*******************************************************************
A Funny Political Site:
"The End Of Kakistocracy"
(Yes it's a real word)

*******************************************************************

REVERSE MORTGAGE BASICS

(Issued by NRMLA)

Established in 1997, NRMLA is the national voice for lenders and investors engaged in the reverse mortgage business. NRMLA fulfills several roles, which include educating consumers about the opportunity to utilize reverse mortgages, training lenders to be sensitive to the needs of older Americans, developing Best Practices and enforcing a Code of Conduct to make sure lenders participating in the program treat seniors respectfully, and promoting reverse mortgages in the media.

NRMLA has issued the basic information for Reverse Mortgages, shown below, for all people who are interested in learning about reverse mortgages for themselves, or their parents, other elderly relatives, friends, neighbors or acquaintances.

All Reverse Mortgages—whether the government-insured Home Equity Conversion Mortgage (HECM) or a conventional product offered as a proprietary product by banks or savings and loans—share a set of common characteristics, which include the following:

§ You must be at least 62 years old and own a home. (Note: There are some conventional proprietary reverse mortgages that have differing age requirements.)

§ You ALWAYS retain title (ownership) to the home. The lender never, at any point, owns the home, even after you (or last surviving spouse) permanently vacate the property.

§ You must still pay property taxes and insurance, and keep the home well maintained. If you are unable to pay your property taxes and insurance, then a special set-aside from your reverse mortgage can be created.

§ Repayment of the loan occurs when you (or last surviving spouse) permanently vacate the home. You or your heirs (estate) then must facilitate the pay back of the loan using either private funds or selling the home. After the loan is repaid, all leftover proceeds from the sale of the home go to you or the estate. [ If your heirs inherit your home and want to sell it, they have up to 12 month or more (if the property is listed for sale) to repay the loan by selling the property or refinancing it. If the home is sold FHA will contribute up to 7% of the sales price to cover closing costs.]

§ The amount of funds you are eligible to receive depends on your age (or age of the youngest borrower in the case of couples), the value of the home, the interest rate and the upfront costs. With the HECM product, the county lending limit is a factor. With all products, the older you are, the more proceeds you are eligible to receive.

§ Loan fees can be financed, or paid out of the available loan proceeds. This means you incur very little out-of-pocket expense to get a reverse mortgage. In most cases, you only have to pay for the appraisal, which costs roughly $350 or more depending on your market.

§ The loan balance (amount owed) grows each time you access funds from your line of credit or receive a monthly payment. In addition, the lender is charging you interest on the outstanding loan balance as well as a monthly servicing fee.

§ Repayment of the loan is not required until you (or the last surviving spouse) permanently leave the home as a primary residence. For the HECM program, you can live up to 12 consecutive months outside the home, but this may vary for other products.

§ All reverse mortgages have a “non-recourse” feature, which means that the total amount owed can never exceed the appraised value of the home.

If the amount owed exceeds the home’s appraised value, then the lender or the federal government (in the case of the HECM product) will absorb that loss. No other assets of the borrower(s) can be attached or used to pay off the reverse mortgage; the house is the only security.

What does a reverse mortgage offer seniors?

§ The reverse mortgage, allows a homeowner to convert a portion of their equity in their home into a lump sum payment, a lifetime of monthly income payments, a line of credit or any combination of the above.

§ Many seniors use it to supplement social security, meet unexpected medical expenses, make home improvements, add safety features to the house, purchase automobiles, or RV's, take that "special" vacation or more.

§ How do you know if you’re eligible for a HUD reverse mortgage? The requirements are simple, you must be 62 years of age or older; own your home outright, or have a lower mortgage balance that can be paid off with proceeds from the reverse loan. You must live in your home and you’re required to receive consumer information from HUD-approved counseling source prior to obtaining the loan.

And, unlike a home equity loan or second mortgage there is no monthly payment, there is no asset, income or credit score requirement, the funds are tax free, and they do not affect your rights to social security or Medicare.

§ Your home must be a single family dwelling or a two-to-four unit property that you own and occupy. Townhouses, detached homes, units in condominiums and some manufactured homes are eligible. Condominiums must be FHA-approved. It is possible for individual condominiums units to qualify under the Spot Loan program.

§ The amount you can borrow depends on your age, the current interest rate, and the appraised value of your home or FHA’s mortgage limits for your area, whichever is less.

§ Although you never have a mortgage payment, you, the homeowner, must keep the taxes and hazard insurance current, and keep the house in good repair.

******************************************************************

What Do People Do With A Reverse Mortgage?

A Few of Our Recent Reverse Mortgage Closings.

Elderly Couple Immigrant Citizens and the SubPrime Loan:

This couple, in their late 70's had recently and tragically lost their 37 year old son to a sudden brain anurysm when in grief and under emotional and financial duress signed documents which was represented to them as a 30 year fixed rate loan. Within 2 1/2 years their payment went from $1700 a month to $3450 a month. The 76 year old husband, in spite of back and severe kidney problems continued to work as a gardner since his social security is less than $650 a month. Unable to make the mortgage payments they sought relief with a reverse mortgage.

But, they did not qualifiy for enough reverse mortgage money to pay off the subprime loan. They still needed another $46,000 to add to the reverse mortgage. Not being able to do this, and knowing that Congress and FHA were going to raise the lending limits to $417,000, and then they could pay off the subprime loan. They notified their lender and worked out a temporary payment adjustment.

But, when the FHA Reverse Mortgage cap was raised to $417,000 so much time had passed that, in our declining market, their home value had fallen so much that even with the new reverse mortgage level they still needed to come up with over $20,000 to pay off the subprime lender.

At this time they have submitted their approved reverse mortgage commitment letter, a statement of hardship, a budget to the subprime lender requesting a short-payoff. If the subprime lender does not approve the short payoff, then they will have to file for bankruptcy and put their hopes in a court order requiring the lender to accept the short-payoff.

And, we (at BeaconReverse Mortgage/American Home Bank, N.A.) will be at their side, assisting in every way we can until the matter is settled in the borrower's favor.

Southern Virginia Couple:

This couple was lucky in that they had no mortgage, and their property had increased greatly in value. But they did suffer from some early retirement health problems. He needed two knee replacements; and she had a stroke that affected her legs making it painful to walk. They needed additional funds so he could retire from his plumbing business, and to pay for their medications and food. They opted for monthly tenured payments, along with a credit line and a minimal initial payout of funds for current bills.

Fairfax Woman:

A single woman, a prior real estate agent, living on a small income from social security. She had no mortgage, some savings, but needed more cash flow. She loves her home and is doing a lot of home improvements (even laying her own kitchen floor - although she did allow workmen in to put in the new kitchen counter and sinks). For her 75th birthday this last April she went out skydiving (strapped to the instructor, thank goodness). She opted for lifetime (tenured) monthly payments.

Mother and Son:

This borrower, 86, was quite ill, and deemed legally blind. In spite of her high equity, due to her loan payments, extremly high medical and credit card bills she was facing foreclosure. Her son was determined that his Mother be able to stay at home as she wished, instead of going to a nursing home.

He had been caring for her, but his car repair business and his own ill health suffered, too.

With her approval and Power of Attorney he arranged her Reverse Mortgage. . The approved Reverse Mortgage paid off all lienholders, gave her cash to pay off all her bills and set up a credit line account for possible future emergencies. The unused portion of the creditline will grow each year.

Now she has no mortgage payment or medical bills, and her spendable income has increased considerably allowing her to pay for daily in-home care. Her son has now seen doctors and with improved health and care for his mother, has been able to return to work and restore his business.

Maryland Couple:

A couple with a wide disparity in age. He wanted to make sure that should something happen to him, his wife would have funds available to her immediately. In addition they wanted to travel and pay for their daughters wedding. They had no mortgage, good savings and opted to take all their funds in a Reverse Mortgage credit line. And the unused portion of their credit line will grow each month at an annual rate of over 6%.

Unmarried Woman:

A woman with a beautiful home fully paid for, but a minimum of savings and a medium-income. Her desire was to increase her monthly income, pay off some bills for home improvement and to pay for her dreams of traveling throughout the United States - especially Montana - and ride, ride, ride the most beautiful horses there. She opted for an initial payout and lifetime monthly payments.

