Trends in 2nd Mortgages; More Disaster Lender News - Loan Sellers Beware
Residential lending, and real estate in general, is impacted by legal maneuvering big and small. Sure the big cases and settlements garner the headlines, but what about the "in the weeds" things that impact borrowers? Let's take a random case study... maybe not so random since plenty of foreigners are buying property in the United States.
When it comes to the law and lawsuits, there are numerous time-consuming and expensive steps in the process. Property owners are not an exception to this procedure. Unfortunately, both buyers and sellers are on the hook for any misrepresentations, with or without knowledge. Tax liens, easement rights, existing lawsuits, etc. are examples of issues that can turn into a drawn-out legal battle.
So what happens when a property transaction crosses international lines? As more investors abroad are purchasing property in the states, the laws can become tedious and convoluted. The state of California has existing guidance regarding the requirements allowing parties to complete their lawsuits against non-resident owners of properties.
Henry Chuang of Peter Brewer law offices discussed a recently decided California appellate case regarding international buyers of California property. In the case of (Buchanan vs. Soto), the legal issue was whether "service" (serving lawsuit paperwork to the defendant) was proper to an out-of-country, non-resident owner of California property.
Buchanan sold a property to Soto in 2007. In 2011, Soto had defaulted on the loan and was subsequently sued by Buchanan but in the interim, Soto transferred interest of the property to her husband, Ramon. Thus, Buchanan entered another suit with the trial court for the fraudulent transfer. With two lawsuits pending, Buchanan's attempt at serving Soto's husband revealed he has been deported back to Mexico. Buchanan, unable to obtain a current address for Ramon, petitioned the court to allow a published notice of lawsuit instead of serving the paperwork.
Although Soto argued Ramon's unavoidable absence at the trial should warrant the proceedings to cease, the trial court moved forward stating the published notice as well as Soto's conversations with her husband regarding the suit during the pending case was sufficient notification.
The Trial Court's decision to award the judgement to Buchanan was appealed by Ramon, however, the Fourth Appellate District Court upheld the trial court decision. The Appellate Court further held that California law allows for the court system to have jurisdiction over a non-resident for lawsuits relating to propertied located in California.
Disaster news and updates from investors & agencies continues to flood lenders. (Pun intended.)
Servicers are reminded that Fannie Mae has selling and servicing policies to assist impacted borrowers (or potential borrowers) following a disaster, such as the recent flooding in the Midwest. Refer to Assistance in Disasters for information on where to find Fannie Mae's policies for providing assistance to borrowers impacted by a disaster. View the press release.
In addition to FEMA's up to date listings to include affected counties in Missouri, Stearns is also requiring the inclusion of Collin, Ellis, Rockwell and Dallas counties. To view Stearns' latest full Disaster Matrix, including the State and affected counties or areas, Click Here.
In response to the flooding in Arkansas and Missouri, Wells Fargo Funding will require Sellers to follow our standard Disaster Policy for all impacted properties, effective immediately. Although Federal Emergency Management Agency (FEMA) had not yet issued a declaration for the impacted area(s), Wells Fargo Funding has determined that properties located within certain ZIP codes are impacted. As a result, the Disaster Policy must be followed. Log into Wells website for zip code details found on its January 6th Newsflash.
Pacific Union is monitoring the impact of severe storms resulting in flooding, straight-line winds, tornadoes, and blizzards throughout several states, including Arkansas, Idaho, Illinois, Louisiana, Mississippi, Missouri, Oklahoma, and Texas. See Idaho, Mississippi, Missouri, Oklahoma and Texas maps for areas recently impacted as identified by the Federal Emergency Management Agency (FEMA).
AmeriHome summed things up in its recent bulletin to clients, "On January 4, 2016, the Federal Emergency Management Agency (FEMA) announced that federal disaster aid with individual assistance has been made available to the State of Mississippi to supplement individual, state, and local recovery efforts in the areas affected by severe storms, tornadoes, straight-line winds, and flooding...The President's action makes federal funding available to individuals and business owners, state and eligible local governments and certain private nonprofit organizations on a cost-sharing basis for emergency work and the repair or replacement of damaged facilities...See AmeriHome Seller Guide Section 10.10 Disaster Policy for property inspection requirements for properties located in FEMA declared disaster areas.
"Re-inspection requirements are expected to remain in place for all properties with appraisal dates prior to the incident end date or for at least 90 days following the incident end date for loan transactions where an appraisal inspection is not otherwise required unless otherwise announced by AmeriHome. Sellers are reminded that they are responsible for determining potential impact to a property located in an area where a disaster is occurring or has occurred. Irrespective of whether a property was included in the area covered by the declaration, if a Seller has reason to believe that a property might have been damaged in a disaster the Seller must take appropriate action to ensure that the property is free from damage and meets AmeriHome requirements at the time of purchase by AmeriHome. Employment re-verification requirements for declared disaster areas are not necessary at this time.
No doubt about it: plenty of lenders are eyeing 2nd mortgages as a growth business for 2016.
Taking a broad view for a second, the U.S. Housing Debt and Credit numbers are an important data set to economists. Recently, the NY Fed released 2Q15, and noted, "Aggregate household debt balances increased in the third quarter of 2015. As of September 30, 2015, total household indebtedness was $12.07 trillion, a $212 billion increase from the second quarter of 2015. Overall household debt remains 5% below its 2008Q3 peak of $12.68 trillion." According to the release Mortgage balances, the largest component of household debt, increased in the third quarter. Mortgage balances shown on consumer credit reports stood at $8.26 trillion, a $144 billion increase from the second quarter of 2015. Balances on home equity lines of credit (HELOC) dropped by $7 billion, to $492 billion.
