Archive for August, 2010
FHA is in Better Shape than Expected
Mortgages backed by the Federal Housing Administration have performed better than expected so far this fiscal year, though the improvements could be overturned if home prices sink, according to a report the agency submitted to Congress this week. The report analyzed the FHA’s loan portfolio from October through June and compared the results to the projections in an independent audit released late last year. That audit found that as the FHA’s loan volume expanded, its default rate rose and the excess cash it set aside to deal with unexpected losses eroded to dangerously low levels as of Sept. 30. The auditors concluded taxpayers would be on the hook for losses if worst-case scenarios played out – a first for the agency, which has always used fees it charges borrowers to pay lenders for losses. In its report to Congress this week, the FHA updated lawmakers on the performance of its loans since the audit’s release. The agency said it collected more money than it disbursed in the nine months ended June 30, for a net increase of $446 million. It concluded that FHA loans are holding up better than the audit had predicted on many fronts, in part because the agency has attracted more creditworthy borrowers and rooted out fraudulent lenders. But the report did not update the excess cash reserves calculated in last year’s audit. Those were about $3.6 billion as of Sept. 30. That represented about 0.53 percent of all outstanding single-family home loans insured by the agency – well below the 2 percent required by law. A new audit is due later this year. The FHA’s report to Congress said that from October through June, the FHA had 19,310 fewer insurance claims on loans gone bad and paid $3.7 billion less than projected by the audit. Some states are experiencing a backlog in processing foreclosures, which may help explain the lower-than-expected claims, the report said. But aggressive foreclosure prevention efforts and stabilizing home prices also contributed to the better results. When home values drop and borrowers end up owing more than their homes are worth, they are vulnerable to foreclosure because they can’t sell their properties or refinance if they face a financial setback. But just as better-than-predicted home prices have helped the FHA so far this fiscal year, a sustained drop in prices could severely damage its finances going forward. “That’s the overarching caution,” said Bob Ryan, the agency’s chief risk officer. “We have to think about what loan performance will look like based on what houses’ prices will be doing going forward.” The most at-risk loans are the ones made in 2007 and 2008, the report said. FHA Commissioner David H. Stevens has told Congress that “rogue players” migrated to FHA lending in those years and used aggressive tactics to attract poor-quality borrowers to the FHA. Those loans are now maturing into their worst years because failures most often occur two to three years after a mortgage is made. As the loans go bad and clear off the FHA’s books, the agency expects its losses to taper off. The 2009 and 2010 loans – which now make up 60 percent of its outstanding dollar balances – are of better quality, which is why the delinquency rates on those loans are low, the report said. In the quarter ended June 30, only 0.42 percent of the FHA purchase loans were at least 90 days late within their first six months. By contrast, 2.6 percent of the mortgages in the comparable quarter of 2007 and 1.5 percent of the loans in the same portion of 2008 were seriously late. The report also said that the FHA has endorsed more than 1.3 million single-family loans in the first three quarters of the fiscal year as of June, and it’s on pace to ensure 1.7 million by the end of the fiscal year on Sept. 30. Home purchase mortgages alone may surpass the one million mark for the first time since 1987. But refinance activity has slowed dramatically since its peak in late 2009. Copyright © 2010 washingtonpost.com.
Beware of Bogus Health Insurance
The Florida Department of Financial Services (DFS) and the Office of Insurance Regulation (OIR) issued a warning about unauthorized health insurance plans. The plans are sold under different names but backed by Association of Independent Managers (AIM), according to Florida officials. OIR has issued a Cease and Desist Order to AIM, and preliminary OIR estimates indicate as many as 1,800 Florida consumers have already purchased these bogus health plans. “Bogus health insurance scams rob consumers of their hard-earned money and also leave them uncovered in the event that medical care is needed,” said CFO Alex Sink, who oversees DFS.” DFS has received complaints from about 100 consumers. Most notably, AIM recently marketed “AIM Health Plans.” Insurance Resource Group (IRG) is another name associated with AIM Health Plans. Some of the individuals involved with the sale of AIM plans have also participated in the unauthorized sale of health insurance products with other companies including Serve America Assurance and Real Benefits Association. Other unauthorized plans marketed by AIM are known to include—but are not limited to: • AIM Health Solutions • AIM Guaranteed Health Insurance • “CEO Club Benefits” • “CEO Health Club Benefits” • “Chief Executive Officers Club” • “CEO Health Select” AIM is also known to associate with the names of: • National Association of Business Leaders (NABL) • Worldwide Family Benefit Association • Insurance Resource Group (IRG) • Integrated Insurance Marketing (IIM) • Phoenix Insurance/Star, U.K./Star Group, U.K. • Viking Administrators • Commerce Benefits Group Agency No entity with these names is currently authorized by the OIR to transact health insurance business in Florida. Consumers who believe they bought coverage from an unlicensed insurance operation should: • Call the CFO’s Consumer Helpline at 1-877-MY-FL-CFO (1-877-693-5236) or log on to Consumer Help Online at www.MyFloridaCFO.com. • Consider closing the bank account or canceling the credit card from which premiums are paid so no unauthorized transactions can occur. • Replace the unlicensed coverage with coverage from an authorized insurer. To verify the authorization of an insurance company visit http://www.floir.com. To check on an agent’s license, go to www.MyFloridaCFO.com or call the CFO’s Consumer Helpline at 1-877-MY-FL-CFO (1-877-693-5236).
