Real Estate Home Loans in Boise Idaho, Waterstone Mortgage - Prime Equity Group

U.S. foreclosure rates fell for the third straight month according to RealtyTrac's new report.  New foreclosure fillings in June dropped 2.81 percent from the previous month and 6.98 percent from the previous year.

While foreclosure rates are falling, they are still at high levels with 16 straight months of readings of over 300,000.  Still 410 out of every 411 homes are not in foreclosure, so there is still some strength in the housing market.

Posted by Dean Tucker, Waterstone Mortgage - Prime Equity Group in Boise Idaho

The Administration announced adjustments to Federal Housing Administration (FHA) programs that will permit lenders to provide additional refinancing options to homeowners who owe more than their home is worth because of large falls in home prices in their local markets. These adjustments will provide more opportunities for qualifying mortgage loans to be responsibly restructured and refinanced into FHA loans as long as the borrower is current on the mortgage and the lender reduces the amount owed on the original loan by at least 10 percent. This option should be available by the fall.

The new FHA loan must have a balance less than the current value of the home, and total mortgage debt for the borrower after the refinancing, including both first and any other mortgages, cannot be greater than 115 percent of the current value of the home - giving homeowners a path to regain equity in their homes and an affordable monthly payment. This refinancing will help homeowners by setting monthly payments at affordable levels and decreasing the mortgage burden for families owing significantly more than their homes are worth. Keeping more responsible families in their homes should support the continued recovery of the housing market.

FHA Refinance Option

1)  FHA Refinance Option for Underwater Loans -Encouraging Responsible Restructuring and Refinancing.

•  Voluntary option encourages lenders and borrowers to work together, when appropriate, to restructure underwater mortgages. Because it is voluntary for lenders, not all underwater borrowers who meet criteria below will receive an FHA refinance loan.

•  Enables refinancing into more sustainable loans that are no higher compared to the value of the home than the standard FHA refinance loan (97.75 percent).

•  Lenders write down principal of the original first mortgage at least 10 percent to reduce the debt burden on borrowers, though we expect the average principal write-down to be significantly more than that.

•  Enables refinancing to a reduced monthly payment at current low interest rates to facilitate affordable homeownership.

•  Homeowner Eligibility

     i)  Homeowners must be current on their existing mortgage. They must occupy the home as their primary residence, fully document their income and have a qualifying credit score.

     ii)  As with any loan forgiveness, this short refinancing should be reflected as a negative feature on a borrower's credit score.

     iii)  Option is available to homeowners with mortgages not currently insured by the FHA.

2)  Incentives for Principal Write-downs on Second Liens

•  All mortgage debt including second liens must be written down to a maximum of 115 percent of the current value of the home to qualify for the refinance.

3)  Transparency on Impact of These Refinancings

•  FHA will publish data on number of loans, average percentage written down and quantity of principal reduced quarterly.

4)  TARP Funded Support to Expand Impact of Refinance Option

•  TARP funds will be made available up to a total of $14 billion to provide incentives to support writedowns of second liens and encourage participation by servicers, and to provide additional coverage for a share of potential losses on these loans.

The following information provides a brief overview of the key features of the refinance option. Detailed guidelines will be announced by FHA Mortgagee Letter.

1)  FHA Refinance Option for Underwater Homeowners - Encouraging Responsible Refinancings

•  Voluntary option for lenders and borrowers

•  Encourages lenders and borrowers to work together, when appropriate, to restructure debts

     i)  Qualifying first lien mortgage loans must have a minimum write-down of at least 10 percent and total mortgage loan to value on the home can be no greater than 115 percent after the refinancing

•  Eligible underwater loans are refinanced into new FHA loans on FHA terms for full documentation, income ratios, and complete underwriting

•  Terms of FHA refinancing:

     i)  FHA loan will be equal to no more than 97.75 percent of the value of the home

     ii)  Combined mortgage debt must be written down to a maximum of 115 percent of the current value of the home

     iii)  Standard FHA mortgage insurance premium structure will apply

•  Mandatory principal write-down as part of refinance

     i)  Minimum write-down by lender of 10 percent of the unpaid balance of the original loan

•  Affordable monthly mortgage payments to facilitate affordable homeownership

     i)  New monthly mortgage payment at current low FHA interest rate

     ii)  Total monthly mortgage payment, including for second mortgage, will not be greater than approximately 31 percent of income, and total debt service including all forms of household debt will not be greater than approximately 50 percent except for some borrowers with especially strong credit histories

•  Existing lenders can retain second mortgages on the property, but only up to a combined 115 percent of the current value of the home

     i)  If there is an existing mortgage that is not extinguished, holders must agree to resubordinate and write off any amount over 115 percent of the current value of the home

     ii)  The existing first mortgage is refinanced into a fully documented FHA insured mortgage at no greater than 97.75 percent of the value of the home

•  Homeowner Eligibility

     i)  Homeowners must be current on their existing mortgage payment

     ii)  Homeowner must occupy the home as their primary residence and fully document their income

     iii)  Homeowners must qualify under standard FHA underwriting guidelines

     iv)  Homeowners must have a FICO credit score of at least 500

     v)  Existing lenders/investors holding the first lien must agree to the principal write-down requirement. Thus, not all homeowners who meet above criteria will receive an FHA refinanced loan

     vi)  As with any loan forgiveness, the short refinancing should be reflected on borrowers' credit score

•  Performance of these refinanced loans will not count against lenders for their Credit Watch scores, if the above parameters are met

2)  Incentives for Principal Write-downs on Second Liens

•  Incentives for immediate write-down of underwater second liens by lenders will be offered to encourage write-downs in connection with the FHA refinance.

