U2 – Pride/City Of Blinding Lights Live 1/18/09 Obama Celebration
U2 Sings Pride and City of Blinding Lights to Obama and Biden
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Author Archives: Jillayne Schlicke
Fannie and Freddie to track loan performance of originator and the appraiser.
It was announced today that beginning Jan. 1, 2010 Freddie Mac and Fannie Mae will be required to obtain loan-level identifiers for the loan originator, loan origination company, field appraiser and supervisory appraiser. The purpose of the requirement is to prevent fraud and predatory lending, to ensure mortgages owned and guaranteed by those Enterprises are originated by individuals who have complied with applicable licensing and education requirements under the S.A.F.E. Mortgage Licensing Act. In addition, they will use the data collected to identify, measure, monitor and control risks associated with originators’ and appraisers’ performance, negligence and fraud. Hat tip John Long and Gordy.
Here is the PDF from the Federal Housing Finance Agency, Fannie and Freddie’s new regulator.
“This represents a major industry change. Requiring identifiers allows the Enterprises to identify loan originators and appraisers at the loan-level, and to monitor performance and trends of their loans,
Layoffs at Microsoft
Hat tip Sniglet. From Reuters and the Wall Street Journal:
Microsoft Corp. is seriously exploring significant work force reductions that could be announced as early as next week, in a sign that the weak economy is prompting tough decisions even at one of the steadiest ships in the technology industry. According to people familiar with its plans, the Redmond, Wash., giant is considering layoffs across its various divisions, a rare occurrence for the world’s largest software company. However, plans for the cutbacks are still in flux and Microsoft could end up finding alternative methods of reining in costs, one of these people said.
Reuters says Microsoft might announce the job cuts when it reports quarterly earnings next week.
Speaking as a Microsoft stockholder I’m pleased to hear the company talk about cutting costs. All signs point to a global recession which means corporations must control expenses. Microsoft has been growing non-stop for years. Many employees have never experienced any kind of staff reductions throughout their Microsoft careers. Layoffs are a good time to get rid of underperforming employees. Layoffs are typically political. The employees that make their supervisor’s job a daily hell will be second on the list.
I’d like to see Microsoft go on a diet. Let’s ramp up employee productivity and get lean and strong. This is what companies do to survive tough times. Long live Microsoft.
FHA Mortgage Insurance Fund Down 40%
Mortgage Law Central reports today on FHA’s Oversight Capability.
“Rep. Stephen Lynch, D-Mass., voiced his concern that FHA’s Mutual Mortgage Insurance Fund levels were decreasing and might go under the required two percent threshold. He said the latest data forecast, from June 2008, was done before the meltdown and he believed that the funds could dip below the 2 percent threshold. Heist also had these concerns, stating that the results from the Office of the Inspector General’s (OIG’s ) latest actuarial study show that HUD has sustained significant losses in its Single-Family program, reducing the program’s reserves. He said that as of Sept. 30, 2008, the fund’s economic value was an estimated $12.9 billion. This is an almost 40 percent decrease from over $21 billion the year before. “The current $12.9 billion economic value represents 3 percent of the mortgages insured by the FHA,
Is Excise Tax Payable on Short Sale Debt Forgiveness?
The Washington State Department of Revenue (DOR) seems to think so. Background: At an Escrow Association of Washington (EAW) meeting on Nov 13, 2008, Mel Kirpes and Steve Bren from WA DOR spoke at a regional dinner meeting where it was announced that when there is a short sale, the DOR considers the debt forgiven as additional consideration above the contracted sales price between the parties and that the DOR will be pursuing the home seller for payment of the excise tax. (Reference is a EAW letter dated Nov 25, 2008 from EAW Director Cindi L. Holstrom)
Naturally this had a chilling effect amongst escrow officers. The DOR responded on Dec 12, 2008 in a letter from Gilbert Brewer, Assnt Director of the DOR:
RCW 82.45 imposes an excise tax on the sale of real estate unless specifically exempt from statute. “The measure of the tax is based on the total selling price of the property conveyed. The incidence of the tax is usually on the seller. However, if the tax is not paid in full, the tax (together with any interest and penalties) becomes a lien on the real property. This is mandated by RCW 82.45.030 …which defines “selling price” as the “true and fair value of the property conveyed.” If a property has been conveyed in an arm’s length transaction between unrelated persons for a valuable consideration, a rebuttable presumption exists that the selling price is equal to the total consideration paid or contracted to be paid to the transferor, or to another for the transferor’s benefit….”total consideration paid or contracted” to be paid as including “money or anything of value, paid or delivered or contracted to be paid or delivered in return for the sale, and shall include the amount of any lien, mortgage, contrat, indebtedness, or other incumbrance, either given to secure the purchase price, or any part thereof, or remaining unpaid on such property at the time of the sale.”
Since there is an exemption from real estate excise tax in the event of foreclosure or a deed in lieu of foreclosure (see WAC 458-61A-208) this DOR opinion may unfortunately motivate homeowners to consider foreclosure a more viable option. Perhaps the home seller’s Realtor can negotiate with the lender to pay for the additional excise tax lien as well. However, then that extra amount paid by the lender may also be subject to excise tax.
