By Nick Zieminski Nick Zieminski – 2 hrs 39 mins ago
NEW YORK (Reuters) – High U.S. unemployment keeps pushing up the rate of mortgage delinquencies, which could in turn drive personal bankruptcies and home foreclosures, monthly data from the Equifax Inc (EFX.N) credit bureau showed on Monday.
Among U.S. homeowners with mortgages, a record 7.58 percent were at least 30 days late on payments in August, up from 7.32 percent in July, according to the data obtained exclusively by Reuters.
August marked the fourth consecutive monthly increase in delinquencies, and the report showed an accelerating pace. By comparison, 4.89 percent of mortgages were 30 days past due in August 2008, while in August 2007, the rate was 3.44 percent, Equifax data showed.
The rate of subprime mortgage delinquencies now tops 41 percent, up from about 39 percent in each of the prior five months.
The results, which correlate with consumer bankruptcy filings, suggest U.S. homeowners remain under financial stress despite signs of improving sentiment and fundamentals in the U.S. housing market.
August bankruptcy filings were up 32 percent from a year earlier, compared with a 35 percent year-over-year increase in July.
Still, while more Americans were late with mortgage payments, they are keeping up with other bills. The proportion of credit card accounts at least 60 days past due was down in August for the third straight month, while subprime card delinquencies also fell.
That improvement in delinquency rates partly reflects risk-aversion among issuers, which have cut the number of cards by 82 million, or 19 percent, over the past year, while slashing credit limits by $721 billion, to about $3.6 trillion.
The number of new cards being issued is down even more dramatically. In June, 2.6 million new cards were issued, compared with 4.7 million a year earlier.
Lenders are increasingly targeting consumers with high credit scores, Equifax found. While in 2007, about one in five new cards went to people with a credit score above 760, such consumers account for two in five new cards in 2009. Equifax found similar trends in auto loans.
"The data from August further confirms that we're witnessing a dramatic change in consumer habits," said Dann Adams, president of Equifax's Consumer Information Solutions group.
Total consumer debt is down more than $300 billion, or almost 3 percent, from its peak in September 2008, Adams said, while the savings rate is nearing 5 percent, "a level we haven't seen in years."
(Editing by Lisa Von Ahn)
Monday, September 21, 2009
Wednesday, July 15, 2009
New Home Appraisal Rules Stir Industry Backlash
By THE ASSOCIATED PRESS
Less than three months after new rules for home appraisers kicked in, the real estate industry is in uproar.
Realtors, homebuilders, mortgage brokers and the appraisal industry itself all agree the rules are causing problems. Some are backing a bill in Congress to kill them.
The new guidelines essentially put a firewall between lenders and home appraisers. They also ended the practice of lenders using their in-house staff for initial home appraisals and prohibit the use of appraisal-management companies owned or controlled by lenders.
But since they went into effect May 1, the rules have created a slew of unintended consequences that critics say are causing delays in closing sales, or undermining sales because botched appraisals are coming in too low.
''This thing is not only preventing the housing market from recovering, it's destroying the housing market,'' said Marc Savitt, president of the National Association of Mortgage Brokers. ''We're eliminating competition, and we all know what happens when you eliminate competition: Prices go up.''
After a homebuyer and seller agree on a price, the buyer applies for a mortgage. The lender then orders an appraisal to ensure the value of the property, because if the borrower defaults the property will be sold to satisfy the debt. The appraisal fee, which can run between $250 and $500, is usually paid by the buyer.
To determine what a home is worth, the appraiser compares prices of similar homes that were recently sold in the area and makes adjustments for different features, such as a swimming pool or extra bathroom. If the property appraisal comes in below the agreed upon price, the buyer usually has to make up the difference and may instead walk away.
Suzanne Wilhelm, who has been trying to sell her home in Henderson, Nev., for six months, blames an appraisal done under the new rules for scuttling what had been a done deal with a buyer several weeks ago.
The appraisal valued her four-bedroom, 2,000 square-foot house at $190,000 -- $45,000 less than the price the buyer agreed to pay. Wilhelm, who paid $187,000 for the house in 2001, believes the appraiser based his estimate on the sale of several foreclosed homes in the area but ignored sales of regular homes that would have reflected a higher price.
''It's very unfair that we're put into the same bracket as those people who were so irresponsible in buying their homes,'' said Wilhelm, a teacher.
