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FHFA Say Watt?

President Obama thanks the Senate for what he knows will be a speedy approval of Mel Watt as the new head of FHFA.

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Seems like Mel Watt becoming the new head of FHFA has kind of gone quiet for a while.  We really haven’t heard much lately but that has changes.  The President is already thanking the Senate in advance for Watt being appointed as the head of FHFA.  Oops.  Doesn’t look like that’s going to go through so easily.  Here’s the bottom line.  What does it matter to you as a loan officer or a real estate professional on the street?

Why would you care who becomes head of the FHFA?  Each and every day you do your routine and that’s all you’re concerned about right?  Yeah us too.  But here’s why you should have you eye on this matter.  See, DeMarco (the guy currently in charge of FHFA) doesn’t want to allow principle reductions as a means of modifications.  Some on the Hill like this cause they feel that it will make investing in Mortgage Backed Securities a safer bet going forward and investors will continue to do so.  But many believe that Watt will push for principle reductions as a means of modification.

The problem here is that it compromises the integrity of investing in MBS.  If you invest in MBS and you know there’s a good chance that you’ll loose a significant amount of your investment on the whim of a modification, you’ll probably look elsewhere to put your money.  If this were to occur you’d see rates shoot through the roof and underwriting guidelines become tighter than a gnats behind.  So that’s why you may want to take some sort of interest in the possibility of Mel Watt becoming the head of FHFA.

If that happens, your job becomes very difficult and the new home buyer pays a big price for the sake of existing homeowners getting the benefit of a principle reduction as a means of modification.  Call it whatever you want, but that’s just the way it is.  Of course, we all have our opinions and we’d love to hear yours down below.

Have a great day!

Frank and Brian.

Eminent Domain Gains Steam

September 12, 2013 Eminent Domain, FHA/HUD, FHFA 31 Comments

Hello my friends. Due to travel and US Airways, we’ve found ourselves in a situation where shooting a show is really not possible. Let me tell you, we’ve got a couple of stories that will make you laugh and make you mad. We will save those for tomorrow and later.

With that said, we do want to get a couple of points across to you about this eminent domain craze that seems to be gaining some steam. The first one is this: The city of Richmond has decided, on Tuesday, to allow the use of eminent domain, as a means of correcting their housing problem. You might know that a few days ago, we told you, that a group opposed to this directive were meeting prior to the final vote, in order to let the city know that their decision was less than shining.

Those folks met in Richmond, they were loud and compelling but apparently not convincing enough for Richmond to make a sound decision. The City voted 4 to 3 to allow eminent domain as a cure to foreclosures to go forward.

Let me be subtle. City council folks of Richmond are total and complete idiots. The long standing implications of their decision will be felt by Richmond for years to come. The short term ramifications will be equally as destructive.

Here’s what happens. First, Richmond is being sued by banks that own mortgages secured within the city. Big Banks. The cost of these lawsuits are going to be overwhelming for the limited coffers of a city that is already nearing bankruptcy.

Second: Hud has floated the idea to FHFA, who runs Fannie Mae and Freddie Mac, that they should quit doing loans within the city. Oh, by the way, if this is HUD’s directive, then we can only, logically, assume that FHA will be done with Richmond as well.

Thirdly, Richmond has debt for which they’re paying a pretty high premium on. It’s been the goal of Richmond to refinance their debt to a lower and more reasonable rate. By the way, this is pretty common.

The city offers bonds, folks by the bonds, the money is used at the lower bond rate to pay the higher rate. It makes sense. PROBLEM! Here this loud and clear! Because of their decision to use eminent domain to cure their foreclosure woes, Richmond is not able to fix their current debt problems.

The reason is simple, investors do no want to deal with a city that is so clearly and recklessly, trying to fix their problems.

It’s like you’re kids! Solutions built on ideas that make sense in theory but application becomes entirely impossible. In short, it’s reckless and irresponsible.

Richmond is a city that needs help. Dire help. It also is a city that is near and close to both myself and Frank, so we want to see a solution. However, because it’s close we’re emotionally involved. Rather that being outside viewers of a train wreck, we’re seeing it on our doorsteps.

What we want to impart upon you is this; It’s personal to us because we see it. You need to react to it because it could be coming your way. This bad idea “traveling road show” has money and inspiration. These guys, Mortgage Resolution Partners, are probably looking at your city right now and trying to convince them into a terribly bad idea.

In short, this could happen to you. The best way to stop a fire is to build a fire line. Your best way to build a fire line is to understand the situation, realize the event, then dig a barrier so your neighborhood does not get burnt to the ground, as is the case with Richmond.

~ Brian Stevens

VA QM Rules on the Way

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