Wall Street Journal

Let’s hope this comes to pass soon.  We could use some improvement in that area!  Let’s make short sales…SHORT on time!

The Obama Administration is launching a revised version of HARP to expand the borrower which will qualify essentially helping many more people refinance who otherwise wouldn’t have under the original program.  Below is a list of FAQ’s.

What is HARP?
The Obama administration in 2009 rolled out HARP to refinance borrowers whose loans were backed by Fannie Mae and Freddie Mac and who were current on their payments. The idea was simple: If you were making your payments on time but didn’t have enough equity to refinance, you would be able to lower your rate without having to pay down your mortgage balance or take out mortgage insurance.

Initially, the program was limited to borrowers who owed between 80% and 105% the value of their homes. In mid 2009, the program was opened to borrowers who owed up to 125% the value of their homes.

But a series of unforeseen “frictions” have led fewer borrowers to take up on the offer of lower rates. Fewer than 900,000 homeowners have refinanced under HARP over the past 2½ years, and just 72,000 of those borrowers have loan-to-value ratios between 105% and 125%.

How is HARP being expanded?
Borrowers will soon be able to refinance no matter how far underwater they are. This should have a big impact in certain parts of Nevada, Arizona, and Florida where many borrowers owe more than 125% of the value of their homes. In Nevada, for example, two thirds of all loans backed by Fannie Mae are underwater, and half of all loans are above the 125% loan-to-value cut-off.

Will I be able to refinance through HARP if I’ve already used the program once?
No. The program will continue to be limited to loans that were delivered to Fannie and Freddie before June 2009, which means that anyone who has already refinanced under HARP won’t be able to refinance again.

What other changes are being made to improve HARP?
One of the most important changes addresses the risk that banks will have to “buy back” defaulted mortgages from Fannie and Freddie if the loans are discovered to run afoul of underwriting rules. This has prompted banks to scrutinize appraisals and require extensive documentation of borrowers’ incomes on loans for which they don’t already collect payments, even if Fannie and Freddie already guarantee those loans. As a result, some borrowers can only qualify for HARP by going to their current mortgage servicer, rather than shopping around for the best rate. Some lenders have been just “cherry picking the easiest loans,” says Keane Ng, a mortgage broker in Kirkland, Wash.

Under changes to be announced on Monday, banks will be largely shielded from the “buy back” risk on HARP mortgages, and they’ll only have to verify that borrowers meet a more tailored set of eligibility rules: that they’ve made their last six payments and have no more than one missed payment in the last year and that they have a job or another source of regular income. Those changes are a pre-requisite for “any game-changing refinance activity,” says Mahesh Swaminathan, senior mortgage strategist at Credit Suisse.

How will this change help borrowers?
This will streamline the refinance process, eliminating the need in many cases for borrowers to obtain appraisals or to provide extensive income documentation. Instead, borrowers will have to show that they’re current on their mortgage, that they have a job or another source of regular income, and that they meet the other eligibility criteria for HARP.

What if I have mortgage insurance?
Mortgage insurers have also agreed to make it much easier to transfer existing mortgage insurance coverage, which has blocked many borrowers from refinancing.

What if I have a second mortgage?
Borrowers with a second mortgage, such as a home-equity loan, need the mortgage owner to agree to “re-subordinate” the loan before refinancing the first mortgage. Federal officials say the largest lenders have agreed to automatically re-subordinate all second mortgages under HARP.

What else is being done to lower costs?
Another change involves fees that Fannie and Freddie charge banks for riskier borrowers. The firms, and their regulator, the Federal Housing Finance Agency, have agreed to waive those fees for borrowers who refinance into loans with a shorter term, such as a 15-year mortgage. They’ll also reduce the fees, but not eliminate them entirely, for everyone else.

When will these changes take effect?
March 18th.

How do I find out if Fannie and Freddie own my mortgage?
You can look that up online for Fannie Mae and Freddie Mac.

Fannie MAE: http://www.fanniemae.com/loanlookup/

FreddieMAC: https://ww3.freddiemac.com/corporate/

What if Fannie or Freddie don’t own my loan—can I refinance through this program?
No. That’s a major limitation, of course, because “jumbo” mortgages aren’t held by Fannie and Freddie, and many of the most underwater subprime mortgages are in privately held mortgage securities that weren’t issued by Fannie and Freddie.

How many mortgages could be refinanced as a result of the changes?
The Federal Housing Finance Agency estimates that another 800,000 to 1 million borrowers could refinance through HARP as a result.