The rules, dubbed the Home Valuation Code of Conduct, are meant to eliminate conflicts of interest that created pressure on real estate appraisers to inflate the value of a property. Lenders, agents and brokers have been known to pressure appraisers to ''hit the number'' that the homebuyer and seller agreed on so the deal would close and everyone could collect their fees. Inflated appraisals were partly blamed for fueling the housing bubble.
But under a settlement last year New York Attorney General Andrew, Fannie Mae and Freddie Mac agreed only to buy loans from lenders that don't directly hire appraisers. The move sent shock waves through the industry because Fannie Mae and Freddie Mac own or guarantee about half of all U.S. home loans.
So lenders started giving more business to appraisal management companies, which critics say draw appraisers from a pool of candidates willing to do the job for less money and who, in some cases, may be unfamiliar with a neighborhood.
Paul Conforti, a broker with Prudential Douglas Elliman in Merrick, N.Y., said he's seen appraisers based as far as Maryland, about 200 miles away, come into New York's Nassau County to evaluate homes there.
''If you're appraising a house, all you really have to go on is the'' recent sale of similar properties, Conforti said. ''If the person doesn't know the area ... they end up using comparables from another town. It doesn't make sense.''
Almost 60 percent of builders are reporting that inadequate appraisals are causing serious problems in the market, often comparing newly built homes to foreclosures without considering the money needed for property repairs. Of those reporting appraisal problems, more than half said the appraisal amount was actually less than the cost of building the home, according to a survey released this week by the National Association of Home Builders.
Cuomo's office maintains the rules are necessary, and that critics are using the appraisal rules as a scapegoat for a declining housing market made worse by the recession.
''With homes prices falling and foreclosures rising, this complaint is simply wrong and risks returning us to a corrupt system filled with conflicts of interest that promoted artificially inflated values,'' said Emily Browne, a spokeswoman for Cuomo.
But the real estate industry is coming out against the rules in force.
The National Association of Mortgage Brokers went to court in February to block the changes, which it claims limit competition. Since then, other key industry groups, including the Appraisal Institute, have voiced their opposition to all or elements of the home appraisal guidelines.
Last week, the National Association of Realtors urged members of Congress to support a bill that would impose an 18-month moratorium on the new appraisal guidelines. The measure is still working its way through Congress.
The Realtors said the new appraisal guidelines are hurting the real estate industry. It contends that appraisers hired by appraisal management companies are not hired ''for their competency and qualifications, but for their turnaround time and price.''
Freddie Mac tried to address some of those concerns last week when it issued new home appraisal ''best practices'' guidelines for lenders.
Among its recommendations, the mortgage finance company said appraisers must be certified or licensed in the state where the property being appraised is located and be familiar with the local market.
Fannie Mae issued similar guidelines in April.
''We're optimistic that the push to quality will in fact solve some of the problems,'' said Ken Chitester, spokesman for the Appraisal Institute. ''If consumers are demanding that qualified appraisers perform the valuation on the properties, then that's a big step in the right direction.''
Less than three months after new rules for home appraisers kicked in, the real estate industry is in uproar.
Realtors, homebuilders, mortgage brokers and the appraisal industry itself all agree the rules are causing problems. Some are backing a bill in Congress to kill them.
The new guidelines essentially put a firewall between lenders and home appraisers. They also ended the practice of lenders using their in-house staff for initial home appraisals and prohibit the use of appraisal-management companies owned or controlled by lenders.
But since they went into effect May 1, the rules have created a slew of unintended consequences that critics say are causing delays in closing sales, or undermining sales because botched appraisals are coming in too low.
''This thing is not only preventing the housing market from recovering, it's destroying the housing market,'' said Marc Savitt, president of the National Association of Mortgage Brokers. ''We're eliminating competition, and we all know what happens when you eliminate competition: Prices go up.''
After a homebuyer and seller agree on a price, the buyer applies for a mortgage. The lender then orders an appraisal to ensure the value of the property, because if the borrower defaults the property will be sold to satisfy the debt. The appraisal fee, which can run between $250 and $500, is usually paid by the buyer.
To determine what a home is worth, the appraiser compares prices of similar homes that were recently sold in the area and makes adjustments for different features, such as a swimming pool or extra bathroom. If the property appraisal comes in below the agreed upon price, the buyer usually has to make up the difference and may instead walk away.
