The loans came to light after Issa handed Bank of America a pair of subpoenas shortly after becoming committee chairman in the beginning of 2011. The bank purchased the mortgage lender in 2008, and has since had to pay $8.5 billion to settle investors claims that it and Countrywide sold low-quality mortgages that failed when the housing market collapsed.

The subpoenas have yielded roughly 100,000 documents, Issa said, and they reveal that Countrywide used its VIP program to build relationships with government officials and others positioned to advance Countrywides business interests. Other questionable recipients include up to 173 employees of Fannie Mae and Freddie Mac, including some in senior management positions.

Issa added that it is possible that other lawmakers received special benefits from Countrywide.

This does not mark the first time Countrywides reach into the halls of Congress have come under scrutiny. The lenders Friends of Angelo program was scrutinized by Congress last year after it was revealed the program was utilized by lawmakers and other government officials.

The Senate Ethics Committee examined and ultimately cleared retired Sen. Chris Dodd (D-Conn.) and Senate Budget Committee Chairman Kent Conrad (D-ND) for receiving loans through the program. Both lawmakers denied any wrongdoing and said they did not ask for preferential treatment. Angelo is a reference to Angelo Mozilo, Countrywides former CEO.

In 2010, Mozilo paid a record $22.5 million penalty to settle charges with the Securities and Exchange Commission (SEC) that he and other ex-Countrywide executives misled investors as the subprime mortgage crisis developed. He also is barred from ever again severing as an officer or director of a public company.

ByKirk Haverkamp
Provided by

Books are always a popular item at Christmas. Since were all about mortgages and personal finance here, we thought wed put together a list of some of the more popular mortgage-related books for consumers this year.

Legislation proposed to extend payroll tax cuts for two months could cause some Federal Housing Administration mortgage fees to rise, essentially leading to an increase in the cost of those mortgage loans for homeowners. The House is scheduled to vote on the legislation Monday night.

The legislation has been hotly contested as a means to extend payroll tax cuts for two months.

Under the proposed legislation, FHA annual mortgage insurance premiums to could rise by 10 basis points, according to the bill. Guarantee fees, or G fees for Fannie Mae and Freddie Mac loans would also rise.

Mortgage Bankers Association President and CEO David Stevens, speaking on behalf of the MBA, urged the House to vote down the payroll tax extension.

The idea that you should pass a ten year tax increase for two months of payroll tax relief is appalling. Fannie and Freddies guarantee fees are supposed to be used to help offset the risk inherent in providing mortgages, and any increases should be used for that purpose, he said. Siphoning off a portion of those fees into the general government coffers may be politically expedient, but it is far from sound policy.

House speaker John Boehner (R-Ohio) told NBCs Meet the Press that the two-month renewal would create additional uncertainty for workers and employers and that Congress should delay its holiday break to ensure that a one-year extension was passed.

Its pretty clear that I and our members oppose the Senate bill. Its only for two months, he said.

Written by Elizabeth Ecker

Tapping into those opportunities is the main objective of the new Vertical Capital Income Fund, which will invest exclusively in individual residential mortgages.

One of the real attractions of this investment is it doesnt correlate closely with equity and most bond markets, said Bayard Closser, manager of the fund and president of Vertical Capital Markets Group.

The one-of-a-kind fund, which currently is funded with seed capital and does not yet have a ticker symbol, gives retail investors access to a strategy that Mr. Closser is already offering to accredited investors through private-placement vehicles.

The fund, which could eventually hold thousands of individual mortgages, will start buying its first mortgages next month, he said.

We are looking to purchase discounted mortgages, sometimes as cheap as 60 cents on the dollar, he said.

Prior to the financial crisis, Vertical Capital was operating as a mortgage-origination firm, but as the mortgage market dried up, Mr. Closser saw an opportunity in the secondary market to trade mortgages directly with banks looking to add or reduce their mortgage exposure and capital requirements.

While the bulk of the residential mortgage market already is wrapped up into residential-mortgage-backed securities, Mr. Closser is concentrating on those mortgages that have not been syndicated in the RMBS space.

There is an estimated $3 trillion in nonpackaged individual mortgages held by banks, many of which looking to offload some risk.

With this strategy we are providing some liquidity for financial institutions, Mr. Closser said, explaining that the market presents investment opportunities.

In the process of purchasing loans, Vertical Group researches both the property and the borrower, the same way as it would have if it were originating the loan. Vertical Group is also servicing the loans and has the ability to modify individual loans if necessary.

We are buying the actual mortgages, and there are risks associated with strategic defaults [when borrowers abandon a home] and foreclosures, Mr. Closser said. Through this structure, the fund will own the underlying collateral in the event of a loan default.

He also pointed out that, despite all the fear and gloom surrounding the housing market, 87% of borrowers pay their mortgages like clockwork, whether theyre currently underwater on their loan or not.

The fund is structured as a continuously offered closed-end fund, which makes it a kind of hybrid between a closed-end and open-end mutual fund.

From an investors perspective, the structure equates to reduced liquidity.

The fund looks and acts like an open-end fund, but liquidity is limited to a quarterly tender offer, Mr. Closser said.

