The U.S. Treasury Department is exploring a plan that could help 1 million or more homeowners avoid foreclosure. It applies to non-agency (in securities not issued by government agencies) mortgages, and is an attempt to promote modifications of delinquent or defaulted home loans, including write-downs of principal, by bringing fresh private capital into the market.
Sometimes I wonder if Laurence Yun, the chief economist with the National Association of Realtors, has a set of phrases which, when NAR announces numbers, he draws out of a hat and uses for the press. With yesterday’s release showing another drop in the sales of existing homes in June, Mr. Yun used, “problems including tight credit and low appraisals, 16 percent of NAR members report a sales contract was cancelled in June, up from 4 percent in May, which stands out in contrast with the pattern over the past year.” Last month it was partially attributed to, “Even with recent economic softness, this is a disappointing performance with home sales being held back by overly restrictive loan underwriting standards. There’s been a pendulum swing from very loose standards which led to the housing boom to unnecessarily restrictive practices as an overreaction to the housing correction – this overreaction is clearly holding back the recovery.”
In an interesting twist, however, NAR President Ron Phipps also said the lower conforming loan limits that are scheduled to go into effect on October 1 are also likely playing a role as some lenders are already placing the lower limits on current contracts in anticipation they won’t close by the end of September. “As a result, some contracts may be getting cancelled because certain buyers are unwilling or unable to obtain a more costly jumbo mortgage,” said Phipps.
Here’s a trivia question for you. “Which lender received the largest fine ever issued by the Fed under its consumer-protection authority and is the first action taken against a bank for predatory lending practices related to the housing bubble?” The answer is….