FDIC Chairman, Sheila C. Bair sees no end to housing woes

In a statement to the Committee on Banking, Housing and Urban Affairs the FDIC Chairman states:

"Poor underwriting and abuses in the subprime mortgage market are having a significant negative impact on the housing markets and the U.S. economy. In the coming months, large numbers of subprime adjustable rate mortgages will reset to higher interest rates and borrowers will generally be facing default and possible foreclosure. In addition, a wave of nontraditional mortgage resets is looming in the next year."

"Current market conditions indicate this negative trend will continue, as a significant rebound in housing market activity or home prices is unlikely during the coming year."

The statement focuses on the mortgage industry performance, foreclosures and financial distress she offered this observation regarding the housing industry;

"The combination of declining home prices and scarce refinancing options will stress borrowers with subprime hybrid ARMs and other nontraditional mortgage loans and could result in hundreds of thousands of additional mortgage foreclosures over the next two years. These foreclosures, if they occur, will inflict financial harm on individual borrowers and their communities as they drive down home values. Studies show that property sales associated with foreclosures tend to reduce average home prices in the surrounding neighborhood, placing stress on remaining homeowners and their communities."

The complete statement can be found here.


Related Florida real estate views:

FDIC – Home ownership declines with income levels

FDIC offers suggestions to obtain the best mortgage terms

FHA expected to help thousands avoid foreclosure


- Greg Staker - Watson Realty Corp. - 407-304-0255

Poor underwriting help fuel subprime mortgage mess

In a news release from the Mortgage Bankers Association, poor underwriting practices contributed to the increase in defaults and foreclosures of loans originated in 2006 and 2007.

A report by Fitch Ratings made several observations regarding the current mortgage situation the country is facing.

In addition to the inherent risk of these products, evidence is mounting that in
many instances these risks were not controlled through sound underwriting practices.

Moreover, in the absence of effective underwriting, products such as “no
money down” and “stated income” mortgages appear to have
become vehicles for misrepresentation or fraud by participants
throughout the origination process.

Fitch believes that much of the poor underwriting and fraud associated
with the increases in affordability products was masked by the ability
of the borrower to refinance or quickly re-sell the property prior to the
loan defaulting, due to rapidly rising home prices.

Homeowners who have very little or nothing invested in their homes would seem more likely to walk away when times are tough.

The effort should be in finding those honest hard working homeowners who wish to keep their homes and helping them find solutions to avoid default and foreclosure.


Related Florida real estate views:

Mortgage fraud in Florida

Impact of foreclosure on families

Florida vs Countrywide. Lawsuit filed.


- Greg Staker - Watson Realty Corp. - 407-304-0255

Mortgage fraud in Florida

Mortgage fraud in Florida

We see it more and more in this market. Unscrupulous individuals trying to take advantage of the sellers desire to sell and a buyers inexperience with mortgage financing in order for an individual or individuals to illegally profit from the transaction.

The excuses we most often hear from buyers, real estate agents and mortgage brokers who are involved in these questionable deals is, "we do this all the time"?

I am here to tell you, you can put a dress on it, paint it purple and get it's nails done but at the end of the day, a pig is still a pig.

Here is a list of what the FBI considers warning signs to mortgage fraud:

• Inflated Appraisals
• Exclusive use of one appraiser
• Increased Commissions and/or Bonuses by Brokers and Appraisers
• Bonuses might paid (outside or at settlement) for fee-based services
• Broker or appraiser might receive higher than customary fees
• Falsifications on Loan Applications
• Buyers instructed how to falsify the mortgage application
• Buyers requested to sign blank application
• Fake Supporting Loan Documentation
• Buyer requested to sign blank employee or bank forms
• Buyer requested to sign other types of blank forms
• Purchase Loans Disguised as Refinance
• Purchase loans that are disguised as refinances typically require less
  documentation or might be scrutinized less by the lender
• Short Term Investments with Guaranteed Re-Purchase
• Investors might be used to flip property prices for a fixed percentage
• Multiple "Holding Companies" might be utilized to increase
  property values.

Related Florida real estate views:

Realtors should not write home loans

Poor underwriting help fuel subprime mortgage mess

- Greg Staker Watson Realty Corp. 407-304-0255