Update: After one trip West, she came home and bought two puppies, who are being lovably spoiled.

The Italian Sisters:

Two widowed Italian sisters who live close together in Fairfax, VA. They live in condos, have strong savings but small incomes from their husband’s social security. The daughter of one is an Elder Attorney/CPA, who recommended they get tax-free Reverse Mortgages, instead of using their savings (which were partially taxable) to meet everyday expenses, entertainment, travel and medical costs, such as long term care insurance.

Below is a Web project from Media Matters Action Network and the Center for American Progress Action Fund. I have presented the first page, and the 2nd page "Facts". To read more of this commercial, yet interesting project keep clicking away on "Myths", "Who's to Blame", "News", "Take Action" and "Share".

This is an information packed presentation, purely their opinions: Yet definitely something to read, IMHO.

Have a great day.
Gloria



A Projec.t of Media Matters Action Network and the Center for American Progress Action Fund

CLICK HERE FOR MORE INFO: Facts Myths Who's to Blame News Take Action Share

Bush, Wall Street, and conservative policies caused the financial crisis.

We provide the facts, debunk the myths and show who's to blame.

Greenspan Tells the Truth





















Nick Anderson, Houston Chronicle from Cartoonist Group



Next Steps to Resolve the Crisis

The Treasury Department and the FDIC are close to an agreement that would have the government guarantee some distressed mortgages. That’s a good step, since stemming home foreclosures and restructuring troubled mortgages is key to slowing the downward spiral hammering financial institutions and the real American economy....

Charles Krauthammer wants to blame the financial crisis on the Community Reinvestment Act for forcing Freddie and Fannie to issue lots of minority, low-income, and distressed neighborhood sub-prime loans. That’s bunk! It was private lenders, not Fannie and Freddie that issued nearly all of the subprime mortgages and triggered the crisis. And they were not subject to the CRA at all!

According to Media Matters, Fox News’s Brit Hume and Bret Baier tried to blame Fannie Mae and Freddie Mac for the crisis, claiming on 9/24/08 that the mortgage giants were heavily involved in sub-prime lending “years ago,” seemingly implying that it was back in 2003.

According to Dean Baker, co-director of the Center for Economic and Policy Research in Washington, DC, “Fannie and Freddie got into subprime junk and helped fuel the housing bubble, but they were trailing the irrational exuberance of the private sector.

They lost market share in the years 2002-2007, as the volume of private issue mortgage backed securities exploded.” Laying blame at their feet only diverts attention from those primarily responsible for the mortgage crisis: private lenders.

Social Security Privatization: A Review of the Risks

Nearly four years ago, President George W. Bush tried to make the privatization of Social Security a cornerstone of his second term. His approach was roundly criticized by economists and Social Security experts, unpopular with the American people, and failed to even earn a vote in Congress.

*****************************************************************************
Get the Facts: The Story of the Financial Crisis

These crises were caused by calculated deregulation and the gross negligence of the Bush administration and congressional conservatives.

We are in this mess today because of the deregulatory policies and negligent leadership of President George W. Bush, his financial regulatory officials, and congressional conservatives such as Phil Gramm.

The Bush solution: cut regulations

First, Bush and the conservative mantra of deregulation encouraged the explosion of risky new financial products, and blocked them from common-sense oversight and regulation.
Second, they turned a blind eye to dire warnings that risky lending practices were spiraling out of control.

Their failure to act allowed Wall Street CEOs to recklessly gamble with other people’s money.

Now, the bubble has popped and the markets have crashed, and conservatives are desperately casting about for someone else to blame for the consequences of their failed policies.

Their efforts to pass the buck are an insult to our intelligence. Conservatives policies dominated the past eight years while this crisis grew out of control. This is the legacy of their failed policies—it is time for them to own it.


Beginning in 2000, free-market ideologues led by President Bush, Phil Gramm, and Alan Greenspan encouraged the explosion of risky new financial products and blocked the products from regulation.

Under their watch, there was an explosion in subprime mortgage lending accompanied by exponential growth in new financial derivatives such as credit-default swaps that encouraged banks and lenders to take huge risks and gamble on products that no one really understood.

People knew these products were extremely risky. Five years ago, Warren Buffett called derivatives “financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal.”[1]

But Alan Greenspan and conservatives in Congress, led by Phil Gramm, encouraged the development of these risky new products, and blocked them from regulation. Greenspan said, “it seems superfluous” to regulate derivatives, and Gramm quietly slipped his Commodities Futures Modernization Act into a must-pass budget bill in 2000 to ensure the highly risky derivatives market would not be regulated.

As the housing bubble grew out of this risky marketplace, common-sense regulations were blocked by conservatives in Congress.

Predatory lending exploded as commercial and investment banks competed fiercely to originate more and more home mortgages by dropping their lending standards lower and lower. The more mortgages originated, the more could be bundled together as mortgage-backed securities—bonds consisting of mortgages or pools of mortgages that are sliced and diced in different ways and then sold as bonds to institutional investors around the world.

The development and sale of these mortgage-backed securities was turbocharged by the completely unregulated credit-default swaps market, which was expressly enabled by Gramm’s Commodity Futures Modernization Act.

The credit-default swaps market acted as a kind of insurance on mortgage-backed securities and collaterized debt obligations, another type of bond that included slices of mortgages and other types of debt comingled with credit-default swaps. These swaps gave these risky new bonds a blue-chip patina even though they actually were very risky securities.

Bills trying to institute common-sense regulation to discourage banks from engaging in some of the risky lending practices that led to the current crisis were frequently introduced. One such amendment was offered in 1999, 2001, and 2005, and defeated by conservatives each time.

As risky lending exploded, the Bush administration and conservatives in Congress ignored and enabled Wall Street’s reckless behavior.

All this time, the Bush administration and conservatives in Congress turned a blind eye to warnings that predatory lending was getting out of control, and that the markets of new financial products such as credit-default swaps and collaterized debt obligations were getting too hot, too risky, and too big.

Under conservative leadership, the Securities and Exchange Commission turned a blind eye as the credit-default swaps market ballooned under its nose, going from essentially zero in 2000 to $17 trillion in 2005 to over $60 trillion in 2007.[2]

In fact, in 2004, the SEC actively abetted greater risk-taking on the part of the big Wall Street investment banks by allowing them to more than triple their so-called “leverage ratio” to 40-to-1 debt-to-equity levels, up from 12-to-1 levels.

This change enabled these banks (Bear Stearns Cos., Goldman Sachs Group Inc., Lehman Brothers Holdings Inc., Merrill Lynch & Co., and Morgan Stanley) to indulge in the highly irresponsible borrowing practices that led all five of them this year to either go bankrupt, sell themselves to a bigger bank holding company, or convert themselves into a bank holding company to avoid collapse.[3]

There were plenty of warnings about the housing bubble as well.

The current chair of the Federal Deposit Insurance Corporation, Sheila C. Bair—who today is at the forefront of cleaning up the subprime mess—realized back in 2001, when she was a senior official at the U.S. Treasury Department, that lending practices were amiss in the mortgage markets. She tried to persuade mortgage lenders to adopt a best-practice code of conduct to no avail.[4]
Community activists in neighborhoods where predatory lending was most evident warned the Federal Reserve repeatedly about the rising threat of abusive subprime

loans, but Greenspan declined to act.[5] At the beginning of the decade, subprime mortgages accounted for only 6 percent of total residential mortgage originations. By 2006, subprime mortgages accounted for 25 percent of mortgage originations.[6]

Greenspan and other Bush administration regulators even refused to listen to repeated prescient warnings between 2000 and 2005 from Federal Reserve Board governor Edward Gramlich, who warned his colleagues about mounting problems in the mortgage markets.

Worse still, other federal regulatory agencies supported abusive subprime lending by pre-empting state laws protecting borrowers from lending abuses, as the Office of the Comptroller of the Currency did in 2003.[7]

While the Bush administration and conservatives ignored the warnings and continued to promote deregulation, Wall Street CEOs gambled with other people’s money.

In a few short years, this toxic combination of risky new products and no regulation transformed the financial market from a place that traded in known quantities like stocks and bonds into a market where exotic new products that no one really understood were being traded at breakneck speed.