LoanMe Inc., an "alternative" online lender, offers borrowers two new loans: LoanMe Small Business' Premier Loan and LoanMe Personal's Look Alike Loan. "The Premier Loan allows small businesses access to funds without having to tap their home equity. This can be a game changer for those owners who may find opening a line of credit to be particularly challenging. The loan amount can go up to $250,000 without using a home as collateral. In the area of personal loans, LoanMe Personal's 'Second Mortgage' Look-Alike Loan allows a homeowner to gain funds through an unsecured loan in amounts typically associated with a second mortgage. Borrowers can now receive as much as $100,000 to spend in all the ways they might use a second mortgage without putting their home up as collateral. In fact, homeownership is not even required to qualify for this loan.
"For both loans, once approved, LoanMe's streamlined application process can have funds deposited into customers' bank accounts as quickly as the same day. With interest rates as low as 14.9% and origination fees from 7.5%, Premier loans can be a great option for business owners. Meanwhile consumers can take advantage of The 'Second Mortgage' Look Alike Loans with rates starting from 9.9% and an APR as low as 11.39%, if they qualify. These potent loan alternatives are expected to complement each other well in the marketplace. Both loans are available online at www.loanme.com." Talk about charging what the market will bear!
For a list of lenders/investors by state offering second mortgage programs you may want to check out www.mortgageelements. com - just type in the state and then the program and see who pops up.
Going back to November, effective with case numbers assigned after November 11, 2015, Land Home Financial Services, Inc. is updating its HECM-to-HECM Refinance Policy in accordance with the NRMLA Ethics Advisory Opinion 2015-2. Generally, the seasoning requirement has been extended to eighteen (18) months and the borrower must either be adding an eligible borrower to the loan or pass both a Closing Cost Test and a Loan Proceeds Test. To avoid any adverse unintended consequences to our Senior Customers, Originators or Partners with HECM to HECM refinances that are currently in the application process, but have yet to pull a case number and believe the HECM to HECM refinance will provide the borrower with a Bona Fide Advantage, may request a prior review and exception through November 30, 2015.
As an additional clarification to existing Sun West guidelines regarding HECM-to-HECM Refinances, Sun West will accept a HECM-to-HECM Refinance only if it meets the seasoning requirement. There must be an 18 month waiting period after the closing of the prior HECM loan before it can be refinanced to a new HECM loan.
In terms of interest rates, "experts" and the Fed can predict short term rate increases all they want. But if China dissolves into a sea of even further government intervention, and the world's economic picture is negatively impacted, then rates may head right back down. This week global markets once again took their cues from Chinese markets/news: yuan devaluation, articles further yuan depreciation, equity markets shut after trading down by 7%, news of a lift of the circuit breakers. The overall theme of the global markets was a "risk-off" tone in very choppy trading which in turn leads to cash moving out of stock markets and into safer investments such as Treasury securities.
But let's not forget Europe. The U.S. Dollar Index fell 0.81% to 98.38 today to move into negative territory for 2016. The strongest major currency against the greenback was the euro, which benefited from a surprisingly low unemployment rate for December and another month of robust German factory order growth. Eurozone unemployment declined to a four-year low, touching 10.5% in December versus economists' expectations for an uptick from November's 10.6%.
This morning we've had the unemployment data. Nonfarm Payrolls for December, expected at +200k, came in at +292k, with a back-month revision higher. Hourly Earnings were unchanged, and the Unemployment Rate was 5.0%. We closed the risk-free 10-year T-Note at a yield of 2.15% and this morning it is 2.20% with the usual agency MBS prices worse .250.
"Golf Ball Marker"
Golfer walks into the pro shop at the local course and asks the golf pro if they sell ball markers.
The golf pro says they do, and they are only $1.00.
The guy gives the golf pro a dollar.
The golf pro opens the register, puts the dollar in, and hands him a dime to use as the marker.
NOTE: This economic model is also used by our government.
Jobs and Announcements
Freddie Mac announced a new relationship with the Lenders One Mortgage Cooperative. The new alliance will give Lenders One members who are Freddie Mac Seller/Servicers pricing and execution benefits, enhanced access to mortgage products and professional training and development opportunities. Dan Goldman, Interim Chief Executive Officer of Lenders One said, "We are committed to forming valuable alliances for our members. This relationship enables us to further support our members in growing originations and gives them additional opportunities to increase engagement in the increasingly dynamic housing market." The announcement and the recent addition of 12 new members mark a strong start of the year for Lenders One. Additionally, there will be several exciting announcements from Lenders One heading into their Winter Conference in New Orleans, March 6-9. For more information about Lenders One, please contact Dan Goldman.
In job news Indecomm, "known as a sales leader in outsourcing, technology, training and support to the mortgage industry, is looking for an experienced sales director to promote Indecomm services. Duties will include selling Indecomm Technology and outsourcing solutions to new and existing customers, meeting specific goals and targets for new sales and maintaining relationships with multiple contacts in each account on various business matters. The ideal candidate will have a good working knowledge of mortgage banking, outsourcing and relationships with midsize and large mortgage companies on a national basis that can be leveraged. Confidential resume should be directed to Linda Bomar, Vice President of Sales.