Florida’s Largest Foreclosure Law Firm Faces Allegations
Florida’s purported largest foreclosure law firm filed thousands of documents to take people’s homes that contained deceptive and intentionally ambiguous information, according to a proposed class action lawsuit. The suit, filed last month in U.S. District Court, Southern District of Florida, says David J. Stern and his Plantation-based legal team violated the Racketeer Influenced and Corrupt Organizations Act by generating fraudulent mortgage assignments when pursuing foreclosures. An assignment is held by the entity that has the right to receive mortgage payments. Stern’s practice, which the lawsuit claims filed up to 7,000 new foreclosure cases in Florida every month last year, is also alleged to have pursued foreclosures for lenders that didn’t own the debt on the homes. “There really is no proper plaintiff to sue and foreclose and that’s what this charade is designed to cover,” said Fort Lauderdale Attorney Kenneth Eric Trent, who is seeking class action status and filed the suit on behalf of Oakland Park resident Ignacio Damian Figueroa. “There is no real holder of the note and the mortgage anymore because they broke it up and sold it to 10, 12, 20 people.” During the real estate boom, loans traded hands often, sometimes being bundled or split up and sold to investors. Tracking the true owner of the debt sometimes can be a challenge. When pressed for proof of debt ownership, Trent said Stern’s office would create an assignment signed by a Stern employee instead of a representative of the lender attempting to foreclose. “The assignments were meaningless shells designed to pull the wool over the eyes of the judiciary and ease the burden upon the unknown real parties of interest,” the lawsuit states. Miami Attorney Jeffrey Tew, of Tew Cardenas law firm, is representing Stern. He said Stern and his company have done nothing wrong, and that it is accepted practice for a firm employee to be given power to approve assignments. “This foreclosure crisis was not created by David Stern, but it is so huge and a lot of people are in very bad shape, so some of the finger pointing goes to him,” Tew said. Trent also named the Mortgage Electronic Registration Service Corp. as a defendant. The private entity, known as MERS, was created by banks in 1995 to track mortgage ownership electronically and reduce paper documents. Trent says MERS helps hide the identity of loan ownership and that it conspired with Stern to “confuse everyone as to who owned what.” Tew called that claim “fantastical.” He did acknowledge, however, that errors can happen. West Palm Beach foreclosure defense Attorney Thomas Ice found 21 examples last year of assignments from Stern’s office that had been executed with a date before the notary’s commission was issued. In a deposition, a Stern employee agreed with Ice that “sloppiness” was to blame for the irregularity. Palm Beach County Circuit Judge Meenu Sasser, who handles the county’s foreclosures, said she’s dismissed cases when she found problems with assignments. She wasn’t speaking directly about cases filed by Stern, and said it’s only happened a few times. “I haven’t seen any widespread problem,” Sasser said. Copyright © 2010 The Palm Beach Post, Fla., Kimberly Miller. Distributed by McClatchy-Tribune Information Services.
5 Reasons to Buy a Home Now
The tax credit expired, but it’s still a great time to buy a home thanks to low mortgage rates and motivated sellers. Here are five reasons why now is a great time to buy: 1. Low mortgage rates serve as an equity shock absorber. When buyers borrow at today’s record-low rates, they start building equity as soon as they close. That means they can absorb a few ups and downs as the still-recovering housing market gains traction. 2. Houses are in move-in condition. Homeowners continue to spend on maintenance and repair, according to the Harvard Joint Center on Housing. As these houses enter the market, they stand in marked contrast to tattered foreclosures. 3. Terrific houses are coming on the market. Foreclosures are finally starting to clear the system, and they are being replaced by some very attractive properties. 4. Appraisal regulations are finally aligned with market realities. Fannie Mae has adjusted its appraisal guidelines, giving appraisers more flexibility to set values that reflect the current market. 5. Plenty of programs. Many programs that encourage middle-class families to buy homes still exist, despite market downturns. Buyers who qualify can get a big boost by combining one of these programs with today’s low mortgage rates. Source: ForSaleByOwner.com (07/29/2010) © Copyright 2010 INFORMATION, INC. Bethesda, MD (301) 215-4688
