Tuesday, February 26, 2008
[mortgage] Nevada, California, Florida Top Foreclosure Increase, Slower Than 2007 Rate
News about mortgage foreclosure rates jumping 57% in January 2008 when compared to January 2007 seems destined to dominate today's headlines. But one mortgage expert thinks there might be a silver lining in the gloomy numbers.
RealtyTrac CEO James J. Saccacio, whose company performs the analysis for multiple media outlets thinks some
promising mortgage news is mixed in with the big number.
"January's foreclosure numbers demonstrate that foreclosure activity is continuing on its upward trend, substantially increasing from a year ago in many states," said Saccacio in a statement. "However, the 8 percent monthly increase in January is not as precipitous as the 19 percent spike we saw in January of 2007, and several key states actually experienced decreasing foreclosure activity from the previous month."
RealtyTrac's cautiously optimistic outlook on the mortgage market is worth noting, especially for context. As radios and television blare that 57% number in the coming days, remembering that context may prove very beneficial.
Meanwhile, if you are behind in making mortgage payments, contact the lender and talk with them about how to create a payment plan that keeps you in your home. Your local consumer regulatory agency also has information about appropriate credit counseling services. Don't simply choose one from the phone book or an online search -- get advice from the pros. The FCIC maintains a
free online list of consumer agencies on their website.
Labels: FCIC, mortgage, RealtyTrac
Tuesday, January 22, 2008
Appraiser Sues Washington Mutual [finance]
Jennifer Wertz is a home appraiser who began working for Washington Mutual (NYSE: WM) through a third party about 18 months ago. In court papers filed in Superior Court in California (Sacramento), Wertz claims that she was designated a "preferred" vendor whose work was "proven".
Since then, however, things have gone downhill, and now the financial giant has a David and Goliath situation that would naturally turn even uglier if other Davids (or Jennifers) showed up alleging similar behavior.
Wertz's suit against WAMU is neatly summarized in two allegations (#17 and #19 in her January 10, 2008 filing):
17. On or about May 21,2007, RICHTER [ed note: previously identified as a Washington Mutual Sales Manager] informed Plaintiff that a loan for which laintiff
had prepared an appraisal report had been declined because Plaintiff had indicated in her report "declining" market conditions. RICHTER insisted that Plaintiff change her appraisal report to indicate "stable" market conditions so that the loan could be approved. RICHTER, however did not provide any evidence to contradict Plaintiffs opinion and the facts supporting the decline of market conditions. RICHTER then told Plaintiff that if she did not change the appraisal report, that,she RICHTER would have Plaintiff blocked or prevented from doing any WAMU appraisal work.
and
19. On or about June 13,2007, LSI informed Plaintiff that Plaintiff had been blocked by WAMU, that WAMU would not give Plaintiff any more appraiser work because of two of Plaintiffs appraisal reports.
It has certainly be an old saw, if not an axiom, that home appraisers favored by lenders bring in high appraisals so that borderline lending situations are not quite so close. In our informal poll today, homeowners gravely nodded when we shared the story. Those who had refinanced believed that appraisers helped the process because they were friendly with the lender or wanted to stay in the lender's good graces.
The latter is simply poor judgment if it occurred. But what Ms. Wertz is alleging is much more serious. This would be the smoking gun zealous consumer advocates (yes, we're supposed to be one too, but we believe in stories having two sides) use to prove that the subprime mortgage crisis led to an economic crisis and was caused by greedy lenders.
And the ankle bone is connected to the.....
We still say greedy consumers had more than a share in creating this mess. Ms. Wertz's day in court will be interesting and closely watched, however, and heaven help us all if she is not the only appraiser to make similar allegations.
Labels: appraisal, mortgage, WAMU, Washington Mutual, Wertz
Thursday, January 10, 2008
Baltimore Sues Wells Fargo Over Mortgage Discrimination
Kudos to Baltimore Sheila Dixon (left). When data reached the City of Baltimore that they believe showed a major finance company was targeting minority neighborhoods and creating foreclosures based on "illegal practices", they took decisive action and sued.
