Sunday, February 26, 2012

Bank of America Stops Selling Mortgages to Fannie Mae

InvestmentsBank of America stops selling mortgages to Fannie Mae By Jacob Gaffney• February 23, 2012 • 5:19pmBank of America ($7.88 -0.14%) is faced with numerous reps and warrants challenges on the mortgage front, and as a result of growing uncertainty, it will no longer sell certain mortgage refinances into Fannie Mae mortgage-backed securities."The issue is tied to ongoing disagreements between Bank of America and Fannie Mae in regards to repurchases," said Dan Frahm, spokesman for BofA.Specifically, Bank of America will no longer place non-Making Home Affordable Program (MHA) refinance first-lien residential mortgage products into Fannie mortgage-backed securities.Making Home Affordable is the Obama administration's initiative to help struggling homeowners get mortgage relief through a variety of programs."We continue to deliver MHA programs, including loan modifications and refiancing through HARP to our customers whose loans are owned by Fannie Mae," Frahm said, adding mortgage origination levels will not drop at the bank. "We're adequately prepared for this, there will be no impact to our customers." BofA will likely do more business with Freddie Mac and Ginnie Mae as a result of this decision.The bank says the risk of repurchases on non-MHA mortgages is too great, and hedging repurchase risk is now too difficult."We are not able to predict changes in the behavior of the GSEs based on our past experiences," BofA reports in a regulatory filing with the Securities and Exchange Comission. "Therefore, it is not possible to reasonably estimate a possible loss or range of possible loss with respect to any such potential impact in excess of current accrued liabilities," the filing states."The ultimate resolution of these exposures could have a material adverse effect on our cash flows, financial condition and results of operations," the filing said.At the heart of the decision is recent changes in mortgage insurance policies. The filing notes Fannie Mae policy where MI rescission must be resolved in a timely fashion. As of Dec. 31, 2011, 74% of the MI rescission notices received had not been resolved, and Fannie began exercising repurchases with Bank of America."We have informed FNMA that we do not believe that the new policy is valid under our relevant contracts with FNMA and that we do not intend to repurchase loans under the terms set forth in the new policy," BofA states. "If we are required to abide by the terms of the new FNMA policy, our representations and warranties liability will likely increase."

Tuesday, February 21, 2012

Will Mortgage Forgiveness Debt Relief Act Be Extended

Will Mortgage Forgiveness Debt Relief Act Be Extended?by The KCM Crew on February 21, 2012

Many of our readers have asked whether or not we believe the Mortgage Forgiveness Debt Relief Act of 2007 will be extended past its current expiration scheduled for the end of the year. As a reminder, the legislation ensures that homeowners who received principal reductions or other forms of debt forgiveness on their primary residences do not have to pay taxes on the amount forgiven.The reason this act is important in today’s housing market is that, without the act, debt reduced through mortgage modifications or short sales qualifies as income to the borrower and is taxable. If the legislation is not extended, then it would require homeowners to complete a short sale or modification prior to year’s end in order to avoid a tax consequence.Last week, DSNews reported:“Obama’s FY2013 budget proposal includes an extension of the Mortgage Forgiveness Debt Relief Act of 2007… In the Treasury’s Green Book, its summary explanation of the administration’s budget proposal, it calls for an extension of the tax break due to “the continued importance of facilitating home mortgage modifications.”The administration is proposing an extension that would apply to any amounts forgiven before January 1, 2015.”In today’s political environment, the passage of any budget proposal could be considered doubtful. However, both parties seem to be in agreement that this provision should be extended. We can only hope that it doesn’t fall victim to an election year.Disclaimer: As with all tax issues, we strongly suggest you consult with your accountant to find out how this may impact you and your family.

Monday, February 20, 2012

This Month in Real Estate (US) February 2012

Mortgage Settlement to Drive Increase in Foreclosures

Mortgage Settlement to Drive Increase in Foreclosuresby The KCM Crew on February 20, 2012