Now the bubble has burst, the stock market is crashing, credit markets are frozen, and conservatives are looking for someone to blame.

For the past decade, the Bush administration and conservatives aided and abetted wild risk-taking on Wall Street while CEOs raked in huge profits. Now that the bubble has burst and the market has come crashing down, they are desperately casting about for someone else to blame.

Charles Krauthammer and other conservative commentators are desperately trying to pin the blame on a 30-year-old law, the Community Reinvestment Act, which was weakened significantly by the Bush administration before the housing bubble started inflating.
Conservatives’ desperate attempts to pass the buck are an insult to our intelligence. This is their legacy of failed policies and failed leadership. It’s time for them to own it.


Citations for Measures of Prosperity chart

[1] According to the Bureau of Labor Statistics, the U.S. non-farm unemployment rate was 3.9% in September of 2000. By September of 2008, the unemployment rate had risen to 6.1%.

[2] According to the U.S Treasury Department, the United States’ national debt was $ 5,751,743,092,605.50 on January 3, 2000. By October 1, 2008, the debt had increased to $ 10,124,225,067,127.69.

[3] According to the Bureau of Labor Statistics, the U.S. city average Consumer Price Index (CPI) adjusted price for one pound of ground beef was measured as 1.483 in January of 2000 and 2.419 in September of 2008.

[4] According to the U.S. Department of Energy’s Energy Information Agency, the price of a gallon of regular conventional gasoline was $1.53 on October 23, 2000. According to the same source, the price of a gallon of regular conventional gasoline was $2.85 on October 20, 2008.

[5] According to the U.S. Department of Agriculture’s Agricultural Marketing Service, the average price of a gallon of whole milk was $2.85 in 2000. Through September 2008, the average price had increased to $3.80.

[6] According to the Bureau of Labor Statistics, the U.S. city average Consumer Price Index (CPI) adjusted price for a one dozen large grade A eggs was measured as 0.92 in September 2000 and 1.978 in September 2008.

[7] According to the Bureau of Labor Statistics, the U.S. city average Consumer Price Index (CPI) adjusted price for a one pound loaf of white bread was measured as 0.90 in 2000 and 1.38 in 2008.

[8] According to CNN, the Dow closed at 10,393.07 on October 24, 2000. At 1:45 p.m. on October 24, 2008, the Dow was at 8,292.77. [CNN, accessed 10/24/08]

Endnotes

[1] BBC News, “Buffett Warns on Investment ‘Time Bomb,’” March 4, 2003, available at http://news.bbc.co.uk/2/hi/business/2817995.stm
[2] International Swaps and Derivatives Association, 2005 and 2007 year-end surveys. Available at http://www.isda.org/press/press031506.html and http://www.isda.org/press/.
[3] Stephen Labaton, “U.S. regulators 2004 rule let banks pile up new debt,” International Herald Tribune, October 3, 2008, available at http://www.iht.com/articles/2008/10/03/business/sec.php.
[4] Edmund L. Andrews, “Feds Shrugged as Subprime Crisis Spread,” The New York Times, December 18, 1007, available at http://www.nytimes.com/2007/12/18/business/18subprime.html.
[5] Ibid.
[6] The Federal Reserve Bank of San Francisco, “The Subprime Mortgage Market: National and Twelfth District Developments” (2007), available at http://www.frbsf.org/publications/federalreserve/annual/2007/subprime.pdf.
[7] Jonathan Fuerbringer, “Some Exemptions Are Proposed on Predatory Lending Laws,” The New York Times, August 1, 2003, available at http://query.nytimes.com/gst/fullpage.html?
res=9904E2DA153EF932A3575BC0A9659C8B63.

HOUSING CRISIS: REACH OUT TO BORROWERS BEFORE THEY BECOME DELINQUENT

U.S. moves to prop up those at risk of foreclosure
Bush administration directs Fannie and Freddie to ease mortgage terms, hopes to set standard for lenders

BARRIE MCKENNA
With a report from Associated Press
November 12, 2008

WASHINGTON -- In a sign that the U.S. housing crisis is getting worse, not better, the Bush administration and the mortgage industry are moving to stop a fresh wave of Americans from losing their homes to foreclosure.

The government yesterday directed Fannie Mae and Freddie Mac to ease terms on hundreds of thousands of delinquent home loans. The announcement follows similar foreclosure prevention plans by major commercial banks, including Bank of America Corp., Citigroup Inc., and JPMorgan & Chase Co. The bank said that Citigroup's efforts, for example, would save as many as 130,000 homeowners from foreclosure.

"We need to stop the downward spiral," said James Lockhart, director of the U.S. Federal Housing Finance Agency.

This week's actions mark a renewed effort by the government and banks to tackle the heart of the mortgage crisis - the millions of American households losing their homes or threatened with foreclosure as the United States slides into recession. The various loan workout plans would touch roughly 1.6 million homeowners.

The move by Fannie Mae and Freddie Mac, which own or guarantee nearly 60 per cent of all U.S. home mortgages, should set a standard for the rest of the industry, Mr. Lockhart said.
Anything that keeps homeowners out of foreclosure is a good thing, agreed Celia Chen of Moody's Economy.com. But she said these programs "only nibble at the problem."

Some U.S. authorities also criticized the plan as inadequate. Federal Deposit Insurance Corp. head Sheila Bair said the plan "falls short of what is needed to achieve wide-scale modifications of distressed mortgages, particularly those held in private securitization trusts."
Those mortgages could prove much trickier to modify.

As many as 12 million homeowners are now "underwater" on their mortgages, meaning they owe more than their homes are worth, she said.

By the end of June, more than four million homeowners were behind on payments or in foreclosure, data from the Mortgage Bankers Association show. That represents 9 per cent of borrowers with a mortgage.

And Moody's Economy.com estimates that 8.5 million U.S. homeowners will default on their mortgages between 2008 and 2010. Roughly 5.2 million of them will lose their homes.

Troy Courtney, for example, left his Mill Valley, Calif., home after many attempts at a loan modification. Mr. Courtney had two loans on the house and could not persuade the loan manager to modify terms.

"I feel like I missed the boat," said the San Francisco police officer, 44.
Economist Nouriel Roubini of New York University said the underlying problem is that Americans have too much debt.

"You cannot grow yourself out of a debt problem," he said. "When debt to disposable income is too high, increasing the denominator with rebates is ineffective and only temporary. You need to reduce the debt."

The Fannie Mae and Freddie Mac plan targets homeowners most at risk - those who've missed at least three loan payments, live in their homes and haven't declared bankruptcy. Under the arrangement, Fannie Mae and Freddie Mac will pay loan service companies $800 for every homeowner for which they arrange more affordable monthly payments (defined as 38 per cent of gross household income), either by cutting interest rates, extending loan terms or deferring payment of principal.

The program is set to begin Dec. 15.

Citigroup said it would target borrowers at risk of foreclosure by cutting interest rates to as low as 3 per cent and stretching payment periods to as long as 40 years.

"With the unemployment rate rising and rising, more and more borrowers are getting into financial distress because of loss of income," said Sanjiv Das, chief executive of CitiMortgage. "It is a problem the country will face for some time to come, so it is very important to reach out to borrowers before they become delinquent."

Even U.S. authorities acknowledge the plan has limitations. The government is not stepping in to forgive all or part of any mortgages.

"There is no silver bullet to address the housing downturn," said Neel Kashkari, the Treasury's interim assistant secretary for financial stability.

"We are experiencing a necessary correction and the sooner we work through it, the sooner housing can again contribute to our economic growth."

The scope of the problem is much larger than the relatively small part of the problem that is in the hands of Freddie Mac or Fannie Mae.

The dismal shape of the housing market is making loan modifications increasingly tricky. As U.S. home prices continue falling, a growing number of homeowners are underwater on their mortgages.

These homeowners have little incentive to honour their debts, and many of them will choose to simply walk away from their homes.

And U.S. officials said most troubled mortgages are held by entities other than Fannie and Freddie.

Mr. Lockhart urged those lenders to follow Fannie Mae and Freddie Mac's lead. Beyond moral suasion, the government can't make that happen.