Suzanne Wilhelm, who has been trying to sell her home in Henderson, Nev., for six months, blames an appraisal done under the new rules for scuttling what had been a done deal with a buyer several weeks ago.
The appraisal valued her four-bedroom, 2,000 square-foot house at $190,000 -- $45,000 less than the price the buyer agreed to pay. Wilhelm, who paid $187,000 for the house in 2001, believes the appraiser based his estimate on the sale of several foreclosed homes in the area but ignored sales of regular homes that would have reflected a higher price.
''It's very unfair that we're put into the same bracket as those people who were so irresponsible in buying their homes,'' said Wilhelm, a teacher.
The rules, dubbed the Home Valuation Code of Conduct, are meant to eliminate conflicts of interest that created pressure on real estate appraisers to inflate the value of a property. Lenders, agents and brokers have been known to pressure appraisers to ''hit the number'' that the homebuyer and seller agreed on so the deal would close and everyone could collect their fees. Inflated appraisals were partly blamed for fueling the housing bubble.
But under a settlement last year New York Attorney General Andrew, Fannie Mae and Freddie Mac agreed only to buy loans from lenders that don't directly hire appraisers. The move sent shock waves through the industry because Fannie Mae and Freddie Mac own or guarantee about half of all U.S. home loans.
So lenders started giving more business to appraisal management companies, which critics say draw appraisers from a pool of candidates willing to do the job for less money and who, in some cases, may be unfamiliar with a neighborhood.
Paul Conforti, a broker with Prudential Douglas Elliman in Merrick, N.Y., said he's seen appraisers based as far as Maryland, about 200 miles away, come into New York's Nassau County to evaluate homes there.
''If you're appraising a house, all you really have to go on is the'' recent sale of similar properties, Conforti said. ''If the person doesn't know the area ... they end up using comparables from another town. It doesn't make sense.''
Almost 60 percent of builders are reporting that inadequate appraisals are causing serious problems in the market, often comparing newly built homes to foreclosures without considering the money needed for property repairs. Of those reporting appraisal problems, more than half said the appraisal amount was actually less than the cost of building the home, according to a survey released this week by the National Association of Home Builders.
Cuomo's office maintains the rules are necessary, and that critics are using the appraisal rules as a scapegoat for a declining housing market made worse by the recession.
''With homes prices falling and foreclosures rising, this complaint is simply wrong and risks returning us to a corrupt system filled with conflicts of interest that promoted artificially inflated values,'' said Emily Browne, a spokeswoman for Cuomo.
But the real estate industry is coming out against the rules in force.
The National Association of Mortgage Brokers went to court in February to block the changes, which it claims limit competition. Since then, other key industry groups, including the Appraisal Institute, have voiced their opposition to all or elements of the home appraisal guidelines.
Last week, the National Association of Realtors urged members of Congress to support a bill that would impose an 18-month moratorium on the new appraisal guidelines. The measure is still working its way through Congress.
The Realtors said the new appraisal guidelines are hurting the real estate industry. It contends that appraisers hired by appraisal management companies are not hired ''for their competency and qualifications, but for their turnaround time and price.''
Freddie Mac tried to address some of those concerns last week when it issued new home appraisal ''best practices'' guidelines for lenders.
Among its recommendations, the mortgage finance company said appraisers must be certified or licensed in the state where the property being appraised is located and be familiar with the local market.
Fannie Mae issued similar guidelines in April.
''We're optimistic that the push to quality will in fact solve some of the problems,'' said Ken Chitester, spokesman for the Appraisal Institute. ''If consumers are demanding that qualified appraisers perform the valuation on the properties, then that's a big step in the right direction.''
Wednesday, June 24, 2009
Lenders Leave Desperate Homeowners Hanging
As a result of President Obama’s $75 billion dollar foreclosure relief plan being plagued with backlogs and delays, tens of thousands of desperate homeowners are left waiting out in the cold.
Many homeowners are reporting they have left numerous desperate messages that go unanswered for weeks at a time or that their loan modification was denied for reasons that are unclear to them.
The specifics of the relief plan were reveled in March and designed to encourage banks to modify as many as 4 million loans making payments affordable and slowing foreclosures nationwide.
As stated by the Treasury Department, to date over 190,000 homeowners received a payment reduction due to their loans being modified.
Even though RealtyTrac reports that during the same time lenders initiated or advanced over 1 million foreclosure actions.
