The Consumer Financial Protection Bureau was formed as part of the Dodd–Frank Wall Street Reform and Consumer Protection Act, signed into law by President Obama in the wake of the 2008-2009 financial crisis. But official titles of government agencies can be misleading, and to characterize the CFPB’s activities as “protection” may be downright deceptive. The bureau’s ostensible purpose is to “promote fairness and transparency for mortgages, credit cards, and other consumer financial products and services.” It is true that some institutions were and still are engaging in predatory lending practices, but is this bureaucratic boondoggle really the answer? It would seem not.
The CFPB is subject to very little oversight, be it congressional or presidential. No government agency should be permitted to wield power without being accountable to the people or their elected representatives. Furthermore, the CFPB’s disturbingly wide jurisdiction (not to mention their power to levy $1,000,000 fines against companies as well as individuals) has instilled a sense of paranoia in many lenders. These lenders are now unwilling to loan to otherwise qualified consumers for fear of doing something wrong without malice. This reduction in consumer choice has been exacerbated by the CFPB judging certain lending programs as “abusive” and forcing companies to discontinue them. Isn’t the consumer in a better position to decide what type of loan is best for them rather than a bureaucrat in an office on the other side of the country?
The foremost criticism of the CFPB is that most of the abuses that it was formed to handle are already under the jurisdiction of other federal agencies. Furthermore, it has so far failed to address the worst abuses in the consumer financial industry. Some critics even contend that the creation of the bureau was simply political grandstanding by Obama in order to improve his odds of re-election. In any case, the CFPB is a fine example of how ham-fisted government regulation of financial services can hamper consumer freedoms while completely neglecting the problems that it was intended to solve.
Need guidance through the complicated world of mortgage and real estate? Don’t hesitate to contact Todd Ableson at Tucson Mortgages, the experts on Tucson mortgage rates.
January 1 2014 marks the end of the Mortgage Forgiveness Debt Relief act extension that exempted debt forgiven due to foreclosure from taxation (yes, you ARE normally taxed on the “benefit” you received, which was forgiven). There is talk that when Congress gets back together next year, this provision could be extended but that is far from certain at this point. Failure to extend this provision would leave homeowners working through the short-sale process with significant tax liability after the sale of their home.
Keeping in mind how decisions are made in Washington, here’s the uphill battle homeowners (and the Real Estate industry in general) are facing to extend the provision:
1. The chairmen of both tax committees have committed to passing comprehensive tax reform legislation this Congress. As part of tax reform, they have both indicated that they plan to go through the long list of expiring items and cull those that are not worthy of permanence and make all the “worthy” ones a permanent part of the tax law. However, tax reform is still months away from completion. If they were to extend the expiring provisions now, it might appear that they were giving up on tax reform. This is not the message they wish to convey.
2. There are over 50 such expiring tax provisions (often referred to as “extenders”). Congress rarely passes single tax provisions by themselves. The rules in both the House (and especially the Senate) could allow for added amendments that would turn a simple bill with wide support into a politically divisive bill.
3. In Congress’ view, there are no real “must do” items that must be done before the end of the year. In past years, some of these tax provisions have been added to “must pass” legislation as amendments.
4. The extension of the tax relief provision “costs” money to the Treasury. The Joint Committee on Taxation estimates that a one-year extension of the mortgage debt cancellation relief would “cost” $3.7 BILLION. Some members of Congress will insist that amount be offset by raising taxes elsewhere or cuts in spending – an ongoing debate in Congress.
In summary, getting this provisional extension passed by year-end is not impossible, but is a very steep climb.
What can you do?
First, you can contact your Representatives and Senators to urge them to act on this bills. If you know someone that will be affected by this change, urge them to do so as well. The more our Politicians hear from constituents, the better.
Second, check with your Professional Tax Accountant before making any decisions – there may be options for you (hey! I’m not a Tax Accountant so don’t take my word!).
Call Todd Abelson at Sunstreet Mortgage for all your Mortgage Needs! (520) 331-LEND (5363)
If you are considering the option to sell your home but you are concerned about the current market, it can be difficult to move forward with the process. Utilizing a few tips to help sell your home in a bad market can allow you to move forward with your life and into a better property that is right for you. Implementing tips and tricks to sell your home in a bad market not only helps to save time when it comes to selling your house, but it also expedites the process of moving to a new one.
