Aug 15 2007 2:07AM EDT
How Tight Are Mortgage Underwriting Standards, Really?
The WSJ's Jonathan Karp wants to tell us "How the Mortgage Bar Keeps Moving Higher", in the words of his headline. After all, he says, "mortgage lenders are tightening standards, even for borrowers with strong credit". We've known this for a while, of course, but cut the chap some slack: he's writing for the Personal Journal.
Naturally, Mr Karp needs to kick off the story with an anecdotal example of underwriting standards tightening up. Does he find a hardworking executive with an embarrassing past which is hurting his FICO score? A young couple with a good double income who have just blown a bundle on their wedding and therefore don't have a lot of money for a downpayment? Not exactly. Rather, he finds Frankie Van Cleave, a 70-year-old denizen of Marietta, Georgia, who already lives in her $890,000 riverfront property.
Now 70-year-olds are not the kind of people that mortgage lenders naturally court at the best of times. Their future income is unlikely to go up, and indeed is highly likely to go down. They're at very high risk of enormous medical bills, or death. In other words, their ability to make mortgage payments over the course of 15 years or more is likely to be limited.
But if the home in question is valuable enough, and the loan in question is small enough, then banks will still lend the money. So maybe the problem with Ms Van Cleave is that she was asking for too much money. A bank might be willing to lend her half the value of her home – $450,000. But if she asked for, say, 80% of the value – $720,000 – you can see why a lender would say no.
So how much is Ms Van Cleave asking for? A cool $1 million, or more than 110% of the appraised value of her home. Never mind the risk that house prices might drop: in order for any such lender to have the remotest chance of being paid back in full, Frankie's house will have to rise, and quite substantially too, in value. But that's not the way she sees it, of course:
"A good credit record doesn't count for anything now," Ms. Van Cleave says of her futile refinancing effort. "If you don't have assets, forget it. If you're self-employed, you have real problems in this market."
No. If you're 70 years old, and you have $110,000 of negative equity, then you have real problems in this market. (Actually, we're told that the appraisals on the house came in below $900,000, which means that she has even more negative equity than that.) The self-employed bit is the least of Van Cleave's worries: no lender is going to assume that a 70-year-old is going to stay on the payroll at any company for very long.
The fact that Frankie Van Cleave can't get a mortgage is not news. It's the fact that "several mortgage brokers" were still courting her not so long ago which is the more worrying part.
Indeed, I wonder whether underwriting standards have in reality tightened up nearly as much as we're constantly being told they have. Look at the most recent tranche of ABX.HE subprime indices, the 07-02 vintage, containing mortgages written in the first half of this year, long after systemic problems in subprime underwriting had been splashed all over the headlines. It turns out that those subprime loans are trading just as badly as – if not worse than – the subprime loans of the 2006 vintage. And does this sound like underwriting standards are tight, or just that they've been insanely loose right up until now?
IndyMac Bancorp is the latest lender to shun 100% financing for borrowers who want merely to state their income. For Alt-A loans that don't have third-party mortgage insurance, IndyMac is insisting on at least a 5% down payment for "all loan sizes and property types," according to guidelines sent to mortgage brokers.
IndyMac has been providing, all year, 100% financing for people who won't even show them how much money they were making? And it's still providing 95% financing? Yikes. This article isn't showing me how tight underwriting standards are: it's showing me how loose they are.
I do think that there's less outright fraud in loan applications now, compared to a year ago. But I'm not convinced that there's been a significant tightening of underwriting standards more generally – certainly not until the past couple of weeks, anyway. And if that's the case, then mortgage lenders have been acting even more foolishly than we'd heretofore imagined.
You say in your answer that "If 70% of all Americans own a home how can we have so many buyers on the sidelines?"
The current efforts to remedy the delinquency issue in domestic housing are significant and concerning. 1 in 6 is in foreclosure I believe. However, the liquidation and methods for disposing of the institutional "bad" assets (REO) are more problematic and requires further review. With confidence I offer that as much as 30% of all housing should be labeled as impaired due to negligent and or fraud related borrower lender circumstances - who ever or whatever, doesn't matter. Add another 7 % to 10% of the population of consumer SFR 1-4 housing should be classified as 120 days out to becoming delinquent. ...impacted due to job loss or other regional economic problems making long range earnings unlikely.
