Mortgage Giants Leave Legal Bills to the Taxpayers

According to newly released documents, mortgage giants Fannie Mae and Freddie Mac have spent more than $160 million of taxpayer's money defending former executives in civil lawsuits. Raise your hand if that sounds like a good use of your tax dollars. Didn’t think so.

NYTimes.com reports:

The bulk of those expenditures — $132 million — went to defend Fannie Mae and its officials in various securities suits and government investigations into accounting irregularities that occurred years before the subprime lending crisis erupted. The legal payments show no sign of abating.

Documents reviewed by The New York Times indicate that taxpayers have paid $24.2 million to law firms defending three of Fannie’s former top executives: Franklin D. Raines, its former chief executive; Timothy Howard, its former chief financial officer; and Leanne Spencer, the former controller.

Late last year, Randy Neugebauer, Republican of Texas and now chairman of the oversight subcommittee of the House Financial Services Committee, requested the figures from the Federal Housing Finance Agency. It is the regulator charged with overseeing the mortgage finance companies and acts as their conservator, trying to preserve the company’s assets on behalf of taxpayers.

“One of the things I feel very strongly about is we need to be doing everything we can to minimize any further exposure to the taxpayers associated with these companies,” Mr. Neugebauer said in an interview last week.

Continue reading at NYTimes.com...

Home Refinancing Demand At Highest In 15 Months

From Reuters.com:

Mortgage applications leaped last week as rock-bottom rates lifted demand for home refinancing loans to its highest level in 15 months, the Mortgage Bankers Association said on Wednesday.

Home loan refinancing puts extra cash into consumers' hands that can be used to pay off existing debt or funnel into the economy through purchases. By lowering a monthly mortgage payment it may also help some homeowners avoid default and foreclosure.

The MBA said its seasonally adjusted index of mortgage applications, which includes both purchase and refinance loans, for the week ended August 13, increased 13.0 percent. The four-week moving average of mortgage applications, which smooths the volatile weekly figures, was up 2.6 percent.

The MBA's seasonally adjusted index of refinancing applications increased 17.1 percent, the highest since the week ended May 15, 2009.

Borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 4.60 percent, up 0.03 percentage point from the previous week's record low. The survey has been conducted weekly since 1990.

Interest rates were also below their year-ago level of 5.15 percent.

5 Tips for Protecting Your Home from Foreclosure

Many U.S. homeowners are in foreclosure or desperately trying to prevent their home from being foreclosed upon. Maybe they have missed a couple of mortgage payments and they just aren’t sure what to do next. www.federalreserve.gov has posted five 5 tips to protect your home:

1. Don’t ignore your mortgage problem. If you are unable to pay--or haven’t paid--your mortgage, contact your lender or the company that collects your mortgage payment as soon as possible. Mortgage lenders want to work with you to resolve the problem, and you may have more options if you contact them early. Call the phone number on your monthly mortgage statement or payment coupon book. Explain your financial situation and offer to work with your lender to find the right payment solution for you. If your lender won’t talk with you, contact a housing counseling agency. You can find a list of counseling resources at NeighborWorks and on the U.S. Department of Housing and Urban Development's (HUD) website or by calling (800) 569-4287.

2. Do your homework before you talk to your lender or housing counselor. Find your original mortgage loan documents and review them. Review your income and budget. Gather information on your expenses, including food, utilities, car payment, insurance, cable, phone, and other bills. If you don’t feel comfortable talking to your lender, contact a housing or credit counseling agency. Counselors can help you examine your budget and determine the options available to you. They may also advise you about ways to work with your lender or offer to negotiate with your lender on your behalf.

3. Know your options. Some options provide short-term solutions/help, while others provide long-term or permanent solutions. You may be able to work out a temporary plan for making up missed payments, or you may be able to modify the loan terms. Sometimes, the best option may be to sell the house. For information on different options, visit HUD’s website or Foreclosure Resources for Consumers for links to local resources.

4. Stick to your plan. Protect your credit score by making timely payments. Prioritize bills and pay those that are most necessary, such as your new mortgage payment. Consider cutting optional expenses such as eating out and premium cable TV services. If your situation changes and you can no longer meet your new payment schedule, call your lender or housing counselor immediately.

5. Beware of foreclosure rescue scams. Con artists take advantage of people who have fallen behind on their mortgage payments and who face foreclosure. These con artists may even call themselves “counselors.” Your mortgage lender or a legitimate housing counselor can best help you decide which option is best for you. For tips on spotting scam artists, visit the Federal Trade Commission's website, Foreclosure Rescue Scams. Report suspicious schemes to your state and local consumer protection agencies, which you can find on the Consumer Action Website.

