California Governor Arnold Schwarzenegger’s latest movie, The Expendables, is a summer hit and Californians are now waiting for him to morph into the homeowners’ hero by signing SB 1178, the bill extending anti-deficiency protection for consumers facing foreclosure who refinanced their original mortgage loans that was approved by the California Sate Assembly earlier this month.

Currently, if a homeowner defaults on a mortgage loan, their liability is limited to the property itself.  However, homeowners who refinanced their original mortgages did not have the same protection.  Sponsored by the California Association of Realtors (C.A.R.), SB 1178 was passed to protect homeowners in foreclosure from lenders suing for the difference between the value of the foreclosed property and the outstanding balance on the loan.

If the Governor signs the bill, it will become law effective June 2011.

At a conference held last week to discuss the overhaul of housing finance, Treasury Secretary Timothy Geithner said that the Obama administration was not looking to perform “radical surgery” on the system, but was focused instead on creating a “new and improved” version of the current system where the government would subsidize mortgage loans made by private lenders.

The administration convened the conference with dozens of leading experts on housing finance, who were largely of two minds:  some want to do away with the current system altogether, with the government taking a more limited role by offering insurance for catastrophic losses only.  Others argue that mortgage lending will not recover unless the government plays a more active role, providing the guarantees necessary to attract investors.

Left largely unsaid was the fate of Fannie and Freddie, which now guarantee 90 percent of all new mortgages.  While most agree that they are unlikely to survive in their current form, there are so far no suggestions on what to do to get rid of them and their vast portfolios of troubled loans.

For the New York Times coverage of the conference, go here.

The Obama administration is holding a conference today to discuss ways to overhaul Fannie Mae and Freddie Mac, saying that doing so will be important to fixing the country’s broken housing finance system.

The conference will focus on a review of Fannie Mae, Freddie Mac, the FHA, Ginnie Mae, the Federal Home Loan Banks and the “significant private sector role” in mortgage origination, funding and servicing.

To date, the U.S. Treasury has spent more than $145 billion to keep Fannie and Freddie solvent, after seizing the lending giants in September of 2008, as they teetered on the brink of collapse.

Treasury Secretary Timothy Geithner said that the Obama administration wants a “comprehensive reform proposal that protects taxpayers, institutes tough oversight, restores the long-term health of our housing market, and strengthens our nation’s economic recovery.”

According to the Treasury, Fannie, Freddie and other government entities currently guarantee more than 90 percent of new mortgages.

Fannie Mae has relaxed the limit of 30 REO listings per broker from any one Fannie Mae source, according to a report from REO Insider.

In June, Fannie imposed a strict limit of 30 REO listings per broker at any one time, and imposed a 25-mile restriction as well.  The new rules elicited an immediate response from NAR and Keller Williams Realty.

In a letter to the president of Fannie Mae, Mark Willis, Keller Williams CEO, said that the REO listings limitation “will impede the objectives of both Fannie Mae and the real estate professionals who have invested heavily in people and systems to efficiently move REO properties. Clearly, the REO arena is an extremely specialized field, requiring dedicated professionals who possess distinct expertise and sufficient financial and organizational resources.”

Apparently, Fannie agreed and said it would approve special exceptions to the limit.  Fannie also made the clarification that a broker could have 30 REO listings directly from Fannie Mae and take on additional listings from outsourcers without the need for approval from Fannie.

The California Department of Real Estate (DRE) said that it revoked a record number of real estate licenses over the past year – a total of 633, for a 10 percent increase over the previous year.

For its fiscal year ended June 30, DRE also said that it suspended another 163 real estate licenses and had 90 licenses that were surrendered.  In addition, the department noted that disciplinary actions have risen 60 percent over the past three years in the state, and that this trend will likely continue.  A total of 5,400 investigations have been opened since 2007.

DRE Commissioner Jeff Davi noted that while loan modification scam complaints were most prevalent, the department’s most recent enforcement activity has centered around short sale fraud.

Davi has urged California homebuyers to log on to the department’s website to check out real estate agents and brokers before employing them.  The database provides consumers with information on licensed agents and brokers, including records of disciplinary action or license revocation.

The Federal Trade Commission has banned eight mortgage relief and foreclosure prevention marketers from plying their trade and fined them over $23 million for deceptive advertising.  The eight individuals involved in three companies – two of them in California — have also been ordered to return over $30 million in fees to fleeced consumers.

The California firms included:

Federal Loan Modification Law Center run by Steven Oscherowitz, which marketed a “federal loan modification program” that charged an upfront fee of $3,000 and promised mortgage mods to distressed homeowners.  The settlement order includes a $11.5 million judgment against Oscherowitz, and the FTC continues to pursue five other individuals in connection with this scam.