According to The Center for Responsible Lending, over this year alone 2.5 million homeowners are at risk of foreclosure, and during the next four years over 8 million homes could also be in jeopardy.
NeighborWorks America, an organization that provides foreclosure counseling, reports lenders are taking 60 days or more to respond to desperate homeowners applying for a loan modification.
Many modification applications go unanswered for 6 months or more leaving terrified homeowners uncertain if they will be able to keep their homes at all.
"No one will admit they're doing this," but, "some lenders may not be turning (homeowners) down right away because it might be politically easier to push them off and delay," says Joel Naroff of Economic Advisors.
Naroff also claims that banks are overrun by the demand for mortgages, including refinancing, and it will probably become worse as more homeowners become unemployed.
Lenders say they're doing the best they can with all of the requests, but some industry leaders say that delays are obstructing efforts to bring back the strength in the housing market.
"The loan-modification program is suffering. What we're doing right now isn't working as expected," states Richard A. Smith, CEO of Realogy, the parent company of Century 21, Coldwell Banker, Sotheby's International Realty and ERA. "The delays are horrible. Banks, unfortunately, just weren't geared up for this."
Earlier this month, Senator Jack Reed, D-R.I., along with 14 other senators wrote a letter to Housing and Urban Development (HUD) Secretary Shaun Donovan to try to establish a new approach to get lenders to respond more quickly to homeowners.
The letter stated, "Of particular concern are homeowners who have been instructed by HUD-approved counselors to contact their (loan) servicers only to be rebuffed or, worse, never even reach their servicer."
Other key lenders say it has taken some time due to the delay in the release of the Obama administration’s plan details, but they are now increasing their number of employees in order to process modification requests more quickly.
Loan modifications can assist homeowners by lowering mortgage principal, the interest rate or the term of the loan.
There has also been money placed aside by the government to aid nearly 5 million borrowers with refinancing into non-risky, long-term long term fixed rate mortgages.
Those families who fail to qualify for a loan modification are instructed on alternatives to foreclosure, such as short sales or deeds in lieu of foreclosure.
Treasury Department officers say 16 mortgage servicers have signed up to take part in the program and that they are aware of servicer delays.
"Treasury continues to pursue strategies to help servicers reach more borrowers faster. Given the fragile state of housing markets, we will need to continue to do more to ensure loan modifications are occurring at scale under our program," says Meg Reilly, a spokesperson for the Treasury.
Lenders claim they require enough time to review each application so that the modifications are significant, although some economists caution that rushing approvals may end in modifications that only delay the inevitable foreclosures instead of averting them.
Posted on Tuesday, June 23, 2009 by admin
Many homeowners are reporting they have left numerous desperate messages that go unanswered for weeks at a time or that their loan modification was denied for reasons that are unclear to them.
The specifics of the relief plan were reveled in March and designed to encourage banks to modify as many as 4 million loans making payments affordable and slowing foreclosures nationwide.
As stated by the Treasury Department, to date over 190,000 homeowners received a payment reduction due to their loans being modified.
Even though RealtyTrac reports that during the same time lenders initiated or advanced over 1 million foreclosure actions.
According to The Center for Responsible Lending, over this year alone 2.5 million homeowners are at risk of foreclosure, and during the next four years over 8 million homes could also be in jeopardy.
NeighborWorks America, an organization that provides foreclosure counseling, reports lenders are taking 60 days or more to respond to desperate homeowners applying for a loan modification.
Many modification applications go unanswered for 6 months or more leaving terrified homeowners uncertain if they will be able to keep their homes at all.
"No one will admit they're doing this," but, "some lenders may not be turning (homeowners) down right away because it might be politically easier to push them off and delay," says Joel Naroff of Economic Advisors.
Naroff also claims that banks are overrun by the demand for mortgages, including refinancing, and it will probably become worse as more homeowners become unemployed.
Lenders say they're doing the best they can with all of the requests, but some industry leaders say that delays are obstructing efforts to bring back the strength in the housing market.
"The loan-modification program is suffering. What we're doing right now isn't working as expected," states Richard A. Smith, CEO of Realogy, the parent company of Century 21, Coldwell Banker, Sotheby's International Realty and ERA. "The delays are horrible. Banks, unfortunately, just weren't geared up for this."
Earlier this month, Senator Jack Reed, D-R.I., along with 14 other senators wrote a letter to Housing and Urban Development (HUD) Secretary Shaun Donovan to try to establish a new approach to get lenders to respond more quickly to homeowners.