That said consider the data that is out and what is happening with in the SFR housing sector of banking. The data we are using for arguing forecasts is failing to divulge the real foreclosure numbers which are far too conservative given the real numbers being withheld and the anticipated reserve requirements that otherwise will cause further banking failures and untimely further government response or "bail outs'. The capacity for the market to absorb the excess units coming on line over the next 24 months at depressed prices are the real overbuilding that was guised as controlled growth. The balance was not in line with the markets capacity as realtors and brokers made a market out of low to moderate income families moving from outhouse to penthouse under unethical and deceptive lender programs and practices. (Not the agents fault - - it's the CDO markets (joke, what a mess really) and their demand for yields that filled inventory with unqualified borrowers. The distressed assets or percent of housing inventory lenders call REO is backlogged 6 months in this draconian and archaic foreclosure process. Is domestic banking feeling the crunch of added reserves, losses and weak earnings to date? Add in the added cost added for each REO whereby 6 more months of accrual is added to your basis in the assets required under GAAP when booking combined capital cost and cost to carry. Of over 1 trillion in originations considered excess and artificial or synthetic, institutional balance sheets will carry these assets at twice the value of the Real Estate. Wake up friends. There are no traditional models that can truly quantify the problems without rethinking the calc's. or adding to it a variance for these extraordinary factors. Again, it's the Streets algorithmic that never came to fruition in the CDO and derivatives securities models which threw in a phony or make believe assumption for housing supply and absorption relative to the population of homeowners, affordability, capacity and low teaser start rates which distorted real economic capacity.
My finely tuned and intellectual friends! Your models are too sterile! As for the comment "I have one friend out of 50 that is renting". Throw a total of 100 pennies into the air and watch at least another 34 come down tails.
MSoliman / Stop Predatory Lending / www.borrowerhotline.com
AARP Board Members
Su: Predatory lending
Predatory lender practices are a difficult and complex issue. For seniors it is also devastating.
My name is Maher Soliman and I am a published writer, mortgage lending "legal" consultant and court expert (not counsel). I seek to become active in the efforts of protecting seniors with the help or endorsement of AARP.
I offer 25 years of non agency and subprime experience ranging from Wall Street, the MBA, trading large bulk pools and down through the servicing side.
I want to start by telling you I sat out the last five years while lenders originations ran out of control. In response to the abusive lender practices we see today, I formed a company in 2006 with the objective of providing victims and their counsel unqualified audits for each subject loan file.
The objective is for each senior who is delinquent or in foreclosure to file notice of a pending claim. We substantiate compliance violations and to allow counsel to argue a borrower request for settlement or if necessary, a rescission of the loan.
Where my audits were once used to cover up a beneficiary's exposure, they are now helping to isolate abusive lending practices. There is a lot I can share with you and offer AARP. Therefore, keep this in mind;
1. Be on guard of Foreclosure Help You consultants.
2. Understand very few attorneys exist nationally with capacity to counter argue lender fraud.
3. I am seeing have way too many cases (concentration) with seniors losing everything.
We are prevailing for these few...but what about the thousands out there who are yet to fight to keep their homes and exercise their rights as borrowers.
Can I offer assistance under an AAPR proposal or member plan? My references are understandably required and will be made available upon request.
Thanks AARP
M Soliman
NLS www.borrowerhotline.com
877-732-7653
2004 2007 2008 4 a AARP advocacy Alaska and animals anniversary art at Austin autumn Babies baby beach beautiful Benn birds birthday blue California camping car cat Cats chapters Christian city Clinton
I cannot tell you how disappointed I was when I briefed GP while you were gone. Since you left we have received 24 correspondences from counsel representing
the lenders. Finally. Each request is very respectful and some are just grasping (in an attempt to cover up the exposure). One letter from Downey Savings Chief Counsel states "....therefore, we have no responsibility for the welfare of any customer!" Wrong asshole! Next said that "borrowers only have a 3 day right to rescission which expired". Sorry moron. HUD rules say 3 years from date of discovery. This is confidential, but we met with a big wheel from Countrywide who looked at some of the paper. He said Countrywide will honor rescissions 10 years and beyond. The ninth circuit recently ruled that a refinance
subsequent to a purchase loan will not relieve the prior lender of responsibility and exposure to errors under RESPA.
