Mortgage
April 23, 2008
Cash for Condos Grows Scarcer; Equity Lines Vanish
Syndicated real estate columnist Kenneth Harney reports that would-be condo buyers across the country are about to find financing harder to come by. Fannie Mae and Freddie Mac have both recently issued guidelines that require loan officers to perform due-diligence research on characteristics like a condo's legal documentation and the percentage of units owned by investors, and for lenders to assume legal and financial responsibility for the accuracy of their assessments. "Even if you had an 800 FICO score and 50 percent equity," says one mortgage broker, "you still might not be able to get a condo loan." As Harney writes, "It depends on whether the underlying project can pass the underwriting tests, is in a declining market, and has a lender 'concentration' limit on it. Some lenders refuse to finance more than a set percentage of units in a single condo project to limit their risk." At the same time, many home owners are starting to see big reductions, or freezes, on their home equity lines of credit. A poster on the Forum recently wrote the following: "Logged into my bank account today to find that my line of credit had been cut down by more than half. When I called the bank they told me it was due to a "reduction in property value". I know things ain't peachy, but I haven't noticed prices going down that much! Has anyone else had experience with challenging this type of decision? I put 40% down on my home, fer chrissakes, got a great lease on my rental unit and my credit is well above 750. What gives?!" As the Times has reported, banks are freezing equity lines "even in areas where property prices are rising." Ouch.
Condo-Loan Restrictions Tightening [Baltimore Sun]
Incredible Shrinking HELOC?? [Forum]
Photo by Evaonne Hendricks.
March 19, 2008
Closing Bell: Architect of Subprime Crisis Dies
Roland E. Arnall, the founder of the Ameriquest Mortgage Company, died earlier this week. Arnall, whose personal fortune was pegged at $1.5 billion by Forbes last year, was a top donor to the Republican party and was named the U.S. Ambassador to the Netherlands in '06. Ameriquest, which went out of business last August, was one of the largest subprime lenders in the country and was the target of dozens of lawsuits over its allegedly deceptive lending practices. Arnall was 68.
Roland Arnall, Mortgage Innovator, Dies at 68 [NY Times]
March 10, 2008
Fannie Mae Supersizes You
Last week Fannie Mae and Freddie Mac made it easier for buyers in high-priced areas like New York to get big loans or re-fi their existing ones. Limits for federally backed loans in 70 counties across the U.S. have now been raised to $729,750, according to an article in the Wall Street Journal. The move is supposed to encourage lenders to to drop rates on jumbo loans (those over $417,000), which have soared above smaller loan amounts in the wake of the credit crunch. The loan-limit increase, however, will be short-lived: It's set to expire at the end of this year. Still, this should do more to prop up the economy than tax rebate checks.
Fannie, Freddie Loan Limits Raised [WSJ]
Photo by *andrew.
October 15, 2007
Study: Subprime More Prevalent in Minority Nabes
A new study from NYU’s Furman Center for Real Estate and Urban Policy shows that subprime lending in the city last year was much more common in minority-heavy neighborhoods than in mostly white neighborhoods, irrespective of median income levels. For example, 44 percent of loans in East Flatbush, a predominantly black and Hispanic neighborhood, were subprime; in Sheepshead Bay and Gravesend, which are majority white, 10.8 percent of mortgages were from subprime lenders. All three neighborhoods have median incomes in the $40,000 to $50,000 range. Though the study didn’t take into account things like borrowers’ credit histories, it definitely raises questions about whether subprime lenders have engaged in discriminatory practices by offering white borrowers loans with better rates. “There certainly is a disgraceful element here, but how big it is, we don’t know,” said Julia Vitullo-Martin, a senior fellow at the Manhattan Institute. “Is it a few rogue lenders, or is it an extensive problem that requires a regulatory response? We don’t know yet.”
Study Finds Disparities in Mortgages by Race [NY Times]
Tilden Avenue photo by polychrome
October 10, 2007
Renegotiating a Mortgage: One Man's Quest
A reader emailed us the letter he was planning to send to his lender in an effort to renegotiate the terms of his loan. We thought it would be interesting to get readers' input, both in terms of changes/improvements to the letter as well as predictions about the likelihood of his success.
Dear Madam or Sir:
I am writing to be considered for a loan modification. I am currently in year three of a 5yr fixed mortgage at a rate of 5.75%. As I weigh my options, I am asking that MORTGAGECO extend me a lower, fixed rate for a term of 30 or 20 years. I have every intention of exploring my mortgage options with other lenders but first I wanted to contact you. I would be happy to remain a customer of MORTGAGECO under the proper terms.
In no way should this be considered a plea...
Continue reading "Renegotiating a Mortgage: One Man's Quest"
September 28, 2007
Man on the Street: Mortgage Crisis Hitting Close to Home?
We buttonholed a few folks this week on the streets of Park Slope and asked whether they knew anyone who'd been affected by the mortgage crisis. While no one reported trouble close to home, plenty thought it might be looming just 'round the corner...
I don't know anybody who's been affected, but I'll probably see some in the coming months. Houses around here are so expensive that I don't know how you can buy without a heavy mortgage.
Kyle; lives in Park Slope.
Not really, but I know mostly young people who've recently bought and people who've owned their houses for many years. I assume I'll start seeing more people affected by it. Part of it might be, though, that it's not something that people readily talk about.
Julia; lives in Fort Greene.
No. I certainly can't imagine anyone I know having trouble with a mortgage, because I don't know anyone in New York who can afford a mortgage--let alone be in trouble for it.
Steve; lives in Williamsburg.
No. I don't really know anything about it.
Tiffany; lives in Park Slope.
No. I think I'll probably see more, though. The market is obviously changing.
Abby; lives in Park Slope.
September 24, 2007
As Mortgage Rates Rise, More Deals Sink
The suffocating embrace of the subprime crisis is definitely starting to take the wind out of the city’s residential deals. Mortgage brokers say they’re seeing a pronounced uptick in the number of buyers who are backing out of deals because they can’t get mortgages at competitive interest rates. Hardest hit are borrowers who don’t have excellent credit histories, or who expected to take out large mortgages and then pay them down with bonuses. A number of brokers say they’re seeing plenty of prospective buyers who didn’t lock in rates and who can’t close on the units because they can’t afford higher-than-expected monthly payments. And these are borrowers who aren’t necessarily on financially shaky ground—a sobering article in today’s Times documents some of the effects of too-lenient lending practices geared towards lower-income earners. Large swaths of working-class enclaves in the boroughs, like parts of central Brooklyn, have turned into new-development “ghost towns” because of predatory lending practices and concomitant rising foreclosure rates. So it’s becoming clear that the mortgage industry crisis is now affecting the city’s haves and have-nots. Anyone had a deal scuttled recently?
Frustrated New Yorkers Grapple With Loan Rates [NY Times]
Risky Loans Help Build Ghost Town of New Homes [NY Times]
Photo by D.B. Blas
April 2, 2007
Bargaining With The Bank
The Times ran an interesting piece yesterday reminding those facing a mortgage payment crunch to be proactive with their lenders. The logic makes sense: Your bank does not want to foreclose on you; it's not in the real estate speculation business and the process of disposing of a repossessed property costs it $40,000 or so. As a result, if you can come up with a proposal that will cost your bank less than $40,000, a compromise is likely. The article recomends starting the conversation three to four months before a rate reset. Have any Brownstoner readers been through a negotiation like this or know anyone who has?
Homeowners, Call Your Bankers Before They Call You [NY Times]
Photo by Mark Lennox