The letter stated, "Of particular concern are homeowners who have been instructed by HUD-approved counselors to contact their (loan) servicers only to be rebuffed or, worse, never even reach their servicer."
Other key lenders say it has taken some time due to the delay in the release of the Obama administration’s plan details, but they are now increasing their number of employees in order to process modification requests more quickly.
Loan modifications can assist homeowners by lowering mortgage principal, the interest rate or the term of the loan.
There has also been money placed aside by the government to aid nearly 5 million borrowers with refinancing into non-risky, long-term long term fixed rate mortgages.
Those families who fail to qualify for a loan modification are instructed on alternatives to foreclosure, such as short sales or deeds in lieu of foreclosure.
Treasury Department officers say 16 mortgage servicers have signed up to take part in the program and that they are aware of servicer delays.
"Treasury continues to pursue strategies to help servicers reach more borrowers faster. Given the fragile state of housing markets, we will need to continue to do more to ensure loan modifications are occurring at scale under our program," says Meg Reilly, a spokesperson for the Treasury.
Lenders claim they require enough time to review each application so that the modifications are significant, although some economists caution that rushing approvals may end in modifications that only delay the inevitable foreclosures instead of averting them.
Posted on Tuesday, June 23, 2009 by admin
Tuesday, June 23, 2009
Myths About Homeownership
How lenders assess mortgage applications has changed a lot in the last 20 years. What closed the door to homeownership then may not be a factor today.
The following are some common homeownership myths:
Myth: You need great credit to become a homeowner.
Fact: You may still be able to buy a home and you have less-than-perfect credit. And remember, you can improve your credit over time. But if you are buying a home and you have less-than-perfect credit, talk to a housing counselor who can help you avoid a mortgage you can't afford. It is important to comparison shop. Be wary of a lender who tells you, "Your less-than-perfect credit means that no one but me will work with you to find you a loan."
Myth: You need to put 20% down to buy a home.
Fact: There are many types of mortgage products and programs that allow low and no down payments. But remember that your interest rate may be higher for a low or no down payment loan. Also, be sure to factor in other costs such as closing costs, property taxes, moving expenses, and repairs.
Myth: You can't buy a home in the U.S. if you're not a citizen.
Fact: If you're a permanent or non-permanent resident alien, you can purchase a home in the U.S.
Myth: If you don't have a bank account or credit cards, you can't qualify for a mortgage.
Fact: Having a bank account is always a good idea and helps you establish credit. However, lenders can approve you for a mortgage even if you don't have a bank account or credit cards. You'll likely need to keep records showing a history of payments you've made for items such as rent, utilities, and car payments.
Myth: Lenders share your personal financial information with other companies.
Fact: By law, banks and other financial institutions are restricted in their uses and disclosures of information about you. In some situations, you may choose to restrict the disclosure of your information if you don't want it to be shared. If you are unsure how your information will be used, don't be afraid to ask – it's your right to know.
Myth: If you're late on your monthly mortgage payments, you'll lose your house.
Fact: If you have a financial hardship, like the death of your spouse or a medical emergency, and fall behind, it's possible to keep your home and get back on track if you contact your lender early. Even if it is not possible to keep your home, you can sell your home and possibly buy a less expensive one rather than face foreclosure.
Myth: You can't get a mortgage if you've changed jobs several times in the last few years.
Fact: Not true. You can change jobs several times and still get a loan to buy a home. Lenders understand that people change jobs. The important thing is to show that you've had a stable income.
2009 Freddie Mac
The following are some common homeownership myths:
Myth: You need great credit to become a homeowner.
Fact: You may still be able to buy a home and you have less-than-perfect credit. And remember, you can improve your credit over time. But if you are buying a home and you have less-than-perfect credit, talk to a housing counselor who can help you avoid a mortgage you can't afford. It is important to comparison shop. Be wary of a lender who tells you, "Your less-than-perfect credit means that no one but me will work with you to find you a loan."
Myth: You need to put 20% down to buy a home.
Fact: There are many types of mortgage products and programs that allow low and no down payments. But remember that your interest rate may be higher for a low or no down payment loan. Also, be sure to factor in other costs such as closing costs, property taxes, moving expenses, and repairs.
Myth: You can't buy a home in the U.S. if you're not a citizen.
Fact: If you're a permanent or non-permanent resident alien, you can purchase a home in the U.S.
