The FHA warned lenders this week that it is keeping a close eye on how mortgage companies are following the agency’s standards.

And to put teeth into the warning, the FHA announced that it has permanently pulled its approval from two mortgage lenders: RSA Financial, Inc., Atlanta and 1^st Alliance Mortgage LLC of Houston.

From the HUD press release:

HUD’s MRB cited RSA for misleading HUD that it was properly licensed by the Georgia Department of Banking and Finance at the time the company submitted an application to FHA for lender approval. In addition, the MRB alleges that RSA submitted false and/or misleading information regarding the criminal conviction and sanction history of its owner and executive, Ramsey Suphi Agan. HUD claims 1st Alliance engaged in prohibited branch arrangements, provided false certifications, failed to implement a Quality Control Plan, and a number of other violations of HUD/FHA standards.

“If lenders want to do business with the FHA, it’s critical that they provide complete and truthful information so that we can properly determine who we’re dealing with,” said FHA Commissioner David Stevens. “If any lender can’t operate within FHA’s guidelines, they can’t do business with us.”

The foreclosure crisis has hit reality TV! No, not a new show…although “Pimp My Short Sale” might be popular….but the fact that many of the homes featured on the highly rated reality TV show Extreme Makeover are facing foreclosure.

If you’re not a fan of the show, the premise is simple: hardship-stricken homeowners are sent on a Disney vacation while their dilapidated homes are torn down and replaced with new showcase homes.

They come home to a large cheering crowd, a spectacular new home…and a mortgage they can’t afford.

In recent seasons, homes have included extravagant swimming pools, outdoor entertainment areas and other lush amenities. Unfortunately, many of these opulent homes are in rundown neighborhoods, making them doubly tough to sell.

So the ABC-TV show’s producers have said they are scaling back for next season, reducing square footage, scaling back on the pools and the lavish landscaping.

Reality TV finally meets…reality.

California state lawmakers passed SB 401 this week, which exempts homeowners who have lost their homes to short sales or foreclosure, or who have received loan modifications, from having to pay state tax.

From the Sacramento Bee report:

The bill extends the state ban from 2009 through the end of 2012. It also bans state taxes on federal stimulus grants for renewable energy projects.

Who is affected:

Primarily, the bill affects people who had debt forgiven as they lost homes in foreclosures, short sales and deeds in lieu of foreclosure last year – and through 2012 now. Also affected: those who got loan modifications that cut the amount they owe the bank.

In short sales, a bank might accept a sales price of $250,000 when it is still owed $350,000 on the home. In deeds in lieu of foreclosure, the bank simply takes back the house and may forgive what’s still owed. The difference is the forgiven debt. Borrowers can avoid state taxes on up to $500,000 in forgiven debt.

The Franchise Tax Board says the tax forgiveness measure mostly applies to people who refinanced their homes to get better interest rates or extract equity, and then had a short sale or foreclosure where debt was forgiven.

But the tax board also warned that refinanced dollars taken out as cash and spent on items other than home improvements may be taxable.

Who is not affected:

Those who bought houses and never refinanced before doing a short sale, loan modification or foreclosure are unaffected. In most cases the banks just take back the houses. There is no forgiven debt, and no tax bill, said the tax board.

Investors are also unaffected. They still must pay state taxes on forgiven debt. The bill affects only people who live in their home.

Fannie Mae issued new policy guidelines this week that told servicers they can no longer name MERS as a plaintiff in foreclosure actions on a mortgage loan owned or securitized by the GSE.

From DSNews.com:

“…the system has become the centerpiece of a number of lawsuits, with foreclosed homeowners challenging the naming of the electronic system as mortgagee.

Fannie Mae stated in its new servicing guidelines that when MERS is listed as the mortgagee of record, the servicer must prepare a mortgage assignment transferring the position from MERS back to the servicer, and then bring the foreclosure in its own name.

In the event that the GSE requires the foreclosure be brought in the name of Fannie Mae, the servicer must conduct that transfer assignment as well. In all cases, the assignment from MERS to the servicer or Fannie Mae must be recorded before the foreclosure begins.

“Fannie Mae will not reimburse the servicer for any expense incurred in preparing or recording an assignment of the mortgage loan from MERS to the servicer or to Fannie Mae,” the guidelines read.”

To read the full story, go here.

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A forecast out last week from the University Financial Associates of Ann Arbor says that most metro areas in the country will see prices fall below the lowest levels of the past two decades, due in large part to fear.

From the Real Estate Economy Watch website:

“It is often stated that prices decline faster than they rise because fear is a stronger emotion than greed. This certainly proved to be the case in Detroit where 10 years of real price gains were erased in just 4 years,” said UFA in its most recent UFA^TM House Price Forecast.

“Detroit metro was the canary in the coal mine this cycle, with falling house prices arriving earlier than in other metros,” said Dennis Capozza, who is the Dykema Professor of Business Administration in the Ross School of Business at the University of Michigan, and a founding principal of UFA. “Other metros that have already or will soon converge to pre-bubble real prices include Las Vegas, Phoenix, the inland California metros and many south Florida metros.”

UFA’s prediction would take the national median price of a home in most markets below $101,000, the national median in 1990, according to the Census Bureau.