Economist Ed Yardeni said Fannie and Freddie remain "hobbled" by inadequate capital and so they are unable to vastly grow their mortgage portfolios. He urged the government to nationalize the two agencies, and let them lend as much as $2-trillion at a heavily discounted rate of 4 per cent.

"That would be a much more effective way to bail out the financial system, the housing market, and the economy," Mr. Yardeni said.

The Treasury Department seized the two government-created entities in early September because of their ailing finances.

A break for homeowners

Some of the biggest U.S. banks and mortgage companies plan to cut home-loan payments for borrowers facing foreclosures. Here are some of the current and planned initiatives to help homeowners avoid foreclosure:

Citigroup
Will reach out to about 500,000 homeowners with $20-billion in new mortgages during the next six months. Helped about 370,000 people with $35-billion in mortgages avoid foreclosure since 2007. Restructured more than 120,000 mortgages, including granting extensions, during the first half of 2008.

JPMorgan Chase
Will halt foreclosure on some loans as it works to make payments easier on $110-billion of problem mortgages. Plans to assist 400,000 families with $70-billion in mortgage loans in the next two years. Helped an additional 250,000 families with $40-billion in mortgages under existing loan-modification programs.

Bank of America
Will cover more than $120-billion in unpaid loan balances. Announced two plans this year to help reduce customers' loan payments by as much as $11-billion. Modified 226,000 loans this year.

Fannie Mae, Freddie Mac
Will reduce principal or interest rates on some loans and extend terms of others.
Programs won't include money from the Treasury's $700-billion bank rescue package.

Source: Bloomberg

***********************************************************
HECM (Reverse Mortgage) Numbers Rising

— But Rising Enough?


by Peter G. Miller
November 4th, 2008

The new year has begun early — at least for the federal government which starts its fiscal year each October 1st. For reverse mortgage borrowers the results for the first two weeks of the new year look like this:

___6,232 HECM applications to date. This is down 11.1 percent from the same period last year.

___4,921 reverse mortgage approvals — up 28.2 percent over last year.

___HUD is planning on 210,000 FHA reverse mortgages during the next 12 months, that’s up from the 112,154 HECMs actually insured last year.

It’s too early in the game to see how reverse mortgage demand will actually pan out during the coming year. Logically it seems reasonable to believe that FHA HECM numbers should go up for two reasons:

First, origination fees have been reduced from a 2 percent flat rate to 2 percent of the first $200,000 of the loan amount, 1 percent of the balance and not more than $6,000.

Second, the maximum reverse mortgage amount has been raised to $417,000 from $200,160 in low-cost areas to $362,790 in high-cost areas.

That said, an increase from 112,154 reverse loans to 210,000 HECMs is quite a one-year jump. The current rate of 118,104 HECMs per year (24 reporting periods x 4,921 loans) won’t come close.

Part of the problem is that while origination fees are down and loan limits are up — that’s the good news, property values in most markets have fallen. That means less equity to finance or refinance with a reverse mortgage.

Alternatively, what other financing is available to people age 62 and above? Lenders have tighten standards for forward loans to the point where even people with good credit are having trouble getting a mortgage.

In an environment where private-sector loans are drying up it may well be that reverse mortgages will find a new level of popularity.

How Much Money Do Mortgage

Associations Spend Lobbying?

October 23rd, 2008

by administrator of Reverse Mortgage Daily, Published in

MBA Reverse, NRMLA, News, Reverse Mortgage

With election day right around the corner, I thought I’d pass along an interesting site I came across called Open Secrets. According to its website, Open Secrets is a nonpartisan guide to see money’s influence on U.S. elections and how it impacts public policy. Since most of us are paying for at least one mortgage association to represent us in Washington, wouldn’t it be nice to see how they’re spending our money?

Open Secrets allows you to search its database to look up lobbyists, senators, PACs, and a range of other things. To look up an organization like NRMLA or the Mortgage Bankers Association you would have to search under PACs.

According to Wikipedia, a PAC is: the name
commonly given to a private group, regardless of size, organized to elect
political candidates. Legally, what constitutes a “PAC” for purposes of
regulation is a matter of state and federal law.

Under the Federal Election Campaign Act, an organization
becomes a “political committee” by receiving contributions or making
expenditures in excess of $1,000 for the purpose of influencing a federal
election.

Using Open Secrets you can see the amount an organization is paying lobbyists. For example, below is a snapshot of how much the Mortgage Bankers Association spent over the last four years lobbying in Washington:

If you want to look up what lobbyists NRMLA paid and how much click here. Below is a snapshot of what how much NRMLA spent lobbying over the past four years in Washington:

NRMLA spent lobbying over the past four years in Washington:

Overall it’s a really interesting website that aims to bring some transparency to how money is being spent in politics. It’s definitely worth checking out.Open Secrets

The BAILOUT Plan: Bush Wants $700 Billion to Purchase Bad Mortgages

By Associated Press Saturday, September 20, 2008


WASHINGTON - The Bush administration is asking Congress to let the government buy $700 billion in toxic mortgages in the largest financial bailout since the Great Depression, according to a draft of the plan obtained today by The Associated Press.

The plan would give the government broad power to buy the bad debt of any U.S. financial institution for the next two years. It would raise the statutory limit on the national debt from $10.6 trillion to $11.3 trillion to make room for the massive rescue. The proposal does not specify what the government would get in return from financial companies for the federal assistance.

"We’re going to work with Congress to get a bill done quickly," President Bush said at the White House. Without discussing details of the plan, he said, "This is a big package because it was a big problem."

The White House and congressional leaders hoped the developing legislation could pass as early as next week.

Administration officials and members of Congress were to negotiate throughout the weekend. The plan is designed to let faltering financial institutions unload their distressed mortgage-related assets on the government, and in turn the taxpayer, in a bid to avoid dire economic consequences.

Bush said he worried the financial troubles "could ripple throughout" the economy and affect average citizens. "The risk of doing nothing far outweighs the risk of the package, and over time we’re going to get a lot of the money back."

He added, "People are beginning to doubt our system, people were losing confidence and I understand it’s important to have confidence in our financial system."

"In my judgment, based upon the advice of a lot of people who know how markets work, this problem wasn’t going to be contained to just the financial community," the president said. He said he was concerned about "Main Street" and that what happens on "Wall Street" affects "Main Street."

Sen. Chuck Schumer, D-N.Y., called the proposal "a good foundation," but raised concerns it "includes no visible protection for taxpayers or homeowners."

Democrats are insisting the rescue include mortgage help to let struggling homeowners avoid foreclosures. They also are also considering attaching additional middle-class assistance to the legislation despite a request from Bush to avoid adding controversial items that could delay action. An expansion of jobless benefits was one possibility.

Asked about the chances of adding such items, Bush sidestepped the question, saying only that now was not the time for political posturing. "The cleaner the better," he said about legislation he hopes Congress sends back to him at the White House.

If passed by Congress, the plan would give the Treasury secretary broad power to buy and sell the mortgage-related investments without any additional involvement by lawmakers. The proposal, however, would require that the congressional committees with oversight on budget, tax and financial services issues be briefed within three months of the government’s first use of the rescue power, and every six months after that.

While the proposal contains no requirement that the government receive anything from banks in return for unloading their bad assets, it would allow the Treasury Department to designate financial institutions as "agents of the government," and mandate that they perform any "reasonable duties" that might entail.

In a briefing to lawmakers Friday, Paulson and Federal Reserve Chairman Ben Bernanke painted a grave picture of an economy on the edge of a major recession and telling them that action was urgent and imperative.

In a session with House Democrats, they described a plan where the government would in essence set up reverse auctions, putting up money for a class of distressed assets — such as loans that are delinquent but not in default — and financial institutions would compete for how little they would accept for the investments, said Rep. Brad Sherman, D-Calif., who participated in the conference call.

"You give them good cash; they give you the worst of the worst," Sherman said. A critic of the plan, he complained that Bush and his economic advisers were trying to panic lawmakers into rubber-stamping it.

Paulson said the new troubled-asset relief program must be large enough to have the necessary impact while protecting taxpayers as much as possible.

"I am convinced that this bold approach will cost American families far less than the alternative — a continuing series of financial institution failures and frozen credit markets unable to fund economic expansion," Paulson said. "The financial security of all Americans ... depends on our ability to restore our financial institutions to a sound footing."