Myth: If you don't have a bank account or credit cards, you can't qualify for a mortgage.
Fact: Having a bank account is always a good idea and helps you establish credit. However, lenders can approve you for a mortgage even if you don't have a bank account or credit cards. You'll likely need to keep records showing a history of payments you've made for items such as rent, utilities, and car payments.
Myth: Lenders share your personal financial information with other companies.
Fact: By law, banks and other financial institutions are restricted in their uses and disclosures of information about you. In some situations, you may choose to restrict the disclosure of your information if you don't want it to be shared. If you are unsure how your information will be used, don't be afraid to ask – it's your right to know.
Myth: If you're late on your monthly mortgage payments, you'll lose your house.
Fact: If you have a financial hardship, like the death of your spouse or a medical emergency, and fall behind, it's possible to keep your home and get back on track if you contact your lender early. Even if it is not possible to keep your home, you can sell your home and possibly buy a less expensive one rather than face foreclosure.
Myth: You can't get a mortgage if you've changed jobs several times in the last few years.
Fact: Not true. You can change jobs several times and still get a loan to buy a home. Lenders understand that people change jobs. The important thing is to show that you've had a stable income.
2009 Freddie Mac
Tuesday, May 5, 2009
Bank of America to need $34 billion in capital
WASHINGTON (Reuters) - Bank of America (NYSE:BAC - News) has been deemed to need an additional $34 billion in capital, according to the results of a government stress test, a source familiar with the results said on Tuesday.
A Bank of America spokesman declined comment.
The amount is far higher than published reports had speculated the largest bank might need. It is certain to increase the pressure on Chief Executive Kenneth Lewis, whom shareholders ousted as chairman last week.
It may also unnerve investors who had hoped the results of the stress tests on Bank of America and 18 other banks might show the industry was in less dire condition than had been feared. Shares of major U.S. banks have nearly doubled since bottoming out in early March.
U.S. equity market futures extended losses late on Wednesday and the yen gained following the news.
The government has spent the last three months conducting stress tests on the 19 largest U.S. banks to determine their revenue, losses and capital needs, should economic conditions deteriorate even further than many economists' estimates.
Officials plan to release results of the tests on late Thursday, and are expected to reveal both aggregate figures and the results of the examinations on the 19 institutions' holding companies.
Bank of America has been at the top of the list of banks believed to need more capital, as it is facing significant credit losses and a challenging combination with Merrill Lynch & Co.
The $34 billion figure more than triples previously published reports of Bank of America's capital needs.
The bank's shareholders voted to oust Lewis last week as chairman of the board, possibly laying the groundwork for his eventual departure from the company.
The bank has already received $45 billion in capital from the federal government.
The Federal Reserve and Treasury declined comment.
Most of the 19 U.S. banks being stress-tested intend to hold press conferences on Friday to explain the results of the government's assessments, the source said, adding that many of the banks are in the process of crafting capital recovery plans.
(Reporting by Karey Wutkowski, with additional reporting by Jon Stempel, Mark Felsenthal and David Lawder; Editing Bernard Orr)
A Bank of America spokesman declined comment.
The amount is far higher than published reports had speculated the largest bank might need. It is certain to increase the pressure on Chief Executive Kenneth Lewis, whom shareholders ousted as chairman last week.
It may also unnerve investors who had hoped the results of the stress tests on Bank of America and 18 other banks might show the industry was in less dire condition than had been feared. Shares of major U.S. banks have nearly doubled since bottoming out in early March.
U.S. equity market futures extended losses late on Wednesday and the yen gained following the news.
The government has spent the last three months conducting stress tests on the 19 largest U.S. banks to determine their revenue, losses and capital needs, should economic conditions deteriorate even further than many economists' estimates.
Officials plan to release results of the tests on late Thursday, and are expected to reveal both aggregate figures and the results of the examinations on the 19 institutions' holding companies.
Bank of America has been at the top of the list of banks believed to need more capital, as it is facing significant credit losses and a challenging combination with Merrill Lynch & Co.
The $34 billion figure more than triples previously published reports of Bank of America's capital needs.
The bank's shareholders voted to oust Lewis last week as chairman of the board, possibly laying the groundwork for his eventual departure from the company.
The bank has already received $45 billion in capital from the federal government.
The Federal Reserve and Treasury declined comment.