If attorneys only knew how empty this field is void of informed counsel to represent these borrowers / respondents.
So as for GP et al...I just wanted to show them that with patience and time comes the fruits of our labor (the final chapter to closing some of these files). It's show time! It's difficult to consider Chris Pham, who was a very good friend, would walk away at this point. I met with a para legal who works with a legal (800) referral service who said attorneys will pay up to $25,000 for 5 cases packages where I can show they are positioned to commence with serious settlement talks.
Again, a contact inside Countrywide swore secrecy to this (as I tell you) saying It's mandatory, bring action against
the lender, in order to commence settlement talks, not a trial. From there they are likely to consider the law firm as contract in house counsel or something more synergistic for resolving these matters and conflict for future customers they refer out to us....hmmmm.
File a suit, prevail and make a client?
Again, TILA and RESPA require the lender in these cases to pay ALL legal costs and court costs upon even the slightest settlement; i.e. rescinding the
foreclosure and just staring the process of recovery over is sufficient for claiming your attorney hours and fees. In fact, should I assign the 100 plus hours at $300 an hour to Gareeb Pham for you to collect on Olehy. We agreed to split it with the firm.
Olehy is not an underwriter and EVERYTHING I pulled from the file can be switched and easily be made by the opposition to argued against the couple. So let her do as she see's fit but be careful here. The findings I make are not necessarily the facts but are my interpretation as an auditor. That's call an investigation and its ongoing. It suggests inconsistency which for the respondent is good! . This is a critical component for arguing these cases. Please listen to me here. With RESPA and under the Truth and Lending Act there is no room for interpretation. It is black and white and nothing in between. If the file appears to me (examiner) to say one thing, and it something else to the lender. . .then the file is inconsistent ... it's still the lender who loses.
I have experience in a similar matter and that was my divorce. Everything i claimed and responded to ultimately resulted in the same tried and true decision the courts make year after year. Split the community in half and rule the primary wage earner is to support the other for so many years. Some attorneys are calling this a mandatory Pro Bono that is even better than major claims insurance cases. Attorneys will always get there fees and cost reimbursed. Lock stock and barrel. Done!
Everything in a file must be spelled out correctly, from the date they started their last job to the current date with the exact income they earned for that period averaged correctly over 365 days, calculating the per diem by 30 days, then divided by 4.3 for a weekly average earnings figure. - - -It's overkill that lenders have unfairly had to deal with over time and have neglected to adhere too.
My findings are what they are. Let the lender invest the time to tell us what there interpretation is and therein, they will appear negligent, deceptive and or willfully in violation of the mandate to properly and accurately
disclose information free of any errors and omissions.
Okay Sir
Chris
I cannot tell you how disappointed I was when I briefed GP while you were gone. Since you left we have received 24 correspondences from counsel representing
the lenders. Finally. Each request is very respectful and some are just grasping (in an attempt to cover up the exposure). One letter from Downey Savings Chief Counsel states "....therefore, we have no responsibility for the welfare of any customer!" Wrong asshole! Next said that "borrowers only have a 3 day right to rescission which expired". Sorry moron. HUD rules say 3 years from date of discovery. This is confidential, but we met with a big wheel from Countrywide who looked at some of the paper. He said Countrywide will honor rescissions 10 years and beyond. The ninth circuit recently ruled that a refinance
subsequent to a purchase loan will not relieve the prior lender of responsibility and exposure to errors under RESPA.
If attorneys only knew how empty this field is void of informed counsel to represent these borrowers / respondents.
So as for GP et al...I just wanted to show them that with patience and time comes the fruits of our labor (the final chapter to closing some of these files). It's show time! It's difficult to consider Chris Pham, who was a very good friend, would walk away at this point. I met with a para legal who works with a legal (800) referral service who said attorneys will pay up to $25,000 for 5 cases packages where I can show they are positioned to commence with serious settlement talks.
Again, a contact inside Countrywide swore secrecy to this (as I tell you) saying It's mandatory, bring action against
the lender, in order to commence settlement talks, not a trial. From there they are likely to consider the law firm as contract in house counsel or something more synergistic for resolving these matters and conflict for future customers they refer out to us....hmmmm.
File a suit, prevail and make a client?