Administration officials hoped the rescue plan could be finalized this weekend, to lend calm to Monday morning’s market openings, said Keith Hennessey, the director of the president’s economic council.

The goal is to have something passed by Congress by the end of next week, when lawmakers recess for the elections.

Congress Pledges Action

Rescue Talks Coming With White House as Differences Surface
By GREG HITT SEPTEMBER 20, 2008, Wall Street Journal


WASHINGTON -- Congressional leaders Friday vowed speedy action on a rescue plan for U.S. financial markets. But dangers lurked on Capitol Hill, as Democrats pushed for additional measures to aid the economy and conservative Republicans griped about the huge government bailout.

With a little more than 40 days to go before an election where control of both the White House and Congress are up for grabs, some lawmakers suggested the market-rescue package should offer fresh relief to troubled borrowers.

Doing so, however, could turn the bill into a "Christmas tree," by hanging unrelated measures on it and perhaps endanger its passage. Meanwhile, finance-industry lobbyists began fighting to block certain proposals, such as limits to executive pay.

Lawmakers from both parties and Bush administration officials plan negotiations over the weekend to pull together details of the program. A centerpiece of the proposal will be a new government authority empowered to buy hundreds of billions of dollars in bad securities and loans from troubled financial institutions.

The White House is urging Congress to act rapidly to calm turbulent markets. Democratic leaders said they hope to push the measure through the House and Senate by the end of next week.
House Speaker Nancy Pelosi said Democrats "are committed to quick, bipartisan action." A spokesman for Senate Majority Leader Harry Reid said the Nevada Democrat intends to "move heaven and earth" to get the bill done, though in a private meeting late Thursday night he was less sanguine, warning it can take a couple of days in the Senate "to pass a bill to flush the toilet," congressional officials said.

Just a few days ago, Mrs. Pelosi and Mr. Reid were saying they didn't expect major action on financial-markets issues before the current session ends. But that turned around overnight on Thursday after briefings from Treasury Secretary Henry Paulson, Federal Reserve Chairman Ben Bernanke and others.

Senate Banking Committee Chairman Chris Dodd (D., Conn.) said the looming threats to the U.S. economy outlined by Mr. Paulson in a meeting with lawmakers late Thursday have galvanized lawmakers. "I've been here 28 years. I've never been in a more sobering moment," Mr. Dodd said Friday.

Until Friday, Capitol Hill was mired in partisan bickering over gas prices, an ethics inquiry into a top Democratic committee chairman and finger-pointing over the state of the teetering economy. But those issues have receded in the face of the crisis in the credit markets.

"Members of Congress need to set politics aside," said Missouri Rep. Roy Blunt, the House's second-ranking Republican, in comments echoed across Capitol Hill.

"We're all on the same page," said Sen. Jon Tester (D., Mont.), after emerging from a closed-door meeting of the Senate Banking Committee. "We understand this is bigger than anything we've faced in a long, long time."
New Hampshire Sen. Judd Gregg, the senior Republican on the Senate Budget Committee, pegged the cost of the bailout at "somewhere in the $500 billion range." Alabama's Richard Shelby, the senior Republican on the Senate Banking Committee, said the final figure could be closer to "a trillion dollars."

For Democrats, the unfolding crisis is forcing difficult choices about the party's priorities ahead of the election. Democratic leaders want the White House to support additional measures to stimulate the economy, such as expanded jobless benefits. Mrs. Pelosi pressed Mr. Paulson on that issue Friday.

At this point, the administration is deflecting the Democratic overtures. But the unfolding crisis could give Democrats new leverage to wring concessions from the White House: either in a must-pass budget bill later this month or the emerging financial-services bill.

Mr. Dodd said the financial-services bill shouldn't become a "Christmas tree" but should reflect Democratic priorities. One idea bandied about among Democrats would create a special funding mechanism that would help homeowners get out from underneath troubled mortgages.

Another proposal would give federal bankruptcy judges enhanced authority to adjust mortgages to prevent borrowers from tilting into foreclosure. Banking-industry lobbyists say they will fight proposals to amend mortgages in bankruptcy.

Mr. Tester said the goal is to make sure "we don't do something that makes Wall Street happy, but doesn't take care of Main Street."

House Republican Leader John Boehner (R., Ohio) urged Congress and the administration to keep the bill "as simple and straightforward as possible," warning any attempt to "score political points or fit a partisan agenda" into the measure will only delay action.

So far, no one on Capitol Hill was moving to openly oppose the administration plan. But in Republican ranks, conservatives were growing restless with the steady drumbeat of government intervention.

What The Feds and Wall Street Are Proposing

The federal government is asking Congress for $700 billion to buy up distressed assets as part of its plan to help halt the worst financial crisis since the 1930s.

The Treasury Department sent Congress legislative language last night asking for broad authority to buy assets from U.S. financial institutions. The request is just two-and-a-half pages and contains a broad outline of how this new entity would function. The government wanted to keep the plan simple, in part because it wants the flexibility to adjust what its doing as market conditions change, a person familiar with the matter said. (Associated Press )

Among the things the government is asking for is the authority to hire asset managers to oversee the buying of assets. The bare-bones request may irk Congress, which is already expressing concerns about the plan. It could present an opportunity for Congress to stack the bill with other provisions, such as more housing relief.

The proposal would give the Treasury secretary significant leeway in buying, selling and holding residential or commercial mortgages, as well as "any securities, obligations or other instruments that are based on or related to such mortgages."

The only limitation would be that purchases couldn't exceed $700 billion outstanding at any one time. That figure compares with the $515 billion President George W. Bush included in his fiscal 2009 base budget request for the Department of Defense. The plan also calls for an increase in the public debt limit, boosting it to $11.3 trillion.

Congress already voted once this year to increase the debt limit, to $10.6 trillion as part of omnibus housing legislation that included broader federal authority over Fannie Mae and Freddie Mac. The two mortgage firms have since fallen under government control.
Democrats will work with the Bush administration on enacting legislation swiftly, but will insist on adding measures to protect taxpayers and tighten regulation of the industry, said House Speaker Nancy Pelosi (D., Calif.).

"We will strengthen the proposal by ensuring that the government is accountable to the taxpayers in any future actions under this broad grant of authority, implementing strong oversight mechanisms, and establishing fast-track authority for the Congress to act on responsible regulatory reform," she said.

Other leading congressional Democrats struck similar themes in statements issued Saturday. Senate Majority Leader Harry Reid (D., Nev.) struck a more critical tone, saying that "while the Bush proposal raises some serious issues, we need to resolve them quickly."

Sen. Charles Schumer (D., N.Y.) in a statement released by his office, offered a mixed reaction to the proposal. "This is a good foundation of a plan that can stabilize markets quickly," he said. "But it includes no visible protection for taxpayers or homeowners. We look forward to talking to Treasury to see what, if anything, they have in mind in these two areas."

Lawmakers have said they want to add additional provisions to the Treasury proposal, including more help for cash-strapped homeowners facing foreclosure. Financial Services Chairman Barney Frank (D., Mass.) has floated the idea of including limits on executive compensation for firms that take advantage of government aid.

Republican and Democratic staff from the Senate Banking Committee and the House Financial Services Committee met with Treasury staff at noon to discuss the proposal. No lawmakers attended the meeting.

Aides were "trying to understand this and get our hands around it" because "a lot of aspects of this are unprecedented," according to one senior Democratic aide who was present at the meeting.

Lawmakers want to make sure that taxpayers will be protected and that "we're not misfiring," the aide added.

Treasury 'Fact Sheet'

The Treasury Department on Saturday evening issued a "fact sheet" on the proposal, saying, "Removing troubled assets will begin to restore the strength of our financial system so it can again finance economic growth."

Congressional Republicans have sent early signals that they oppose the addition of other measures to the Treasury proposal, such as an economic stimulus package pushed by Democrats. House Minority Leader John Boehner (R., Ohio) said in a statement that "efforts to exploit this crisis for political leverage or partisan quid pro quo will only delay the economic stability that families, seniors, and small businesses deserve."

