Tag Archives: Bank of America

Banks Finally Try to Make Short Sales Shorter

short-sale-sign

There is sometimes nothing more frustrating than a short sale. Banks typically take 90 days to six months, accept other offers if they are a dollar higher in the meantime, therefore never knowing if the home your are trying to buy will become a reality. So the news is that Bank of America and Wells Fargo, say they are making it easier for delinquent borrowers to avoid foreclosure by selling their homes for less than they owe on them.

Their efforts dovetail with a strategy unveiled last week by the Obama administration to promote such short sales.

Demand for short sales has burgeoned because falling home prices have made it impossible for many homeowners to get high enough prices to repay their lenders if they run into financial trouble, such as a job loss.

A short sale has an advantage over foreclosure for the homeowner because it is less embarrassing and does less damage to his or her credit. And for the lender, it is less costly than having to repossess, market and maintain a vacant property. Avoiding a foreclosure means keeping a house occupied which helps preserve a neighborhood.

However, because of the complexity of such transactions — including the need for approval of a sales price by lenders, investors and mortgage insurers — the sales often fall apart. Real estate agents complain that by the time they get an answer from the bank on an offer, the potential buyer has lost interest.

At Bank of America, the nation’s largest mortgage servicer, more than 60 percent of approved short sales do not close, which is why the bank wants to streamline the process, said BofA Senior Vice President David Sunlin by telephone Thursday.

Sunlin, who manages short sales for the bank, said the “bank’s first goal still is to negotiate a mortgage modification that will let a borrower keep his home —during those negotiations the bank can simultaneously obtain the documentation needed to qualify the borrower for a short sale if the modification doesn’t work”

Banks typically do not begin the lengthy process of qualifying a borrower for a short sale until it has received a purchase offer.

To expedite short sales, Bank of America has enlarged and updated staff training and set up a phone line dedicated to short sales that borrowers and their agents can use.

 Sunlin said, ” in 60 to 90 days the bank will roll out a Web program it will use to find and track the short sales of houses with mortgages that it services.  The Web portal also will accept qualifying documentation from clients wishing to do short sales.”

It typically takes 45 to 60 days for the bank to tell a client if a short sale offer can be accepted and up to 90 days if an investor must approve , with the goal for the banks is to shorten this time line.

By doing this, we should see more private sales instead of more sales of bank-owned (houses),” 

Sunlin said short sales will also benefit from an amendment to President Barack Obama’s Making Home Affordable program announced last week that will standardize short sale application and acceptance forms. It also provides monetary incentives to servicers and helps cover relocation expense for homeowners.

David Knight, senior vice president at Wells Fargo Home Mortgage, said in an interview that his bank has been working many months to reduce delays in the short sale process. He said the bank is working closely with borrowers’ agents to increase the likelihood that the listing prices on a short sale will be accepted.

The lending and real estate industries have been on a crash course to learn about short sales since the housing market bust, Knight said. “The big challenge is none of us really understood the process,”

By the way, as of May 22, 2009, in Nevada County, there are 103 active short sales on the market and 55 short sales with contingencies, for a total of 158 short sales.

Putting Mortgages into ‘Plain Language’

house-on-hands

Bank of America has created a new website called Bank of America Home Loans for borrowers that includes a calculator that determines not just what size loan people can qualify for, but how much they can spend without being stretched too thin. “We wanted to change the conversation to ‘How much house can I comfortably afford?’ rather than ‘What’s the maximum I can buy?’ ” said Aditya Bhasin, the product, pricing and strategy executive for Bank of America Home Loans.

The site is designed to be easy to read, spelling out a variety of contingencies, including the maximum payment that an adjustable rate mortgage could potentially cost.

The new site also offers what BofA calls Flat Fee Mortgage Plus, which has no application fee and a single closing fee that includes processing costs and fees for third-party services like appraisals.

Not included are other standard costs like property taxes, homeowners’ insurance and prepaid interest.

Craig Focardi, a senior research director at the Tower Group, a financial consulting firm, said the idea for the plan is nothing new – it’s been tried by others. But the prominence of the programs could persuade competitors to adopt the features.”

If you recall, Bank of America took over Countrywide Lending and renamed it Bank of America Home Loans. I’m not sure that their new website is not a rehash of Countrywide’s old website. But with B of A’s great customer service (tongue in cheek) they need some kind of P.R. to make them look helpful. Some related information on Countrywide Financial Corporation:

According to the LA Times 04/27/2009

“Linked more recently with high-risk loans, co-founder Angelo R. Mozilo’s huge paydays and FBI investigations, the Countrywide name became “too toxic to resuscitate,” as another expert puts it — and a liability for Bank of America Corp., which snatched it up last year as it neared collapse.

