HUD Press Release From 2000 Reveals Roots of Housing Crisis

HUD ANNOUNCES NEW REGULATIONS TO PROVIDE $2.4 TRILLION IN MORTGAGES FOR AFFORDABLE HOUSING FOR 28.1 MILLION FAMILIES

WASHINGTON – The U.S. Department of Housing and Urban Development today announced new federal regulations that require the nation’s two largest housing finance companies to buy $2.4 trillion in mortgages during the next 10 years to provide affordable housing for about 28.1 million low- and moderate-income families.

The historic federal regulations by HUD raises the required percentage of mortgage loans for low- and moderate-income families that finance companies Fannie Mae and Freddie Mac must buy annually from the current 42 percent of their total purchases to a new high of 50 percent – a 19 percent increase.

“Even with a record high homeownership rate of 67.7 percent, there is still much more to be done. These new regulations will greatly enhance access to affordable housing for minorities, urban residents, new immigrants and others left behind, giving millions of families the opportunity to buy homes or to move into apartments with rents that they can afford,” HUD Secretary Andrew Cuomo said. “We acknowledge and appreciate that Fannie Mae and Freddie Mac have accepted this challenge.”

The mortgage purchase requirement — also known as the affordable housing goals — for Fannie Mae and Freddie Mac was last set by HUD in 1995, under a requirement mandated by Congress. The goals came up for renewal last year, and HUD had the choice of leaving them unchanged, or lowering or raising them.

In addition to helping low- and moderate-income families, the new federal regulations will also increase the affordable housing goals for loans made to underserved areas and will raise the goal for mortgages to benefit families with very low incomes. A special affordable housing goal for families with very low incomes and low incomes (those with less than 60 percent and 80 percent of area median) jumps from the current 14 percent to 20 percent (a 43 percent increase). In addition, a geographically targeted goal for underserved areas (central cities, rural areas, and underserved communities based on income and minority concentration) increases from 24 percent to 31 percent (a 29 percent increase).

Moreover, the new regulations also disallow GSEs (Government Sponsored Enterprises i.e. Fannie Mae and Freddie Mac) from receiving affordable housing goals credit for the purchase of mortgage loans with predatory features. These limitations are consistent with the recommendations contained in the HUD/Treasury report “Curbing Predatory Home Mortgage Lending,” issued in June 2000.

Under the higher goals, Fannie Mae and Freddie Mac are anticipated to acquire an additional $488.3 billion in mortgages that will be used to provide affordable housing for 7 million more low- and moderate-income families, many of them minorities, during the next 10 years. Those new mortgages and families are over and above the $1.9 trillion in mortgages for 21.1 million families that would have been generated if the current goals had been retained.

HUD published a proposed rule on these new goals March 9, 2000, with the promise that it would be fully implemented beginning in year 2001. The Federal Regulations published today will take effect January 1, 2001.

In evaluating the affordable housing goals for several months, HUD conducted extensive outreach, including public forums, to publicize the proposal and received more than 250 written comments from interested parties, including industry and community organizations, local public officials, and the GSEs themselves. (The new Federal Regulations are posted under “Recent FR Notices” at: http://www.hudclips.org/)

Fannie Mae and Freddie Mac buy mortgages for both individual homes and for apartment buildings. Congress gave HUD the responsibility of regulating the two companies because they were chartered by Congress.

The GSEs buy mortgages issued by banks, thrift institutions and other mortgage lenders, and then package the loans and sell them to investors as mortgage-backed securities. When Fannie Mae and Freddie Mac buy mortgages from lenders, they provide lenders with cash needed to issue new mortgages.

Congress has given GSEs special advantages – such an exemption from all state and local taxes except property taxes, and an exemption from Securities and Exchange Commission registration requirements. In addition, the ties of the GSEs to government has helped them obtain the highest credit rating to reduce their borrowing costs, and has boosted investor confidence in the two companies, thereby helping to increase their earnings. The Treasury Department reports that the benefits of federal sponsorship are worth almost $6 billion annually to the GSEs.

The GSEs are publicly chartered to provide broad public benefits. Congress, through Fannie Mae’s and Freddie Mac’s Charter Acts and the 1992 GSE Act, required that the two GSEs, in return for their publicly provided benefits, extend the benefits of the secondary mortgage market to a broad range of Americans. These include low- and moderate-income families, first-time homebuyers, and residents of communities underserved by mortgage credit.

If Fannie Mae and Freddie Mac fail to make a good faith effort to achieve the affordable housing goals, the Secretary of HUD has the authority to impose civil money penalties of up to $10,000 for each day the failure occurs.

Families are considered as having low and moderate incomes if they make no more than the area median income, which varies by community. The national average for the median income is $47,800.

These new regulations are among a series of actions HUD has taken to increase homeownership in under-served areas, particularly among minority Americans. Though America’s homeownership rate is at a record high level of 67.7 percent, there is a disparity between the rate for white borrowers and others. The homeownership rate for whites is 74 percent, while it is 46 percent for both Hispanics and African-Americans.

BREAKING NEWS:HUD TO OFFER $50K BRIDGE LOANS TO UNEMPLOYED HOMEOWNERS IN DISTRESS

The Obama Administration’s Department of Housing and Urban Development is today annnouncing plans to launch a new, $1 Billion loan program designed to help unemployed homeowners avoid foreclosure. While details are still being released as I write, initial reports from CNBC News indicate the program will provide homeowners who have lost their jobs and are three months behind on their mortgage payments a “bridge” loan of up to $50,000 at 0% interest. The new foreclosure prevention program comes in part as a response to rising unemployment and ongoing mortgage default numbers in advance of a mid term political election. Despite the Administration’s attempts to stem the tide with programs such as HARP, HAMP and HAFA–programs which I have discussed in previous blogs–it is estimated that nearly 8 million of the 9 million homeowners in default who have held out the hope of modifying their mortgage payments through government backed programs will “walk  away empty handed” for their efforts. Stay tuned for more details as they are announced.

