mortgage settlement

Is The Zero-Down Mortgage Loan Making A Comeback?

Buyers may soon be able to bring less to closing. They were blamed for precipitating the housing crisis years ago, but major lenders are giving no- and low-downpayment loans another shot.

Several major lenders are reportedly offering loans with just 1 percent down. Navy Federal, the nation's largest credit union, offers its members zero-down mortgages in amounts up to $1 million. NASA Federal Credit Union markets zero-down mortgages as well.

Quicken Loans, the third highest volume lender, offers 1 percent downpayment options, as does United Wholesale Mortgage. And the Department of Veterans Affairs has offered zero-down loans to eligible borrowers for many years.

Also, Movement Mortgage, a large national lender, has introduced a financing option that provides eligible first-time buyers with a non-repayable grant of up to 3 percent. As such, applicants can qualify for a 97 percent loan-to-value ratio conventional mortgage, which is basically zero from the buyers and 3 percent from Movement. For example, on a $300,000 home purchase, a borrower could invest zero personal funds with Movement providing $9,000 down. The loan also allows sellers to contribute toward the buyer's closing costs.

So far, the delinquency rates on these low- to zero-down payment loans have been minimal, according to lenders. Quicken Loans says its 1 percent down loans have a delinquency rate of less than one-quarter of 1 percent. United Wholesale Mortgages told The Washington Post that it has had zero delinquencies from the borrowers on its 1-percent down loan since debuting it last summer.

For Movement's new loan product, the lender will originate the loans and then sell them to Fannie Mae, which remains under federal conservatorship. Fannie officials released the following a statement:

"(We're) committed to working with our customers to increase affordable, sustainable lending to creditworthy borrowers. We continue to work with a number of lenders to launch (test programs) that require 97 percent loan-to-value ratios for all loans we acquire." They add that there "is no commitment beyond the pilots," which are "focused on reaching more low- to-moderate income borrowers through responsible yet creative solutions."

During the housing crisis, zero-down loans were among the biggest losses for lenders, investors and borrowers. However, housing experts say the latest versions are different from years ago. Applicants must now demonstrate an ability to repay what's owed. They also must have stellar credit histories and scores, and lenders require a lot more documentation to prove borrowers are in good standing.

Also, many of the programs are charging higher interest rates. For example, Movement's rate for its zero-down payment option in mid-June was 4.5 percent to 4.625 percent, compared with 4 percent for its standard fixed-rate mortgages.

Some critics say that the borrowers who really could benefit from such options aren't able to qualify for them. Paul Skeens, president of Colonial Mortgage Corp. in Waldorf, Md., told The Washington Post that "it seems like people without excellent credit scores and three months of [bank] reserves don't qualify."

Source: "No Down Payment? No Problem, Say Lenders Eager to Finance Home Purchases," The Washington Post (June 14, 2017)

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Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact an attorney.

Mortgage Underwater? 4 Options That May Help

We've all heard this term of a a mortgage being "underwater".  What it simply means is that you owe more on the mortgage than the home is actually worth.  Its a precarious situation that leaves few options for most.  Nearly one out of every five mortgages is underwater.  But that doesn’t make it any less painful.

If you find yourself with your mortgage underwater, here are several options that may help you counter this problem.

Option 1: Ride out the storm
Many people panic when they find out that they have their mortgage underwater – but the situation doesn’t always demand action. If you can make the payments and you’re happy with your house (aside from its current valuation), staying put may actually be your best option. This allows you to avoid the stress and expense of moving or modifying your loan, and over time the value of your home is likely to increase; eventually you may break even or even see some equity and get out of having your mortgage underwater.

Option 2. Request a short sale
If you have to move or if you’re having trouble making your payments, you can request a short sale from your lender. With a short sale, the lender agrees to accept less than you owe as payment on the property and forgive the remainder of the debt. Lenders are typically only going to do this if you have already defaulted on the loan. A short sale is a complicated process that requires the assistance of a lawyer and a real estate agent. A short sale will have a negative impact on your credit, so it’s not something to undertake lightly.  But, if executed properly, it can solve the issue of having your mortgage underwater but getting you out of a bad debt situation.

Option 3: Rent out your home
Renting your home can be a challenge, but it presents a viable option in some circumstances – especially if you are unable to sell the home but can’t afford to keep making payments on your mortgage. You’ll need a new insurance policy on the property, and you may need someone to manage the property or a real estate agent. Ideally, the rental amount you receive should cover property management fees, your monthly payment, insurance, and taxes.

Option 4. Refinance
There are a variety of government programs that may be helpful. One is the Home Affordable Refinance Program (HARP). If you’re current on your house payments but have a mortgage underwater, you may be eligible to refinance through this program. Your current mortgage must be owned or guaranteed by Freddie Mac or Fannie Mae, and it must’ve been sold to Freddie Mac or Fannie Mae on or before May 31, 2009.