House and Senate lawmakers, working hand-in-hand with the Bush administration, are expected to work throughout the weekend on finalizing the details of the plan. Congressional leaders have targeted a vote on the comprehensive plan for the coming week, though that will depend on the ability of the White House and Congress to agree on a final product.

The proposal would expire after two years but would allow the government to hold the assets purchased from financial firms -- which must be headquartered in the U.S. -- for as long as is deemed necessary by the Treasury. Any assets purchased through the program would have to be tied to mortgages originated before Sept. 17 of this year.

The plan offered to Congress also gives the Treasury legal immunity from any lawsuits. "Decisions by the secretary pursuant to the authority are non-reviewable … and may not be reviewed by any court of law or any administrative agency," the proposal says.

The proposal doesn't detail how Treasury would manage the assets, but does give Paulson the authority to hire private financial institutions to conduct the program, as well as to create other entities to purchase mortgage assets and issue debt.

"Treasury will have full discretion over the management of the assets as well as the exercise of any rights received in connection with the purchase of the assets," the Treasury fact sheet said.

The Treasury "fact sheet" suggests very broad powers for the Treasury secretary under the proposal. The Treasury secretary "will have the discretion, in consultation with the Chairman of the Federal Reserve, to purchase other assets, as deemed necessary to effectively stabilize financial markets," the fact sheet said.

"Treasury may sell the assets at its discretion or may hold assets to maturity. Cash received from liquidating the assets, including any additional returns, will be returned to Treasury's general fund for the benefit of American taxpayers," the fact sheet said.

Devil Is in the Details

The nation's top economic generals pressed Congress to move with extraordinary speed -- by next week -- to authorize a plan to bail out the U.S. financial system, but are still working to iron out enormously complicated details likely to generate controversy.

Markets soared Friday for a second straight day on news of the discussions. The Dow Jones Industrial Average rose 368.75, or 3.35%. Financial stocks led the rebound. Stock markets in Asia and Europe also rose sharply. The news also helped improve credit markets: Investors poured out of the ultra-safe Treasury bond market Friday, sending yields on the three-month T-bill up to 1% after briefly touching 0% on Wednesday.

Still, though members of Congress briefed on the idea generally voiced approval, lobbyists, policymakers and financial-services executives geared up for a fight over the details. (See related story.)

Among the measures announced Friday, the Treasury temporarily extended insurance, similar to that on bank deposits, to money-market mutual funds and the Federal Reserve said it would buy commercial paper from the funds. The Securities and Exchange Commission, meanwhile, banned short-selling of 799 financial stocks -- a financial bet that they will fall in price -- for at least 10 days. And the Treasury said it -- along with mortgage giants Fannie Mae and Freddie Mac, recently taken over by the government -- would step up their purchases of mortgage-backed securities to help keep the housing market afloat.

The most ambitious part of the government plan is to create a new entity to purchase impaired assets from financial firms. The process could work as a type of reverse auction, in which the government would buy from the institution that sells its assets for the lowest bid.

However, the government may find itself in a quandary: Does it pay more than fair-market value for hard-to-assess distressed assets, putting taxpayers on the hook for any losses? Or does it drive a hard bargain, buying for pennies on the dollar?

The latter approach would further hurt financial institutions, since they would have to write down the losses and take additional hits to their balance sheets. The Treasury department, which hasn't commented on specifics about the plan, is expected to propose issuing debt in $50 billion tranches to fund the purchases.

"I am convinced that this bold approach will cost American families far less than the alternative -- a continuing series of financial-institution failures and frozen credit markets unable to fund economic expansion," Mr. Paulson said at a morning press conference.

Others aren't sold. Douglas Elmendorf, a senior fellow at Brookings Institution and former Treasury official, said while inaction is a risk, the Treasury's plan could cost taxpayers a huge amount of money. "This approach saddles taxpayers with significant downside risk but limited potential upside gain," Mr. Elmendorf said.

Broad, Systematic Approach

The moves are an effort to take a broad, systematic approach to the financial crisis after a series of incremental moves failed to stem the turmoil. The crisis has worsened over the past two weeks as credit downgrades, bad investments and falling stock prices have felled financial institutions such as Lehman Brothers Holdings Inc. and American International Group Inc., a huge insurer.

While the Treasury department awaits approval from Congress it is also moving to start buying up mortgage-backed securities through existing mechanisms. The Federal Housing Finance Agency, a division of government that is effectively running both Fannie Mae and Freddie Mac, immediately directed both companies to purchase more mortgage-backed securities to help fund lending markets.

The Treasury department also plans to expand a program it implemented in the wake of its takeover of Fannie and Freddie to buy up to $10 billion in mortgage-backed securities debt issued by the companies in the open market. The Federal Reserve and the SEC also acted to stem the crisis.

The Fed acted before U.S. markets opened, effectively coming to the rescue of the money-market mutual-fund industry. Worried that money-market mutual funds weren't liquid enough to handle a wave of redemptions from nervous investors, the Fed said it would use its so-called discount window to lend up to $230 billion to the industry -- via commercial banks -- against illiquid asset-backed commercial paper which is widely held by money-market funds.

The asset-backed commercial paper market went through severe strain last year, because of holdings of troubled subprime mortgage debt instruments. Fed staff say that isn't a problem for the industry now, and that most of the assets backing the instruments it will lend against are auto loans and credit-card loans. The paper the Fed is financing is high-rated and Fed staff don't see it as a money-losing step.

The central bank is taking on a potentially big risk: If these assets fall in value or default, it may be on the hook, because the Fed cannot claim anything other than collateral as repayment. Officials say the assets are safe and the move is a temporary measure to provide liquidity to the market.

In another bid to provide liquidity, The Fed Friday, said it would buy short-term debt issued by Fannie Mae, Freddie Mac and Federal Home Loan Banks through primary dealers. The Fed said it would buy up to $69 billion of these securities, called discount notes, to ease the crunch in the market.

The SEC ban on short selling of some financial stocks -- an attempt to stem some of the worst stock-market slides in years -- is effective immediately and will last 10 days, but could be extended for up to 30 days.

In short selling, traders borrow shares of stock and sell them, hoping the price of the shares declines and they can profit by buying them back at a lower price.

The SEC said it was acting in concert with the U.K.'s Financial Services Authority. The FSA said Thursday it would ban short selling in financial stocks until January, and would review the ban in 30 days.

Regulators in other countries quickly followed suit by tightening their own rules on short selling, including Ireland, Australia and France.

Bank of France governor Christian Noyer said Friday that the country's stock-market watchdog Autorité des Marchés Financiers would move to impose new restrictions on short-selling.
Commercial banks expressed skepticism about the Treasury department plan. They fear it may prompt investors to pull their money out of banks and place it in money-market mutual funds, which often have higher rates of return than commercial bank savings accounts.

The Independent Community Bankers of America in a statement said it was extremely concerned about the Treasury's announced mutual-fund guaranty program. "ICBA cautions

Treasury not to propose any solution to Wall Street's turmoil that will drain funding from community banks, constraining their ability to fund local economic activity and growth and serve local communities across the nation."


—Jon Hilsenrath, Kara Scannell, Peter McKay, Joellen Perry, Elizabeth Rappaport, James R. Hagerty, Corey Boles and Cassell Bryan-Low contributed to this article.
Write to Deborah Solomon at deborah.solomon@wsj.com, Michael R. Crittenden at michael.crittenden@dowjones.com and Damian Paletta at damian.paletta@wsj.com







.
.

ANOTHER GOVERNMENT RESCUE PLAN

Wall Street extended a huge rally Friday as investors returned to a buying mode with relief after the U.S. government announced plans to rescue mortgage banks from billions of dollars in bad home loan debt. The Dow Jones industrials rose nearly 360 points, giving them a massive gain of more than 770 points over two days, and Treasurys fell as money flowed into equities.

Treasury Secretary Henry Paulson, spoke about the home financing rescue plan said a bold approach is needed to remove troubled assets from the books of financial firms. He gave few details, but said he would work on it through the weekend with congressional leaders.

A plan to help the banking industry could help alleviate the uncertainty that has been sending the markets into tumult over the past week. Mortgage lending has almost completely come to a stop in the wake of the bankruptcy of IndyMac and Lehman Brothers Holdings Inc. and the bailout of teetering insurer American International Group Inc.