Again, TILA and RESPA require the lender in these cases to pay ALL legal costs and court costs upon even the slightest settlement; i.e. rescinding the
foreclosure and just staring the process of recovery over is sufficient for claiming your attorney hours and fees. In fact, should I assign the 100 plus hours at $300 an hour to Gareeb Pham for you to collect on Olehy. We agreed to split it with the firm.
Olehy is not an underwriter and EVERYTHING I pulled from the file can be switched and easily be made by the opposition to argued against the couple. So let her do as she see's fit but be careful here. The findings I make are not necessarily the facts but are my interpretation as an auditor. That's call an investigation and its ongoing. It suggests inconsistency which for the respondent is good! . This is a critical component for arguing these cases. Please listen to me here. With RESPA and under the Truth and Lending Act there is no room for interpretation. It is black and white and nothing in between. If the file appears to me (examiner) to say one thing, and it something else to the lender. . .then the file is inconsistent ... it's still the lender who loses.
I have experience in a similar matter and that was my divorce. Everything i claimed and responded to ultimately resulted in the same tried and true decision the courts make year after year. Split the community in half and rule the primary wage earner is to support the other for so many years. Some attorneys are calling this a mandatory Pro Bono that is even better than major claims insurance cases. Attorneys will always get there fees and cost reimbursed. Lock stock and barrel. Done!
Everything in a file must be spelled out correctly, from the date they started their last job to the current date with the exact income they earned for that period averaged correctly over 365 days, calculating the per diem by 30 days, then divided by 4.3 for a weekly average earnings figure. - - -It's overkill that lenders have unfairly had to deal with over time and have neglected to adhere too.
My findings are what they are. Let the lender invest the time to tell us what there interpretation is and therein, they will appear negligent, deceptive and or willfully in violation of the mandate to properly and accurately
disclose information free of any errors and omissions.
Okay Sir
Chris
I cannot tell you how disappointed I was when I briefed GP while you were gone. Since you left we have received 24 correspondences from counsel representing
the lenders. Finally. Each request is very respectful and some are just grasping (in an attempt to cover up the exposure). One letter from Downey Savings Chief Counsel states "....therefore, we have no responsibility for the welfare of any customer!" Wrong asshole! Next said that "borrowers only have a 3 day right to rescission which expired". Sorry moron. HUD rules say 3 years from date of discovery. This is confidential, but we met with a big wheel from Countrywide who looked at some of the paper. He said Countrywide will honor rescissions 10 years and beyond. The ninth circuit recently ruled that a refinance
subsequent to a purchase loan will not relieve the prior lender of responsibility and exposure to errors under RESPA.
If attorneys only knew how empty this field is void of informed counsel to represent these borrowers / respondents.
So as for GP et al...I just wanted to show them that with patience and time comes the fruits of our labor (the final chapter to closing some of these files). It's show time! It's difficult to consider Chris Pham, who was a very good friend, would walk away at this point. I met with a para legal who works with a legal (800) referral service who said attorneys will pay up to $25,000 for 5 cases packages where I can show they are positioned to commence with serious settlement talks.
Again, a contact inside Countrywide swore secrecy to this (as I tell you) saying It's mandatory, bring action against
the lender, in order to commence settlement talks, not a trial. From there they are likely to consider the law firm as contract in house counsel or something more synergistic for resolving these matters and conflict for future customers they refer out to us....hmmmm.
File a suit, prevail and make a client?
Again, TILA and RESPA require the lender in these cases to pay ALL legal costs and court costs upon even the slightest settlement; i.e. rescinding the
foreclosure and just staring the process of recovery over is sufficient for claiming your attorney hours and fees. In fact, should I assign the 100 plus hours at $300 an hour to Gareeb Pham for you to collect on Olehy. We agreed to split it with the firm.
Olehy is not an underwriter and EVERYTHING I pulled from the file can be switched and easily be made by the opposition to argued against the couple. So let her do as she see's fit but be careful here. The findings I make are not necessarily the facts but are my interpretation as an auditor. That's call an investigation and its ongoing. It suggests inconsistency which for the respondent is good! . This is a critical component for arguing these cases. Please listen to me here. With RESPA and under the Truth and Lending Act there is no room for interpretation. It is black and white and nothing in between. If the file appears to me (examiner) to say one thing, and it something else to the lender. . .then the file is inconsistent ... it's still the lender who loses.
