Fannie Mae Gets Smart, Adds Electronic Lock Boxes to Houses

June 21, 2011 By Leave a Comment

Fannie Mae, the mortgage giant, will begin requiring electronic lock boxes on their listings. This means that showing agents will use these boxes instead of the current practice of push button lock boxes.

Some may ask, “so what?”  Foreclosure properties are occasionally mistreated by real estate agents – some will or let their buyers pull up carpet and move/destroy things you wouldn’t do in a normal house.  Others will show these homes without permission or go back many times without informing the agent, which is effectively breaking and entering (kinda a bid deal) and will result in an automatic $1000 fine by our MLS.  Sometimes the house is left unlocked or with a bunch of lights still on.  I have heard stories of a million other things that have happened that you’d never imagine in a “traditional listing.”

With electronic boxes, all accesses are logged and any issues with unauthorized entry or concerns about damage can be much more easily addressed when the agent and the seller know who were in the property and when.  Plus, now that agents know they can be held accountable, I would expect fewer issues in the future.

Here is Fannie Mae’s letter regarding the new policy.  Will more lenders smarten up in the coming months? I wouldn’t hold your breath but there’s always a chance!

Filed Under: Community Issues, Foreclosures and Short Sales, Opinion, Personal Experiences Tagged With: , ,

A Mortgage Modification in Just 7 Days!

April 27, 2011 By Leave a Comment

The Program

For the past several weeks the Minnesota Home Ownership Center has been piloting an innovative program with Fannie Mae that offers a new and more efficient way for Minnesota homeowners with Fannie Mae loans to access assistance.  This program, known as the Fannie Mae Partnership, builds on the strengths of the Homeownership Advisors Network (statewide counseling network) and maximizes the relationships Fannie Mae has with servicers.

Dedicated Fannie Mae staff that office at the Minnesota Home Ownership Center are able to greatly enhance and improve communications between counselors, servicers and investors and have been empowered to expedite the workout process.

The Process

The process starts with a homeowner contacting a nonprofit foreclosure counselor to discuss their situation and determine if they are a good candidate for a mortgage modification.  This foreclosure counselor is not employed by Fannie Mae or a loan servicer – their interests are solely as an advocate for the homeowner.

If the homeowner is a good candidate for a modification, the counselor works with the borrower to fill out all the required paperwork and collect the necessary documentation from the borrower.  That counselor then forwards the complete package to one of Fannie Mae’s in-house staff at the Minnesota Home Ownership Center for review.

If approved by the Fannie Mae representative, the modification is drafted and sent to the loan servicer for review and acceptance and then sent to the homeowner for their review and acceptance.

The Results

One story I heard from Ed Nelson, Marketing and Communications Manager at the MNHOC, was truly amazing: a borrower that had spent many months working through their servicer for a loan modification and was accepted on a trial modification was subsequently denied a permanent modification even though they had made all their payments on time.  Recently this borrower participated in an early pilot of this program and was able to get a permanent modification approved in just 7 days!

The Impact

To date, the mortgage modification programs have had lackluster results – far fewer mortgages have been modified than had been projected and the stories of borrower frustration and confusion over the process have been prevalent.  This new streamlined program ensures that for Fannie Mae loans, borrowers will have assistance in submitting a complete application to Fannie Mae and should have a response to their request in weeks versus months!

It is unclear how much mortgage modifications are helping to reduce foreclosures but I do believe it has helped keep foreclosures lower than they otherwise would be.  With this new program I’d expect far more approved modifications and thus more foreclosures prevented.  While this program most certainly will not end the foreclosure crisis, it can serve as an important lifeline for borrowers struggling to keep their homes and I think will have a measured impact on foreclosure activity in the future.

The Model for Other Mortgage Note Owners

This program is so simple and intelligent that I hope Freddie Mac and other large holders of mortgages will implement similar solutions – if we were to see this, we’d see even greater results in the future.  It just makes sense!

A similar program to this would also be perfect for homeowners that cannot afford to stay in their house and would rather try to work out a short sale with their lender versus letting the home go to foreclosure. Just like with mortgage modifications, not all borrowers are good candidates for short sales but a streamlined program such as this I believe could literally double or triple the number of successful short sales.

Filed Under: Short Sales Tagged With: ,

We Need a New GSE: Please Welcome Fattie Mae

January 15, 2009 By 1 Comment

Every day there is a new article on the housing crisis and every day there’s a new offered solution.  Since everyone else is doing it, I figured it’s time for me to throw my idea into the ring:

My Idea:

The U.S. Government should set up another Government Sponsored Enterprise (GSE) charged with providing liquidity and stability to U.S. housing’s jumbo mortgage market.  Jumbo mortgages are necessary on loan amounts above $417,000 to $625,500 depending on the affordability of homes in each market.

If we look back to 2005, jumbo mortgages could be had with 5% down (with a 2nd mortgage for the amount over 80% LTV) and at mortgage rates often only .25% to .75% more than conforming conventional rates.  Flash forward to today and we find that most jumbos require at least 20% down (if not more… 2nd’s are practically non-existant) and rates I’ve seen quoted recently are 2% – 2.5% higher than conventional conforming rates, which lately means 7% or so.  I think everyone will agree that jumbo lending suffered from lax requirements and was too cheap for the inherent risk in the product but I believe the pendulum has swung too far the other direction and that today’s terms and rates are out of line for real risk.

