The law concerning foreclosures in California is set to change on January 1, 2012. Many are concerned this will complicate the foreclosure process and grind the foreclosure machinery to a halt. So far the banks have taken little notice. Some speculated there would be a last-minute push to get foreclosures done before the change took effect. That isn’t happening. The banks are in no hurry to process their backlog of foreclosures, and if the changes in the law complicate the process for them, they will grin and bear it.
Calif. hands trial lawyers ‘nuclear weapon’ to use against mortgage industry: legal expert
By Kerri Ann Panchuk — October 5, 2012 • 8:42am
The Homeowner Bill of Rights launched in California not only changed hundreds of years of real estate law, it may have turned the West Coast state into a judicial foreclosure state with financial firms on high alert, legal experts claim.
“In California, they just gave trial lawyers a nuclear weapon to use against the industry,” said Bob Jackson, president and attorney at Irvine, Calif.-based Jackson & Associates. Jackson spoke at HousingWire’s REperform Summit, a mortgage servicing conference under way in Dallas.
“The Homeowner Bill of Rights is the most massive change in the last 100 years of real estate law,” he said. “It used to be servicers were in the business of enforcing simple contract law. What the loan servicer did is they enforced the contract, but that is no longer how the game is played.”
Servicers are still in the game of enforcing contracts. The recent changes spell out a new series of procedures they must follow in order to do their jobs, and it provides penalties if they do it poorly. The most likely result will be higher documentation standards for new loans and increased costs for loans that will get passed on to consumers. 
The bill of rights, which was legislation designed by California Attorney General Kamala Harris, gave borrowers standing to legally address violations of the new foreclosure legislation.
The law bans dual-track foreclosures, requires single point of contacts for distressed borrowers and imposes civil penalties for the filing of multiple unverified documents, otherwise known as robo-signing. The robo-signing provision essentially means a law firm cannot file a notice of default or another foreclosure-related action unless a servicer has reviewed the filings to verify them, Jackson said.
The review requirement will ensure paperwork is in order from now on. This is not a bad development, unless you like shoddy paperwork.
Jackson said the bill created several new areas of concern for servicing shops. The first is the potential to be sued for wrongful denial of a loan modification. Firms also can be sued if a loan modification was denied because of a mistake made in the process.
With any document misstep leading to the possibility of litigation, Jackson said the hedging strategy would be to file judicial foreclosures, bypassing the common practice of nonjudicial foreclosures in California.
The lenders and servicers will put procedures in place to minimize their exposure, and then they will go back to business as usual. The savings in time and money over a judicial foreclosure will pay for a lot of new procedures and paperwork. The whole point of a non-judicial foreclosure process was to avoid clogging the courts with these proceedings and reduce costs. One look at the mess in Florida reveals the wisdom of the non-judicial foreclosure process.
“You need to start looking at your foreclosure timelines,” Jackson said. “Judicial foreclosures get rid of 80% to 90% of this stuff.” He asserted, “[T]he bill will turn California from a nonjudicial foreclosure state to a foreclosure state.”
Jackson noted that Arizona and Oregon are currently considering similar legislation.
I think these concerns are overblown. If servicers can’t put procedures in place to comply with the new law, then judicial foreclosures will be far more common, but someone, somewhere will find a less expensive non-judicial procedure to save money on the foreclosure process.
One side effect of this will be ongoing delays in foreclosure processing, but lenders don’t seem to mind that. They are taking their write downs as they can afford them, and with a near zero cost of capital, they can afford to wait.
A detailed review of the new changes
Back in July I wote a detailed review of the new changes to California foreclosure law.
The California legislature passed the so-called Homeowners’ Bill of Rights, and Jerry Brown has indicated he will sign it into law. So how does this new law change the foreclosure process? Let’s take a closer look.
Calif. Legislature OKs homeowners’ bill of rights
Marisa Lagos and Wyatt Buchanan — Updated 11:33 p.m., Monday, July 2, 2012
What the legislation does:
Delays: Bans banks from proceeding with a foreclosure when a homeowner is seeking a loan modification, a practice known as dual tracking.