Please see my blog entry and video on the same topic, Other Options than Foreclosure here.

Bank Profits Rise, But So Do Bad Loans

Lately major financial institutions have been boasting higher profits lately to assure consumers they have rebound from the economic crisis. However, a new Federal Deposit Insurance Corp. report is asserting that although banking profits have increased, so have the number of bad loans.

Even though profits increased sharply, troubled assets continued to grow. According to the Workshop's analysis, 411 banks have a "troubled asset ratio" of more than 100, up from 389 banks at the end of December. In other words, they had more problem loans and foreclosed properties on their books than capital and loan loss reserves.

While not an official FDIC statistic, the troubled asset ratio has proven to be a strong indicator of bank stress. Of the 81 banks that have failed so far this year, nearly all had trouble asset ratios above 100, according to their latest FDIC reports.

One especially troubling fact: the FDIC reported that mortgage delinquencies hit an astounding 10.8 percent in the first quarter, up from 6.4 a year ago and just 1.2 percent three years ago. Those numbers may portend more defaults and foreclosures over the next several months.

Feds Bust Billion-Dollar Mortgage Fraud Ring

Federal agents have arrested former mortgage-lending executive Lee Farkas for his involvement in a billion dollar fraud ring. As the former chief of Taylor Bean & Whitaker, a wholesale mortgage lender, Farkas "operated a sophisticated shell game" to prop up his struggling company and take advantage of investors and taxpayers.

According to CNN.com, Farkas could spend life in jail if found guilty. Officials claim he “ripped off the Federal Housing Administration and investors in at least two financial firms, and tried to make off with funds from the Troubled Asset Relief Program”

"The gravity of this fraud is really quite amazing," said Assistant Attorney General Lanny A. Breuer. He said losses from the scheme will be measured "in the billions."

Among other things, authorities said, Farkas filed false information to get TARP loans via an investment in TBW's biggest lender, Colonial Bank of Alabama. Colonial failed last August in the third-biggest bank failure of the year.

Taylor Bean also was a huge lender under Federal Housing Administration programs. Officials said the FHA and Ginnie Mae, another government mortgage lender, lost some $3 billion in the Taylor Bean fraud. It is the FHA program's biggest-ever loss, they said.

Continue reading at CNN.com…

Bid to Curb Mortgage Tax Break Falters

Although there have been effectors recently in congress to reduce the tax deduction for mortgage interest, the cause is finding little support in Congress. President Obama’s newest budget proposal aimed to shrink deductions for mortgage interest, property taxes, charitable contributions for married couples earning more than $250,000, or individual taxpayers earning more than $200,000 per year.

But the proposal has gained no traction in Congress so far. Members from both parties are concerned about how it would affect both the housing market and charitable contributions, says Matthew Beck, a spokesman for the Democratic majority on the House Ways and Means Committee.

The administration believes the proposal would reduce the deficit and "distribute the cost of government more fairly among taxpayers of various income levels," says a Treasury spokeswoman.

But lobbyists for the real-estate industry say scaling back the deduction would hurt demand for housing at a time when the market remains fragile. "It seems very counterintuitive to impose this kind of pain on an industry that's already suffering more than any industry in America," says Jerry Howard, chief executive of the National Association of Home Builders.

Continued at Wall Street Journal.com…

Refinance Program Expands to Cover Mortgages 25% Under Water

Earlier in week it was announced that the Home Affordable Refinance program would now accept applications from homeowners who are up to 25% under water on their mortgage. Meaning that you can still qualify to refinance your home even if the current value is up to 25% less then what you still owe.

Financial expert Suze Orman took to her blog to explain what this change means to the average American. You can check out a clip from her entry below, or click here to check out the full text and links to more information.

If you have a mortgage that is either backed or held by Fannie Mae or Freddie Mac, and you are still on-time with the payments, you may be able to refinance into a low-rate mortgage to help you stay in the home. When the program was launched in the spring your mortgage could be as much as 105% of the home’s current value (or to put it another way, you could be 5% under water) and still be eligible for the program But the government realizes that it needs to reach more people at risk of losing their home, so it has now expanded the acceptable loan-to-value (LTV) to 125%.

What to Do:

If you have were already turned down for a Home Affordable refinance because your LTV was too high, I want you to go back and try again. Make sure the lender knows about the new rule. Hey, print out this official release and show them.

If you hadn’t bothered to try and refinance because you knew your mortgage was over the old 105% limit, well, now’s your chance.