Most of the 19 U.S. banks being stress-tested intend to hold press conferences on Friday to explain the results of the government's assessments, the source said, adding that many of the banks are in the process of crafting capital recovery plans.
(Reporting by Karey Wutkowski, with additional reporting by Jon Stempel, Mark Felsenthal and David Lawder; Editing Bernard Orr)
Tuesday, April 28, 2009
Treasury has new mortgage incentives: official
1 hr 45 mins ago
WASHINGTON (Reuters) – The U.S. Treasury Department will on Tuesday tap a $50 billion housing rescue fund to pay off mortgage investors and reduce monthly payments for millions of borrowers, said a senior administration official.
Mortgage servicers that own a small stake in costly loans will receive a cash payment to either erase the debt or agree to accept a reduced
return on their investment.
"It will be a shared effort with lenders, investors, borrowers and the government to ease or extinguish second-lien mortgage payments," a senior administration official told Reuters.
During the height of the housing boom, some borrowers were able to buy a home with no downpayment by adding a second lien, and many of those loans are now failing as the economy and housing market struggle.
Second liens typically carry a higher interest rate than primary mortgages but those second liens will have a lower rate under the modification plan, the officials said.
"The second lien holder, as is appropriate in the junior position, is taking more of a reduction in interest rate," one official said. "The interest rate will go at least as low as the interest rate on the first and it will (fall) much further to get there."
Tuesday's announcement will build on President Barack Obama's housing rescue plan announced in February that aims to reduce the cost of homeownership for up to 9 million borrowers straining to make their monthly payments.
RESCUE GETS A REVAMP
Officials will also announce new incentives for the Hope for Homeowners program conceived last summer to refinance hundreds of thousands of struggling borrowers.
In fact, the program has only aided a handful of homeowners and the Department of Housing and Urban Development will offer mortgage servicers thousands of dollars for each home loan that they successfully modify under that troubled program, the officials said.
The officials said that they will continue to remove other bureaucratic encumbrances and expand incentives where needed to steer more homeowners away from default.
Some analysts have faulted officials and lawmakers for leaving Hope for Homeowners hamstrung by the question of second liens as those investors have had a near veto power on modifications.
"It has taken policymakers a long time to realize that second liens are a showstopper," said Dwight Jaffe, a professor of housing finance at Berkeley University in California.
(By Patrick Rucker and David Lawder; Editing by Bernard Orr)
WASHINGTON (Reuters) – The U.S. Treasury Department will on Tuesday tap a $50 billion housing rescue fund to pay off mortgage investors and reduce monthly payments for millions of borrowers, said a senior administration official.
Mortgage servicers that own a small stake in costly loans will receive a cash payment to either erase the debt or agree to accept a reduced
return on their investment.
"It will be a shared effort with lenders, investors, borrowers and the government to ease or extinguish second-lien mortgage payments," a senior administration official told Reuters.
During the height of the housing boom, some borrowers were able to buy a home with no downpayment by adding a second lien, and many of those loans are now failing as the economy and housing market struggle.
Second liens typically carry a higher interest rate than primary mortgages but those second liens will have a lower rate under the modification plan, the officials said.
"The second lien holder, as is appropriate in the junior position, is taking more of a reduction in interest rate," one official said. "The interest rate will go at least as low as the interest rate on the first and it will (fall) much further to get there."
Tuesday's announcement will build on President Barack Obama's housing rescue plan announced in February that aims to reduce the cost of homeownership for up to 9 million borrowers straining to make their monthly payments.
RESCUE GETS A REVAMP
Officials will also announce new incentives for the Hope for Homeowners program conceived last summer to refinance hundreds of thousands of struggling borrowers.
In fact, the program has only aided a handful of homeowners and the Department of Housing and Urban Development will offer mortgage servicers thousands of dollars for each home loan that they successfully modify under that troubled program, the officials said.
The officials said that they will continue to remove other bureaucratic encumbrances and expand incentives where needed to steer more homeowners away from default.
Some analysts have faulted officials and lawmakers for leaving Hope for Homeowners hamstrung by the question of second liens as those investors have had a near veto power on modifications.
"It has taken policymakers a long time to realize that second liens are a showstopper," said Dwight Jaffe, a professor of housing finance at Berkeley University in California.