•  An extinguishment schedule will be implemented based on the below taking into account the likely distribution of the second lien lenders that will agree to immediate write-downs

Table: Extinguishment Price Schedule: Per Dollar of Unpaid Principal

3)  Transparency on Impact of These Refinancings

•  FHA will publish data on numbers of loans refinanced in this way including average percentage written down and quantity of principal reduced quarterly

4)  Up to a total of $14 billion in TARP funds to expand impact of refinance option

•  TARP funds will be made available for incentives to support write-downs of second liens and encourage participation by servicers as well as the provision of coverage for some share of potential losses on loans. Total support provided through these three mechanisms will not exceed $14 billion

•  TARP funds will be used to provide coverage for a share of losses on loans up to a specified amount. The FHA will provide remaining loss coverage up to the maximum insurance coverage. Thus, the new lender will have a loan that is backed by the United States for up to 97.75 percent of the home value, as with other FHA refinance loans

•  TARP will purchase a letter of credit that will provide this loss coverage

This is a ton of new information to digest. I will provide more clarification as it becomes available.  At first blush it looks like this might keep some Idaho homeowners in the houses.

May 4 (Bloomberg) -- Berkshire Hathaway Inc. Chairman Warren Buffett lambasted bankers, insurers and regulators for being blind to the possibility home prices could fall, and said their shortcomings caused the worst recession in half a century.

Buffett and Vice Chairman Charles Munger said Wall Street sold subprime mortgage "sewage," blamed the media and regulators for missing the danger and said the government stress tests of financial firms won't advance Berkshire's understanding of the stocks the company owns. Buffett hosted a record 35,000 people at the Omaha, Nebraska-based firm's annual meeting May 2 and spoke at a news conference yesterday.

"I think that virtually everybody associated with the financial world contributed to it," Buffett said of the crisis. "Some of it stemmed from greed, some from stupidity, some from people saying the other guy was doing it."

Home foreclosures have advanced to a record, U.S. unemployment rose to its highest in 25 years and Berkshire shares plunged 31 percent since shareholders gathered at Omaha's Qwest Center arena last year. The U.S. government and the Federal Reserve have spent, lent or committed $12.8 trillion -- an amount that approaches the value of everything produced in the country last year -- to stem the recession.

Buffett, 78, used the five-hour question-and-answer session at the meeting and the press conference to promote the long-term prospects of his derivative bets and explain his stock picks. He said that San Francisco-based Wells Fargo & Co., the second- largest holding in Berkshire's portfolio, will prosper regardless of the results of the test of top U.S. lenders.

Wells Fargo

"Wells Fargo has a dramatically different business model," than competitors, Buffett said yesterday. He said the public has a distorted perception of lenders because of losses at Citigroup Inc., once the largest U.S. bank. Minneapolis-based U.S. Bancorp and Buffalo, New York-based M&T Bank Corp., which are in Berkshire's portfolio along with Wells Fargo, avoided the riskiest bets, he said.

"We would buy stock in any of the three banks at the present prices," he told reporters. In a Bloomberg Television interview, Buffett dismissed the importance of stress tests in helping him assess those firms, saying "I think I know their future, frankly, better than somebody who comes in and takes a look."

Stephen Cohen, a spokesman for New York-based Citigroup, declined to comment.

Buffett said most of the companies undergoing stress tests aren't too big to fail. "The top four get to be more special cases," he said. Results of the examinations may be released this week.

‘That's Poison'

Buffett told shareholders he expects Berkshire will eventually profit from derivative bets on world stock markets that caused a $10 billion liability as of the end of 2008. Berkshire will only have to make payments on the contracts if markets are below agreed-upon levels when the terms expire, which is 10 years from now at the soonest. Berkshire has received about $4.9 billion in payments on the derivatives.

Life insurers that made similar bets with customers by guaranteeing returns on equity-linked retirement products "didn't get paid appropriately," Buffett said yesterday.

When insurers "tell the policyholder that he gets some of the up side and you take all the down side, that's poison," Buffett said. "That would be like a stockbroker telling you that he'll pay you back if your stocks lose money."

Buffett said the media failed to adequately report on the housing bubble, and singled out regulators of mortgage companies Fannie Mae and Freddie Mac for missing the danger their loans would pose if home prices fell. Munger said the firms that packaged subprime mortgages into securities "were either delusional or flim-flam artists."

‘Sewage-like Qualities'

"They were going to take a lot of sewage and mix it up in a different way and said it's not sewage," Munger said. "The laws of nature are such that it keeps its sewage-like qualities."

Berkshire's first-quarter operating earnings fell to about $1.7 billion from $1.9 billion in the same period a year earlier, Buffett said May 2. The figure, which doesn't count some investment results, declined as the recession pressured Berkshire businesses that make building materials and sell jewelry and furniture.

Net income has fallen in five straight quarters through the end of 2008, and book value, a measure of assets minus liabilities, dropped by the most last year in Buffett's four decades leading the company. Berkshire is scheduled to release complete first-quarter results on May 8.

Future Gains

Munger said the recession gives Berkshire, which had $25.5 billion in cash at the end of 2008, a chance to bolster the company while competitors are hobbled.

"These times when it looks terrible are the times when you are laying your foundation" for future gains, Munger said. "If you think we are in trouble because the stock price went down, you don't understand the situation."

Buffett has been investing in preferred shares of Goldman Sachs Group Inc. and General Electric Co. and buying corporate debt. Buffett reached an agreement in February for a 3 billion Swiss franc ($2.6 billion) investment in Swiss Reinsurance Co.

"That wouldn't have happened" without the recession, Buffett said.

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