Dual tracking has always been part of the foreclosure process. Foreclosure is supposed to be a threat to compel a borrower to either pay up or sell and move out. Foreclosure is a threat designed to compel action. Banks use the threat of foreclosure to ensure borrowers are dealing with them in good faith. If a lender senses the borrower is not cooperating, they pull the trigger on the foreclosure to boot them out.
This provision came about because some borrowers were frustrated when they were negotiating with one division at the bank, and another foreclosed on them. There were instances where the left hand didn’t know what the right hand was doing. Was this widespread? Probably not, but many people who were denied short sales, often without explanations for the denial, were foreclosed on, and they felt the process needed clearer procedures. Perhaps they are right.
The details on how this is implemented matters. If the lender cannot begin the process while a borrower is applying for a loan modification, then after the loan modification is denied, each borrower gets four months of free rent while the lender waits the statutory timeframe. However, if the lender must simply halt the process, then very little has changed.
There is only a three week period between the Notice of Trustee Sale and the actual auction. If the lender has filed a NOD, something they will now be strongly encouraged to do in order to start the process, then they can process a loan modification request during the 90-day redemption period, which is what that period is intended for (loan modification is another form of curing).
If this change prevents the lender from taking the next step rather than the first step, then this law will have a positive impact. One thing it will likely do is streamline the loan modification process. When lenders finally want to stop amend-extend-pretend, they will want to process foreclosures in a timely manner, which means processing a loan modification request in 90 days.
This law will also require some clarification on the loan modification process. Is there a timeframe for borrower compliance? If not, this is ripe for abuse. What happens when the borrower is tardy with providing necessary documents? Is that an automatic denial? Does the borrower have the right to appeal a “no” answer? If so, what are the timeframes, and what is the process. If these items are not spelled out, attorneys will use these ambiguities to tie up lenders in loan modification requests for months to help their clients get more free housing.
Contacts: Requires banks to provide struggling borrowers with a single point of contact at the bank.
This is a good idea. This should eliminate most of the intra-bank communication problems. Borrowers should know who to call who can give them answers.
Answers: Requires banks to clearly explain to borrowers why they are rejected for a loan modification.
This is another good idea. Of course, borrowers may not like the answer they are given, but that leads back to the questions I posed above about the loan modification process. Once a borrower gets a “clear no” what can they do about it? Anything? Attorneys will take advantage of this part of the process.
Recourse: Gives borrowers the right to sue lenders for “significant, material violations” of the law.
This is another provision the attorneys are going to love as “significant, material violations” of the law is defined. If this provision has real teeth, like the law in Nevada, it could really put a damper on foreclosures and enshrine squatting for many in shadow inventory.
Fines: Subjects lenders to fines of $7,500 per loan for filing and recording unverified documents.
This is similar to the Nevada law. If the paperwork in California is truly shoddy, this will halt many foreclosures and give free houses to loan owner who don’t deserve them.
Limits: Applies to first-lien mortgages for owner-occupants.
At some point, I expect to see this broadened to cover seconds and HELOCs. Right now, those mortgages are unlikely to foreclose because they are underwater and have no value, but if prices do rise, these subordinate lien holders will play havoc on delinquent borrowers unless the banks create universal procedures for both first and second mortgages.
I don’t think California will become a judicial foreclosure state. The cost of private lending will go up here, and lenders will pass those additional costs on to borrowers. The people intent on gaming the system will have a few new cards to play, and the rest of us will end up paying the price for their bad behavior.
Doubling mortgage debt in just five years
People do really stupid things with their finances. When someone doubles their mortgage debt in just five years, you have to wonder what they were thinking. Did their income double? How were they going to pay that off? Was the house going to pay it for them?
- The former owner of today’s featured REO was a typical Ponzi who spent her house. She paid $440,000 on 4/11/2002 using a $300,700 first mortgage, a $60,000 second mortgage, and a $80,000 down payment. She also had a $60,000 HELOC approved when she bought which may have been used for purchase money.
