Study: Minority Borrowers/Communities Get Too Many FHA and VA Loans.

Story about study in seven cities (not including Portland or Seattle) is HERE; study is HERE.

Tempting to put this into "no good deed goes unpunished" bin; reality is that government loans have long been a primary source of mortgage financing for African American and Hispanics (especially first time buyers), while conventional and GSE loans to African Americans and Hispanics have lagged. 

Only period when this was not true was during subprime days (remember those were conventional loans) and that didn't work out so well.

Originally created and posted on the Oregon Housing Blog.

New Report: Disparities in Mortgage Lending and Foreclosures.

Report, from Center for Responsible Lending in North Carolina, is HERE.  No Oregon or Portland data, but important findings like those shown in this graph and in these excerpts:

Racial and ethnic differences in foreclosure rates persist even after accounting for differences in borrower incomes.
Racial and ethnic disparities in foreclosure rates cannot be explained by income, since disparities persist even among higher-income groups. For example, approximately 10 percent of higher-income African-American borrowers and 15 percent of higher-income Latino borrowers have lost their home to foreclosure, compared with 4.6 percent of higher income non-Hispanic white borrowers. Overall, low- and moderate-income African Americans and middle- and higher-income Latinos have experienced the highest foreclosure rates

Loan type and race and ethnicity are strongly linked.
African Americans and Latinos were much more likely to receive high interest rate (subprime) loans and loans with features that are associated with higher foreclosures,specifically prepayment penalties and hybrid or option ARMs. ... the disparities were especially pronounced for borrowers with higher credit scores. For example, among borrowers with a FICO score of over 660 (indicating good credit), African Americans and Latinos received a high interest rate loan more than three times as often as white borrowers.

Originally created and posted on the Oregon Housing Blog.

Federal Reserve Study: Subprime Didn't Increase Minority Homeownership.

Federal Reserve of Boston study of Massachusetts subprime lending is HERE.

Tip of Hat to Washington Independent; their story is HERE. Quote from report, and story:

"We show that much of the subprime lending in the state was concentrated in urban neighborhoods and that minority homeownerships created with subprime mortgages have proven exceptionally unstable in the face of rapid price declines. The evidence from Massachusetts suggests that subprime lending did not, as is commonly believed, lead to a substantial increase in homeownership by minorities, but instead generated turnover in properties owned by minority residents."

New Study from Bankruptcy Attorneys Says that Loan Modification Programs Not Working.

The National Association of Consumer Bankruptcy Attorneys (NACBA) issued press release HERE saying that new study shows loan modification programs are not working well. From their press release:

• "Less than 10 percent of the time do the voluntary programs result in a reduced principal loan balance with more than half of modifications capitalizing unpaid interest and fees into larger and more drawn out debt on the back end of the mortgage; and

• Only about a third (35 percent) of voluntary mortgage modifications reduce monthly payment burdens for homeowners, with nearly half (45 percent) actually saddling distressed homeowners with increased payments under the modifications."

Link to December 08 update to original study done in August 08 is HERE. (Link within this document will take you to the original August study).

Fed Action Spurs Burst of Refinance Interest from Consumers.

So says story HERE from WSJ.

$100 Million Florida Preliminary Offering Statement Opens Door to Non-AMT Bonds for SubPrime/ARM Refinance Loans With FHA Insurance.

Florida has joined the chorus of states opening the door to the use of mortgage revenue bonds for subprime/ARM refinances, as permitted by federal housing legislation enacted into law this summer.[Public Law 110-289, Section 3021(b)].

The Preliminary Offering statement for the Florida Housing Finance Corp. Series 4 , non AMT bonds that I have posted HERE provides the details:

"Florida Housing may elect to use a portion of the proceeds of the 2008 Series 4 Bonds to refinance loans in accordance with the 2008 Housing Act. Although Florida Housing has not finalized the terms with respect to loans for refinancing, it expects that such loans would have terms (interest rates, upfront points, etc.) similar to loans made to first-time homebuyers under the Program. Florida Housing also expects that these loans for refinancing would be underwritten in accordance with the FHA Secure or FHA Hope for Homeowners programs and pooled into GNMA Securities."

As I have posted previously, the Ohio HFA expects to move forward with a similar subprime/ARM refinancing program, and the Tennessee HFA subprime/ARM refinancing program is already up and operating.

Detailed Explanation of FDIC IndyMac Loan Modification Program.

Washington Post story is HERE.

State Foreclosure Prevention Working Group Urges Sub Prime Loan Modifications.

Letter from members of the State Foreclosure Prevention Working Group HERE to subprime lenders urges them to adopt loan modifications along the lines of those recently negotiated with Bank of America (on Countrywide loans).

Note that membership on State Foreclosure Prevention Group includes both attorney generals and two state banking regulators.

