The L.A. Times recently reported that the Fed is now looking to find ways to dispose of the 248,000 homes it owns (through bank REOs) by either selling them in bulk to investors who will be required to rent them, or to sell them on rent-to-own basis.

“One idea could be to create pools of foreclosed properties that would be sold in bulk to private investors, who would then rent them out, helping reduce taxpayer losses on the bailouts of Fannie and Freddie. Another idea could be for investors to buy homes and then rent them on a rent-to-own basis.”

http://latimesblogs.latimes.com/money_co/2011/08/foreclosure-obama-housing-market-rent-fannie-mae-freddie-mac.html

Who is kidding whom here? “Rent-to-Own”? What are we – a mattress store?

The Fed will give a new buyer a break by allowing them to rent, then buy at a price (presumably) fixed at the time they enter into this agreement (thus allowing the buyer to get some upside?) Or, is the program designed to let the Renter buy it at market value several years from now, if they qualify? (That way, the Fed gets the upside, and the rental value. It beats having an empty house…)

Why not just take the mark-down to market value today, and reform the existing loan – and allow the current owner to keep it?

Either way, there is going to be a loss.

HUD announced this week that it is changing how it defines foreclosed and abandoned properties.

At HUD, foreclosed used to apply only to properties that had completed the foreclosure process. Now, foreclosed at HUD also encompasses properties in default.

The agency used abandoned to define property that had been foreclosed on and had been vacant for at least 90 days. Now, abandoned includes homes with lingering code violations and those where mortgage or tax payments are more than 90 days overdue.

From DSNews.com:

HUD officials say the new wordsmith-ing will help communities acquire, rehabilitate, and re-sell foreclosed and abandoned properties more quickly under the Neighborhood Stabilization Program (NSP) and help prevent further decline in hard-hit neighborhoods.

The changes come just as reports are surfacing that states and local municipalities have spent less than half of the $4 billion available through the NSP initiative to buy up distressed properties in their communities.

For the complete report, go here.

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.”

HUD Commissioner David H. Stevens announced a new initiative this week that focuses on mortgage companies with significant claims against the FHA mortgage insurance program, issuing 15 subpoenas to mortgage lenders across the country demanding documentation on failed loans that resulted in claims paid by the FHA insurance fund.

According to a press release posted on the HUD website:

“This initiative was prompted, in part, by the FHA Commissioner, David Stevens, who was alarmed by the incidence of claims against the FHA insurance fund by a number of poor performing companies and reached out to the HUD OIG for assistance.

FHA Commissioner David Stevens said, “We are taking risk management extremely seriously. In addition to the policy changes we are implementing and additional changes we plan to announce later this month, we need to hold FHA lenders accountable for the high rates of defaults and claims against FHA. The Inspector General’s initiative will help us determine whether there is fraud and better manage risk in the long run.

”The HUD OIG identified these direct endorsement companies from an analysis of loan data focusing on companies with a significant number of claims, a certain loan underwriting volume, a high ratio of defaults and claims compared to the national average, and claims that occurred earlier in the life of the mortgage. These are key indicators of problems at the origination or underwriting stages. The HUD OIG wants to see why these loans failed.”

The companies served with subpoenas included:

• First Tennessee Bank N.A., Memphis, TN
• Alethes LLC, Lakeway, TX
• Security Atlantic Mortgage Co., Edison, NJ
• Pine State Mortgage Corporation, Atlanta, GA
• Birmingham Bancorp Mortgage Corporation, West Bloomfield, MI
• Alacrity Financial Services, LLC, Southlake, TX
• Assurity Financial Services, LLC, Englewood, CO
• D and R Mortgage Corporation, Farmington, MI
• Webster Bank, Cheshire, CT
• Mac-Clair Mortgage Corporation, Flint, MI
• Americare Investment Group, Inc., Arlington, TX
• 1st Advantage Mortgage, Lombard, IL
• American Sterling Bank, Independence, MO
• Sterling National Mortgage Company Inc., Great Neck, NY
• Dell Franklin Financial LLC, Columbia, MD

No California mortgage lenders on the HUD subpoena list…yet.

The government continues to struggle to put together a loan modification program that will work for both the homeowner and the lender. According to a recent announcement by HUD and the U.S. Department of the Treasury, new provisions to the mortgage modification program (HAMP-Home Affordable Modification Program) that will speed the process will go into effect on June 1, 2010 and include:

Documentation – homeowners must supply three types: a Request for Modification and Affidavit form, IRS Form 4506T-EZ and proof of income.

Acknowledgement – lenders must acknowledge in writing within 10 days that they have received the documentation and provide a timeline and explanation of the evaluation process.

Evaluation – lenders must evaluate application within 30 days and request any additional information needed from the homeowner within that timeframe. Also within that same 30 days, lenders must provide homeowners who meet modification eligibility requirements with a trial modification plan notice. If the homeowner does not qualify, they must also be notified within 30 days and be given consideration for other options, including forbearance, refinancing, non-HAMP modifications, short sales or deeds in lieu of foreclosure.

Homeowners who obtain a trial modification must make payments on time for the modification to become permanent.

And when they say “permanent”, it’s the government definition: the lender can choose to continue or end the modification at any time, even years later.