And so over the weekend, nearly 10 months after the Bank of America deal closed, Countrywide Home Loans signs came down and Bank of America Home Loans signs appeared at the lender’s 215 storefront offices in California. It was the start of a rebranding of nearly 1,300 Countrywide mortgage offices nationwide.”

Yep, Countrywide and Bank of America, great combination.

Nevada County Residential & Land Sales, April 2009

"Alternative Housing" Location, Oregon
"Alternative Housing" Location, Oregon

 

What the figures show for April of this year is that residential sales are about the same number as it was for April of last year.  However, we’ve had a further decline in medium residential home prices of minus 23 percent. Here are the stats for sales in Nevada County.

There were 67 residential properties sold in April 2009 compared to 62 residential sales in April 2008.  Total residential sales from January to the end of April 2009 were 191 sales compared to the same period last year of 203 sales.

The medium price for April 2009 was $299,000 compared to April 2008 of $387,500 a decline in market price of 23 percent.  There were 1,165 residential properties listed for sale at the end of April, which based on the number of sales from January to April 2009 equals about 1.6 years supply of residential property for sale, assuming sales continue at the same rate.

There were 20 land sales from January to April in 2009 with a 45 month supply of land at the end of April. Last year there were 45 land sales with a 49 month supply of land.

I’ve noticed a pickup in pending sales, which I post on this website daily for those that are interested, and it seems that the pending sales are up. They have been hovering in the 200 pending sales starting within the last month. However, this is for all sales, not just residential sales.

Where are we with future sales? It’s anyone’s guess, Fannie Mae and Freddie Mac asked lenders to forestall any more foreclosures until March 6, 2009.  What they are doing now that the agreement date has expired? Some circles say we are in for a tsunami of foreclosures. The following banks had agreed to the government’s request and their expiration dates of the agreement. 

JP Morgan Chase – New Owner-Occupied residential loans that are owned and serviced by JPMorgan Chase.  As with Fannie Mae, the moratorium of foreclosures end date, March 6th.

Citigroup – All Citi-owned first mortgage loans that are principal residence and on loans for which understandings with investors have been reached.  Moratorium end date – March 12th.

Bank of America (also Countrywide now renamed Bank of America Home Loans) – Delay foreclosures sales on owner occupied properties whose mortgage loans are owned and serviced by B of A or Countrywide  – Through March 6th.

Wells Fargo (also Wachovia) – For Loans it holds.  The moratorium is expected to remain in place until the government’s foreclosure prevention plan is announced.  The majority of Wells Fargo’s mortgage loans are serviced by it and owned by other investors. 

 

Banks Banking Their Money

Banks and their money
Banks and their money

So the major banks have been given billions of dollars from TARP so we could start borrowing money to buy cars and homes to get the economy going again. But now that the banks are awash in cash they’re keeping it in the bank. It seems that the banks are hoarding their cash so they can pay back TARP funds and of course, so they can raise the pay of their CEO’s. After all, they claim if they can’t pay millions to the top help, they won’t be able to hire good managers?

According to Fortune Magazine, writing about the large amounts of cash that lending institutions have on hand:

“The rise was even more dramatic at Bank of America, where cash on hand soared to $173 billion at the end of the first quarter from $33 billion at year-end. CEO Ken Lewis, whose Charlotte-based bank recently acquired the troubled broker-dealer Merrill Lynch, called the shift “very expensive in the short term but well worth the cost in the long term.”

Other institutions holding cash are Goldman, $164 billion, Morgan Stanley $150 billion, AmEX, $25 billion in the third quarter from $13 billion in the forth quarter.

Here’s another quote from Fortune Magazine:

“Liquidity allows the banks to lend if they can find borrowers who can pay them back,” said Gary Townsend, a former bank analyst who now runs Hill-Townsend Capital in Chevy Chase, Md. “That’s the big challenge right now, because the risk-adjusted returns are as big as we’ve seen in a couple of decades.”

Interpret that statement to mean if you want to borrow money from a bank, you must have enough money and assets that you really don’t need to borrow money.