The upfront premium for all loans will also increase by 0.75 percent on April 1. The upfront premium will thus increase from 1 percent to 1.75 percent of the base loan amount regardless of the amortization term or loan-to-value ratio of the loan. FHA will continue to permit financing of this charge into the mortgage. Finally, on June 1 an additional increase of 0.25 percent will be imposed on FHA-insured loans with principal balances over $625,000 bringing the total hike in those large loan fees to 0.35 percent.

Acting FHA Commissioner Carol Galante said, “After careful analysis of the market and the health of the MMI fund, we have determined that it is appropriate to increase mortgage insurance premiums in order to help protect our capital reserves and to continue encouraging the return of private capital to the housing market. These modest increases are one of several measures we are taking towards meeting the Congressionally mandated two percent reserve threshold, while allowing FHA to remain a valuable option for low- to moderate-income borrowers.”

FHA estimates that the premium changes will, in the aggregate, add more than $1 billion to the MIF based on the current volume projections through Fiscal 2013. The increase to the upfront premium will cost new borrowers an average of approximately $5 more per month. The agency said in its announcement that the increases were marginal and affordable for nearly all homebuyers who would qualify for a new mortgage loan.

Details of the rate increases will be published in a Mortgagee Letter to FHA-approved lenders. Borrowers already in an FHA-insured mortgage or Home Equity Conversion Mortgage (HECM) will not be impacted by the pricing changes announced today nor will borrowers in special loan programs which will be outlined in FHA’s forthcoming Mortgagee Letter.

Yesterday, HUD published a request for comments (due in 30 days, by March 26) on their revised changes to policies for seller concessions. The new proposal is to limit seller concessions as follows:
• Reduces the amount of permitted seller concessions to 3% or $6,000, whichever is greater;
• Further limits seller concessions to never exceed the borrower’s actual closing costs;
• Redefines what can be considered as acceptable closing costs to be paid by seller concessions to: closing costs, prepaid items, discount points, up-front MIP, and any interest rate buydown. No longer permitted are “payment supplements” such as HOA/condo fees, mortgage interest payments, and mortgage payment protection plans.
We will provide additional details in a few days. The notice also mentioned that HUD is getting closer to issuing another notice regarding tighter standards for manual underwriting.

Here is a link to the proposed rule -

http://www.gpo.gov/fdsys/pkg/FR-2012-02-23/pdf/2012-3934.pdf

The Sacramento-Stockton area, since it was an epicenter of foreclosure activity, has more recently begun to demonstrate the ways local real estate markets can emerge creatively from the depths of the economic crunch.

The community of Elk Grove, for example, has 967 bank-owned properties, most of them boarded and silent, waiting to go on to the market at an undetermined future date. Recently, though, fifteen of the homes have been purchased by a municipal organization, improved, and sold at a low enough price to qualify as a great opportunity for low-end buyers.

The money for this comes from the federal Neighborhood Stabilization Program and the improvements are guided locally by NeighborWorks. The amount of money allocated is determined by how bad the foreclosure situation is and has been in an area. Elk Grove has receive $2.4 million. The city suffered 2,657 foreclosures between January 2007 and June 2008—which should qualify it for great sympathy, at the least.

There are currently about six homes on the market (check egplanning.org/housing). It’s limited to first-time buyers within certain income ranges. And it’s working.

Now, the sale of fifteen homes to qualified low-income buyers is hardly going to make the foreclosure problem disappear. But within the modest parameters of its goal and expectations, it’s working. When a home goes from empty and boarded to attractive and occupied by people with pride of ownership, the whole neighborhood begins to improve. Lenders get REOs off their books. Local builders get work. And any profit generated by the project goes back into the program to help bankroll the next home improvements. (The program also includes assistance with down payment.)

Such things need to be done on a small scale, it seems; otherwise, they stop working very well. “Baby steps,” as the old film, “What About Bob?” asserted.

I confess I am astonished that we are still seeing so few effective programs dealing with foreclosed properties, homeowners who are underwater, and neighborhoods in decline. Perhaps most people look at the magnitude of the remaining problems and assuming it’s all too much and there is no way to whittle it down to the size that allows us to make genuine progress toward solutions.

Beside, if we want something big and terrifying, we can always look at the sovereign debt problems in Europe and elsewhere, and we can get lost in the seemingly unsolvable problem of our national indebtedness. Problems like this inspire many of us to hide our heads, instead of sparking creative, workable solutions.