The government took other steps Friday to restore stability to the financial system.

The Federal Reserve said it will expand its emergency lending and let commercial banks finance purchases of asset-backed paper from money market funds. The Fed will also buy short-term debt obligations issued by Fannie Mae, Freddie Mac, FHA and the Federal Home Loan Bank.

The Treasury Department decided to use a Depression-era fund to provide guarantees for U.S. money market mutual funds. Money market mutual funds are typically considered safe, but many investors have been fleeing them due to worries about the funds’ exposure to the embattled financial industry.


On Thursday, the Federal Reserve and other major central banks around the world joined forces to inject as much as $180 billion into global money markets in an attempt to keep the mortgage loan and credit crisis from worsening.

But with worries swirling about the financial health of such major companies as thrift bank Washington Mutual Inc. and investment bank Morgan Stanley, the cash infusion was not enough to alleviate the tension on Wall Street.

Mortgage refinance activity has continued to decline even though interest rates remain below 6% for FHA mortgage rates. The bottom line is that lending guideline are still too tight for equity levels that have evaporated with the housing market and foreclosure crisis.

From: From the Nationwide Mortgage Loan Blog 9/19/2008
.
.
.
.

September 19, 2008

Work Continues on Loan Limit Issue

NRMLA continues to be engaged with the Department of Housing and Urban Development and industry stakeholders in the interpretation and implementation of H.R. 3221 Housing and Economic recover Act (HERA).

The question on HECM loan limits is being evaluated at the highest levels of the Bush Administration. There is a debate on the interpretation of the housing legislation with regard to the limit being at a flat $417,000 or it being $417,000 with high cost area exceptions up to $625,000 or a third scenario of a flat limit of $625,000.

Needless to say, this is our highest priority and we are devoting our full attention to it as it gets attention at the highest echelons of the Administration.

We understand that some members received a communication from U.S. Senator Barbara Boxer’s (D-CA) office stating the limit is $625,000.

In fact, a final decision has not been made yet and we believe the Senator’s office, upon receiving clarification that a final decision has not yet been made, pulled this letter from their web site.

NRMLA President Meets With Fed Officials

NRMLA President Peter Bell met in Minneapolis with officials from the 12 regional Federal Reserve Banks to give a general overview of reverse mortgages and an industry update. The September 17th meeting gave Bell an opportunity to meet with economists and other influential staff.

NRMLA has met previously with staff attorneys from the Fed’s Washington, DC headquarters to provide valuable background information as more of the agency’s examiners review depository institutions that originate reverse mortgages.


Paulson and Bernanke Swoop to Rescue Financial Markets

In an unprecedented series of actions from the U.S. Treasury Department, the U.S. Federal Reserve and the U.S. Securities and Exchange Commission over the last 24 hours, the administration has announced plans to purchase illiquid assets from financial institutions.

It also promised to buy up Fannie Mae and Freddie Mac Debt, it will launch an initiative to lend to banks for the purchase of commercial paper, created a fund geared at insuring money market mutual funds and banned short selling on 799 financial stocks.

After a meeting with Congressional leaders, and Fed Chairman Ben Bernanke on Thursday night, Treasury Secretary Henry Paulson said he is working on legislation that would allow the removal of illiquid assets from the balance sheets of financial institutions.

The Treasury Secretary pledged to continue working closely with Congress on a proposal, but warned that that systemic risks in markets need to be dealt with.

The U.S. Securities and Exchange Commission enforced a temporary ban Friday on the short selling of 799 financial stocks in an effort to calm investor fear and markets in general. The ban is in place until 11:59 p.m. EDT on Oct. 2, and can be extended 10 days or beyond if deemed necessary.

The move follows similar actions in the UK late Thursday evening. Meanwhile, Australia said it plans to institute a similar rule on Monday. Hours later, in an effort to continue bolstering investor confidence, the U.S. Treasury announced on Friday that it is launching an Exchange Stabilization Fund worth up to $50 billion geared at insuring money market mutual fund holding assets. The insurance program triggers when the net asset value for a money market mutual fund falls under $1.

Following the announcement a Treasury official told reporters that the action is geared to providing the same confidence that the FDIC does in ensuring bank deposits.

The money market is a critical part of the financial system, said the spokesperson.
In an announcement made on Friday, the U.S. Federal Reserve announced its intentions to purchase federal agency discount notes from primary dealers and launch an initiative allowing banks to borrow money for the purchase of asset-backed commercial paper.

The bank loan includes a non-recourse lending at the primary credit rate for the purchase of "high-quality" ABCP. Under the provision, the Fed will be able to purchase debt from Fannie

Mae and Freddie Mac.

In an interview with Bloomberg Television on Friday, U.S. House Financial Services Chairman Barney Frank said that government buying up illiquid assets would help boost market psychology. Although the lawmaker stressed the need for better rules on leverage and disclosure practices, Frank said the costs of not acting would be much worse than the double digit billions it would cost government to aid the markets.

By Erik Kevin Franco©CEP News Ltd. 2008

New Housing Law Sets Stage for Reverse Mortgage Growth

NEW HOUSING AND ECONOMIC RECOVERY ACT (HERA) ALLOWS
REVERSE MORTGAGES TO BE USED FOR HOME PURCHASE

September 4th, 2008 by Bob Yeary Published in GNMA, News, Servicers

Enactment of the Housing and Economic Recovery Act (HERA) carries what many view as a long-awaited modernization of FHA rules for reverse mortgages.

The new law, which lowers fees while raising loan limits, has the industry speculating that a significant rise will be seen in FHA-insured reverse mortgages among middle-class seniors.
There are about 12 million seniors in the United States who own their homes; this equates to $4 trillion in equity.

Traditionally, reverse mortgages have been geared towards low- and medium- value properties.

With higher lending limits and potentially lower origination fees, the reverse mortgage process should be more appealing and appear as a stable option for seniors interested in increasing their monthly cash flow.

In return, the reverse mortgage is a great financial product for seniors to prepare and use for retirement planning. The Center for Retirement Research calculated that 43 percent of working households were in danger of having too little income to fund retirement needs. Reverse mortgages are becoming more attractive as retirees consider home equity as a reliable income source.

A new secondary market especially for reverse mortgages is being built with Ginnie Mae HECM MBS (HMBS) securities, designed to broaden the reverse mortgage sector by offering lower interest costs to seniors and allowing issuers to securitize and sell FHA-insured reverse mortgages.

Thus far, nine Ginnie pools have been issued and RMS has provided paper for the last four, acting as servicer, subservicer, master servicer and issuer on the loans – something even the largest originators can’t accomplish without external parties.

HMBS was considered a great security with potential for success, but its induction into the marketplace during the height of the liquidity crisis, could not have been met with worse timing.
Justin Burch, senior mortgage banking analyst for Ginnie Mae, explained that the chance for success of any mortgage-related product trying to make a mark in the secondary market at that time was slim to none.

Dissipating the negativity

HERA’s prohibition against having to purchase additional products [such as insurance, annuities or other investment vehicles] as a condition for granting a Home Equity Conversion Mortgage (HECM) should help dissipate the negativity that the additional purchase requirement created towards reverse mortgages.

HUD/FHA has had a long-standing presence in the reverse mortgage sector through its HECM program, which is often referred to as the pioneer secondary market instrument. I

t was not the intention of HUD to devise a product that would dominate or be the only one of its kind in the marketplace.

It recognizes that the growth rate of the reverse mortgage sector is widely dependent upon the greater acceptance and development of new products from the private sector.

This is becoming more feasible as smaller and mid-size companies gain entryway into the business through new origination servicing processes and technological portals.

The unique composition of the reverse mortgage product mandates providers to have a different skill set than required for forward loans. In addition, traditional forward mortgage loan software does not work for reverse mortgage servicing.

To combat the variances of the two distinct mortgage types, Reverse Mortgage Solution’s senior management designated a supervisory team for the development of a proprietary reverse mortgage servicing system.

The system was designed to manage the RMS reverse mortgage portfolio in addition to having the capability to communicate with borrowers, originators and investors. The company expects to have a servicing portfolio exceeding 20,000 loans by the end of this year.