(By Patrick Rucker and David Lawder; Editing by Bernard Orr)
Tuesday, March 3, 2009
Citigroup to lower some mortgage payments
NEW YORK (AP) -- Citigroup Inc. said Tuesday that it will lower mortgage payments for some homeowners to an average of $500 a month for three months as part of a new program to help the unemployed.
The struggling bank makes the move as President Barack Obama looks to lenders to adjust the way loans are handled.
Citigroup's new mortgage efforts also come on the heels of the latest attempt to bail out the company, which includes the U.S. government's exchange of up to $25 billion in emergency bailout money given to Citigroup for as much as a 36 percent equity stake in the company. The deal between the Treasury Department and Citigroup represents the third rescue attempt for the bank in the past five months.
Unemployed homeowners who may qualify for assistance from Citigroup under the Homeowner Unemployment Assist program include those that are 60 days or more past due on their mortgages or in foreclosure and can pay the reduced amount. Customers must also have a first mortgage loan that is owned and serviced by CitiMortgage Inc. and conforms to government sponsored enterprise limits. The house must also be the customer's primary residence, with homeowners meeting all insurer and guaranty requirements.
"Our Homeowner Unemployment Assist program is intended to serve as a bridge toward a longer-term solution, helping homeowners stay in their homes and in their communities while they get their feet back on the ground," CitiMortgage Chief Executive Sanjiv Das said in a statement.
Citigroup predicts thousands of homeowners may be eligible for the program over the next two years.
Those that partake in the program and are still without jobs after three months will have their mortgages handled on a case-by-case basis to come up with the best payment option, Citigroup said. Others that find work within the three-month period can go back to paying their original mortgage amount or receive a long-term loan modification if qualified.
The program may also be expanded to include customers that are in early delinquency stages or are current on their mortgage at a later point in time once an initial evaluation of the program is complete.
Homeowner Unemployment Assist is part of the bank's existing Citi Homeowner Assistance, which tries to help customers avoid foreclosure.
One of the hardest hit banks by the ongoing credit crisis, Citigroup is in the process of shedding assets and cutting staff as it looks to reduce costs and streamline operations ahead of splitting its traditional banking businesses from its riskier operations. In January the company reached a deal to sell a majority stake in its Smith Barney brokerage unit to Morgan Stanley.
Citigroup shares rose 2 cents, or 1.7 percent, to close at $1.22 Tuesday.
Michelle Chapman, AP Business Writer
The struggling bank makes the move as President Barack Obama looks to lenders to adjust the way loans are handled.
Citigroup's new mortgage efforts also come on the heels of the latest attempt to bail out the company, which includes the U.S. government's exchange of up to $25 billion in emergency bailout money given to Citigroup for as much as a 36 percent equity stake in the company. The deal between the Treasury Department and Citigroup represents the third rescue attempt for the bank in the past five months.
Unemployed homeowners who may qualify for assistance from Citigroup under the Homeowner Unemployment Assist program include those that are 60 days or more past due on their mortgages or in foreclosure and can pay the reduced amount. Customers must also have a first mortgage loan that is owned and serviced by CitiMortgage Inc. and conforms to government sponsored enterprise limits. The house must also be the customer's primary residence, with homeowners meeting all insurer and guaranty requirements.
"Our Homeowner Unemployment Assist program is intended to serve as a bridge toward a longer-term solution, helping homeowners stay in their homes and in their communities while they get their feet back on the ground," CitiMortgage Chief Executive Sanjiv Das said in a statement.
Citigroup predicts thousands of homeowners may be eligible for the program over the next two years.
Those that partake in the program and are still without jobs after three months will have their mortgages handled on a case-by-case basis to come up with the best payment option, Citigroup said. Others that find work within the three-month period can go back to paying their original mortgage amount or receive a long-term loan modification if qualified.
The program may also be expanded to include customers that are in early delinquency stages or are current on their mortgage at a later point in time once an initial evaluation of the program is complete.
Homeowner Unemployment Assist is part of the bank's existing Citi Homeowner Assistance, which tries to help customers avoid foreclosure.
One of the hardest hit banks by the ongoing credit crisis, Citigroup is in the process of shedding assets and cutting staff as it looks to reduce costs and streamline operations ahead of splitting its traditional banking businesses from its riskier operations. In January the company reached a deal to sell a majority stake in its Smith Barney brokerage unit to Morgan Stanley.
Citigroup shares rose 2 cents, or 1.7 percent, to close at $1.22 Tuesday.
Michelle Chapman, AP Business Writer
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