You may have gotten a mortgage through the local branch of one of the megabanks, but did you know there's a good chance your bank turned around and sold the rights to service your loan to somebody else?
The mortgage servicing industry is a big business and growing. Servicers handle the daily operations of your loan, such as collecting payments and calculating late charges. They also track when loans get in trouble, and can even start foreclosure proceedings.
The biggest non-bank mortgage servicer is Ocwen Financial. It specializes in what it calls "high risk loans." You've probably never heard of Ocwen, but regulators are keeping close tabs on the company.
In December, the Consumer Financial Protection Bureau and 49 state attorneys general reached a $2.1 billion settlement with Ocwen because of mortgage servicing violations. The head of the CFPB, Richard Cordray, said that Ocwen took "advantage of borrowers at every stage of the process." He also estimated that as many as 185,000 consumers may have been unlawfully foreclosed upon by Ocwen.
CFPB spokesman Sam Gilford added that Ocwen's violations included "robo-signing documents during the foreclosure process".
Remember robo-signing? That was when bank employees basically authorized foreclosure documents without reading them. More than a dozen banks ultimately ended up settling with the government over foreclosure abuses tied to robo-signing.
Ocwen has remained in the crosshairs of regulators though. In 2012, the New York Department of Financial Services issued a consent order against Ocwen. The regulator found what it called "gaps in the servicing records of certain loans," and evidence that Ocwen "commenced foreclosure actions without sufficient documentation."
And it appears that Ocwen's troubles may not be over yet. The company said last week it was putting "an indefinite hold" on plans to buy a portfolio of servicing rights fromWells Fargo that consisted of about 184,000 loans with a total principal balance of $39 billion.
This week, the Consumer Financial Protection Bureau's (CFPB) new qualified mortgage (also known as the ability-to-repay) rule went into effect.
The new rule is about helping borrowers understand the true costs of the mortgage they apply for. On the flip side, it is designed to keep lenders from lending money to borrowers who can't afford to make those payments over time.
If it works out the way the CFPB has planned, the number of foreclosures should drop in the coming years, and, hopefully, some of the conditions that helped create one of the biggest real estate bubbles in U.S. history will be eliminated.
To be considered a qualified mortgage, a lender may not charge excessive upfront points and fees (capped at 3 percent of the loan), and the loan cannot be longer than 30 years in length (say goodbye to 40-year mortgages.)
Also, interest-only loans (also known as zero-down payment loans) and negative amortization loans (where the monthly payment doesn't not cover the true cost of the interest, so the total amount of the debt grows each month) will not be considered qualified mortgages.
No-doc loans, also known as stated-income loans because the loan officer would just write down how much the applicant said he or she earned and not verify that information, have been eliminated. Starting this week, if you apply for a mortgage, you have to be able to prove that you can afford to repay it in full.
In addition, the loans must fall into one of three categories: The monthly loan payment plus the borrower's other debt payments cannot exceed 43 percent of the borrower's gross monthly income; the loan must qualify to be purchased or guaranteed by a government-sponsored enterprise (such as Fannie Mae or Freddie Mac) or to be insured or guaranteed by a federal housing agency; otherwise, the loan must be made by a smaller lender that keeps the loan in its portfolio and does not resell it.
As the CFPB website puts it: "The ability-to-repay rule is intended to prevent consumers from getting trapped in mortgages that they cannot afford, and to prevent lenders from making loans that consumers do not have the ability to repay. It's that simple."
So, of course, the nonprofit real estate and mortgage trade associations, which represent the housing industry's interests in Washington, are up in arms. They claim that self-employed individuals, small business owners, and many others will have a harder time qualifying for loans. They also say that loans will cost more.
Perhaps. But while lenders may offer other sorts of nonqualified mortgages (provided they verify that the borrower can repay that loan), if a loan doesn't fall into the qualified mortgage category, it will not receive the same sort of legal protections.
And, after the billions spent to pay off the housing crisis, lenders may be inclined to primarily offer qualified mortgages.