- On 3/10/2003 she refinanced with a $322,000 first mortgage.
- On 6/27/2004 she obtained a $100,000 HELOC.
- On 3/25/2004 she refinanced with a $480,000 Option ARM.
- On 6/7/2007 she refinanced with a $640,000 first mortgage.
- On 6/7/2007 she opened a $80,000 HELOC.
- Total property debt was $720,000 assuming she maxed out the HELOC. Total mortgage equity withdrawal was $360,000. She doubled her mortgage debt in five years.
If the housing bubble inflated further, do you think she would have doubled her mortgage again over the five years that followed? Since she never thought she would have to pay it back, it’s reasonable to assume she would have. All the Ponzis would have. Once they believed the house would pay off their debts, it was free money, and no Ponzi is ever going to turn down apparently free money even if it’s really debt.
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Proprietary OC Housing News home purchase analysis
25002 RAVENSWOOD Lake Forest, CA 92630
$569,900 …….. Asking Price
$440,000 ………. Purchase Price
4/11/2002 ………. Purchase Date
$129,900 ………. Gross Gain (Loss)
($35,200) ………… Commissions and Costs at 8%
============================================
$94,700 ………. Net Gain (Loss)
============================================
29.5% ………. Gross Percent Change
21.5% ………. Net Percent Change
2.5% ………… Annual Appreciation
Cost of Home Ownership
——————————————————————————
$569,900 …….. Asking Price
$113,980 ………… 20% Down Conventional
3.38% …………. Mortgage Interest Rate
30 ……………… Number of Years
$455,920 …….. Mortgage
$109,674 ………. Income Requirement
$2,017 ………… Monthly Mortgage Payment
$494 ………… Property Tax at 1.04%
$0 ………… Mello Roos & Special Taxes
$142 ………… Homeowners Insurance at 0.3%
$0 ………… Private Mortgage Insurance
$180 ………… Homeowners Association Fees
============================================
$2,833 ………. Monthly Cash Outlays
($311) ………. Tax Savings
($733) ………. Equity Hidden in Payment
$119 ………….. Lost Income to Down Payment
$91 ………….. Maintenance and Replacement Reserves
============================================
$2,000 ………. Monthly Cost of Ownership
Cash Acquisition Demands
——————————————————————————
$7,199 ………… Furnishing and Move In at 1% + $1,500
$7,199 ………… Closing Costs at 1% + $1,500
$4,559 ………… Interest Points
$113,980 ………… Down Payment
============================================
$132,937 ………. Total Cash Costs
$30,600 ………. Emergency Cash Reserves
============================================
$163,537 ………. Total Savings Needed
The property above is available for sale on the MLS.
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32 Responses to “Did the Homeowner Bill of Rights make California a judicial foreclosure state?”
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A 10% reduction in shadow inventory means we only have 10 more years to go before it’s gone.
Shadow inventory gone in 10 more years
The shadow inventory that previously darkened industry outlook is beginning to fade. In fact, we may soon begin to see the sunlight on the horizon.
In July shadow inventory – unlisted homes that are seriously delinquent, in foreclosure, or held as REOs – declined 10.2 percent year-over-year, falling to 2.3 million homes, according to CoreLogic’s Shadow Inventory Report released Tuesday.
“This is yet another hopeful sign that the housing market is slowly healing,” said Anand Nallathambi, president and CEO of CoreLogic.
Last July’s 2.6 million-home shadow inventory was eerily close to the level recorded two years prior in May 2009. Now, the heavy shadows are lifting.
The current shadow inventory is valued at $382 billion, down from $397 billion in July 2011.
The current shadow inventory equates to a six-month supply, according to CoreLogic.
The analytics firm also reports the rate of distressed sales taking homes out of the shadows is close to matching the rate of newly seriously delinquent homes falling into the shadows.