The limited liquidity is a result of the unique nature of the underlying assets. Buying and selling an individual mortgage can take up to 45 days because they dont trade on exchanges like stocks.

The ultimate appeal, however, is a new entry point to the real estate sector for smaller investors.

According to a study by BlackRock Investments LLC, between 2001 and 2010 the Barclays Capital US MBS Index, the Vertical funds benchmark, had a -0.18 correlation to the SP 500.

WASHINGTON (Reuters) – The regulator for Fannie Mae and Freddie Mac is actively considering a proposal that would allow for a reduction in the outstanding mortgage debt of homeowners in Chapter 13 bankruptcy, Financial Times reported on Tuesday.

The plan under review by the Federal Housing Finance Agency would call for the mortgage financing companies to allow bankrupt homeowners who owe more on their housing debt than their homes are worth to pay zero per cent interest for five years, the report said.

Participation in the debt reduction program would be subject to approval by bankruptcy judges, the FT said.

Details of the proposal were laid out in a letter to Congress dated Monday, the newspaper reported.

Fannie Mae and Freddie Mac, combined with the Federal Housing Administration support, about 90 percent of all US mortgages.

An FHFA spokeswoman confirmed the proposal to assist underwater homeowners was under discussion, but declined to provide additional details, the FT said.

But the White House said the proposal was not under consideration.

While we continue to talk to the FHFA and other market participants about ways to help borrowers and support the housing market, the administration is not at this time considering this particular idea, White House spokeswoman Amy Brundage told FT.

Spokesmen for the White House and FHFA were not immediately available for comment on the FT report late on Tuesday.

(Reporting By JoAnne Allen; Editing by Muralikumar Anantharaman)

Rising property values have been an article of faith in the housing market for a generation of Australians who borrowed big as real estate prices marched ever upward.

• Know more? Contact czappone@fairfax.com.au

Now, though, some buyers are finding that their homes are worth less than the size of mortgages taken out to acquire the proverbial roof over their heads.

While the percentage of home owners with so-called negative equity remains tiny – about one in fifty of the 3 million households with mortgages – the number may well swell in 2012 if home prices extend their declines as some analysts expect.

The emergence of a sector of the housing market under water on their mortgages may hurt an already fragile real estate market. Any forced sales would obviously dent individual household wealth but further drops in home prices would deter investors from buying residential properties.

Ben Phillips, principal research fellow at the National Centre for Social and Economic Modelling, helped prepare the analysis which pointed to 60,000 households nationwide with negative equity.

The prospect of negative returns will certainly detract from sentiment through 2012, said NATSEMs Mr Phillips.

Gloomy outlook

To be sure, Australian households have fared better than most countries in coping with living costs even with housing affordability hovering near historic lows.

For instance, the most recent assessment of late payments on residential mortgages by ratings agency Fitch showed the tally actually fell to 1.42 per cent of loans in September, down from 1.77 per cent in March.

The twin interest rate cuts to end 2011 will also make it easier for mortgage holders to keep up with repayments – with markets predicting as many as five more 25 basis-point cuts to come by next June likely to help even more.

Still, the prospect of stagnant or falling house prices may see the number of families with negative equity in their home continue to rise. National city home prices retreated 4 per cent in the year to October after peaking at the end of 2010, according to RP Data figures.

The final weekend auctions for 2011 indicated the interest rate cuts hadnt reversed that slide, with Sydneys clearance rate and median price, for instance, both ending the season at lows for 2011.

To add context, a fall of 4 per cent or more in prices would eclipse the 2.6 per cent drop in 2008 – when the global financial crisis neared its nadir.

Commentators such as University of Western Sydney Professor Steve Keen see home price falls of at least 5 per cent nationwide next year, as households rush to pare debt they so eagerly acquired in the past two decades.

Even mainstream commentators, such as Westpac economists, predict home prices to be flat or lower in 2012, with worries about the European crisis and a greater reluctance by households to take on debt even as borrowing costs contract nullifying the impact of the RBA cuts.

Relaxed rules

One reason for the growth in negative equity households is that relaxed banking rules in recent times have allowed many borrowers to take mortgages near or in excess of the value of the home being purchased. Others also took out extra debt to fund renovations or other improvements to their property.

Macquarie senior economist Brian Redican said negative equity has been a rare feature of the Australian property market until recently.

High loan to valuation ratio have been quite uncommon until the last 10-15 years, Mr Redican said, citing the standard LVR measure used to assess homeowners exposure to debt.

The negative equity estimates here are derived from the share of borrower households with an LVR of 100 per cent or more, compared with this years home price falls, in an analysis of Australian Bureau of Statistics and RP Data by the NATSEM.

LVRs have swelled in the past two decades as lending rules were relaxed, permitting banks to extend a higher percentage of the value of the home. Buyers, armed with more funds, then bid up home prices to levels that international observers, such as The Economist, say are among the highest in the world.

In Queensland, 19,700 households are estimated to be in negative equity, or 3.2 per cent of the states mortgage holders.

While in Western Australia, the total amounts to about 4.5 per cent, or 16,000. New South Wales had the smallest share of mortgages under water, at 1 per cent, or 9000, slightly better than Victorias rate which was 1.2 per cent or 9100, although the latters household debt levels are drawn from 2010 data.