Article written by Bob Yeary, Chairman and Chief Executive Officer of Reverse Mortgage Solutions, Inc.
.
. Don't forget to review Daily News, Notes & Shorts
. ..
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.

Questions About the New Housing Bill (with Notes)

.
.
The main interest of this blog is the Reverse Mortgage. The new Housing Bill covers many housing factors from finance to foreclosure; it also made significant changes to the Reverse Mortgage program. Below, within this timely article from The Arizona Republic, I have written some notes...Ok...extensive notes regarding the Reverse Mortgage. I hope you will find the whole article interesting and educating... both the original article and my notes. If you have questions or comments, please don't hesitate to make comments or email me at gloria.boone@gmail.com

Thanks....
Enjoy your weekend.
Gloria

August 29, 2008

5 questions about the new housing bill
By J. CRAIG ANDERSON The Arizona Republic

PHOENIX, Ariz. - The Housing and Economic Recovery Act of 2008, signed into law by President Bush on July 30, has sparked numerous debates over its mechanisms to assist struggling homeowners, future homebuyers and lending institutions.

However, some of the complex law’s nuances are poorly understood, and certain provisions have received only a passing mention in news reports.

In an effort to better explain the law, here are five key questions and answers:

Question: Why does the housing act offer unlimited credit to Fannie Mae and Freddie Mac?

Answer:

The law’s most far-reaching provision gives financial assistance to the government-sponsored Federal National Mortgage Association and Federal Home Loan Mortgage Association, which own or insure nearly half of the roughly $12 trillion in U.S. mortgage debt.

Fannie Mae and its younger brother Freddie Mac have suffered losses totaling about $11 billion in recent months, due in large part to their investments in financially risky sub-prime loans.

Both associations purchase loans from lenders and sell them as mortgage-backed securities to the global investment market.

The housing act allows the U.S. Treasury to offer Fannie Mae and Freddie Mac an unlimited line of credit until the end of 2009, and it can also buy their stock. The hope is that a federal guarantee will bring gun-shy investors back to the secondary market, which provides the funding for lenders to make future loans.

Q: Which homeowners are eligible for Federal Housing Administration refinancing of their existing mortgage loans?

Answer:

To qualify, a borrower must live in the home, cannot own any other property and must have a high mortgage debt-to-income ratio - most likely 31 percent or more, though there may be exceptions.

Applicants also must agree to forfeit no less than 50 percent of the home’s future appreciation. They lose even more - up to 100 percent - if they sell within one to five years.

FHA must consider the applicant’s debt-to-equity ratio, which means borrowers who are significantly upside-down would not likely qualify.

The borrower must provide tax returns for the past two years to prove adequate income and must not have any fraud convictions in the past 10 years.

Possibly the most significant hurdle is that lenders are not obligated to accept the refinancing plan. Also, there is a $300 billion limit on the cost of insuring all refinanced loans.

Q: What are the terms and conditions of the new $7,500 homebuyer tax credit created under the law?

Answer:

Most importantly, the tax credit is in the form of an interest-free loan and is not a gift or grant. The borrower must repay it within 15 years of purchasing the home. Only first-time homebuyers are eligible, and the tax break only applies to homes purchased between April 9, 2008, and July 1, 2009.

The tax credit’s full amount is only available to individual borrowers whose annual income is below $75,000 and couples with a combined income below $150,000.

Q: How does the new law affect reverse mortgages?

Answer:

The housing act will have a significant effect on the issuance of home equity conversion mortgages, also known as reverse mortgages.

Proponents of reverse mortgages, which allow homeowners age 62 or older to liquidate their home’s equity over time by deeding the home to a bank upon their death, say the law makes them safer and more accessible than in the past.

(Note: Homeowners, at no time, deed the house to the bank, unless at the end of the mortgage, the amount owed is greater than the value of the home. At that time, the bank takes ownership in one of several ways, and FHA pays the lender the loss-difference between their loan and what the house is sold for.

The bank does not lose money on the FHA insured loans, and since the Reverse Mortgage is a non-recourse loan, and neither the lender, nor FHA, has any access to the borrowers other assets. Neither the borrower or the heirs must pay the mortgage loss back to FHA or the bank. This is one of the major safeguards of the FHA insured home equity conversion loan (HECM), and one that gives so much safety and security to the borrower.

And, for some reason, it's very hard for people to believe that the title is not turned over to the bank at the time of the loan. It is not! The homeowner/borrower always keeps title to the home.

I believe the confusion is because many people, including writers, bloggers and reporters do not know the difference between a Deed, and a Deed of Trust. A Deed transfers ownership. There are many types of Deeds, such as grant deeds, gift deeds and quit-claim deeds.

A Deed of Trust transfers legal, not physical, ownership or warranties or the body of property rights, to a trustee, so the trustee can enforce repayment of the Loan Note through foreclosure.

When a foreclosure takes place, it is conducted by the trustee named in the Deed of Trust, not by the lender. The reverse mortgage borrower signs, essentially, the same deed of trust and note any homeowner signs when they borrow to purchase property. But this is not a deed transferring ownership to the bank.

The law requires reverse-mortgage borrowers to receive “adequate counseling” from a third party not associated with the lender, and it allows the government to create a new counseling program funded by mortgage insurance premiums.

(Note: The new counseling program is, essentially, a program to improve the quality of the counseling that has been mandatory since the inception of the government reverse-mortgage program, through more thorough training and testing of counselors. How this is to be done is under discussion now by regulators striving to put the requirements of the Housing Bill into effect.)

It also reduces possible conflicts of interest by forbidding reverse-mortgage loan originators from selling insurance, annuities or other financial products. They may not give or receive incentives from others to sell such products to reverse mortgage borrowers.

(While banks and savings and loan companies like to cross-sell products, reputable institutions have never required borrowers to purchase other products they sell in order to get reverse mortgages.

However, this is true that there have been independent brokers who have hooked up with the sellers of these other products, or brokers who have run, or had an interest in, insurance agencies, or investment companies so they could require the sale of additional financial instruments. This was more common when reverse mortgages were newer and less well understood.

Those lenders, obviously did this to earn even greater fees, and often at the expense of the borrowers. This has been well documented in many other public publications. However, all lenders were required by law to disclose all cross-selling facts to the borrowers. Unfortunately, there are those who don't serve their clients, just themselves.)

The law also places a $6,000 cap on origination fees, which will be adjusted periodically for inflation.

(It has also been suggested by many in the reverse-mortgage field, that the FHA also reduce their 2% upfront mortgage insurance fee, because up to this point there have been relatively few reverse mortgage loans that have needed the FHA to pay off the lender. That may change in the future with the current decline in housing prices vs the past reverse mortgages that were given based on higher home prices and equity. At the present time, I have read in various reports covering FHA insurance, the FHA fee account from reverse-mortgages carries a surplus, that looks mighty good to some regulators as a way to pay for services to homeowners, other than the reverse-mortgage homeowners.)

Note: One of the most important provisions in the Housing Bill (not mentioned in this article) is that it raises the lending limits on Reverse Mortgages for FHA insured loans. Currently, the loans caps are determined by county and vary from approximately $210,000 - $362,790. In light of today's home prices this has not been adequate for senior to really access their equity. The new Bill will have a national minimum cap of $417,000 to a maximum of $625,000 in high-cost areas. The regulators are working out how to determine high-cost areas, and to determine if there should be a tiered plan that would allow loans to step up to $625,000, depending on the economic cost ratios in given areas.

Q: What other provisions are included in the bill?

A: One provision that has received some attention is the elimination of seller-funded down payment assistance programs for FHA borrowers, which takes effect Oct. 1. The ban will virtually eliminate no-down-payment offers on new homes.

FHA officials have long requested the ban, saying loans issued with down payment assistance carry a default rate three times higher than that of traditional FHA loans.

The housing act also places a one-year moratorium on “risk-based” FHA loan insurance premiums, a program initiated in July to charge borrowers based on the likelihood of loan repayment.

It streamlines the process for issuing FHA-insured loans on condominiums, and reforms the FHA loan process for manufactured homes.

In addition, it authorizes a pilot program to generate alternative credit rating information for loan applicants with insufficient credit history.
.
.
.