Seriously delinquent homes – those 90 or more days delinquent – are the most common type of home in today’s shadow inventory, making up 1 million of the 2.3 million-home total.
About 900,000 homes are currently in foreclosure, and another 345,000 are in REO.
Despite fading shadows nationally, some states continue to struggle with long foreclosure timelines.
“While a lower outflow of distressed sales helps alleviate downward home price pressure, long foreclosure timelines in some parts of the country causes these pools of shadow inventory to remain in limbo for an extended period of time,” said Mark Flemming, chief economist at CoreLogic.
Forty-five percent of the shadow inventory is concentrated in five states – Florida, California, Illinois, New York, and New Jersey.
It will take about 4 years to get shadow inventory back to historical levels. There has always been about 1 million shadow units for varying reasons… people losing homes due to job loss, illness, or divorce. The bubble was not the start of shadow inventory and the end of this cycle will not spell the end of shadow inventory.
If we are burning through 300,000 units per year, it would take 8 years to go from 2.3 million to 0 units. However, since there will still be 1 million units once things are back to normal, it will only take 4 years at the current burn rate. If the burn rate increases or decreases, the timeline will change accordingly.
Since they include visible inventory, your calculation is correct. Of course, more delinquencies will likely be added in the future as more underwater borrowers quit paying as they decide to short sell or they give up on their loan modification.
Uh…. wishful thinking muchacho.
the gap between income growth vs inflation is widening, not narrowing which ensures as time passes, at certain points, borrowers en-masse won’t be able to pay. Thus, dq’s rise/shadow builds.
btw, this ‘gap’ scenario played out exactly beginning in about the yr 2000 and continued to widen thru 2007. The bubble popped a short time later.
Since OC wages are not indexed to inflation, if prices are supposedly going to keep going up along with borrowing costs, rates must keep going down or the jig is up.
And, speaking of inflation (currency devaluation)…. over the last 9 months or so, expectations have risen dramatically that home prices are finally ready to blast off. So much so, that most recent housing bears have now become bullish. Well, if the next round of currency devaluation is about to commence, why would US corporations (fellow insider elites) be sitting on record level piles of cash (now @ $1.4trillion)?
I have a post coming out later this week that shows the cost of ownership today for an OC homeowner is the same as 1989. All of the appreciation since 1989 is a result of falling interest rates.
http://ochousingnews.com/wp-content/uploads/2012/10/2012-10-OC-median_rent_cost_ownership.png
Corporations are probably sitting on cash because there are not many good investments out there. We have excess capacity in most industries and very little real demand.
They’re probably sitting on cash for the same reason I was sitting on cash for four years – The Great Recession scared the $#!^ out of me. In late 2008 we started saving cash aggressively.
Has the “wealth effect” kicked in for you personally yet? Have you stopped hoarding your cash and spent a little of it (on something besides your recent refi)?
Well, we’re back in hoarding mode because my wife wants a bigger house with a real yard; but that’s less “fearful saving” and more “planning saving.”
I think I married the clone of your wife.
The transition away from fearful saving is exactly what Bernanke is hoping for. As far at that goes, the wealth effect is okay. It crosses the line when people start piling on mountains of debts thinking the good times will last forever.
I am still fearful saving.
Deep down you guys hope bernanke’s solution will work. It won’t.
It is delaying the cure and exacerbating the problem. You are missing the forest for the trees.
“RE affordability spreadsheet says good. Things are good. Prices rising. Rents rising. I no longer save out of fear. I save to buy a bigger house.”
Debt monetization and 0% Fed funds rate has succeeded in clouding your market rationale. 0% Fed funds do create a confusing investment environment.
Distortion of the market creates a scenario where normally nimble, conservative investors & entrepreneurs misinterpret false signals and make mistakes they would not make in a normal functioning market.
Your grounded bearishness is being blunted by these false signals.
You may be right. We are in uncharted waters with zero percent interest rates.
It’s interesting that the more the Fed lowers rates to stimulate the economy, it creates more fearful savers like yourself who are concerned about the end result of all the Fed meddling. The policies of the Fed are having the opposite effect on people like you.
