regulators would have to show a "pattern and practice" of violations. The Connecticut lawmaker called the language a "significant step backwards" from existing guidance on the topic from regulators.
He said allowing borrowers to opt out of escrow accounts after one year could provide unscrupulous lenders a "tool to 'flip' borrowers into another, wealth-stripping refinance."
While the proposed measures don't go as far as some consumer groups and lawmakers had wanted, they represent a significant departure for the Fed, which has come under fire from critics who say it has failed to use its authority under the Truth in Lending Act to prohibit abusive lending practices during the boom.
Lenders have argued against stricter regulations, saying market forces have put an end to many of the most egregious practices and that new restrictions could worsen the credit crunch.
"There is much to commend and much to worry about in the proposed rules," the American Bankers Association said in a statement on the proposed Regulation Z changes.
While the ABA welcomed "uniform, national standards" that will apply to all lenders and target abuses by unregulated or lightly regulated nonbank lenders, the group warned that "replacing important lending flexibility with rigid formulas might also limit lending to some creditworthy borrowers."
Some consumer groups wanted the Fed to simply lower the thresholds that trigger existing HOEPA requirements. Both first-lien loans with an annual percentage rate (APR) more than 8 percent above the rate on Treasury securities of comparable maturity and second-lien loans with APRs more than 10 percent higher are covered by HOEPA.
Among the most feared provisions of HOEPA are the rights it gives borrowers to sue lenders who violate its requirements, allowing them to recover statutory and actual damages, court costs and attorneys' fees. Borrowers also have up to three years to cancel a loan that is subject to HOEPA if they can show the requirements weren't followed.
A bill introduced Dec. 12 by Sen. Dodd, The Homeownership Preservation and Protection Act, would lower HOEPA thresholds to a range of 6 to 10 percent for first mortgages, and 8 to 12 percent for seconds. Loans in which total points and fees exceed 5 percent would also trigger HOEPA requirements under Dodd's bill.
Opponents have warned that lowering HOEPA thresholds to cover subprime loans could discourage investors from buying mortgage-backed securities on Wall Street, further reducing the flow of investment capital into mortgage lending and increasing the cost of borrowing for home buyers.
"Any federal law that begins with amendments to existing HOEPA likely will be freighted with HOEPA's effects," industry lawyer and lobbyist Donald Lampe told members of the House Financial Services Committee in May. "Hardly anyone … in the secondary market funds or purchases HOEPA loans."
Instead of lowering the threshold for triggering HOEPA requirements, the Fed proposes to create a new class of higher-priced loans that would be subject to new regulations.
Lenders who followed the rule that they verify and document a borrower's ability to repay a loan would be granted "safe harbor" from lawsuits if they had a reasonable basis to believe that borrower would be able to make loan payments for at least seven years.
The proposed definition of a higher-priced loan -- 3 percent above comparable Treasury notes for first mortgages, or 5 percent for seconds -- is already used to collect data under the Home Mortgage Disclosure Act.
The definition is intended to "capture the subprime market, but generally exclude the prime market," staff members of the Fed's Division of Consumer and Community Affairs said in a Dec. 12th memo summarizing the proposed changes. There is no uniform definition of prime and subprime markets, however, the memo noted, and the proposed thresholds "would capture at least the higher-priced portion of the alt-A market."
The Fed is requesting comment on whether different thresholds, such as 4 percent for first-lien loans, "would better meet the objective of covering the subprime market and excluding the prime market," and on ways to "limit creditor circumvention" of the thresholds.
The lending industry has argued that prepayment penalties can benefit borrowers by allowing lenders to charge lower interest rates.
But critics say many consumers aren't very good at factoring in their potential cost into the price of a loan, which is not included in the annual percentage rate. Studies have shown most borrowers with adjustable-rate mortgage (ARM) loans seek to refinance before their interest rates reset, and prepayment penalties can decrease a borrower's home equity and increase their loan balance when financed into a new loan.
The new tougher restrictions on prepayment penalties "should allow the vast majority of subprime borrowers to refinance their mortgages without paying a prepayment penalty before the first payment increase takes effect," Fed staff members said in a memo to the Board of Governors.
Dodd questioned the adequacy of provisions intended to limit the use of prepayment penalties and yield-spread premiums, which he said are used to put borrowers in more expensive loans than they qualify for.
All in all, the proposal "raises serious questions as to whether the Federal Reserve is the appropriate institution to house consumer protection functions," Dodd said in a statement. "This is a clear signal that legislation is necessary to help protect homeowners from abusive and predatory lending practices."
The House of Representatives on Nov. 15 approved a bill, HR 3915, the Mortgage Reform and Anti-Predatory Lending Act of 2007, which would limit prepayment penalties, set minimum standards for all mortgages that lenders assess a borrower's ability to repay, and expand HOEPA restrictions.
***
Send tips or a Letter to the Editor to matt@inman.com, or call (510) 658-9252, ext. 150.
Copyright 2007 Inman News
Friday, December 14, 2007
Feeling Nosy about DC? MD? VA?
Ok, I know you're probably not planning on moving this very second, but here's this week's list of interesting-looking listings that have just come on the market. Mind you, they may not actually be my personal listings --- just intriguing properties I've come across this week.
Feeling nosy about the District of Columbia?
Feeling nosy about Virginia?
Feeling nosy about Maryland?
If you know someone who might be interested in this list, please forward it on to him or her. And if there's a listing that you're curious about yourself, just let me know ... and I'll show it to you ... just for the hell of it ... no obligation ... *I promise*. Really. (One of the perks of being the friend of a real estate agent ought to be that you get to freely snoop around other peoples' homes!)