DevelopersÂ areÂ luringÂ downsizingÂ babyÂ boomersÂ withÂ elevators,Â aÂ luxuryÂ feature thatÂ offersÂ convenienceÂ nowÂ andÂ theÂ promiseÂ ofÂ easierÂ movementÂ asÂ theyÂ age.
BusinessÂ forÂ Newtown,Â Pa.ÂbasedÂ BellÂ ElevatorÂ Co.Â Inc.Â isÂ upÂ 25Â percentÂ overÂ theÂ lastÂ year,
saidÂ TomÂ Reavy,Â ownerÂ ofÂ theÂ sixÂyearÂoldÂ residentialÂelevatorÂ firm.
TheÂ agingÂ U.S.Â populationÂ andÂ theÂ lowerÂ costÂ ofÂ installationÂ â€”Â aboutÂ $25,000Â now comparedÂ withÂ nearlyÂ $60,000Â twoÂ decadesÂ agoÂ â€”Â areÂ twoÂ factorsÂ drivingÂ elevatorsâ€™
growingÂ popularity,Â ReavyÂ said.
InÂ realÂ estate,Â targetingÂ theÂ overÂ55Â demographicÂ onceÂ meantÂ singleÂstoryÂ ranchers.Â But
today,Â theÂ liftsÂ â€”Â whichÂ areÂ stillÂ popularÂ inÂ suburbanÂ mansionsÂ â€”Â areÂ becomingÂ more
commonÂ inÂ townhouseÂ developments,Â heÂ said.
TheÂ NationalÂ AssociationÂ ofÂ ElevatorÂ ContractorsÂ didÂ notÂ haveÂ figuresÂ onÂ theÂ increasing
presenceÂ ofÂ elevatorsÂ inÂ theÂ home,Â butÂ localÂ industryÂ observersÂ agreedÂ thatÂ theÂ demandÂ for
themÂ hasÂ grown.
OfÂ theÂ 27Â completedÂ ArtisanÂ TownhousesÂ alongÂ theÂ 1400Â blocksÂ ofÂ Bainbridge,Â Pemberton
andÂ KaterÂ StreetsÂ inÂ Philadelphia,Â 13Â haveÂ elevators,Â saidÂ ScottÂ Neifel,Â salesÂ managerÂ of
PhiladelphiaÂbasedÂ PlumerÂ &Â AssociatesÂ Inc.Â Realtors.
TheÂ loneÂ unsoldÂ propertyÂ doesÂ notÂ haveÂ anÂ elevator,Â and,Â NeifelÂ said,Â itÂ probablyÂ would
haveÂ soldÂ ifÂ itÂ hadÂ one.Â AllÂ eightÂ homesÂ inÂ theÂ nextÂ phase,Â whichÂ willÂ beginÂ inÂ FebruaryÂ atÂ the
southwestÂ cornerÂ ofÂ BroadÂ andÂ FitzwaterÂ Streets,Â willÂ includeÂ elevators,Â heÂ added.
â€œWeÂ areÂ seeingÂ themÂ inÂ justÂ aboutÂ anyÂ newÂ developmentÂ overÂ aÂ certainÂ height,â€Â saidÂ Matt
Pincus,Â ownerÂ ofÂ WestÂ Chester,Â Pa.ÂbasedÂ PincusÂ ElevatorÂ Co.
ElevatorsÂ areÂ aÂ featureÂ oftenÂ expectedÂ inÂ newlyÂ constructedÂ homesÂ ofÂ fourÂ storiesÂ orÂ more,
AnÂ elevatorÂ canÂ serveÂ asÂ aÂ â€œglorifiedÂ dumbwaiterâ€Â forÂ cartingÂ luggageÂ orÂ groceriesÂ between
floors,Â NeifelÂ said.Â Still,Â notÂ allÂ downsizingÂ suburbanitesÂ areÂ interestedÂ inÂ them.
KathyÂ Maris,Â 52,Â isÂ relocatingÂ fromÂ herÂ 3,800ÂsquareÂfootÂ Moorestown,Â N.J.,Â homeÂ to
PhiladelphiaÂ withÂ herÂ husband.Â TheyÂ consideredÂ twoÂ cityÂ townhousesÂ withÂ elevators,Â but
didnâ€™tÂ placeÂ bids.