Last week, we explained that the National Mortgage Settlement gave banks a roadmap showing them how to proceed with the backlog of foreclosures (known as shadow inventory) that has been hanging over the housing market for more than a year. We believe that understanding this dynamic is crucial in determining home prices as we go through the year. We believe the number of houses sold will grow somewhat dramatically in 2012. However, the increase in demand will be offset by an increase in supply of distressed properties that sell at a discount.Others also feel there will be an increase in foreclosures as we move through the year.Calculated Risk“It does appear the number of completed foreclosures will increase following this settlement – especially in some judicial states with large backlogs – so there will probably be more REOs (lender Real Estate Owned) for sale.”Brandon Moore, chief executive of RealtyTrac“The settlement sets forth clear guidelines for lenders and servicers to follow when foreclosing, which should allow them to push through some of the delayed foreclosures from last year.”Susan Wachter, professor of real estate and finance, University of Pennsylvania’s Wharton School“There remains a danger that ‘a wave of foreclosures’ may destabilize the housing market. The logjam has to be unleashed – [the settlement] will do that.”Mark Zandi, chief economist Moody’s Analytics“I think there’ll be more price weakness, because we’ll see the number of distressed sales pick up. But I think the price declines will be modest.” What does ‘modest’ mean? Celia Chen, Moody’s Analytics suggests: “The latest settlement will hasten the pace of filings and push up the distress sale share of total sales over the next several quarters, driving national house prices down another 3%.”Bottom LineThe increase in supply will cause prices to soften even though we will see an increase in demand. Check with a real estate professional to help you understand how this will impact your local market.

What is Suze Orman Talking About

What Is
Suze Orman Talking About?

Posted: 06 Feb 2012 04:00 AM

Our founder, Steve Harney,
occasionally asks to do a personal post on what he sees as important to
our industry. Today is one of those days. Enjoy! – The KCM Crew
have great respect for Suze Orman. She has dedicated her life to educating
consumers on financial matters and has built a sensational personal brand along
the way. I don’t always agree with her advice but can always see the logic in
her position. However, she said something last Friday evening that was
absolutely wrong.
Ms. Orman appeared on HBO’s Real Time with Bill Maher
and addressed the housing market in this country. Her comment:
“We now have an America that
doesn’t even think that they want to own a home anymore; they’re under water in
their homes, and they are praying that somebody will just take it off of their
hands so that they can rent.”
Her statement shocked me. I
realize that there are many individual cases that are nothing less than tragic.
I understand that there are some families trapped in a house they cannot sell.
To say that Americans no longer believe in homeownership, however, is just not
true. If you go to Orman’s own site and search
the words ‘home ownership’, it sends you to FannieMae’s website for infomation.
What makes this ironic is that,
on FannieMae’s
website, you can find the National Housing Survey
which is done quarterly. This survey asks Americans how they feel about
housing. Here are a couple of findings from the most recent survey:
§ 96% of all homeowners (and
even 93% of all homeowners that are currently are underwater)
believe that homeownership has been a positive experience.
§ 84% of Americans and 70% of renters believe home ownership is a
better alternative than renting.
§ 63% of renters have aspirations to someday be a homeowner.
§ 64% of Americans think buying a home is a safe investment. (A
safer investment than stocks or government bonds)
§ When asked which investment is currently showing the most
potential, more Americans picked buying a home than ANY OTHER INVESTMENT
(stocks, bonds, mutual funds, etc.)
§ Broken down – 67% of homeowners, 55% of renters and even 75%
of those homeowners underwater believe it is a good time to buy a home.
Bottom Line
Suze Orman may believe that
families in this country now prefer renting over owning. Surveys say the exact
opposite. Americans still very much believe in owning their own home.

Warren Buffet

What Does Warren Buffet Think About
Buying A Home?

Posted: 30 Jan 2012 04:00 AM PST

Buffet is seen by many as the greatest investor of our time. When he speaks,
people listen. Like anyone else in his position of influence, he is
criticized by some for using his bullhorn to promote his own business agendas
at times. That makes it very interesting when we occasionally learn of how he
privately advises
those closest to him.
Such a situation occurred this
week. Debbie Bosanek, Warren Buffet’s secretary of 37 years, recently
purchased a second home in Surprise, Arizona.
In an article in the Omaha World Herald, Mrs.
Bosanek discussed her reasons for purchasing a second home and the personal
advice she received from Mr. Buffet.
“I just thought it was time
to buy a home. Warren tells me that it will be the best opportunity in my
lifetime. Mortgage rates are low and prices have dropped dramatically…I share
Warren’s view about the future of America, and we believe that our country will
do just fine. I’m happy to make this investment.”
The greatest investor of the last
century privately has told the people closest to him that buying a home right
now “will be the best
opportunity in [their] lifetime”.
That’s good enough for us. How about