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According to a forecast published this week by RealtyTrac, foreclosures are expected to rise to 4.5 million by the end of 2010, from 2.8 million in 2009.

Is HAMP the finger in the dike, or a beaver dam hoping to hold back a tsunami?

Here’s Jon Maddux’s take in a posting on housingstorm.com:

Over a year ago, the government launched the home Affordable Modification Program (HAMP) to help nearly 3 to 4 million struggling households modify their mortgages, and stay at home. It’s clear that it has failed by the sheer ridiculous numbers of people it has helped. Approximately 170,000. I’d say they are on track to help about 5% of the people they aimed to help. I think we have a case of GROSSLY over promising and under delivering. In an entire year, they have helped far less than the number of houses receiving default notices every month.

They See The Wave, They Must Do Something

With 4.5 Million homes going into foreclosure this year, this new program set out to save more homes from going into foreclosure by reducing principle balances. Is anyone… I mean anyone holding their breath that this is really going to make a difference? I mean haven’t we got the picture yet? It really comes down to what the banks / lenders want to do… Bottom line. Look, the program is crap anyway and they’re not allocating anywhere near enough money to really help.

Read the full post here.

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There are five key financial indicators that show exactly what is keeping the housing market – and the rest of us – depressed.

An informative post on drhousingbubble.com recently provided an in-depth look at these trends, which include:

1. Increase in MLS Inventory
2. Falling Prices
3. Competition for Jobs
4. Rise in FHA Defaults
5. Mortgage Delinquency

What this means is what we’ve pretty much known all along…the California housing market gold rush is dead and buried and shall not rise again for a very long time.

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There’s a rising chorus of pleas to enact state legislation that will exempt debt relief for homeowners selling their homes in short sales. The question is, will the California legislature continue to be tone-deaf?

There are currently two bills before the legislature — AB 1799 by Assemblyman Roger Niello, R-Fair Oaks, and SB X614 by Sen. Ron Calderon, D-Montebello – that, if passed by April 15, will provide huge relief for at least 35,000 citizens who had to sell their homes in 2009 in short sales and are now facing big tax bills because, right now, the state sees debt relief as income (who did THAT math?).

If there was ever a time to put pen to paper (or cursor to screen) and write your legislator, this is that time.

Tell him/her that California homeowners have suffered enough, having been clobbered over the head already by loans they couldn’t pay on houses that are worth less than that loan.

Not sure who to write? Go here to find the representative for your district.

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As the economy continues to flounder, crooks seem to get more inventive with ways to scam regular folks out of their hard-earned cash. This one showed up in my Inbox recently and appears to be a fairly easy one to fall for:

It works like this: Person calling says, “This is (any name) and I’m calling from the Security and Fraud department at VISA. My Badge number is 12460. Your card has been flagged for an unusual purchase pattern, and I’m calling to verify. This would be on your VISA card issued by (name) bank. Did you purchase an Anti-Telemarketing Device for $497.99 from a marketing company based in Arizona?”

When you say “No”, the caller continues with, “Then we will be issuing a credit to your account. This is a company we have been watching and the charges range from $297 to $497, just under the $500 purchase pattern that flags most cards. Before your next statement, the credit will be sent to (gives you your address), is that correct?”

You say, “Yes”. The caller continues . . . “I will be starting a fraud investigation. If you have any questions, you should call the 800-number listed on your card and ask for Security. You will need to refer to this Control #”. Then he gives you a 6-digit number. “Do you need me to read it again?” Caller then says he “needs to verify you are in possession of your card. Turn the card over. There are 7 numbers; the first 4 are 1234 (or whatever) and the next 3 are the security numbers that verify you are in possession of the card. These are the numbers you use to make Internet purchases to prove you have the card. Read me the 3 numbers.” Then he says, “That is correct. I just needed to verify that the card has not been lost or stolen, and that you still have your card. Do you have any other questions? Don’t hesitate to call back if you do.”

You actually say very little, and they never ask for or tell you the card number. But it’s a scam and a new purchase of $497.99 has just been put on your card.

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U.S. News & World Report released its Top 10 list of America’s Most Underwater Housing Markets last week:

1. Las Vegas, NV
2. Merced, CA
3. Phoenix, AZ
4. Orlando, FL
5. Greeley, CO
6. Bend, OR
7. Minneapolis-St.Paul, MN
8. Memphis, TN
9. Cleveland, OH
10. Grand Rapids, MI

And closer to home, MONEY Magazine provided its housing market forecast for the largest metro regions in the U.S. Here’s how California shapes up (or not):

Hanford -25.9%
Los Angeles -8.1%
Santa Ana -4.7%
Oakland -4.4%
San Jose -4.4%
Bakersfield -4.3%
San Francisco -4.3%
San Luis Obispo -3.4%
Riverside -3.3%
Vallejo -3.1%
Fresno -2.7%
Stockton -2.4%
Visalia -2.3%
Madera -2.1%
Santa Cruz -0.9%
Oxnard -0.6%
Yuba City -0.4%
San Diego -0.3%
Sacramento -0.1%
Chico 0.0%
Redding 0.2%
Salinas 1.1%
Santa Barbara 1.1%
El Centro 1.3%
Napa 2.3%
Modesto 3.2%
Merced 4.4%
Santa Rosa 6.0%

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