In South Australia 2.1 per cent of households, or 5000, were in negative equity. Tasmania had 1.5 per cent of households, or 1100, according to the analysis.

Europe cloud

Negative equity, of course, remains only a paper problem for borrowers – or their banks – unless the mortgage holder is forced to sell.

Such forced sales, are unlikely to happen unless theres a big upsurge in the jobless rate, currently at about 5.3 per cent, analysts say.

Last week, the Fairfax-owned Australian Financial Review reported that one of the primary bank regulators, the Australian Prudential Regulation Authority, has ordered major banks to stress test their books for scenarios in which home prices drop 30 per cent and unemployment rises to 12 per cent.

Barring a major collapse in Europe and or a sharp slowdown in China, though, that jobless rate may not head much higher, particularly if wider confidence in the economy at home and abroad holds up.

Melbourne-based Wakelin Property Advisory director Monique Sasson Wakelin said the sliver of households in negative equity would likely have little effect on the overall market next year.

Its going to be more of an influence on those people who are sitting on negative equity, she said. It will make them sit on their hands.

The RP Data price falls in the first 10 months of 2011 were led by Brisbane, where home values dived 7.5 per cent and Melbourne where they have slumped 5.8 per cent.

This reality will continue to suppress buyer interest through 2012 and continue to drive the for sale stock, NATSEMs Mr Phillips said, adding the numbers dont suggest the Australian mortgage market is on a precipice.

Rather, there are some markets, such as WA and Queensland, that are more susceptible than others and that should economic conditions deteriorate badly these would be the markets that will feel the strongest pain, he said.

(NECN) – Certified financial planner Jennifer Lane has tips on how to decide if a reverse mortgage is the right option for you.

Lane explains what a reverse mortgage is, who is eligible for one, how much money you can get for it, what to watch out for if you take one out, and other options beside reverse mortgages.

Lane says you can get more information on reverse mortgages from www.AARP.org, www.HUD.gov, from the National Council on Aging at (800) 510-0301 and from an HECM counselor at (800) 569-4287.

Property asking prices dive as uncertainty grows

Category:
Mortgages
Date:
21/11/2011

The price at which properties are being put up for sale tumbled in November as the confidence of sellers was hit by economic uncertainty.

According to Rightmove, the problems in the Eurozone appeared to spook sellers, sending the average property asking price diving by 3.1% compared with October.

The resultant average asking price of £232,144 is some £7,500 lower than a month earlier, and represents the largest monthly fall since December 2007.

At the same time, a 13% drop in the number of new sellers coming to the market seems to suggest that prospective home movers are deciding to sit tight amidst the uncertainty.

Almost three-quarters (70%) of home-movers are of the opinion that it is currently a bad time to sell, although this is could turn out to be good news for some.

Indeed, the air of seller resignation only strengthens the negotiating power of buyers who have the means to proceed with a purchase.

Meanwhile, buy-to-let investors keen to make the most of the environment of rising rents and growing numbers of competitive buy-to-let mortgages are also likely to sense an opportunity for a bargain.

For those desperate to sell, the property website warns they might have to prepare for a long period of subdued buyer activity, particularly as the traditional seasonal slump in activity appears to have arrived early this year.

Markets dislike uncertainty, and so do people who are deciding whether or not to enter the property market, said Miles Shipside, director of Rightmove.

Agents report that many would-be sellers are postponing their marketing until the new year, influenced by the current wall-to-wall media coverage of the Greeks and Italians attempting to get their own far-flung houses in order.

Its no great surprise that those who have braved the stormy conditions have had to accept a substantial haircut on their asking prices.

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Women may bethe biggest spenders, but men have much better game at shopping formortgage loans.

A new study shows that despite having similar credit scores, women are more likely to sign mortgages they cant afford (subprime) without taking high rates, AOL reports.

Before you get your knickers in a twist, ladies, its important to note that the researchers did not point to gender discrimination as the reason behind the trend.

Women are simply quicker to go for a lender they like, while men tend to take their time and shop around for the lowest rate.

The disparity cannot be fully explained by traditional variables such as mortgage features, borrower characteristics, and market conditions, the study says. Women pay higher rates because they are more likely to choose lenders by recommendation, while men tend to search for the lowest rate.

To fix the disparity, the research team suggested womens financial literacy could use some help. To give you a head start, check out these FTC-approved tips on navigating the mortgage shopping experience:

Cast a wide net. Rather than asking pals for recommendations for lenders, do your homework and get information from several lenders or brokers. Be sure you know how much you can afford on a down payment, the FTC says.

Ask about rates. Get a list of the firms current mortgage rates and dont be shy about asking if its the lowest they can offer.

Interest counts. Dont forget to factor in the APR. Ask ahead how much itll be and about any other associated fees.

Also, see our coverage of what you should do if youve been rejected for a loanhere.

Looking to buy rather than rent?Check out the pros and cons here gt;

Government backed mortgages are not return to bad old days

Ministers have insisted they are not going back to the bad old days with a
scheme to underwrite mortgages for first-time buyers.