Some people will argue that the government should not “bail out the rich” but this isn’t a question of bailouts, this is a question of liquidity and stability.  Today most banks want nothing to do with any loan that they can’t resell to Fannie Mae, Freddie Mac, or Ginnie Mae because they do not have the asset base needed to hold these loans for their 30 year terms, they often immediately resell them to the GSE’s or another party.  Since jumbo mortgages have no secondary market, most banks have to hold any jumbo mortgage they write.

$100′s of billions have been offered up to financial institutions to improve liquidity in the lending market and yet there has been no improvement in the jumbo mortgage market and in fact it looks like this segment has actually become worse in recent months.

Enter a new GSE: Fattie Mae

Fattie Mae’s sole focus will be restoring liquidity and stability to the jumbo mortgage market.  They shall do so in much the same way that Fannie Mae and Freddie Mac run: Fattie Mae will buy jumbo mortgages from the originating banks and repackage them as mortgage backed securities and resell those in the open market.  Down payment requirements will continue to be higher than in the past… maybe we keep a 20% down payment… but because lenders can resell these loans to Fattie Mae and Fattie Mae can offer better interest rates when they repackage them as mortgage backed securities, the interest rate spread between conforming and jumbo loans should narrow substantially.

The nice part about this is that like much of the rest of the stimulus that the government has employed, it should be long-term revenue neutral if not even a profit making enterprise since the government is not subsidizing anything but rather “market making” for a product that today has no effective secondary market.  In the future the secondary market for jumbo loans will likely improve but even in that situation a GSE like Fattie Mae would still have significant value… just like Fannie Mae and Freddie Mac have for decades.

Others have discussed this general concept, however no one else has come up with a name as cool as Fattie Mae.  I can’t wait to see the letterhead!

Filed Under: Foreclosures and Short Sales, General, Mortgage Rates, Opinion, Personal Experiences Tagged With: , , ,

Declining Market Appraisals – The End of 100% Financing

January 2, 2008 By 1 Comment

More and more, I am hearing about appraisals that are coming back with notations from the appraiser that the property is in a “declining market.”

Unfortunately there is no set-in-stone definition for what is or is not a declining market.  What’s come up in my experience is either the pricing of comparables has fallen considerably or the days on market is more than 6 months.

In these situations, the amount that the buyer would be able to borrow to purchase the property is reduced by 5% from the maximum allowed for that mortgage product.  For instance, if the buyer was doing a 100% loan with MI, the buyer would only be permitted to do a 95% loan on that property.

Given that the real estate market is slowing dramatically in almost all markets, the likelihood of this issue growing is almost a certainty.

To make matters worse, Fannie Mae has released new rules that mean loan officers that use Desktop Underwriter (DU) for their approvals may see the computer kick back a “declining market” flag without any specific reasoning behind it other than the census tract, city, and/or zip code of the property is an area of declining prices or an area difficult to assess home values.  While this can be overridden by the appraiser & lender under certain guidelines, this automatic blacklisting of properties will invariably cause headaches for everyone involved and likely be difficult to change.

Lenders need to look out for their best interests and the industry as a whole needs to look out for consumer’s best interests but this can also end up further stifling the housing market and, especially in the case of a property being flagged by Desktop Underwriter, could bring unnecessary restraint into the market.

The market data used by Fannie Mae or an appraiser is already old by the time that they get it, so this lag in market data will mean a prolonging of market restrictions beyond the end of the weak market itself.  Further, since Fannie Mae is not giving specific information as to how they are going to determine “declining markets,” it makes it difficult for there to be any dialog as to whether that classification is warranted or not.

In the two cases where “declining market” has specifically affected my clients, the pricing on the homes in question had fallen dramatically, 10%+, in the last two years and these homes were now clearly great values compared to comparables for sale and that had sold.

So here I have buyers that have an opportunity to purchase homes at prices that are considerably more affordable than a couple years ago but they must now find a way to come up with the 5% down payment.  My buyers have been able to do that, but there are many buyers who would not.

With the potential of losing much of what remains of 100% financing, we’re likely to see a further erosion of buyer activity.  This diminished activity will prolong an already difficult phase of our current market.

There is a potential savior: FHA.  The FHA program doesn’t specifically require the additional down payment if the buyer is well within qualifying guidelines, so buyers with solid credit histories that are not trying to max their qualifying amounts can use the FHA program to limit their down payments to only 3%.  With the proposals going through Congress discussing passage of a reduced 1.5% down payment requirement, FHA may finally be able to play a more active role in the real estate market… something it hasn’t done for many years.

Filed Under: Community Issues, Info for Buyers, Info for Sellers, Market Stats, Mortgage Rates, Opinion Tagged With: , , ,
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This website is a service of Aaron Dickinson of Edina Realty, a broker Participant of the Regional Multiple Listing Service of Minnesota, Inc.