But where are you saving this money? If it’s in a bank then if you think about it, given the 10% reserve ratio, this gives a bank 9 new dollars for your 1 to make loans to try and bring that bank in to profitability. This is clearly one of the goals of the Fed. So whether we like it or not we are going along with the Fed. At least that’s what I think.
And companies are borrowing money even if they have no need for it today. The cost of the implied option they get is very low. The cash they have built up is something to look at, but I think too much value is given to it.
Yes, this is a great time for corporations to borrow money. Most of refinanced their old debts and some are taking on debt they don’t need just to have a warchest of cash for future deployment. This has the potential be be very inflationary once these corporations start putting this money to work, but for now, it just sits on their balance sheets, probably stored in short-term treasuries.
“…Since OC wages are not indexed to inflation…”
Yet home owner carry costs (all forms of taxes,insurance,maintenance, etc) keep rising.
Not to mention other living costs such as food, gasoline.
Even if mortgage interest rates drop to zero, at what point do housing costs
expressed as a percent of disposable income become unbearable? 50%, 60%, 70% ??
As a follow on to yesterdays IHB post, could the Fed and banksters craft a
situation where mortgage interest is set at essentially zero, but at the same time write an endless stream of HELOC loans? In other words, instead of
just the banks borrowing free money, extend the concept out to loan owners.
That’s a scary thought. Open up the printing presses to loan owners? That would certainly stimulate the economy. I suppose when the whole system blows up the federal reserve can just buy up all the bad debt and print money to cover those losses as well.
You wouldn’t have to use HELOCs. The GSEs and FHA could stimulate the economy by allowing more people to refi existing mortgages taking cash-out up to ~125% LTV (kinda like HARP 2.0 for all). They could keep all other standards tight.
I would refi into a 125% LTV 3% 15Y mortgage in a heart beat. Not because I want to buy toys, but because I could pay-off our student loans (into a slightly lower tax-advantaged rate) and pay-off the small balances on our auto loans (into same rate but tax-advantaged).
Paying off student loans is one of the few uses of HELOC money I can endorse. Even through the interest rate may be higher, if you have to default on a HELOC, worst case you can bankrupt out of it. You can never bankrupt out of a student loan.
As I noted in a comment below, HELOCs serve as a replacement for welfare. If you allow enough people to feed from the free-money trough, it keeps them compliant and happy which allows the elites to rob them blind.
Wells Fargo Faces Federal Charges of Mortgage Fraud
The U.S. government is suing Wells Fargo over what officials allege constitutes more than 10 years of misconduct as a direct endorsement lender for the Federal Housing Administration (FHA).
The civil mortgage fraud lawsuit, filed in a Manhattan federal court Tuesday, alleges Wells Fargo falsely certified the credit and underwriting quality of FHA loans it originated. According to the complaint, thousands of Wells Fargo’s FHA-insured mortgages defaulted as a result of deficient underwriting, causing the government agency to lose hundreds of millions of dollars.
Preet Bharara, U.S. attorney for the Southern District of New York and lead prosecutor in the case, says Wells Fargo failed to comply with the three basic quality control requirements mandated by FHA’s direct endorsement lender program, which gives approved lenders the authority to originate, underwrite, and certify mortgages for government-backed insurance without having to obtain prior approval from FHA or HUD.
Bharara also alleges that Wells Fargo did not sufficiently train staff on the proper procedures for originating and endorsing FHA loans and instituted a bonus incentive plan that rewarded employees based purely on the number of loans approved regardless of quality, which he contends propagated the practice of reckless underwriting.
Bharara claims that concerns about the quality of FHA loans were raised internally at the bank, but Wells Fargo did not report these concerns or alert authorities about the bad loans until after his office issued a subpoena last year.
According to court documents, between May 2001 and October 2005, Wells Fargo certified that over 100,000 FHA loans met HUD’s requirements and were eligible for government insurance. The complaint alleges the bank knew “a very substantial percentage” of these loans–-nearly half in certain months-–had not been properly underwritten, contained unacceptable risk, and were ineligible for FHA insurance.