We—myself included—follow the uncertain mess in Greece as if it were a sport. We watch the score rise and fall. We predict that a default is nearly inevitable. We wait.

And yet, even in the midst of such uncertain markets, there is an amazing amount to be done, and there are good profit possibilities everywhere we look. People need guidance, they need support, the need a helping hand—and in return, they will bless the reasonable profit we make as we provide meaningful help.

There are hundreds, if not thousands, of markets out there—ranging from small towns to developments in cities to consultation and sales services, to assistance with financing. The federal government is amenable, but it can’t do a great deal. Same with state and municipal governments. What we need is the people with the know-how…builders, lenders, salespeople, community development officials.

Probably, we’re going to have to rebuild our communities from the ground up. But here’s the thing: We know how. We’ve done it before.

Instead of waiting for the market to recover and/or improve, perhaps it’s time to create the markets we’ve been waiting for.

CNN) — The U.S. Postal Service appears to be the latest casualty in digital technology’s slow but steady replacement of working humans. Unless an external source of funding comes in, the post office will have to scale back its operations drastically, or simply shut down altogether. That’s 600,000 people who would be out of work, and another 480,000 pensioners facing an adjustment in terms.

We can blame a right wing attempting to undermine labor, or a left wing trying to preserve unions in the face of government and corporate cutbacks. But the real culprit — at least in this case — is e-mail. People are sending 22% fewer pieces of mail than they did four years ago, opting for electronic bill payment and other net-enabled means of communication over envelopes and stamps.

New technologies are wreaking havoc on employment figures — from EZpasses ousting toll collectors to Google-controlled self-driving automobiles rendering taxicab drivers obsolete. Every new computer program is basically doing some task that a person used to do. But the computer usually does it faster, more accurately, for less money, and without any health insurance costs.

We like to believe that the appropriate response is to train humans for higher level work. Instead of collecting tolls, the trained worker will fix and program toll-collecting robots. But it never really works out that way, since not as many people are needed to make the robots as the robots replace.

And so the president goes on television telling us that the big issue of our time is jobs, jobs, jobs — as if the reason to build high-speed rails and fix bridges is to put people back to work. But it seems to me there’s something backwards in that logic. I find myself wondering if we may be accepting a premise that deserves to be questioned.

I am afraid to even ask this, but since when is unemployment really a problem? I understand we all want paychecks — or at least money. We want food, shelter, clothing, and all the things that money buys us. But do we all really want jobs?

We’re living in an economy where productivity is no longer the goal, employment is. That’s because, on a very fundamental level, we have pretty much everything we need. America is productive enough that it could probably shelter, feed, educate, and even provide health care for its entire population with just a fraction of us actually working.

According to the U.N. Food and Agriculture Organization, there is enough food produced to provide everyone in the world with 2,720 kilocalories per person per day. And that’s even after America disposes of thousands of tons of crop and dairy just to keep market prices high. Meanwhile, American banks overloaded with foreclosed properties are demolishing vacant dwellings to get the empty houses off their books.

Our problem is not that we don’t have enough stuff — it’s that we don’t have enough ways for people to work and prove that they deserve this stuff.

Jobs, as such, are a relatively new concept. People may have always worked, but until the advent of the corporation in the early Renaissance, most people just worked for themselves. They made shoes, plucked chickens, or created value in some way for other people, who then traded or paid for those goods and services. By the late Middle Ages, most of Europe was thriving under this arrangement.

The only ones losing wealth were the aristocracy, who depended on their titles to extract money from those who worked. And so they invented the chartered monopoly. By law, small businesses in most major industries were shut down and people had to work for officially sanctioned corporations instead. From then on, for most of us, working came to mean getting a “job.”

The Industrial Age was largely about making those jobs as menial and unskilled as possible. Technologies such as the assembly line were less important for making production faster than for making it cheaper, and laborers more replaceable. Now that we’re in the digital age, we’re using technology the same way: to increase efficiency, lay off more people, and increase corporate profits.

While this is certainly bad for workers and unions, I have to wonder just how truly bad is it for people. Isn’t this what all this technology was for in the first place? The question we have to begin to ask ourselves is not how do we employ all the people who are rendered obsolete by technology, but how can we organize a society around something other than employment? Might the spirit of enterprise we currently associate with “career” be shifted to something entirely more collaborative, purposeful, and even meaningful?

Instead, we are attempting to use the logic of a scarce marketplace to negotiate things that are actually in abundance. What we lack is not employment, but a way of fairly distributing the bounty we have generated through our technologies, and a way of creating meaning in a world that has already produced far too much stuff.