Up to now Oregon has not been a member of the Working Group, perhaps new Attorney General will join after election next month?

[A link to the Conference of State Banking Supervisors, host to the State Foreclosure Prevention Working Group, has been added to links pane in right side of blog.]

FHA HOPE for Homeowners Mortgagee Letters Issued.

Loan origination is HERE.
Loan servicing is HERE.
Both are in MS Word format.

Estimate: 50,000 Owner Occupied Subprime and Alt A ARM Loans will Adjust in Next Year in Oregon and Washington.

I have prepared two tables HERE, that show the number of Oregon and Washington Subprime and Alt A loans, the number of those loans that are ARMS, and my estimate of the number of subprime and Alt A loans that will adjust in the next 12 months (Federal Reserve data is from August, so 12 months runs from August 08-July 09).

Note that this analysis includes a focus on owner occupant subprime and Alt A loans. This data is useful in evaluating the need for states to quickly implement new revenue bond refinancing programs authorized by the federal housing legislation enacted at the end of July.

(The Bond Buyer table graphic HERE shows the additional bond authority allocated to the states in the summer federal housing legislation. In part this additional authority was to provide expanded resources to finance this new new revenue bond refinancing program; Oregon received an additional $123 million in revenue bond authority and Washington received an additional $212 million in revenue bond authority).

Oregon Subprime and Alt A ARM Loan Estimate: 62,000+ Loans

The Federal Reserve Bank of New York publishes monthly maps and data on subprime and ALT A loans HERE.

After my State Housing Council presentation last week, I went back and did some work to come up with a more refined estimate of how many subprime and Alt A ARM loans exist in Oregon.

The results are shown in the table HERE: my estimate is that there were more than 62,000 subprime and Alt A ARM loans in Oregon as of July 2008. Virtually all of those ARM loans would have been made during the period 2002 to 2007, the qualifying period for the new potential OHCS tax exempt bond refinancing program.

Methodology
The most important caveat about the NY Federal Reserve data is that the counts shown do NOT represent the total universe of subprime and Alt A loans, but instead a portion of that universe. Subprime loan counts shown represent an estimated 47% of the universe of all subprime loans, while Alt A loan counts represent an estimated 90% of the universe of Alt A loans, according to the NY Fed:

• "We estimate that as of year-end 2007, there were about a total of 7 million subprime loans. The underlying data contained 3.3 million active subprime loans, suggesting a coverage ratio of 47 percent. By definition, all alt-A mortgages are securitized. Our best guess is that 2.4 million loans in this portion of the data cover more than 90 percent of the pools marketed as alt-A."

The method I used to estimate Oregon ARM loan counts was to take the count of loans shown in the Fed data for that category, divide by the sample size (47% or 90%) to get an estimate of the total universe. I then multiplied that estimated total universe by the ARM percentage field in the database to arrive at the estimate for ARM loans.

Fannie Mae and Subprime.

Washington Post story HERE.

Federal Reserve Board Final TILA Rule Publication Follow Up Resources.

This is a follow up to my post yesterday on the Federal Reserve approval of final Truth in Lending rules to curb predatory lending practices. Additional resources:

1. A summary of the changes from the Federal Reserve website is HERE.
2. A Mortgage Bankers Association of America website posting of Federal Reserve consumer testing of disclosures is available HERE.
3. On CSPAN, a Flash video of the Board meeting itself is available HERE.
4. A Bloomberg News summary of the rules and some reaction is HERE.
5. Center for Responsive Lending reaction is HERE.

New FHA State Level Data: Non Profit Down Payment Loan Claims Rates 2.9 Times That of Loans Without Non Profit Down Payment Assistance.

HUD/FHA has long struggled to control the use of non profit "gift" fund programs that help pay borrowers make down payments on FHA home purchase loans. Aggressive non profit marketing and lobbying have until now tied the hands of a variety of HUD secretaries going back many years, despite substantial evidence that loans with non profit down payments had much higher claims/foreclosure rates. (See HUD Inspector General 2007 testimony HERE recounting some of that history and prior data).

The current Administration has threatened a veto of any housing reform bill that does not include provisions allowing HUD to control the use of these non profit down payment "gift" programs. The Administration has also reopened a rule for comment that would administratively eliminate the use of these programs; this follows a lawsuit that HUD lost based on it's failure to follow proper administrative rule making procedures.

As part of this reopened rule making HUD has posted detailed information about FHA home purchase loans from FY 2000-FY 2007. I have previously used that information to post state overall state and regional claims information HERE.

Today, this post provides a detailed analysis of claims information for more than 2.1 million FHA home purchase loans for the 5 years from FY 2003-2007. The principal focus is a comparison of loans with non profit down payment assistance to loans that did NOT use non profits to fund borrower down payments. Graphs and extensive tables are included in the 13 page PDF file posted HERE.