“Now a jury will have to weigh the facts to determine the bank’s liability and the scope of the damages it must pay,” Bharara said.
According to the lawsuit, Wells Fargo internally identified 6,558 seriously deficient loans that it was required to self-report under the FHA program. Authorities say Wells Fargo concealed 6,320 of these improperly certified loans. Bharara maintains the bank avoided indemnification to HUD on approximately $190 million in FHA-paid claims for defaults on the 6,320 concealed loans.
U.S. prosecutors are seeking damages and penalties for hundreds of millions of dollars in insurance claims that HUD has paid, and expects to pay in the future, for mortgages that were allegedly wrongfully certified.
Helen Kanovsky, general counsel for HUD, said in a statement that “Wells Fargo has been a valued participant in the FHA-mortgage lending program.”
Kanovsky went on to say, “Unfortunately, as alleged in the government’s complaint, there was a time when Wells Fargo placed profits over people, corporate results over corporate integrity, and did not consider the effect its actions would have on the FHA program as well as the overall economy. Today’s complaint and others like it are necessary, not only to deter future improper acts, but to recover damages on behalf of the FHA mortgage fund and the American taxpayer.”
Now that banks are on the hook for bad loans they underwritten I wonder how much lending really would happen in the next couple of years. Of course this could just be a slap on the wrist like the Robo-signing bank settlement.
The threat of loan buybacks is the only thing preventing the complete abandonment of lending standards. With the government taking all the risk of loss, the banks would like to make unlimited loans. However, with the threat of buybacks if the loan goes bad forces banks to be careful and prudent in their underwriting.
Wells is so back-logged with mortgage apps, that it’s going to take well-over 60 days to complete my fairly standard refi. The good news is, Wells locked my rate for 90 days at no cost – I guess they knew it would take them time to process.
Wells was my lender before I refinanced. I decided to use Wells for my refinance and they were very slow. I went through a loan broker and it was faster.
I’m not surprised they are slow, they are 40% of the mortgage market.
Maybe the threat from the Federal Government is only a threat. This new provision lets the lenders off the hook after January 1 2013
Housing Bubble Part 2: No Equity Left Behind
DBRS: GSE relief on repurchase risk not enough
By Kerri Ann Panchuk October 9, 2012 • 8:38am
A new plan to relieve lenders of repurchase risk when selling loans to Fannie Mae and Freddie Mac is a big step forward, but may not go far enough to ease financial firms’ concerns, analysts with credit ratings agency DBRS said.
Additionally, DBRS believes the new plan, announced last month, is set up so that mortgage servicers need to gauge future repurchase risks. This is simply unreasonable, DBRS claims.
Earlier this month, the government housing agencies said they would roll out new reps and warrants requirements, providing relief on reps and warrants putback risk for loans that establish acceptable payment histories.
Under the reps and warrants clause of the mortgage contract, GSEs have the option to force a lender to buy back a loan that breaches certain representations made about the loan upfront.
But to help financial firms, the GSEs said all of the loans acquired by the GSEs after Jan. 1, 2013 only have to show that the loan had no 30-day or greater delinquencies during the first 36 months or it had no more than two 30-day delinquencies and no 60-day or greater delinquencies during the first 36 months to avoid buyback risk.
In addition, the loan has to be current at the 60th month following the GSE acquisition date.
DBRS analysts applaud that improvement, but say in a market where borrowers are constantly subject to life changes, it’s difficult to see these factors as the gauge of repurchase risk.
“After the record number of repurchase requests that were initiated in recent years, many industry participants were happy to see the GSEs embrace the concept of ‘sunset provisions’ for some of their underwriting and eligibility reps and warrants,” DBRS said.