DirectLender.com aka Loss Mitigation Services, which charged an upfront fee of $5,500 and promised loan modifications.  The firm and individuals Dean Shafer, Marion Anthony “Tony” Perry and Bernadette Perry also misrepresented themselves as agents of the consumer’s lending institution.  The settlement order imposed a fine of $6.2 million.

A New Jersey company – Hope Now Modifications – and brothers Salvatore and Nicholas Puglia were fined $5.3 million for claims they could provide mortgage modifications and for misrepresenting themselves as affiliated with a free federal homeowner assistance program, the Hope Now Alliance.

To date, the FTC has brought 29 cases against marketers who have falsely promised foreclosure prevention and mortgage modification services.

Complaints from lenders about a new Fannie Mae policy that requires lenders to secure a borrower’s “refreshed” credit report just prior to a home purchase has resulted in the lending giant pulling the new rule from its website.

According to a Washington Post report, Fannie Mae introduced a new policy this summer that “encourages” lenders to retrieve a borrower’s updated credit report just before a loan closes to see if the borrower has taken on extra debt since applying for the loan.

Lenders say the new policy creates logistical nightmares and could trip up home purchases at a time when consumers and investors are showing more confidence in the U.S. housing market.

In response, Fannie Mae says it is reviewing the policy, which it has removed from its website, and will offer additional guidance by the end of July.  Fannie said it was never its intent to tell lenders they were required to perform the additional credit check on all loans, just a suggestion on a “tool they could use”.

The Post story noted that until Fannie Mae clarifies its position on “refreshed reports”, lenders are nervous about the potential consequences, including delays that could prove costly to buyers, especially if they are purchasing foreclosures or participating in a short sale.  Those types of purchase contracts can carry harsh penalties for late closings.

Deputy Treasury Secretary Neal Wolin told the Securities Industry and Financial Markets Association (SIFMA) conference in New York recently that Treasury will not propose housing finance reform measures until 2011, and will probably do so in conjunction with the agency’s enforcement of the new financial reform law just passed by the Senate and due to be signed by President Obama next week.

However, several conference attendees question whether Treasury can implement housing finance reform at the same time it is implementing the most sweeping changes to the country’s finance system since the 1930s.

Both sides of the political aisle endorse the need for reform, especially for crippled lending giants Fannie Mae and Freddie Mac, but no one has yet developed a workable plan that would not inflict more harm on the still-sagging housing market.

Congress continues to be leery of implementing big changes that could upset the economic recovery since Freddie, Fannie and the FHA provide the majority of funding for American homebuyers.

Deputy Treasury Secretary Neal Wolin’s keynote address to the SIFMA conference can be read here.

As the result of a post-purchase review of mortgage loan files that identified a number of appraisal issues, Fannie Mae has updated its Selling Guide with additional appraisal guidance.

The new policy requirements and clarifications concerning existing lender requirements – which take effect on all mortgage applications dated on or after Sept. 1, 2010 — have been added to a number of appraisal sections of the Selling Guide, including:

• Inclusion of interior photographs in the appraisal report
• Lender changes to the appraised value and guidance on addressing appraisal deficiencies
• Appraiser selection criteria
• Sources of comparable market data
• Selection of comparable sales
• Communication under the HVCC
• Seller concessions
• Treatment of personal property
• Market Conditions Addendum to the Appraisal Report (Form 1004MC)

A copy of the Fannie Mae Selling Guide updates on appraisal policies can be found here.

The National Association of Mortgage Brokers (NAMB) has sent an alert to its members urging them to urge their congressional representatives to oppose the national financial overhaul legislation that is scheduled for a vote in mid-July.

NAMB president Roy DeLoach told his membership that the new legislation would hurt competition in the mortgage market and put smaller mortgage brokers out of business.

The NAMB’s main bones of contention center around the cap on fees and the elimination of yield-spread premiums, which are deal payments mortgage brokers receive for steering borrowers to a certain type of loan product or rate.

Unsurprisingly, NAMB is getting push-back from consumer groups, who blame mortgage brokers in part for the subprime lending mess.  However, DeLoach says that brokers are not to blame; in a Wall Street Journal article he noted, “Brokers did not invent these products. We didn’t underwrite these products. And we didn’t fund these products.”

The Mortgage Bankers Association said it is not actively opposing the legislation.

Part of the financial overhaul legislation package requires lenders to retain 5% of the credit risk on loans that carry fees higher than 3% in an effort to make it more difficult for brokers to load up loans with extra fees.