Jumbo Loan Limits Raised by Fannie Mae and Freddie Mac

mansion-picture

Fannie Mae and Freddie Mac will once more begin buying “super-conforming” mortgage loans of up to $729,750, which will bring rates down for borrowers with good credit seeking loans previously classified as jumbo.
Currently, loans greater than the $417,000 conforming limit in “normal” housing markets — or the super-conforming limit of up to $625,500 in high-cost markets — are considered jumbo loans.

Jumbo loans carry higher rates than conforming loans because they aren’t eligible for purchase or guarantee by Fannie Mae and Freddie Mac. Rates on jumbo loans are running at least 1 percent to 1.5 percent higher than conforming loans of less than $417,000.

In between conforming and jumbo loans are so-called super-conforming loans that exceed the $417,000 conforming loan limit, but are still eligible for purchase or guarantee by Fannie and Freddie.

Super-conforming loans carry slightly higher interest rates than conforming loans — about 25 to 30 basis points — but are less costly than jumbo loans that Fannie and Freddie can’t buy or guarantee. A basis point is one hundredth of a percent.

On Jan. 1, the upper limit for super-conforming loans was rolled back from $729,750 to $625,500. But the economic stimulus bill signed into law Feb. 17 restored the higher limit for single-family homes in high-cost markets that was in place for much of 2008.

The following week, the Federal Housing Finance Agency published lookup tables for the new Fannie and Freddie limits in high-cost markets — 250 counties nationwide.

But Fannie Mae did not issue its eligibility requirements for the new limits until March 30. Freddie Mac published its guidelines on April 16. Both companies will begin buying super conforming loans of up to $729,750 from lenders on May 4.

Wells Fargo will begin making super-conforming loans of up to $729,750 in high-cost markets on Monday, and Bank of America will start in mid-May, the San Francisco Chronicle reported.

Countrywide Sues AIG, AIG Sues Countrywide

gavel

American International Group also well known as AIG, and Countrywide Financial Corporation have sued each other. Countrywide sued AIG’s United Guaranty Indemnity Company for breach of contract in a dispute over insurance losses for subprime mortgage loans now in default.

In turn, AIG sued Countrywide last week in a California federal court, contending the lender had misrepresented risks tied to more than one billion dollars of mortgage loans that United Guaranty insured.

According to Reuters  ”United Guaranty said in its court papers that unlike the traditional use of mortgage insurance, used to facilitate home purchases by responsible borrowers, Countrywide wanted coverage to increase the credit rating of its mortgage-backed securities offerings.

It said Countrywide traded on a long-standing relationship between the two companies to induce it to insure loans it says were too risky and not issued according to proper underwriting standards. It says it has already paid out insurance claims of more than $30 million tied to the Countrywide loans and is exposed to additional claims of “several hundred million dollars more.”

A Bank of America spokeswoman declined to comment on the litigation on Friday. The bank bought Countrywide, once the largest U.S. mortgage lender, for about $4 billion in stock last July as the lender’s risky subprime mortgage loan business began to fail.

An AIG spokesman said Countrywide made misrepresentations and did not follow appropriate underwriting standards, and as a result “exposed us to claims we would not have had to pay out. Now we want the court to order them to make us whole.”

If I had to bet who is going to win this lawsuit, I would place my money with AIG. Having heard much about Countrywide lending practices while we were in a heated real estate and mortgage lending market, I don’t think AIG is going to have much trouble finding problems with the way Countrywide made their subprime loans before the company went belly up. But anyhow, that’s just my opinion based on hearsay.

By the way, can Congress get over the bonus that AIG gave out and get on with the important business of getting this Country back up and running? I think the news media and Congress have spent enough time on this that the CEO’s of large corporations “get it”.

Mortgage Rates Drops to Near-Record Lows

moneyhouse

Mortgage rates are dropping to near record lows – below 5%. This is in the wake of the Federal Reserve’s decision to buy up Treasury bonds and mortgage securities. Lower rates may help spur home sales, but analysts expect much of the action to come from homeowners seeking to refinance.

If you are in the category of refinancing, expect tighter rules and regulations, meaning you have to have a good credit score, equity in your home and there will be tighter debt to income ratio requirements. Keith Gumbinger of HSH Associates, a publisher of mortgage information, said good interest rates were available to all kinds of borrowers in all kinds of credit circumstances when the market was running flat out five years ago. That’s not the case today. “You must be a much better borrower than you had to be before,” he said. “For some borrowers, you might have to get used to hearing ‘no.’”

