Lance Churchull writes:
“One thing I have wondered about in the past is why the two government-sponsored entities, Fannie Mae and Freddie Mac, found it necessary to have different rules for short sales, but then I remembered that the “G” in GSE stood for government and, of course, the government usually makes things more complicated than they should be. Well, on April 28, 2011, the Federal Housing Financing Agency (FHFA), which has been overseeing Fannie Mae and Freddie Mac since their near financial collapse, decided it would be better if they had uniform rules for delinquent mortgages. The FHFA has directed that Fannie Mae and Freddie Mac align their guidelines for servicing delinquent mortgages they own or guarantee with the stated purpose of creating an updated framework that will establish uniform servicing requirements for how delinquent mortgages are handled, including the short sale process. The director of FHFA said, “Once fully implemented, the enterprises’ aligned policies will require earlier contact, more frequent communication and prompt decisions.”

The aligned guidelines will also govern the “dual track” foreclosure process by requiring the servicers to immediately contact delinquent borrowers in an effort to resolve a delinquency. The foreclosure process may not commence if the borrower and the servicer are engaged in a good faith effort to solve the delinquency. In the event that the property is referred to foreclosure, financial incentives would be provided to encourage the servicers to help continue the borrowers pursue a foreclosure alternative such as a short sale.

Freddie Mac and Fannie Mae must issue the new guidelines to their servicers on or before September 30, 2011. Having reviewed the actual and very detailed servicing announcements by both Fannie Mae and Freddie Mac that seems like an awfully long time to implement the new rules. However, given the fact it took Fannie Mae and Freddie Mac eight months to implement a HAFA program that was nearly the same as the Treasury Department’s program, I guess it is reasonable for them to take five months to align their loss mitigation rules.

One of the new policies that agents will like is that Fannie Mae and Freddie Mac will have the same borrower package for borrowers to be considered for all workout and foreclosure avoidance solutions, including HAMP modifications and short sales. When the borrower’s package is received, it is required that at the beginning of the process there be a simultaneous evaluation of borrowers for both the HAMP and HAFA programs. An additional new standard that agents will applaud is that there will be a uniform case escalation process which requires acknowledgement of an escalation request within three business days after receipt and adherence to a 30-day maximum total time to resolve an escalated case.

Since Fannie Mae and Freddie Mac short sales constitute a large portion of the short sale market, new uniform short sale guidelines and procedures for non-HAFA short sales would certainly be welcomed by the real estate industry. Let’s hope that the new guidelines, when they are issued, will actually simplify and expedite the process, and that the servicers will effectively implement the new rules. Stay tuned for updates on this topic, but don’t hold your breath in anticipation of seeing the newly aligned Fannie Mae and Freddie Mac short sale rules very soon.”

I couldn’t agree more.

This last weekend, the New Your Times published a story that, quite frankly, shows why the financial markets are so f*$#%’d up.

You’ve got to love the FDIC “investigator” who got a bug up his butt, and sought out, and sent a secret investigator (posing as a hot chick trolling for a guy) to dupe a borrower into “confessing” he’d lied on a “liar loan” (what we in the biz refer to as a “stated income” loan).

Really?

Really!

This is absolutely ridiculous.

Why the hell aren’t these precious Federal Resoutrces spend tracking down and throwing the Financial Executives that perpetrated this fraud, in jail?

Read on, and be astounded!

http://www.nytimes.com/2011/03/26/business/26nocera.html

Freddie Mac bulleting 2011-05 states No More MERS foreclosures.
MERS must transfer the interest it holds as indentured trustee (or whatever) to the actual loan services.

I wonder how much money MERS just lost on all those fees it was generating?

And how will the true servicers will feel about having to foreclose the old way?

Mortgage borrowers who are turned down for loan modifications may now get additional information that could help them understand why they didn’t qualify under the so-called “HAMP test.”

Until recently, borrowers weren’t privy to the data used to perform the Home Affordable Modification Program’s, or HAMP’s, “net present value” test. But as of Feb. 1, loan servicers are required to send letters disclosing up to 33 data points to some borrowers who were rejected for HAMP loan modifications. Not all loans are covered by this requirement, which is part of the federal Dodd-Frank Wall Street Reform and Consumer Protection Act, so not all borrowers will receive letters.

HAMP test required

The data points focus on the borrower’s financial situation, home, existing loan and proposed modification, according to Tom Goyda, a spokesman for Wells Fargo in St. Louis. Borrowers who believe they have found mistakes in the data may file appeals with their servicers. Final decisions are up to the servicers.

“If they think there are any errors in terms of the inputs used, they have 30 days during which they can provide, in writing, what their evidence is to support what they believe the correct value should be,” Goyda says.

HAMP’s net present value, or NPV, test measures whether a loan modification makes financial sense for the lender. If so, the servicer must offer the borrower a trial modification. If a modification isn’t in the lender’s financial interest, and the borrower hasn’t made the payments, the servicer may foreclose on the loan.