The City and Mayor Dixon didn't just find any old company to pursue. Instead, they filed suit in U.S. District Court against Wells Fargo & Company (NYSE: WFC), the $100 billion financial giant. The
suit claims that Wells Fargo targeted minority neighborhoods and engaged in "predatory lending practices" including unsuitable products and terms and deceptive practices.
The result, the suit alleges, is that Wells Fargo "has one of the highest rates of foreclosure of any lender in Baltimore, and its foreclosure rate in majority African American neighborhoods is four times the rate in majority white neighborhoods, and twice the City average."
But Mayor Dixon and the government have not filed for damages alone. Instead, the suit will ask for punitive damages sufficient to cover past and future losses and enough "to deter" Wells Fargo from engaging in such behavior in the future.
Other suits from cities caught in a housing crisis caused by foreclosed mortgages are expected, including one from Cleveland versus multiple lenders.
Labels: Baltimore, discrimination, mortgage, Wells Fargo
Monday, December 10, 2007
Our Take On The Mortgage Crisis
Last week,
House Democrats defied the Bush administration's veto threat and rammed through H.R. 6, energy legislation that would change fuel economy requirements for cars and light vehicles over a 13 year period.
Among the arguments raised by the White House and Senate Republicans was that the bill legislated a free market economy.
We thought that was an interesting excuse then because the U.S. does not have a free market economy, despite any political rhetoric to the contrary. Yet the subprime mortgage issue apparently required federal government intervention in those very same markets, which leaves us with a single question.
Why?Overextended consumers in danger of losing their homes is a terrible plight. Equally terrible are the tens of thousands of innocent consumers now on unemployment in time for the holidays because they worked for large financial institutions who gave credit to greedy consumers.
Yes, greedy consumers. "But I didn't know (or think) the rate would change that much," is the most common rallying cry. We're sure that is true because our discussions with consumers show that most don't spend long enough during their mortgage closing process to actually read, much less understand, the documents on what is typically the largest purchase of their life.
We listened to these same consumers crow about their low, low rates while stodgy conservative consumers clung to 30 year fixed mortgages and vowed to reduce their overall interest expense by voluntary rather than mandatory pre-payment as in the accelerated 15 year mortgages. We likewise saw many consumers opt for interest-only notes. Many of those consumers now have no equity left in their homes, which financial planners tell us often funds a major portion of a person's retirement nest egg.
Any financial institution who did not fully disclose the maximum interest rates and payment schedules should face civil, and as necessary, criminal penalties at an individual level. But consumers who just guessed wrong and traded 36 lower payments until a rate reset don't deserve and shouldn't receive federal intervention. No matter what assurances government officials make, the market is too symbiotic for these measures not to impact the overall consumer mortgage market.
Bad financial planning by greedy consumers shouldn't be protected at the expense of fiscally prudent consumers who did their homework and chose not to speculate with their home. For consumers who were told the odds and gambled (much like a lottery or slot machine) with their home, we have sympathy, but a bailout is the wrong message to send to our financial trading partners throughout the world, to our independent businesses and to our younger consumers who have now learned that engaging in the latest financial fad may not have repercussions.
Reinforcing that lesson may be the biggest problem this debacle caused.
Labels: mortgage, sub-prime
Monday, October 29, 2007
Countrywide Goes Proactive
We're still not backing down from pushing a healthy dose of the blame for the mortgage crisis on consumers who overextended themselves. When a recent piece on Capital One aired, an middle-aged couple explained how the credit card giant kept offering them cards even though they were overextended and couldn't pay their existing cards.
Let's be clear, and let's be smart consumers.
Stop digging when you're in a hole. The slanted piece somehow blamed
CapOne instead of irresponsible consumers who kept applying for credit cards they couldn't afford to pay. The same issue is rampant in the
subprime mortgage crisis that is damaging the American economy. Banks and financial institutions sell mortgage and other financial products. If you can't afford them, you shouldn't be applying, much less accepting, them.