“However, several were disappointed to see that the modified reps and warrants would only go into effect if the borrower had a relatively perfect payment history for three to five years,” the note reads. “The sentiment being that it is unreasonable that the seller/servicer’s should have to gauge future repurchase requests around the unexpected life events of a borrower that may render them unable to pay their mortgage loan such as: the loss of a job, death of a bread winner or long term medical illness.
Ben Bernanke’s Mortgage-Refi Nation
Well, that didn’t take long. It’s been less than a month since the Federal Reserve announced plans to buy $40 billion of mortgage-backed securities a month for as long as necessary to spur lending and boost employment. Since then, mortgage interest rates have fallen to the lowest level on record—the average 30-year loan stood at 3.53 percent as of Sept. 28—driving refinance applications to jump to their highest level since 2009, according to the Mortgage Bankers Association.
Borrowers are refinancing at an annualized rate of 22 percent, according to Lender Processing Services (LPS). At this rate, more than one in five borrowers will refinance over the next year. Borrowers who have at least 20 percent equity in their homes are even more likely to refinance. Among those homeowners, one in three will refinance in the next year if the current pace continues.
Refinancing is normally not an option for borrowers who owe more than their home is worth. But they have been getting into the act this year, thanks to the Obama administration’s Home Affordable Refinance Program, which rewards banks for working with underwater homeowners. Since the start of 2012, there’s been a 65 percent increase in refis for borrowers who owe at least 20 percent more than their homes are worth; HARP now accounts for about a quarter of all refis.
With rates so low, some borrowers are taking out shorter-term loans that let them pay down their debt quicker. Gone are the days people take out cash when they refinance. In almost a quarter of all refinancings in the second quarter of 2012, homeowners ponied up cash to reduce the principal on their loans, according to Freddie Mac (FMCC). A further 59 percent kept their loan balance the same—the most ever on record.
Lower interest rates free up real monthly cash flow for homeowners. In the second quarter—before the Bernanke-induced drop in rates—the average refinancing cut the homeowner’s interest rate by 28 percent, the biggest reduction in the 27 years since Freddie Mac began tracking the data. That means a homeowner with a $200,000 loan would save about $2,900 in their first year, Freddie Mac says.
All this refinancing activity is fine for the economy—lower monthly costs could help boost consumer spending–but it’s not Bernanke’s real target. He said (PDF) at a press conference last month: “You get more benefit when people buy homes. … It’s the purchases of new homes that generate the construction activity, the furnishing, all those things that help the economy grow.” Though home sales are starting to rebound slowly, it’s still hard for people with less-than-stellar credit to get mortgages. So for now, while low interest rates may be relieving the consumer debt burden for some, their boost to the overall economy is limited.
Considering modern money mechanics, one thing is for certain…. in due time, a lot of folks who were planning on buying a home are not going to be buying a home for quite some time.
http://1.bp.blogspot.com/-vUDkksk__9Y/UHVoYqD3-iI/AAAAAAAADeQ/Jp4Pkw1Ghv4/s1600/S&P+500+Sideways.png
With mainframe computers and websites, the verified information can be deposited, calls documented, etc. if the banks desired. The law did not get passed without the banks approval of loopholes. It not rocket science — just another delay tacit of delay and pretend for their friends along the left coast.
The so-called foolish borrowers just locked in her profits with a sales price of over $700k that more than $200k more than the current saling price. Plus if the market price when over $750k, she has the option to not excercise the $700k lock-in price by paying off the loan through payments or by selling the property. WS would call her a schrew investor. Is she a burden to the taxpayers because the bank(s) will have the government make good on the loan? In the 80′s, she would be called a welfare queen if she were of color. :]
I think HELOC abuse and dependency were the replacement to welfare. Notice that in 1995 when welfare reform was enacted subprime lending took off and HELOC abuse soon followed. The government used to placate the masses with direct cash payments, but now we do it indirectly by inflating their assets and allowing them to borrow against it.
OK, Spanish credit rating is almost junk. Spain downgraded to BBB-, which includes a negative outlook by S&P.
PS S&P 500 level is below QE3 announcement on Sept 13th.
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