The Seattle King Co Assoc of Realtors and Washington Realtors believes DOR’s position is incorrect and problematic. On Jan 8, 2009, The Northwest Multiple Listing Association posted a notice to their real estate agent members as follows:
“RCW 18.86 requires agents to advise their clients to seek expert advice on matters relating to the transaction that are beyond the agent’s expertise. This duty exists in every transaction but is particularly important in short sale transactions where unique legal and tax issues exist.”
We’ve been saying the same on RCG for many years now. Short sales are way more complex for real estate agents than the average transaction and homeowners are best served when they have retained their own legal counsel to help them understand the lender paperwork as well as this current DOR trainwreck. You may be thinking, “homeowners in financial distress can’t afford an attorney.” However, some attorneys offer low cost options for homeowners facing foreclosure.
UPDATE
January 13, 2009
Department of Revenue: “After receiving extensive input from interested stakeholders and industry representatives about the nature of these transactions, we have carefully reconsidered how real estate excise tax statutes apply to these unique transactions [short sales]….we now see that these short sales are distinguishable from other transactions involving the forgiveness of debt because the seller negotiates separately with the lender for any debt reduction/forgiveness, apart from the actual purchase and sale of the property. As a result, the loan forgiveness is not “paid or delivered in return for the sale” of the property, as required by RCW 82.45.030.” Margaret J. Partlow, Senior Policy Counsel, Dept of Revenue.
(Hat tip Rhonda Porter and Kary Krismer.)
Translation: We are not going to require sellers to pay excise tax on the debt forgiveness with a short sale.
40 representatives from escrow, title, real estate, attorney, and short sale faciliator companies showed up in Olympia to help educate the Dept of Revenue. Thank you, Escrow Association of Washington, for bringing this to our attention and taking on the state head to head.
Government Intervention in Foreclosure
This is Part Four of a series of articles on foreclosures.
This article does not constitute legal advice.
Foreclosure laws vary from state to state.
Homeowners in financial distress should always hire legal counsel. Call your local state bar association for a referral. Reduced or free legal aid may be available in some states. Ask for a referral from your state Bar Association or through a LOCAL HUD-Approved Housing Counseling Agency.
In this article we will address current government intervention as well as discuss possible future intervention programs. For other preventative measures, check out the other parts of this series:
Part one: Foreclosure; Losing the American Dream
Part two: Options for Homeowners Facing Foreclosure
Part three: Loan Modifications
Part four: Government Intervention in Foreclosure
Part five: Foreclosure; Letting Go and Rebuilding
Current government intervention in the foreclosure process has taken many forms. Some states such as California, Florida, New York, New Jersey, Massachusetts, Philadelphia, and Illinois have discussed, proposed, or passed legislation in favor of a foreclosure moratorium. In order to avoid state mandates, some companies placed a temporary halt on foreclosures over the holidays. These companies include Indymac, Countrywide, WAMU, and loans held in the Fannie/Freddie portfolios. Recall that during the real estate bubble run-up, government backed loans fell out of favor. Many subprime loans are held by lender/servicers in pools of mortgage backed securities. The foreclosure moratorium didn’t reach those homeowners.
State moratoriums give homeowners more time to possibly refinance into a Hope for Homeowners loan or complete a short sale and the moratorium also gives banks more time to get caught up on all the backlog of foreclosure paperwork.
Financial Economics Analyst Edward Vincent Murphy, in his Sept 12, 2008 report “Economic Analysis of a Mortgage Foreclosure Moratorium,
Mortgage Company Merit Financial Banned from the Industry for Five Years. Scott Greenlaw: Not Banned.
Wholesale Mortgage Company Merit Financial has the dubious reputation as being the very first company on the ML-Implode list which now sits at 312 imploded lenders.
The original Statement of Charges from 2007 focuses on violations of the state’s Mortgage Broker Practices Act such as failing to pay appraisers over and over and over again, failing to maintain a mortgage broker license, failing to attend the required continuing ed classes, failing to maintain an surety bond, failing to adequately disclose fees to consumers, and so forth.
From the Seattle Times
Merit did put loan officers through a 19-step program. “Loan Officer 101” was 15 minutes long…Saulness wasn’t impressed. She sat next to two 18-year-old loan officers. “They didn’t even know how to read a credit report,” she said. Barry said wryly that many “had no idea what product they were selling, but they knew how much money they could make.” Merit employees proudly posted their résumés, plus photos of their luxury cars and drinking parties, on various Web sites. One loan officer had come to work fresh from being a Hooters Girl. Another solicited clients for two endeavors: writing mortgages for Merit and selling marijuana paraphernalia on the side. Indeed, several Merit loan officers boasted online that doing drugs was a favorite pastime. “Let’s get hopped up and make some bad decisions,” wrote one beside a photo of himself grinning broadly. Numerous former employees, including loan officer Sunny Hoppe, described working at Merit as a raucous — sometimes lewd — frat party. It was “young, hip, drugs and drinking,” Hoppe said, and that was at work. Former employees also said Merit regularly provided a keg of beer for some staff meetings, but Greenlaw said that, no, it was actually two kegs, and employees were free to bring in six-packs on Fridays. Asked about rumors of drug use in the office, Greenlaw said, “We just never checked.”