â€œIÂ lookÂ atÂ itÂ asÂ justÂ anotherÂ thingÂ thatÂ couldÂ breakÂ down,â€Â MarisÂ said.
ReavyÂ acknowledgedÂ thatâ€™sÂ aÂ possibilityÂ andÂ suggestsÂ thatÂ buyersÂ doÂ theirÂ homework
beforeÂ purchasing.Â â€œIfÂ youÂ buyÂ aÂ goodÂ product,Â youÂ areÂ goingÂ toÂ haveÂ fewerÂ problems,â€Â he
said,Â addingÂ thatÂ serviceÂ andÂ lubricationÂ contractsÂ areÂ available.
BrianÂ Stetler,Â ofÂ BerkshireÂ HathawayÂ HomeServicesÂ FoxÂ &Â Roach,Â typicallyÂ advisesÂ his
clientsÂ toÂ considerÂ howÂ muchÂ theyÂ willÂ actuallyÂ useÂ theÂ elevatorÂ beforeÂ theyÂ buy.Â ForÂ some
homeowners,Â itÂ turnsÂ intoÂ aÂ closet,Â heÂ said.
â€œTheyÂ putÂ brooms,Â laundryÂ baskets,Â andÂ vacuumÂ cleanersÂ inÂ them.â€Â StetlerÂ said.Â â€œButÂ itÂ is
onlyÂ storageÂ onÂ oneÂ floor.â€
OutsideÂ theÂ cityÂ limits,Â BrynÂ Mawr,Â Pa.ÂbasedÂ MichaelÂ CutlerÂ BuildersÂ Inc.Â isÂ givingÂ buyers
anÂ elevatorÂ optionÂ inÂ fourÂ threeÂstory,Â carriageÂstyleÂ townhousesÂ underÂ constructionÂ on WoodsideÂ RoadÂ inÂ Ardmore,Â Pa.
IfÂ buyersÂ donâ€™tÂ wantÂ theÂ upgrade,Â theÂ shaftÂ providesÂ additionalÂ closetÂ spaceÂ inÂ the
approximatelyÂ 2,200ÂsquareÂfootÂ homes,Â saidÂ viceÂ presidentÂ DianeÂ Cutler.
OneÂ concern,Â StetlerÂ said:Â thatÂ theÂ elevatorÂ willÂ hinderÂ resaleÂ sinceÂ itÂ takesÂ awayÂ living
spaceÂ onÂ narrowÂ cityÂ lots.Â ForÂ example,Â aÂ fewÂ townhousesÂ inÂ SocietyÂ Hillâ€™sÂ LibertyÂ Court
haveÂ goneÂ onÂ andÂ offÂ theÂ marketÂ inÂ theÂ lastÂ yearÂ becauseÂ ofÂ spaceÂ issues.
RegardlessÂ ofÂ potentialÂ drawbacks,Â PincusÂ said,Â â€œAtÂ aÂ certainÂ priceÂ range,Â anÂ elevatorÂ is
partÂ ofÂ theÂ deal.â€
Â©2013Â TheÂ PhiladelphiaÂ Inquirer
ByÂ AlisonÂ Burdo
Recent info shared by one of my very capable loan broker associates:
Potential changes in the jumbo loan market. Â Most loans in the beachside cities (Santa Monica, Venice, Marina Del Rey) tend to be jumbo... Â The driving force behind likely changes would be the Feds adjusting the size of conforming ($417K) and conforming plus ($625K) limits and QM vs. QRM.
Good newsâ€¦The Federal Government recently announced that loan limits would stay the same through 2014. Â This will help keep the mortgage market stable.
At the same time, there have been no hard developments on how QM vs. QRM loans will play out.
What we do know is that there has been tightening of certain types of loans.
- Interest Only loans have already started to disappear at the big banks. Â (Though many Loan Brokers do still have a reliable source of them.)
- It will be increasingly hard to find niche/semi-stated income loans.