Interest Rates at Historic Lows

This week’s  July 5-July 9 Freddie Mac survey showed the 30 year fixed  mortgage interest rate average at 4.57%, down again from last week’s low of  4.58%, according to the California Association of REALTORS.  Borrowers will need to put 20% down and pay 0.7% of the loan amount in fees to obtain that rate. This is the lowest interest rate average in 39 years. Consider too the California Homebuyer’s Tax Credit of $10,000 is still in effect, although reports suggest the funds for the credit are about 80% depleted and time is running out.  With home prices still at exceptional values, but indications that the market–at least in Orange County–has bottomed, one has to wonder: what are buyers waiting for?

Foreclosed Homeowners Who Refinanced Shielded From Lenders on Deficiencies

Homeowners and Realtors won a huge victory June 3rd when the California Senate overwhelming passed a new foreclosure protection bill despite heavy resistance from lenders. Until now, distressed owners who refinanced their original mortgage but lost their home to foreclosure anyway were liable for the difference between what they owed and what the home was sold for at auction. Such protection has been in place for homeowners who defaulted on their original  “purchase money” mortgage but, unknown to many, this was not the case for refi’s. Senate bill 1178 was originally defeated when it first came up for a vote, but due to the extensive efforts of the California Association of Realtors and over 5000 agents who voiced their support to congress, the bill was reintroduced and passed yesterday by a vote of 30 to 4. The National Association of Realtors is the largest trade organization in the world, and I for one am proud to be an active member. The next time someone criticizes congressional “lobbyists”, you might want to think twice about jumping on the band wagon and painting everyone with a broad tar brush! Hurray for the NAR and the California Senate. Chalk one up for the people!

No More Tax Liability On Short Sale Debt

Great news: California homeowners who are forced to sell their homes for less than their mortgage amount are no longer subject to taxation on the forgiven debt at either the Federal or state levels, the California Association of Realtors has announced today. Senate Bill 401 was enacted into law yesterday and covers indebtedness of up to $800,000 and forgiveness of debt up to $500,000 on a California homeowner’s principal residence. It covers both first and second trust deeds as well as refinances that were used to pay off previous loans. It also applies to sellers of second homes and rental properties who have been granted bankruptcy protection, or whose current liabilites exceed their income and are considered insolvent. The new law is retroactive and covers distressed sellers from 2009 until 2012 . Those who qualify and have already filed their 2009 state taxes may file Form 540X to receive the exemption. As always I highly recommend speaking with a tax adviser about the new law. If you or anyone you know is in financial distress, having difficulty meeting  payments or is upside down in their mortgage, I urge you to call me today at 949-374-9091 for a free consultation. I can help.

Administration Announces New Loan Modification Requirements

There’ s more good news for homeowners who are having difficulty making their mortgage payments. The Treasury Department and the Department of Housing and Urban Development (HUD) have announced new requirements designed to increase the number of permanent loan modifications granted, the LA Times reports. Unsatisfied with the success of the Home Affordabe Modification Program(HAMP),  so far, the administration is scheduled to begin the new guidelines June 1.

Previously, many borrowers who have applied to the program waited for months to hear back from the banks, only to learn their application had been denied. The banks have claimed this is because they temporarily approved many homeowners who didn’t actually qualify, and who failed to make their payments for the 3 month trial period. Also, the lenders claimed that many applicants failed to provide sufficient documentation.

Under the new system, homeowners must submit three documents. They are: A formal application for modification, along with a Letter of Hardship; Proof of Income, including 2 pay stubs or the most recent Profit/Loss statement for the self employed; and A form authorizing the IRS to release tax information to the banks.

For their part, lenders and servicers must respond to applicants within 10 days, and have 30 days from receipt of all documents to approve or deny the application. They must also calculate whether it is in the best interest of the owner of the loan (mortgage) to modify the loan and if so, they are required to grant the modification, the Times reports. If the homeowner successfully pays the modified loan on time for three months, the lender must make the modification permanent.

If you or anyone you know is having difficulty making their mortgage payments during these difficult times, I want you to know two things:

You are not alone, and you do have options. Millions of people are going through the same thing, most through no fault of their own. It can be frustrating, embarrassing and confusing. Many people are simply throwing in the towel and walking away from their home. Please don’t just give up.   I urge you to contact me today, before it’s too late.   I and my team of attorneys and tax accountants can provide valuable information on steps you can take that may help you.

Successful Loan Modification Numbers Improving

The number of homeowners benefiting from the Obama Administration’s Home Affordable Modification Program was up 17% in January over the previous month, the Wall Street Journal reported recently. HAMP, as it is called, was launched a year ago  and is designed to help homeowners having difficulty making their monthly mortgage payments modify the terms of their loan to prevent possible foreclosure. It offers homeowners who qualify for the program a possible reduction of their interest rate–in some cases as low as 2%–and a possible extension of the terms of the loan up to 40 years. Borrowers who successfully pay their modified loan for three months are eligible for permanent modification. The US Treasury said the program has temporarily cut mortgage payments for about 947,000 households. 116,000 loan modifications have been made permanent, up 75% from the previous month.