Be careful when you apply for your refinancing. I have a client who is in the process of refinancing her home. She applied at Countrywide and had me look at what they were going to charge her to refinance. They started out with 2 points or 2 percent of her loan to as part of the cost for refinancing. In addition, they had enough garbage fees that the total refinancing would have cost her $11,000 for a $417,000 loan. I had her shop at two other loan companies, and her costs dropped to about $6,000. Countrywide, when they were made aware of the pricing from the other two mortgage brokers, dropped their cost to refinance to match the other two brokers.

Home buyers and owners who want to refinance should be prepared for a longer process, and for different rates or costs, depending on their credit scores and loan-to-value ratios. Now, there might be three or four different levels for transactions that previously would have been priced equally.

By the way, after April 27, 2009 Countrywide will shed its name that it had since 1969 and will be morph into Bank of America Home Loans. Bank of American acquired Countrywide, once one of the biggest subprime lenders last year. More on Countrywide tomorrow

Only a $500,000 Salary?

John Thain after leaving Bank of America
John Thain after leaving Bank of America

Geez, I can’t get by with $500,000 if I have to run a big corporation like GM, or Bank of America into bankruptcy, woops, I mean run these companies!

Here is what some of the CEO‘s of these large companies made as they ran their companies into the ground according to The New Times

First a little update.

“Executives at companies that have already received money from the Treasury Department would not have to make any changes. But analysts and administration officials are bracing for a huge wave of new losses, largely because of the deepening recession, and many companies that have already received federal money may well be coming back”

Crucial details remained unclear on Tuesday night, including whether the restrictions would apply to all companies that receive money under the so-called Troubled Asset Relief Program, or TARP, or whether they would apply only to the “exceptional” companies that were being rescued from collapse.”

The Times went on to list some executives from severely troubled companies and their current salaries.

The chief executive of Bank of America Kenneth D. Lewis, , took home more than $20 million in 2007. Of that, $5.75 million was in salary and bonuses.

Vikram Pandit, who became chief executive of Citigroup in December of 2007 and previously held other senior positions at the bank, made $3.1 million.

The chief executive of General Motors, Richard Wagoner, made $14.4 million, much of it in stock, options and other non-cash benefits. He earned a $1.6 million salary.

Then there’s John Thain CEO of Merrill Lynch who gave billions of dollars to his employees just before his company went under and was taken over by Bank of America. He spent 1.2 million remodeling his office including a $1,450 parchment waste basket.

Darn, at $500,000 a year, the top dogs will not be able to buy parchment waste baskets for $1,450. How about they use a paper bag from the grocery store instead, that’s parchment, sort of.

By the way, in 2004, Bill Gates of Microsoft received a pay raise and with bonus made $901,667. The rest of his wealth came from the company making money and receiving his wealth from stock growth and dividends. What a concept, company makes money, CEO makes money.

Banks Help Themselves Not Borrowers

Bank of America Nevada City, CA
Bank of America Nevada City, CA

So why am I so mad at banks? Because they have gotten federal bailout monies to start the lending process for borrowers who are distressed and to create new loans. Instead, they have used the money to fatten their bottom line. Have you tried to get a loan for a home lately? Even if you want an equity loan, you need to have a credit score in the upper 700’s, full documentation of your assets and income.
Now how does this grab you for arrogance? A direct quote from a the chairman of Whitney National Bank of New Orleans, quoted from the New York Times:

“At the Palm Beach Ritz-Carlton last November, John C. Hope III, the chairman of Whitney National Bank in New Orleans, stood before a ballroom full of Wall Street analysts and explained how his bank intended to use its $300 million in federal bailout money.

Make more loans?” Mr. Hope said. “We’re not going to change our business model or our credit policies to accommodate the needs of the public sector as they see it to have us make more loans.”

I’ve talked to several people with good credit scores and good income and the banks seem to just put off the loans. In short, the banks do not want to make loans, they want to buy assets. For example, Bank of America has recently bought Countryside, Merrill Lynch and in 2002 they bought FleetBoston Financial for $48 billion. Now, they have received $20 billion to shore up its purchase. Here’s a quote from the BBC News:

“The objective of this program is to foster financial market stability and thereby to strengthen the economy and protect American jobs, savings and retirement security,” the US Treasury said.

In addition to the $20bn cash injection, the Treasury will “provide protection against the possibility of unusually large losses on an asset pool of approximately $118bn of loans”.

If that dosn’t make you mad, let’s start a bank.