What is TORCA?
TORCA stands for: Tenant Ownership Rights Charter Amendment, Conversions
TORCA exists only in the City of Santa Monica. Â Whether property is a condo or a townhome, if the original Tenant still resides there, you are unlikely to be able to have them vacate, except by their own free will. Â Many condos, especially those that are older construction and on the cheaper end are TORCA conversion. Â The main thing to ensure is that the original Tenant is no longer living in the property. Â If an Owner or another (non-original) Tenant lives in the property, then the fact that it is a TORCA conversion is not an issue. Â One way to answer this question 'at a glance' is whether the rent currently being paid is way below market value. Â If itÂ is... chances are you have an original Tenant in place.
TORCA allowed for the conversion of apartment buildings into condominiums as long as a sufficient number of tenants approved the conversion and agreed to purchase their units. Â The program was voted into effect in 1984 by Santa Monica voters and expired in 1996. Â Under this agreement landlords had to offer the unitsÂ for sale first to the tenants already living in the units. Tenants declining to purchase their unit were allowed to remain in their units. Â A participating Tenant was any Tenant, including either a cosigning or non-cosigning Tenant, residing in a building that was converted from apartments to condominiums under the TORCA law who resided in the building on the date that the Tenant-Participating Conversion Application was approved. In addition to all of the protections of the Rent Control Law, participating tenants have a protection against eviction for owner-occupancy.Â
Be on alert for TORCA conversions when buying condos or townhouses in Santa Monica. Â There is nothing wrong with buying a TORCA conversion, just be sure whether the current Tenant is the original Tenant, and if they are... understand the implications.
Warren Buffett, the billionaire chairman and chief executive officer ofÂ Berkshire Hathaway Inc. (BRK/A), said the U.S. housing market has made progress and still has a way to go in recovering.
â€œItâ€™s coming back,â€ Buffett, 83, said yesterday during an event at the New York Public Library. â€œPricing (SPCS20Y%)Â is better in almost all markets by a reasonable percentage from a few years ago. Housing starts are up somewhat. They still are not where I would regard as an equilibrium point, where they match household formation.â€
Buffett has been predicting a real estate revival for years and positioning his company to benefit from it. He said in early 2010 that the turnaround would probably begin â€œwithin a year or so.â€ While that call proved wrong, he has since reiterated that the industry would rebound because of increasing population and limited supply.A rebounding housing market has helped Omaha, Nebraska-based Berkshireâ€™s subsidiaries that make carpet, bricks, insulation and houses. Some of those businesses have expanded in recent years through acquisitions as the industry recovers from the worst slump in seven decades.
Berkshire also has invested in some of the nationâ€™s largest mortgage lenders, includingÂ Wells Fargo & Co. (WFC)Â andBank of America Corp.
Borrowing costs at near-record lows have helped stoke demand for homes and boost theÂ U.S. economy. U.S. mortgage rates fell to a four-month low after a weaker-than-expected jobs report drove investors to the safety of thegovernment bondsÂ that guide borrowing costs. The average rate for a 30-year fixed mortgage dropped to 4.13 percent the week ended today from 4.28 percent, Freddie Mac said in a statement.
Sales (NHSLTOT)Â of new U.S. homes increased 7.9 percent to a 421,000 annualized pace in August, figures from the Commerce Department showed last month. In July, the rate was 390,000. The two-month period was the weakest so far this year.
â€œThe country has made significant progress, since the fall of 2009,â€ Buffett said at the event. â€œThis economy was hit in 2008 by something that never happened in my lifetime except for when I was one or two years of age.â€
Buffett appeared alongside his son and grandson, both named Howard, to promote â€œ40 Chances: Finding Hope in a Hungry World.â€ The book describes lessons the billionaireâ€™s son learned from his years working to improve food security around the world. It was written with Buffettâ€™s grandson and includes a foreword by the Berkshire chairman.
To contact the reporter on this story: Noah Buhayar inÂ New YorkÂ atÂ email@example.com
To contact the editor responsible for this story: Dan Kraut atÂ firstname.lastname@example.org