Another Argument for Short Sales!

Courtesy Mortgage News Daily...

Fannie Mae announced today policy changes designed to encourage borrowers to work with their servicers and pursue alternatives to foreclosure.

Defaulting borrowers who walk-away and had the capacity to pay or did not complete a workout alternative in good faith will be ineligible for a new Fannie Mae-backed mortgage loan for a period of seven years from the date of foreclosure. (anyone want to bet whether Fannie Mae will be around in 7 years?)

"We're taking these steps to highlight the importance of working with your servicer," said Terence Edwards, executive vice president for credit portfolio management. "Walking away from a mortgage is bad for borrowers and bad for communities and our approach is meant to deter the disturbing trend toward strategic defaulting. On the flip side, borrowers facing hardship who make a good faith effort to resolve their situation with their servicer will preserve the option to be considered for a future Fannie Mae loan in a shorter period of time."

Fannie Mae will also take legal action to recoup the outstanding mortgage debt from borrowers who strategically default on their loans in jurisdictions that allow for deficiency judgments. In an announcement next month, the company will be instructing its servicers to monitor delinquent loans facing foreclosure and put forth recommendations for cases that warrant the pursuit of deficiency judgments.

Troubled borrowers who work with their servicers, and provide information to help the servicer assess their situation, can be considered for foreclosure alternatives, such as a loan modification, a short sale, or a deed-in-lieu of foreclosure. A borrower with extenuating circumstances who works out one of these options with their servicer could be eligible for a new mortgage loan in three years and in as little as two years depending on the circumstances

Here is the verbiage from the FN Bulletin:

Currently, the waiting period that must elapse after a borrower experiences a foreclosure is seven years. However, Fannie Mae allows a shorter time period – five years – if certain additional requirements are met (e.g., minimum down payment and credit score, and occupancy requirements).

These requirements are being modified to remove the five year option. Unless the foreclosure was the result of documented extenuating circumstances, which only requires a three-year waiting period (with additional requirements), all borrowers will now be required to meet a seven-year waiting period after a prior foreclosure to be eligible for a new mortgage loan eligible for sale to Fannie Mae.

Fannie and Freddie

Courtesy DSNews.com
6_16_10
FHFA Orders Fannie, Freddie to Delist Stock from NYSE
The Federal Housing Finance Agency has directed Fannie Mae and Freddie Mac to delist their common and preferred stock from the New York Stock Exchange (NYSE) and any other national securities exchange.

“A voluntary delisting at this time simply makes sense and fits with the goal of a conservatorship to preserve and conserve assets,” said FHFA Acting Director Edward J. DeMarco.

Both companies’ common stock price has hovered near the NYSE minimum average closing price requirement of $1 for more than 30 trading days for most months since Fannie and Freddie were placed into conservatorships in September 2008.

For the past 30 trading days, Fannie Mae’s closing stock price has dropped below the required $1 average price. Per NYSE rules, a company in that condition must either drop from the exchange or undertake a ‘cure’ to restore the stock price above the $1 mark. But FHFA says the alternatives for such a cure do not assure that the minimum price level will be maintained or shareholder value will not be lost.

Freddie Mac’s share price has been treading very close to the $1 mark, and FHFA says because both GSEs are operating under its conservatorship and relying on taxpayer support, the agency decided that Freddie Mac should also initiate delisting procedures.

"FHFA’s determination to direct each company to delist does not constitute any reflection on either enterprise’s current performance or future direction, nor does delisting imply any other findings or determination on the part of FHFA as regulator or conservator," DeMarco said. “The determination to direct delisting is related to stock exchange requirements for maintaining price levels and curing deficiencies.”

The GSEs’ stock will continue to trade, but through a different trading mechanism, FHFA said. Once the delisting is completed, each company’s common and preferred stock is expected to be quoted on the Over–the-Counter Bulletin Board (OTCBB).

Both GSEs’ stock prices dropped more than 40 percent in early morning trading.

It's Official: Moody's is Clueless Too

After watching Warren Buffet and the CEO of Moody's testify in front of Congress this week - i sort of thought they got it. Now this story comes out to prove even Warren Buffet is drinking the Kool-Aid. Come-on! With near 7 million properties yet to be recognized as bad assets - WHO ARE THEY KIDDING? Of course, what did you expect from a company that stamped Triple A on bad market paper long after the handwriting was on the wall.

Banks Have Recognized 60% of Expected Loan Charge-Offs: Moody’s

By: Carrie Bay - DSNews.com06/03/2010

In its latest quarterly report on credit conditions of the U.S. banking system, Moody’s Investors Service says banks’ asset quality issues are “past the peak” butcharge-offs and non-performers continue to eat away at profitability and sheer fundamentals.

Based on Moody’s market data, banks’ non-performing loans stood at 5.0 percent of total loan assets at March 31, 2010.

Moody’s says U.S. rated banks have already charged off or written-down $436 billion of loans in 2008, 2009, and the first quarter of 2010. That leaves another $307 billion to reach the rating agency’s full estimate of $744 billion of loan charge-offs from 2008 through 2011.

In aggregate, the banks have recognized 60 percent of Moody’s estimated total charge-offs and 65 percent of estimated residential mortgage losses, but only 45 percent of projected commercial real estate losses.

In the first quarter of this year, the banking industry’s collective annualized net charge-offs came to 3.3 percent of loans, versus 3.6 percent of loans in the fourth quarter

of 2009, Moody’s said. Despite two consecutive quarters of improvement in charge-offs, the ratings agency notes that the figures still remain near historic highs, dating back to the Great Depression.

According to Moody’s analysts, the decline in aggregate charge-offs was driven by commercial real estate improvement, which “we believe is likely to reverse in coming quarters,” they said in the report. A similar commercial real estate decline was experienced in the first quarter of 2009 before charge-offs accelerated through the rest of the year.

“The return to ‘normal’ levels of asset quality will be slow and uneven over the next 12 to 18 months,” said Moody’s SVP Craig Emrick.

But Emrick added that “Although remaining losses are sizable, they are beginning to look manageable in relation to bank’s loan loss allowances and tangible common equity.”

U.S. banks’ allowances for loan losses stood at $221 billion as of March 31, 2010, which is equal to 4.1 percent of loans, Moody’s reported. Although this can be used to offset a sizable portion of remaining charge-offs, banks will still require substantial provisions in 2010, the agency said.

Moody’s says its negative outlook for the U.S. banking system is driven by asset quality concerns and effects on profitability and capital. The agency’s ratings outlook is also influenced by the potential for a worse-than-expected macroeconomic environment, Moody’s said.

“More severe macroeconomic developments, the probability of which we place at 10 percent to 20 percent, would significantly strain U.S. bank fundamental credit quality,” Moody’s analysts wrote in their report.