I have experience in a similar matter and that was my divorce. Everything i claimed and responded to ultimately resulted in the same tried and true decision the courts make year after year. Split the community in half and rule the primary wage earner is to support the other for so many years. Some attorneys are calling this a mandatory Pro Bono that is even better than major claims insurance cases. Attorneys will always get there fees and cost reimbursed. Lock stock and barrel. Done!
Everything in a file must be spelled out correctly, from the date they started their last job to the current date with the exact income they earned for that period averaged correctly over 365 days, calculating the per diem by 30 days, then divided by 4.3 for a weekly average earnings figure. - - -It's overkill that lenders have unfairly had to deal with over time and have neglected to adhere too.
My findings are what they are. Let the lender invest the time to tell us what there interpretation is and therein, they will appear negligent, deceptive and or willfully in violation of the mandate to properly and accurately
disclose information free of any errors and omissions.
Okay Sir
Chris
I cannot tell you how disappointed I was when I briefed GP while you were gone. Since you left we have received 24 correspondences from counsel representing
the lenders. Finally. Each request is very respectful and some are just grasping (in an attempt to cover up the exposure). One letter from Downey Savings Chief Counsel states "....therefore, we have no responsibility for the welfare of any customer!" Wrong asshole! Next said that "borrowers only have a 3 day right to rescission which expired". Sorry moron. HUD rules say 3 years from date of discovery. This is confidential, but we met with a big wheel from Countrywide who looked at some of the paper. He said Countrywide will honor rescissions 10 years and beyond. The ninth circuit recently ruled that a refinance
subsequent to a purchase loan will not relieve the prior lender of responsibility and exposure to errors under RESPA.
If attorneys only knew how empty this field is void of informed counsel to represent these borrowers / respondents.
So as for GP et al...I just wanted to show them that with patience and time comes the fruits of our labor (the final chapter to closing some of these files). It's show time! It's difficult to consider Chris Pham, who was a very good friend, would walk away at this point. I met with a para legal who works with a legal (800) referral service who said attorneys will pay up to $25,000 for 5 cases packages where I can show they are positioned to commence with serious settlement talks.
Again, a contact inside Countrywide swore secrecy to this (as I tell you) saying It's mandatory, bring action against
the lender, in order to commence settlement talks, not a trial. From there they are likely to consider the law firm as contract in house counsel or something more synergistic for resolving these matters and conflict for future customers they refer out to us....hmmmm.
File a suit, prevail and make a client?
Again, TILA and RESPA require the lender in these cases to pay ALL legal costs and court costs upon even the slightest settlement; i.e. rescinding the
foreclosure and just staring the process of recovery over is sufficient for claiming your attorney hours and fees. In fact, should I assign the 100 plus hours at $300 an hour to Gareeb Pham for you to collect on Olehy. We agreed to split it with the firm.
Olehy is not an underwriter and EVERYTHING I pulled from the file can be switched and easily be made by the opposition to argued against the couple. So let her do as she see's fit but be careful here. The findings I make are not necessarily the facts but are my interpretation as an auditor. That's call an investigation and its ongoing. It suggests inconsistency which for the respondent is good! . This is a critical component for arguing these cases. Please listen to me here. With RESPA and under the Truth and Lending Act there is no room for interpretation. It is black and white and nothing in between. If the file appears to me (examiner) to say one thing, and it something else to the lender. . .then the file is inconsistent ... it's still the lender who loses.
I have experience in a similar matter and that was my divorce. Everything i claimed and responded to ultimately resulted in the same tried and true decision the courts make year after year. Split the community in half and rule the primary wage earner is to support the other for so many years. Some attorneys are calling this a mandatory Pro Bono that is even better than major claims insurance cases. Attorneys will always get there fees and cost reimbursed. Lock stock and barrel. Done!
Everything in a file must be spelled out correctly, from the date they started their last job to the current date with the exact income they earned for that period averaged correctly over 365 days, calculating the per diem by 30 days, then divided by 4.3 for a weekly average earnings figure. - - -It's overkill that lenders have unfairly had to deal with over time and have neglected to adhere too.
My findings are what they are. Let the lender invest the time to tell us what there interpretation is and therein, they will appear negligent, deceptive and or willfully in violation of the mandate to properly and accurately
disclose information free of any errors and omissions.
Okay Sir
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