Feeling nosy about the District of Columbia?
Feeling nosy about Virginia?
Feeling nosy about Maryland?
If you know someone who might be interested in this list, please forward it on to him or her. And if there's a listing that you're curious about yourself, just let me know ... and I'll show it to you ... just for the hell of it ... no obligation ... *I promise*. Really. (One of the perks of being the friend of a real estate agent ought to be that you get to freely snoop around other peoples' homes!)
Understand Your Credit
Buyers often ask our team how their credit score will affect their home purchasing power, here is a quick lesson from the Realtor.com website:
Understand Your Credit
By John Adams Homestore.com
Thinking about buying a house? Then think about your credit history...the folks who lend money do!
How well you have handled your credit obligations in the past is of utmost importance to lenders today. The good news is that this information, for the most part, is available to you.
Your credit history is maintained by three different private companies called credit reporting agencies: Equifax, TransUnion and Experian. You can order your report by phone and charge it to your major credit card if you like. It usually takes about a week to arrive. Or you can order your report online and view it within seconds.
It's a good idea to get a copy of all three reports, because if an error exists on even one of the reports, it may negatively affect your chances of getting the loan you want. Your credit report lists all the consumer credit that has been extended to you over the past seven years. It will show what your highest balance has been and what your current balance was on the date last reported by the creditor. It will also show how many payments you made on time and how many late payments were late. Late payments are grouped into categories showing how late you were. For example, if your credit card payment was over 30 days late one time, it might not be considered too serious. But if payments were over 60 days late four times, over 120 days late two times and over 180 days late one time, you have had a serious problem. That problem is going to impact your ability to borrow money.
It just makes sense to find out about your credit and correct any errors now. Regardless of how many credit problems you have had in the past, there are two good points to remember.
First, negative credit information can be reported in your credit file for only seven years. After that, it drops out and cannot even be considered. The one exception is bankruptcy, which can be reported for 10 years. But after that you start with essentially a clean slate.
Second, lenders are much more concerned about how you have handled your credit recently than with what happened several years ago. Even if you have had a bankruptcy, if you have kept your nose clean and paid your bills on time since then, it is possible you could qualify for a loan after as little as two or three years.
One of the best developments in the world of lending has been risk-based pricing. That's a five dollar term for the ability of lenders to offer higher priced loans to borrowers based on their demonstrated ability to repay. In other words, even if you have slightly fractured credit, you can still likely get a loan. It just may cost you a little more.
Understand Your Credit
By John Adams Homestore.com
Thinking about buying a house? Then think about your credit history...the folks who lend money do!
How well you have handled your credit obligations in the past is of utmost importance to lenders today. The good news is that this information, for the most part, is available to you.
Your credit history is maintained by three different private companies called credit reporting agencies: Equifax, TransUnion and Experian. You can order your report by phone and charge it to your major credit card if you like. It usually takes about a week to arrive. Or you can order your report online and view it within seconds.
It's a good idea to get a copy of all three reports, because if an error exists on even one of the reports, it may negatively affect your chances of getting the loan you want. Your credit report lists all the consumer credit that has been extended to you over the past seven years. It will show what your highest balance has been and what your current balance was on the date last reported by the creditor. It will also show how many payments you made on time and how many late payments were late. Late payments are grouped into categories showing how late you were. For example, if your credit card payment was over 30 days late one time, it might not be considered too serious. But if payments were over 60 days late four times, over 120 days late two times and over 180 days late one time, you have had a serious problem. That problem is going to impact your ability to borrow money.
It just makes sense to find out about your credit and correct any errors now. Regardless of how many credit problems you have had in the past, there are two good points to remember.
First, negative credit information can be reported in your credit file for only seven years. After that, it drops out and cannot even be considered. The one exception is bankruptcy, which can be reported for 10 years. But after that you start with essentially a clean slate.
Second, lenders are much more concerned about how you have handled your credit recently than with what happened several years ago. Even if you have had a bankruptcy, if you have kept your nose clean and paid your bills on time since then, it is possible you could qualify for a loan after as little as two or three years.
One of the best developments in the world of lending has been risk-based pricing. That's a five dollar term for the ability of lenders to offer higher priced loans to borrowers based on their demonstrated ability to repay. In other words, even if you have slightly fractured credit, you can still likely get a loan. It just may cost you a little more.
Friday, December 07, 2007
Feeling Nosy about DC? MD? VA?
Ok, I know you're probably not planning on moving this very second, but here's this week's list of interesting-looking listings that have just come on the market. Mind you, they may not actually be my personal listings --- just intriguing properties I've come across that week.
Feeling nosy about the District of Columbia?
Feeling nosy about Virginia?
Feeling nosy about Maryland?
If you know someone who might be interested in this list, please forward it on to him or her. And if there's a listing that you're curious about yourself, just let me know ... and I'll show it to you ... just for the hell of it ... no obligation ... *I promise*. Really. (One of the perks of being the friend of a real estate agent ought to be that you get to freely snoop around other peoples' homes!
Feeling nosy about the District of Columbia?
Feeling nosy about Virginia?
Feeling nosy about Maryland?
If you know someone who might be interested in this list, please forward it on to him or her. And if there's a listing that you're curious about yourself, just let me know ... and I'll show it to you ... just for the hell of it ... no obligation ... *I promise*. Really. (One of the perks of being the friend of a real estate agent ought to be that you get to freely snoop around other peoples' homes!
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