Consider updating the overall curb appeal of the home you are trying to sell before you list it on the market. Most potential buyers who may be interested in your house are likely to drive by the neighborhood and the home itself before requesting a meeting or attending an open house. By ensuring your home’s curb appeal is up to standards, you help to draw and attract more attention to your house and its sale.
This will appeal to those seeking new property for a great value in a down economy. Ridding the clutter from your home not only helps to make it appear clean and organized, but it also helps to improve how spacious it appears to onlookers and those who are dropping in for open houses you host.
Add a New Coat of Paint
This is a simple and inexpensive way to improve your home’s overall appearance. Using a white, off-white or another neutral color such as beige is highly recommended to increase buyer’s interest in the home and the house’s overall spacious atmosphere.
Be a Good Host
Be sure to enjoy yourself and be kind to all of those who stop in. Serving beverages and appetizers is a way to keep guests from leaving too early while maintaining their interest in your home and what it has to offer. Don’t follow prospects around but do make yourself available to answer any questions that might come up (short and simple is the best tact!).
Seeking out the right mortgage solution for you can mean the difference between selling your home and moving into a new property or finding yourself stuck. For more information and to learn more, call me, Todd Abelson at www.TucsonMortgages.com at 520-331-LEND (5363) today.
Mortgage fraud happens when a borrower deceives the mortgage lender when applying for a mortgage so that they can get a mortgage they normally would not qualify for. In many cases, the borrower is working together with the seller, and they split the gains when the mortgage is obtained. Regardless, the lender ends up losing money. Below are some of the more common types of mortgage fraud.
Occupancy Fraud – Occupancy fraud is when a borrower intends to purchase property as an investment, but he or she states they will use it as a residence. This gives the borrower a lower interest rate and requires a smaller down payment, and the lender is usually willing to loan more than they do for investment property. Occupancy fraud also gives the borrower the opportunity to file false tax returns. Investment owners should pay capital gains on their profits, and the borrower can fraudulently claim false tax credits on the home.
Income Fraud – Income fraud occurs when the borrower falsely overstates his or her income. The borrower does this because they know the mortgage company will lend more money with more income. Most lenders make the borrower prove their income, so the borrower usually forges their tax returns, bank records and W-2 statements. Income fraud can backfire on the borrower because the borrower won’t have that much money to pay the mortgage and is likely to default on the loan.
Shotgunning – Shotgunning happens when a borrower takes out several loans on the same property simultaneously through multiple lenders. Each subsequent mortgage the borrower takes out is junior to the mortgage that preceded it. Because the total value of the mortgages is more than the value of the home, foreclosing on the home isn’t enough to recover financial losses. This makes it impossible for the lenders to recover any money given to the borrower when the borrower defaults.
Appraisal Fraud – Appraisal fraud happens when the appraiser overstates how much the property is worth. In some instances, the appraiser and seller work together to pull off this type of scam. When the value is overstated, the seller can get more money out of a buyer, giving them additional money to pay off the appraiser and have money leftover. Sometimes, the appraiser and borrower scheme together. When this happens, the borrower allows the lender to foreclose on the home by intentionally defaulting. The lender tries selling the property to recoup the money, but with the property inflated, this can’t happen. Consequently, the borrower keeps the money and gives the appraiser a pay-off for helping arrange the scam.
Contact Todd Abelson at Tucson Mortgages in Tucson, Arizona for all your mortgage needs! (520) 331-LEND (5363)
Even though the Federal Government is not directly involved with the home loan process, there are several functions performed in conjunction with Federal Agencies that help close a loan. So not only could the shutdown cause a SLOWDOWN, but it may be impossible to acquire documents required in SUPPORT of the loan process which can effect FHA Loans, USDA Loans, VA Loans, and even Conventional Loans. So the answer is “yes, the Government shutdown can delay my loan”!
Delays/holdups that could generally effect ALL loan types:
A standard process for all mortgage companies and banks is to obtain an IRS verification of income (via a “4506-T” transcript) so that Underwriters and can verify that the income provided is correct and accurate. A shutdown or slowdown at IRS will delay processing of tax transcript requests. If income cannot be verified the loan may not close on time.