HAMP test website

Borrowers who want to see the inputs in action will soon be able to run their own practice HAMP tests on a website being developed by the U.S. Treasury. The website is expected to be ready in late spring and will include definitions of terms and icons to explain the inputs, according to Treasury spokeswoman Andrea Risotto. The system will have security features, but it will be open to anyone who wants to use it.

The chief benefit should be greater transparency in the HAMP process. Borrowers will be able to evaluate whether their situation might pass the HAMP test and see how changes in the data could affect the results, Risotto says. For example, a borrower who believes the loan servicer’s opinion of the home’s value was incorrect can see whether a more accurate valuation, perhaps based on an appraisal obtained by the borrower, would affect the outcome of the test.

The website will perform only HAMP calculations, not tests based on servicers’ proprietary non-HAMP loan modification models.

Inputs determine outcome

Besides the disclosed inputs, the results of a HAMP test depend on other factors controlled by the servicer, such as the estimated cost of the loan modification, the perceived likelihood that the borrower will default on the loan and cost of a foreclosure. HAMP’s guidebook for servicers lists 51 recommended inputs for the NPV test.

The design of the HAMP test is critical, a point that was well-explained in a Congressional Oversight Panel’s December 2010 review of federal foreclosure prevention programs.

“If the NPV model is calibrated correctly,” the report states, “it will get the correct homeowners into HAMP to prevent avoidable foreclosures. However, an incorrect calibration could either act as a means to delay inevitable foreclosures or grant subsidies to those who would otherwise cure (a loan default) and therefore do not need the extra help.”

Borrowers won’t be able to test the model’s accuracy, and they won’t be able to test their servicers’ assumptions. But the new data should clear up some of the mystery about what goes into the HAMP test.

By Marcie Geffner

You may have heard? The future of FNMA and Freddie Mac is in jeopardy.

These Government Sponsored Enterprises (GSE’s) were originally created to provide a funding source for socially desireable but higher risk loans. When started, GSE’s provided funds for 30% of all loans. Today, that number is 90% — and steps are being taken in Congress to get government out of the lending business or at least scale it back.

Freddie Mac recently published a Memo that starting June 1st, they will no longer purchase loans with loan-to-value ratios of less than 5%. As these GSE’s retract from the marketplace, interest rates and down-payment requirements are likely to rise making home ownership less achievable.

But that’s OK (I guess). I’m sure some smart banker or government type will come up with the new ‘best thing ever’ and create a program to let people who can’t afford a house to buy one anyway. That is, after all, how we got into this mess in the first place.

One recent blogger commented:

“All the news you have heard this last month does not bode well for those trying to foreclose on poor home owners. Foreclosure levels have dropped tremendously. And the housing market reacts.

“There is no consistency,” says Lawrence Yun, chief economist of the National Association of Realtors.   “In one quarter, a market may see a price increase and the next quarter a price decrease.”

I guess what you’ve been feeling in California is being felt all over the Nation.

There’s a proposed Federal Program to assist Banks and borrowers (one of hundreds) by paying Banks $1 for every $2 a Bank writes off on a loan. Why ‘write off’ any part in the first place? Because many of these homes are worth less than the debt; they’re underwater (banks call this “negative equity”).

Sounds great, right? $75 Billion has been allocated. That’s the equivalent of a $150 Billion write-down on mortgage balances. Nobody knows how, when, or if such a program will ever get off the ground, or who will be “eligible.”

It is supposed to help those who were victims of “predatory lending practices.” In other words, you’ll have to prove you weren’t lying when you filled out that loan application. (Weren’t they called “Liars’ Loans?”) So, there goes 75% of the potential pool of borrowers. (Come on people, does anybody really believe that a nail salon worker could afford a $750,000 house? Or that the worker had a good faith belief they could? What turnip truck did we just fall off of?)

And, just because the government is what the government is, the bailout won’t wipe away all the “negative equity.” No sir. The government wants to eliminate as little negative equity as possible – just enough to “hope to get [borrowers] committed again.” “Committed” to what? To staying in the house and not walking away from the mortgage, and renting the identical place just down the street for about half the cost?

I sure hope this program works. (Hey, I can dream, can’t I?)

Backed by The Clearing House Association, a consortium of banks (and was there ever a better name?), the Federal Reserve has asked an appeals court to shield the names of participants in the federal emergency financial system bailout program from the press and the public.

In response to a lawsuit brought by Bloomberg News and Fox News Network under the Freedom of Information Act, which requires government agencies to make documents available to the public, the Fed said that the release of information on the details of the federal bailout program, including which banks were participating, would inflict further harm on the U.S. financial system.

(Cut to courtroom image of Jack Nicholson: “You want the truth? You can’t handle the truth!”)

During its argument before the U.S. Second Circuit Court of Appeals, the Fed said that if potential participants knew they might be named, they might choose not to borrow rather than face the “stigma” associated with appearing to be in trouble.

Which is apparently worse than the “stigma” associated with driving the economy off a cliff.

The appeals court will take another few weeks before ruling. If the court rules for the news organizations, you can bet it will be appealed to the full court or to the Supreme Court.

And in the dark, the feast continues….