That said, Countrywide Financial (NYSE: CFC), the nation's largest mortgage lender, has announced that it will proactively rewrite more than 80,000 mortgages. The amount is an unfathomable number with a lot of zeroes. This is after Countrywide was forced to grasp at an $11 billion line of credit offered by Bank of America and after thousands of people lost their jobs.
Consumer advocates have been excessively critical of the mortgage lending industry for making loans to consumers who may not have been unable to pay them back. We think that forces too much responsibility at the business world. If a consumer has diabetes, one shouldn't sue the baker for making lovely cakes and pies available. Likewise, if a consumer has a driver's license that restricts night driving, don't go after the auto manufacturer for putting headlights on the car.
Consumers knew or should have known the risks involved with a variable mortgage. Many seemed positively snobbish about the low, low, low rates they were receiving. The smart consumers we knew all either planned to sell before the first adjustment period and needed a place to park the proceeds of their previous sale or locked into a fixed rate.
We're reminded of one of the smartest people we know who once asked us, "Should I apply for a 30 year or 15 year fixed mortgage?" Our answer remains the same: why lock in a higher rate when, with discipline, you can create even less than a 15 year mortgage provided you don't have a
pre-payment penalty for some reason.
This is all opinion from consumer advocates, not financial advice from any sort of planners or consultants. You should talk with a professional before becoming involved in a mortgage. And if you can't afford one, look in the government listings of your telephone book for a local or state agency who can help you.
But don't sign for a mortgage you may not be able to afford in the future and then chastise the company for offering you the opportunity. Perhaps the biggest part of being a smart consumer is knowing when to say "no". And if you don't have the knowledge, find a professional who does.
Meanwhile, hats off to Countrywide for being a smart consumer-friendly company. Yes, they are taking a licking from those who want to blame the fast food restaurant for serving hot coffee. We prefer consumers take more responsibility and let us help them fight the battles against the companies who do them wrong.
If you think you were hurt in this recent financial crisis, think of the consumers who no longer have a job because Countrywide laid them off. And think of the small investors who owned CFC as part of their retirement funds, and saw the healthy stock's value get halved.
And put down the doughnut unless you're planning to work out later.
Labels: Countrywide, credit, financial, mortgage
Tuesday, September 04, 2007
New Month, Same Housing Woes
After July's foreclosure rate surged 9% from June to July and almost doubled between July 2006 and July 2007, many expected August's market gyrations would follow. The Federal Reserve Bank eased the situation somewhat by attempting to control liquidity.
Now Congress is getting involved.
Senator Chuck Schumer (D-NY) has told lending giant, Countrywide Financial, to stop compensating brokers more for adjustable mortgages. Schumer said at a press conference that 40% of borrowers in an adjustable rate mortgage could have qualified for conventional financing.
As usual when politics and consumers mix, the results are framed by the different perspectives.
Consumers took adjustable rate mortgages to lower their payments or qualify for homes they couldn't afford. The mortgage industry did not take advantage of the consumer. The consumer has taken advantage of a loophole that provided a year or three of monthly cash flow. Now with higher rates, those consumers who cannot afford their homes are going to have to take action. They will need to move or take second jobs or higher paying positions that involve other sacrifices.
Foreclosure should be the last possible resort. Banks and lenders did not cause the subprime crisis. Consumers did. While late night comedians joke about anyone qualifying for a mortgage, the same consumer truths were applicable in that market.
1) Understand the terms.
2) Don't overextend yourself if the worst case scenario you agreed to occurs.
Perhaps the second car has to be sold. Perhaps one of the children can't go to college this year or can only go part-time. By behaving as though a low rate mortgage is a right rather than a privilege earned by strong credit ratings, consumers who wanted it all are driving a financial crisis impacting those who had it all.
Consumer Help Web always reminds consumers to know their rights. Knowing their responsibilities is just as important.
Labels: Countrywide, financial, mortgage, sub-prime