Next, to verify Social Security Numbers a bank or mortgage company may need to process a SSA-89 Form for Social Security Number (SSN) Verification. A shutdown or slowdown at the Operations Field Officer of the Social Security Administration will delay processing of SSN verifications. If SSNs cannot be verified the loan may not close on time.
Finally, for properties within flood zones flood insurance is required. A shutdown or slowdown at FEMA will delay the processing of flood zone certifications. If flood zone certs cannot be issued the loan may not close on time.
Will FHA Loans be delayed?
FHA Loans should not be significantly impacted as long as the government shutdown is brief. HUD has issued a memo to banks and lenders explaining that daily operations will be continued. However with reduced staff the process may take longer. The on-line “FHA connection” will still be open and available to request FHA case numbers and transfer requests. Overall, business should continue as usual for FHA loans. Don’t forget to consider the general third party verifications listed up front!
Will VA Loans be delayed?
The Department of Veterans Affairs (VA) has issued a statement that business should continue as usual for VA Loans. Veteran’s Certificates of Eligibility (COE) will still be available online through their “webLGY” site. Additionally appraisals may still be ordered and processed through the Veterans Information Portal. Don’t forget to consider the general third party verifications listed up front!
Will USDA Rural Development Loans be delayed?
USDA Rural Development Loans will be delayed throughout the Government Shutdown since no “Conditional Commitments” will be issued. Additionally their on-line system (called “GUS”) has been turned off. Worse, since the USDA is closed through the shutdown there’s no one to contact for any updates. To make the outcome a bit more murky, many areas that were previously “eligible” were slated to become “ineligible” with the new Government Fiscal Year. So what WILL emerge from the ashes is yet to be seen.
Realtors and Buyers are cautioned that transactions based upon USDA financing should be handled carefully.
Will Conventional Loans be delayed?
As mentioned up front, Conventional Mortgage loans could be directly delayed through the government shutdown or slowdown due to delays in the aforementioned third party verifications (IRS transcripts, Social Security Number verifications, Flood certifications).
How long will the shutdown last?
OUR HOPE is that Congress will quickly pass a “Continuing Resolution” to fund the Federal Government; delays beyond a few days may cause serious delays in loan fundings regardless of the type of loan. THEREFORE it would be wise to plan for and expect delays. Realtors, homebuyers and sellers should be in close contact with the Mortgage Loan Originator to stay up to date to help determine status. The best advice is: be patient. Contingency plans by Lenders, third party companies and some governmental agencies are being put in place to reduce delays. Remember, you are not alone in waiting as there are tens-of-thousands of home loans closed monthly!
WHO DO I BLAME???
It is not the fault of your Realtor nor your Loan Originator so please DON’T SHOOT THE MESSENGER! We all agree this is a unique and crazy-making situation so call your Congressman and hope they do their jobs and get the Federal Government back in business!
Contact Todd Abelson at Sunstreet Mortgage in Tucson Arizona for all your mortgage needs! (520) 331-LEND (5363)
Today the 10-yr T-note’s yield closed at 2.15% after hitting lows in 2012 of 1.52%? What the heck happened?
What was bound and destined to occur – it was only a matter of “when” not “if”… Let’s face it – the low rates we’ve been enjoying since last summer were clearly unrealistic and were only a result of the artificial market the Fed’s created when they began buying $85 BILLION per month.
Who stopped the music? When Bernanke and his band of Fed Committee members commented that Quantitative Easing Version 3 (“QE3”) would probably be scaled back sooner than expected as the economy was showing signs of recovery. GENERALITIES only … but the damage was done and the run on the Mortgage Backed Securities (MBS) Market began. Referring to the chart below, note that the price of MBS has dropped 472 basis points!
The results: Fixed rate loans of the 30,25,20 & 15 variety are way up. But let’s stop for a minute and reflect on what’s real:
Rates are still historically phenomenal and while they’re clearly “up” from their lows, they’re fabulous!
Home prices are “up” from a year ago.
The economy is gaining strength… even though it’s not perfect.