The communist answer to this question was just to distribute everything evenly. But that sapped motivation and never quite worked as advertised. The opposite, libertarian answer (and the way we seem to be going right now) would be to let those who can’t capitalize on the bounty simply suffer. Cut social services along with their jobs, and hope they fade into the distance.

But there might still be another possibility — something we couldn’t really imagine for ourselves until the digital era. As a pioneer of virtual reality, Jaron Lanier, recently pointed out, we no longer need to make stuff in order to make money. We can instead exchange information-based products.

We start by accepting that food and shelter are basic human rights. The work we do — the value we create — is for the rest of what we want: the stuff that makes life fun, meaningful, and purposeful.

This sort of work isn’t so much employment as it is creative activity. Unlike Industrial Age employment, digital production can be done from the home, independently, and even in a peer-to-peer fashion without going through big corporations. We can make games for each other, write books, solve problems, educate and inspire one another — all through bits instead of stuff. And we can pay one another using the same money we use to buy real stuff.

For the time being, as we contend with what appears to be a global economic slowdown by destroying food and demolishing homes, we might want to stop thinking about jobs as the main aspect of our lives that we want to save. They may be a means, but they are not the ends.

The opinions expressed in this commentary are solely those of Douglas Rushkoff.

1. At the conclusion of a tumultuous week in world financial markets, the rating agency Standard and Poor’s has downgraded the United States long-term sovereign credit rating from AAA for the first time in its history. The new rating is AA+ and the outlook remains negative, implying the potential for further downgrades if there is no improvement in the fiscal outlook.

2. In describing an “upside scenario” of greater than expected fiscal consolidation, S&P indicates the result would be AA+ with stable outlook. The upshot is that they appear to see little chance of restoring the previous AAA rating in the near term even if greater deficit reduction occurs. An additional one notch downgrade to AA could result from S&P’s “downside scenario” involving “less favorable” macro assumptions (2.5% real/4% nominal growth) and a failure to enact the $1.2trn in spending cuts called for in the Budget Control Act (BCA) enacted earlier this week. The BCA imposes a Nov. 23, 2011 deadline on a special congressional committee to agree on the additional savings, and Dec. 23, 2011 for Congress to pass them. Therefore, ratings uncertainty will continue.

3. The US short term rating is affirmed and still the highest possible (A1+), implying no effect on money market funds.

4. S&P has shed a bit more light on the metrics used to arrive at this decision, indicating that they have adopted the Congressional Budget Office’s alternate scenario as their baseline. The differentiating factor between AAA and AA+ appears to be not the level of debt at mid-decade, but rather the trajectory of the debt-to-GDP ratio, which S&P expects to decline by 2015 in “relevant peers” with AAA ratings. This actually implies it might be slightly easier for the US to recover the AAA rating than if the threshold were an absolute level. The political debate seems to have played a large part in the decision to downgrade, and is referenced frequently in S&P’s press release, e.g. “the downgrade reflects our view that the effectiveness, stability, and predictability of American policymaking and political institutions have weakened at a time of ongoing fiscal and economic challenges”.

5. US federal agencies have just issued guidance clarifying that S&P’s action will not affect risk weightings for US Treasury or agency debt, or the treatment of this debt under other federal banking agency regulations.

Recent years have seen a dramatic increase in the number of reported mortgage frauds in the U.S. According to a recent article in The Wall Street Journal, banks are reviewing their loan portfolios for questionable loans made during the housing boom, and that has caused a 31 percent increase in the number of mortgage fraud reports filed with the Financial Crimes Enforcement Network, a U.S. Treasury Department agency, in the first three months of this year.

The FBI’s pending investigations of mortgage fraud increased 71 percent from 2008 to 2009. According to the FBI, $14 billion in fraudulent loans are estimated to have originated in 2009 alone, and there have been increases in gang members, organized criminal groups and domestic extremists perpetrating mortgage fraud and the resurgence of debt elimination/redemption schemes. The FBI has also reported that 66 percent of all pending FBI mortgage fraud investigations during 2009 involved dollar losses totaling more than $1 million.

Types of mortgage fraud schemes include:

“Straw” buyers / “Air” loans (nonexistent or front buyers, nonexistent properties)

Loan origination

Double sales (mortgage notes sold to more than one buyer)

Inflated appraisals / property flips

Shot-gunning (mortgaging several properties simultaneously)

Buy and bail

Builder bailout

Foreclosure rescue schemes / advance pay schemes

Short sale schemes