Key findings for of this analysis of FHA home purchase loans from FY 2003-2007:

1. Loans that had non profit funded down payments had claims rates 2.9 times (190% higher) than the claims rate for loans that did NOT use non profit funds for the down payment. In Oregon the ratio was even higher. Loans with non profit down payments resulted in claims 3.5 times (250% higher) than the rate of loans that did NOT have non profit funded down payments.
   
2. The claims rate for loans with non profit funded down payments was 7.2%; for those without non profit down payments it was 2.5%. In Oregon, claims rates for non profit down payment loans were 3.1%, and without non profit down payments .9%
   
3. Non profit down payment funded loans accounted for 27% of all home purchase loans, but a much greater 52% of all claims.
   
4. The highest non profit down payment claims rate was in Colorado at 13.3%. The claims rate in Colorado for loans without non profit down payment funding was 4.9%.
   
5. If the claims rate for loans WITHOUT non profit down payments had been achieved for ALL loans, the number of claims would have been reduced by 34%, or 28,000+ fewer claims.
6. If HUD/FHA losses per claim were $50,000 (an amount that is likely understated), the losses to the FHA insurance fund for these additional 28,000 claims would exceed $1.4 BILLION.

Federal Reserve Board Meeting Materials Including Draft of Final TILA Rule.

The Federal Reserve Board of Governors are meeting this morning to act upon/approve the draft of final Truth in Lending Act regulations designed to deal with sub prime loan problems.

On the Federal Reserve website HERE, you will find a staff memo and the draft of the final regulations which can be downloaded as PDF documents.

Additional posts will follow as news stories occur and as I am able to digest these materials.

Senate (Finally) Passes Housing Bill; Action Now Moves Back to House.

The Senate finally passed the housing reform bill today (Friday) by a vote of 63 to 5. (Both of the Senate members from Oregon voted for the bill). [Question--Where in the hell were the 30 or so other Senators, excluding those with health absences--including Senator Ensign from Nevada, whose objections held consideration of the bill up for weeks?].

The bill now moves to the House where changes from the Senate version remain possible (if not likely). [At one point during the debate Senator Dodd suggested that provisions for HUD block grants to cities and states to fund foreclosure acquisitions may not survive in the House].

While a presidential veto remains a threat the vote margins in the Senate and House may be sufficient to override a veto (should a compromise bill be agreed to by both the House and the Senate). It is also possible that the White House may see the handwriting on the wall , and with some tweaks "agree" to a future House/Senate compromise. Editorial comment: One of the provisions sought by the Administration, to prevent the use of non profit down payment gift funds with FHA loans, is IMO a good provision as FHA loans with non profit down payment gift fund use have a much higher claims rate than loans where home buyers use other sources to fund their down payment.

The version of the bill as passed by the Senate is not yet posted at Thomas. I suggest you wait a day or so and then look HERE for the Senate bill version with today's date(7/11).

AUDIO: NPR's Fresh Air Interview on New Mortgage Problems Book, Chain of Blame.

Tuesday's Fresh Air interview was with author of new book about mortgage problems, Chain of Blame.

Fresh Air website, which includes audio, is HERE; Amazon book site is HERE.

Direct download of 20 MB+ MP3 file, downloaded from Fresh Air website, is HERE.

FHA Oregon Purchase Loans 2005-2007: Non Profit "Gift Fund" Loans 2+ Times More Likely to Default.

As previously posted HERE, HUD is once again proposing regulations to eliminate the use of non profit gift funds as they are seen as a significant factor in losses to the FHA insurance fund.

As part of the rule making HUD has released purchase loan level data which includes information about the source of down payment and whether an individual loan has had a default that has lasted 90 days or more (through February of 2008).

I have isolated Oregon FHA home purchase loans for 2005-2007 and created a two page PDF file HERE, which includes both a graph and a table. Key results for the more than 6,000 Oregon loans analyzed:

1. The overall default rate was 5.2%
2. For loans where borrowers used non profit "gift funds" the default rate was 9.2%
3. Borrowers who used their own funds for down payments had a default rate of 3.6%
4. Non profit gift fund home purchase loans defaulted at a rate that was 255% of loans where down payment funds came from the borrower; 168% of the rate when the funds came from family, and 221% when down payment funds came from any other source.
   

Florida Adds to States Suing Countrywide, Looks for Settlement with Bank of America.

News story HERE.
Attorney General Press release HERE
Lawsuit filing is HERE

3 States: "Countrywide, We Ain't on Your Side".

Interesting story HERE from WSJ on three state legal actions actions against Countrywide; one of states is Washington.

Washington charges are HERE; California's HERE, and Illinois complaint is HERE