With the yield curve steepening on the long maturity side, ARM rates are still UBER Fabulous
While we may see some improvement in rates over the next few weeks/months, the tone is set and you can kiss the 3’s goodbye. Just like a great party, sooner or later it ends and we all have to go back to reality.
Anyway you slice it, rates are great – call me to get a great one for yourself! Todd Abelson at Sunstreet Mortgage (520) 331-LEND (5363)
You may have heard a great deal of rumor about what’s going to happen as a result of the “Sequester” – but what exactly is it?. “Sequestration” refers to a series of automatic, across-the-board spending cuts to federal government agencies that are scheduled to take place starting March 1, 2013.
While it’s hard to know exactly how things will play out as the cuts are implemented, most individuals are probably not going to notice a significant, immediate effect. It is important to understand that the government will not be shutting down.
How much cutting will there be and what will be affected? totaling $1.2 trillion, the cuts will be split evenly between defense and domestic discretionary spending: approx $500 billion from the Defense Department and other national security agencies. The remaining cuts will affect a variety of domestic programs, including education, public safety, energy, national parks, food inspections, housing aid, transportation, and law enforcement. Social Security, Medicaid, and Medicare benefits are exempt from sequestration.
How did this happen? Sequestration was created from the August 2011 standoff over the U.S. debt ceiling. The idea was that sequestration would be a measure of last resort and that Congress would act to replace the sequestration cuts with an equal amount of alternate spending reductions. As a result, the Budget Control Act of 2011 created a deficit reduction “supercommittee” that was charged with reaching consensus on additional budget cuts that would avoid sequestration. But the supercommittee failed so here we are…
Ok, so the Feds cut the budget and that’s the end of it, right? WRONG!
While it hasn’t received the same level of attention as sequestration, there’s another problem rapidly approaching–the government is running out of money again. Federal funding for the current fiscal year expires on March 27, 2013 and so unless Congress authorizes ANOTHER Debt ceiling hike a partial government shutdown would result. And it doesn’t stop there either! The federal government reached its $16.394 trillion debt ceiling limit at the end of 2012. Congress subsequently suspended the debt ceiling limit until May 19, 2013, and although the U.S. Treasury has some ability to continue operations beyond that date, at some point the debt ceiling debate will need to be addressed AGAIN. Thus, it’s conceivable that any short-term agreement on sequestration would include provisions that address these deadlines as well.
Given Congress’ inability to do ANYTHING lately, its best to — breath, continue to watch, and HOPE rational minds prevail in the coming months.
Call Todd Abelson at Sunstreet Mortgage in Tucson Arizona for all your mortgage needs! (520) 331-LEND (5363)
After a LONG wait, CFPB finally released its ruling on “Qualified Mortgages” or QM.
Generally, QM rules prohibit loans with negative amortization, Interest-only payments, balloon payments, loans with repayment terms greater than 30 years, and loans where the points and fees are greater than 3% of the loan amount. The QM rule also generally requires the consumer to have a debt-to-income (DTI) ratio less than 43% (similar to FHA standards).
The QM definition appears to leave plenty of room for exceptions as well as second “temporary QM” definition with more flexible underwriting requirements for GSE loans – Fannie and Freddie (while they operate in conservatorship) and FHA/VA loans. It looks like CFPB heeded the cries from the lending community and were wary of negatively impacting the real estate markets. All of these shenanigans originate from the Dodd-Frank Act that requires creditors to determine whether the consumer has the ability to repay their mortgage. Under the Act, a creditor can assume that the borrower has met the “ability-to-repay” requirement if the loan is deemed a QM.
Per the final rule, creditors must generally consider the following factors in determining ability-to-repay
current income or assets
current employment status
monthly mortgage payment
monthly payments on any other loans associated with the property
the monthly payment for other related obligations (i.e. property taxes)
other debt obligations
monthly debt-to-income ratio the borrower would be taking on with the new mortgage.
