Archive for the ‘Mortgage’ Category

There are more hurdles for mortgage brokers in Florida to overcome when the state starts implementing the rules arising from the Secure and Fair Enforcement for Mortgage Licensing Act on October 1.

Under the new law, mortgage industry professionals are required to renew their licenses once every year by reapplying and submitting new criminal background reports and new credit reports each time.

License applicants also need to take a national mortgage licensing exam, in addition to the state exam. There would also be continuing education course requirements in some cases. Application for licenses under the new program will start on October 1 and end on December 31.

According to the Florida Office of Financial Regulation, license processing normally take three or four months, but with the expected flood of applications in the fourth quarter, processing may take several months to a year to process all applications.

According to several mortgage brokers interviewed, some of the requirements are too harsh and could make a number of mortgage professionals jobless. They argued that there are good and honest mortgage brokers who are going through financial difficulties because of unexpected events in their lives.

The case of a mortgage brokerage owner who is at risk of losing her home and car due to tight business conditions, but who has worked with integrity for almost two decades in the mortgage business is an example.

In response, proponents and supporters of the new licensing rules explained that the new law will help prevent conditions in the mortgage sector that led to the crisis. They said that a significant number of mortgage professionals during the housing boom offered risky mortgages to borrowers and did not follow standard underwriting guidelines.

Under the new program, every mortgage file will record the identification number of every person handling the file, so any mistake or misdeed will be traced back to the doer.

Throughout the country, some mortgage brokers are now rethinking their careers and pondering whether they have enough passion to continue in the mortgage industry despite additional challenges.

Any mortgage company found to have issued defective home loans is being forced by mortgage financiers Fannie Mae and Freddie Mac to repurchase the loans.

For the period from January to September this year, Freddie Mac has returned around $2.7 billion worth of single-family mortgage loans to lenders, more than twice the $1.2 billion worth of loans returned last year. Freddie and Fannie do not directly provide home loans, but they purchase or guarantee home loans from lenders.

During the same period, the number of real-estate owned properties in Fannie Mae books increased to 98,428 units, an increase from the 94,652 units repossessed after foreclosure in 2008. Last year, Fannie Mae returned about one-fourth of these REO to lenders and expects to return about the same percentage to lenders this year and next year.

Major lenders, such as Bank of America, Wells Fargo, Citigroup and J.P. Morgan Chase, have been rejecting some of the loans or properties being returned by Fannie and Freddie because most of the mortgages were provided to creditworthy borrowers and most were fixed-rate 30-year mortgages, but Freddie and Fannie insist that every mortgage company needs to re-examine its underwriting practices and the extensive guidelines provided by Freddie and Fannie Mae.

Michael Cosgrove, spokesperson for Freddie Mac, said that Freddie has been looking for ways to reduce potential losses and has been examining guaranteed loans more thoroughly.

According to Inside Mortgage Finance, 3 million mortgage loans were in default or in foreclosure as of September 30, which is equivalent to $750 billion, assuming an average loan amount of $250,000.

Maria Brewster, head of the Centralized Repurchase Team of Fannie Mae, explained that the decision of Fannie to return poorly underwritten loans will force lenders to become accountable for their lending practices and will spur them to clean up their operations. Brewster also added that Fannie and Freddie, which are controlled by the federal government and funded by taxpayers, should not be made to pay for the mistakes of lenders.

In the third quarter, Wells Fargo increased its reserves for loan repurchase by $146 million in anticipation of more defaults and repurchase demands. Similarly, J.P. Morgan allocated $1.1 billion to meet repurchase demands from investors.

Bank of America, meanwhile, stated that it has repurchased $922 million of mortgage loans which were deemed to be faulty for the period January to September.

One mortgage company that failed due to inadequate reserves for faulty loan repurchase was New Century Financial. It collapsed when it overstated its financial condition and failed to repurchase faulty loans.