Refinancing through the Federal Housing Administration is also a possibility. You need to be current on house payments and the mortgage must have been endorsed on or before May 31, 2009.

 Written by Jurado & Farshchian, P.L.

OCWEN Ordered to Stop Foreclosures for Failure to Comply With National Mortgage Settlement

After posting a massive loss for the first quarter of 2016, the nonbank has run afoul of the terms of the National Mortgage Settlement and is now forbidden from taking foreclosure actions on more than 17,000 loans.

According to Joseph Smith, the monitor of the National Mortgage Settlement, Ocwen is not yet back in compliance with one of the performance metrics of the National Mortgage Settlement that it failed in the second half of 2014.

According to Smith, Ocwen has not fully remedied the issues that led to the compliance failure.

Smith’s office stated that Ocwen “was delayed” in implementing its Corrective Action Plan for the failure of Metric 31 because of “difficulties in resolving the technical issues that led to the original fail.”  And because of those issues, Ocwen must place 17,496 loans that "could have been affected" by this issue on foreclosure hold. 

“While Ocwen has made progress toward correcting a number of past fails, it has not resolved its issues that led to its failure of Metric 31,” Smith said.  “Therefore, I will not allow Ocwen to move forward with foreclosures on any borrowers who could have been affected by this failure until each of these borrowers has correct information and a chance to appeal,” Smith continued.

According to Smith’s office, the hold will not be lifted until every borrower who could have been affected gets correct information and a chance to appeal.

Smith’s office stated it recently received and approved Ocwen’s Corrective Action Plan for Metric 31, and that Ocwen has implemented the plan.

Smith said that if his office determines that Ocwen’s CAP has indeed been implemented, testing of the issue will resume in the second quarter of 2016.

“Despite its progress, Ocwen continues to have work to do,” Smith said. “I will continue my efforts to review Ocwen’s compliance with the NMS and resolve any outstanding issues. I will report to the Court and the public on these efforts in the coming months.”

But it’s not all bad news for Ocwen in the eyes of Smith and the NMS.

Smith’s office stated that Ocwen has provided 23,000 borrowers with more than $2 billion in consumer relief, which fulfills its consumer relief obligation under the NMS.

“As a result of my review of the (Ocwen’s internal review group’s) work papers for Ocwen’s claimed consumer relief credit through Sept. 30, 2015, I have credited Ocwen with $1,246,442,217 toward its consumer relief obligation,” Smith said. “In total, I have credited Ocwen with $2,127,661,401 in consumer relief credit and have determined that Ocwen has exceeded its consumer relief obligations.”

Smith also stated that Ocwen did not fail any of the compliance metrics tested during the first half of 2015 and continues to work on corrective action plans designed to fix past fails.

In a statement, Ocwen said the company is pleased with the progress it has made.

“Ocwen is pleased that the Monitor’s second compliance report determined that we have passed all tested metrics in the first and second quarters of 2015,” the company said.

“These results confirm that we have implemented the appropriate actions to be compliant with our obligations under the National Mortgage Settlement,” the company continued.

‘Ocwen has made significant investments in our risk and compliance management infrastructure to ensure that we are fully compliant with all rules and regulations related to our business,” the company said. “We will continue to work closely with the Monitor and look forward to the next report.”

In fact, Smith’s office stated that Ocwen completed its Global Corrective Action Plan, which is a plan to correct a variety of letter-dating issues previously uncovered.

Smith also said that the Corrective Action Plans for Metrics 7, 8, 19 and 23 also are complete.

According to Smith's office:

  • Metric 7 evaluates the timeliness, accuracy and completeness of pre-foreclosure initiation notification letters sent to borrowers
  • Metric 8 tests whether the servicer complied with servicing standards regarding the propriety of default-related fees (e.g., property preservation fees, valuation fees and attorneys’ fees) collected from borrowers
  • Metric 19 tests whether the servicer complied with servicing standards regarding timeliness for responding to borrowers about missing or incomplete information
  • Metric 23 tests the servicer’s compliance with the requirement to notify borrowers of any missing documents within 30 days of a borrower’s request for a short sale

“The Monitor’s latest Consumer Relief Report is another positive step for Ocwen, and confirms our commitment to providing real solutions to struggling homeowners,” the company said.

“Our work with distressed borrowers will not end just because we have exceeded our NMS obligations,” the company continued.

“Families across the country are still being impacted by the financial crisis,” the company concluded. “Ocwen will continue to work with our customers, especially those facing foreclosure, to find loan modification programs, including principal reduction programs, to help them better afford and remain in their homes.” 

Written by Ben Cane.  This article first appeared on housingwire.com.  Source