As I mentioned above, the final rule also provides for a second, “temporary QM” definition that allows for more flexible underwriting requirements. The release notes that this exemption is driven by the “fragile state of the mortgage market” and the fact that in many cases borrowers can afford a DTI ratio above 43%. To qualify under the “temporary QM” definition, a mortgage must meet the general requirements and be eligible to be purchased or guaranteed by either the GSEs – Fannie and Freddie (while in conservatorship), the FHA, VA, or Department of Agriculture or Rural Housing Service. Could these be Special rules for the especially gifted borrower???? Isn’t that what started the whole “exotic mortgage product” market in the first place???!!!!
Here’s an except from some of the pablum released by the CFPB to “protect consumers from irresponsible mortgage lending”:
Under the Ability-to-Repay rule announced today, all new mortgages must comply with basic requirements that protect consumers from taking on loans they don’t have the financial means to pay back. Among the features of the new rule:
Financial information has to be supplied and verified: Lenders must look at a consumer’s financial information. A lender generally must document: a borrower’s employment status; income and assets; current debt obligations; credit history; monthly payments on the mortgage; monthly payments on any other mortgages on the same property; and monthly payments for mortgage-related obligations. This means that lenders can no longer offer no-doc, low-doc loans, where lenders made quick sales by not requiring documentation, then offloaded these risky mortgages by selling them to investors.
A borrower has to have sufficient assets or income to pay back the loan: Lenders must evaluate and conclude that the borrower can repay the loan. For example, lenders may look at the consumer’s debt-to-income ratio – their total monthly debt divided by their total monthly gross income. Knowing how much money a consumer earns and is expected to earn, and knowing how much they already owe, helps a lender determine how much more debt a consumer can take on.
Teaser rates can no longer mask the true cost of a mortgage: Lenders can’t base their evaluation of a consumer’s ability to repay on teaser rates. Lenders will have to determine the consumer’s ability to repay both the principal and the interest over the long term − not just during an introductory period when the rate may be lower.
QUALIFIED MORTGAGES – Lenders will be presumed to have complied with the Ability-to-Repay rule if they issue “Qualified Mortgages.” These loans must meet certain requirements which prohibit or limit the risky features that harmed consumers in the recent mortgage crisis. If a lender complies with the clear criteria of a Qualified Mortgage, consumers will have greater assurance that they can pay back the loan. Among the features of a Qualified Mortgage:
No excess upfront points and fees: A Qualified Mortgage limits points and fees including those used to compensate loan originators, such as loan officers and brokers. When lenders tack on excessive points and fees to the origination costs, consumers end up paying a lot more than planned.
No toxic loan features: A Qualified Mortgage cannot have risky loan features, such as terms that exceed 30 years, interest-only payments, or negative-amortization payments where the principal amount increases. In the lead up to the crisis, too many consumers took on risky loans that they didn’t understand. They didn’t realize their debt or payments could increase, or that they weren’t building any equity in the home.
Cap on how much income can go toward debt: Qualified Mortgages generally will be provided to people who have debt-to-income ratios less than or equal to 43 percent. This requirement helps ensure consumers are only getting what they can likely afford. Before the crisis, many consumers took on mortgages that raised their debt levels so high that it was nearly impossible for them to repay the mortgage considering all their financial obligations. For a temporary, transitional period, loans that do not have a 43 percent debt-to-income ratio but meet government affordability or other standards − such as that they are eligible for purchase by the Federal National Mortgage Association (Fannie Mae) or the Federal Home Loan Mortgage Corporation (Freddie Mac) − will be considered Qualified Mortgages.
The January 2012 Non-Farms Employment report flat knocked the ball out of the park with 257,000 new jobs created, unemployment down to 8.3% and an upward revision to November & December 2011 figures of an additional 60,000 jobs. In nutshell this was the strongest report since April 2011.
However according to Rick Santelli, my favorite maven from the Chicago Board of Trade, while the figures are good on the surface the story not being told is that there are an estimated 1.2 MILLION people no longer looking for work so they are NOT counted among the unemployed. If they were included in the figures this would be the worst report since 1981. He likens today’s report to a company reporting excellent earnings only to find out that they had a one-time-writeoff that artifically raised net results. In a nutshell, bad news.
So – best report since April 2011 -or- worst report since 1981 – you decide. Either way, stocks took off and took rates along for the ride.
Call Todd Abelson for all your mortgage needs at 520-331-LEND (5363)