Washington State DFI and Merit/Greenlaw decided to settle the case and move on. The Consent Order filed Dec 2008 says our state DFI will collect only $1500 in fines. Merit is banned from the industry for five years. Greenlaw is banned from applying for a mortgage broker/designated broker license for five years yet he is not prohibited from applying to become a loan originator. Let’s take a look at some of the financial carnage from 2006-07:
Thousands of dollars owed to appraisers for work performed.
Thousands of dollars owed in back wages to Merit employees
Unpaid business and occupation taxes owed to the state of $351,294.
Wells Fargo was owed $244,033.
Firstam Credco was owed $228,249.
I wonder how he’s been paying for beer and pizza these days. Let’s find out.
How Much Snow Did You Get?
In Edmonds, we have 7 inches this morning. We had 2 to 3 before last night’s storm so we ended up with an additional 4 to 5. It’s beautiful! We’re going sledding!
How’s everyone doing out there?
Loan Modification Salesmen in WA State Must Be Licensed LOs, Mortgage Brokers, or Work at Consumer Loan Companies
From the Washington State Department of Financial Institutions:
DFI Advises Homeowners To Verify The Licenses Of Anyone Offering Loan Modification Services Before Hiring Them
OLYMPIA – The Washington State Department of Financial Institution’s Consumer Services Division advises homeowners who are delinquent on their mortgage to be cautious about using the services of someone offering to help them work with their lender to modify the terms of their home loan.
The Department of Financial Institutions (DFI) has received a number of inquiries regarding the legality of providing this service in this state. While there is nothing inherently illegal about this business, those providing this service in the State of Washington must be licensed as loan originators, mortgage brokers, or consumer loan companies and be overseen by the Department of Financial Institutions. Additionally, under applicable law, the loan modification provider associated with mortgage brokers have a fiduciary relationship with the borrower and must act in their best interest.
“DFI is concerned that homeowners in desperate situations may pay substantial fees for loan modification services and not take advantage of the HUD-approved counseling services offered for free by numerous non-profits,
Q&A with the Banker Panel at the National Auctioneers Association
Here are my notes from yesterday’s Mortgage Industry Panel from the National Auctioneers Association’s Convention in Denver. When known, the name of the panelist answering the question is noted.
Panelists
A. Wesley Schuneman
Founder, Ultimate Funding Group Mortgage Brokerage
Kevin Feakes
Mortgage Banker, First National Bank; Residential Mortgage Lending
Ken West
VP Commercial Lending Mountain Plains Farm Credit Services
Q: Are lending standards currently too tight or not tight enough compared to 1985?
A: (Kevin) Contrary to what you’re hearing in the media, it’s still relatively easy to get a mortgage loan right now.
A: (Wes) Underwriting guidelines will continue to get tighter. We have a few more years of tightening. The industry will overcorrect before the pendulum will swing back the other way.
A: (Ken) Agriculture loans are underwritten in a much different way than residential. Loans are still widely available for agricultural buyers.
Q: What is your firm doing to prepare for another significant drop in home values?
A: (Ken) Requiring more downpayment. The lenders I work with learned from the S&L bailout.
A: (Wes) We’re close to the bottom here in Denver. We have a decent market. I’m not expecting further, drastic price declines.
A: (Kevin) We’re preparing for more LTV changes from lenders.
Q for Wes: What does the future look like for the mortgage broker?
A: from Wes: Higher standards and raising the barrier to entry will be good for the industry. The mortgage brokerage industry needs a cleansing. I anticipate further erosion in the number of licensed mortgage loan originators.
A: from Kevin: I’m more hopeful than Wes. Competition is good for the industry. Fewer players isn’t necessarily a good thing for the consumer. You may see some former brokers shifting to a bank during these times, and then back to being a broker in the future.
Q: On short sales, Kevin, why are banks taking so long approving short sales and is there any hope for getting answers faster from loan servicing?
A: Loan servicing does not have an efficient system in place to process the overwhelming number of requests for a short sale. It’s going to take time to work out all the short sales and foreclosures.
A: It would be better if all the foreclosures right now were HUD REOs because HUD has a good system of disposing of their REOs.
Q: Why haven’t banks embraced auctions as a way to dispose of their REO inventory?
A: The systems in place right now are for the banks/asset management companies to reach for a Realtor first, and to try and sell REOs using systems that are already in place (MLS) to reach potential buyers.
Follow up Q: Why aren’t banks wanting to move their REOs? Why list the home for month after month? Why are banks holding on to their REOS?
Panelists did not know. Jillayne’s answer: It is possible that the banks are trying like mad to spread out their losses over many months/quarters. It is also possible that if a bank quickly disposed of their REO inventory and had to claim the losses, that a bank’s insolvency would become more transparent to regulators. It is also possible that there is such a huge backlog of inventory, that it’s a time/resource backlog issue.
Q: Should FICO scores be completely tossed out, returning us to a world where real humans touch each file?
A: (Wes) The idea of using any kind of scoring system at all isn’t inherently “bad.