A bit about contruction and mortgages…
Imagine landing your dream home.Your credit is a bit shaky, but you manage to get a subprime loan with an adjustable rate mortgage. A few years later the interest rates jump and you can no longer afford to pay. You see an ad for a business that’s wil…
Couple of random data points to share that support our assertion that mortgage credit standards will continue tightening throughout 2008. From the Second (Mortgage) front: An email from Chase (emphasis ours - notice how they are now talking about survival, rather than profitability): ——– “Due to continued deterioration of the market, Chase has made several changes to credit policy to secure their survival in the future. Some of these changes are reduction to CLTV’s, DTI’s and other policy changes. Please make sure to read the attached credit policy effective on Monday 2-4. All file registered prior to Monday 2-4 will fall under current guidelines. Property needs to be off the market for 180 days No condos in Florida as collateral 85% Max CLTV Primary Residence (Cltv’s vary by state) DTI’s reduced to 40% for Purchases and refinance with credit scores under 700 Max dti allowed for 700+ fico will be 45%. Additional State and County specific CLTV reductions (see chart attached) Many other changes listed in the attachment. ——– And at Countrywide, Home Equity Credit Lines are being suspended [via Calculated Risk, via Implode] ——– “A portion of HELOC customers have already or will soon be notified by CFC Loan Administration that their HELOC draws have been suspended indefinitely. These HELOCs were identified as candidates for suspensions for various reasons including: Significant decrease in supporting property value – If the customer’s current untapped equity (home value minus all mortgage liens) drops by 50% or more from their HELOC opening date, his/her line will be suspended. HELOC payment delinquency – If the customer’s payment is made two or more days after the grace period ends, his/her line will be suspended. Product Terms/Conditions Violation – In cases where the customer violated terms or conditions of the HELOC Agreement, his/her line will be suspended. Examples include, but are not limited to: HELOC on property originated as owner occupied, but now believed to be non-owner occupied or unpaid taxes or insurance on the subject property. Be aware that there may be other actions that could trigger draw suspensions. This is not a one-time event, but an on-going strategy as we continue to manage our lending risk.” ——– Our take on this is that more than a few people will interpret this move from CW as a shot across the bow, and draw the full amount on their equity line to preserve their access to these funds. A run on home equity line withdrawals by cash strapped and otherwise shaky borrowers would be a disaster for banks trying to defend their balance sheet.
On January 28, 2008, the U.S. Army Corps of Engineers modified the procedures for coordinating review of jurisdictional delineations involving significant nexus determinations with the EPA. Significant nexus determinations are required under the Corps and EPA’s joint Rapanos Guidance to determine whether the following aquatic features are jurisdictional under Section 404 of the Clean Water Act: non-navigable tributaries that are not relatively permanent; wetlands adjacent to non-navigable tributaries that are not relatively permanent; and wetlands adjacent to but that do not directly abut a relatively permanent non-navigable tributary.
Under the revised procedures, Corps districts are required to e-mail draft delineations involving significant nexus determinations to EPA regional offices. The EPA has 15 days to decide if a delineation involves a "special case" which would, under the 1989 Memorandum of Agreement between the two agencies, require the EPA to make the final determination of the scope of jurisdiction. There is no more elevation to HQ for significant nexus determinations. Under the revised guidance, Corps districts are directed to finalize delineations if the EPA fails to respond within the 15-day period.
The revised procedures replace the temporary process described in the agencies’ joint memorandum that accompanied the Rapanos Guidance on June 5, 2007. The revised procedures do not apply to jurisdictional delineations involving isolated waters, which are subject to the 21-day review period described in the agencies’ joint memorandum of June 5, 2007.
For further information please contact Keith Garner. Keith Garner, AICP, is an associate in the Real Estate, Land Use and Environmental Practice Group in the firm’s San Francisco office.
On January 28, 2008, the U.S. Army Corps of Engineers modified the procedures for coordinating review of jurisdictional delineations involving significant nexus determinations with the EPA. Significant nexus determinations are required under the Corps and EPA’s joint Rapanos Guidance to determine whether the following aquatic features are jurisdictional under Section 404 of the Clean Water Act: non-navigable tributaries that are not relatively permanent; wetlands adjacent to non-navigable tributaries that are not relatively permanent; and wetlands adjacent to but that do not directly abut a relatively permanent non-navigable tributary.
Under the revised procedures, Corps districts are required to e-mail draft delineations involving significant nexus determinations to EPA regional offices. The EPA has 15 days to decide if a delineation involves a "special case" which would, under the 1989 Memorandum of Agreement between the two agencies, require the EPA to make the final determination of the scope of jurisdiction. Under the revised guidance, Corps districts are directed to finalize delineations if the EPA fails to respond within the 15-day period.
The revised procedures replace the temporary process described in the agencies’ joint memorandum that accompanied the Rapanos Guidance on June 5, 2007. The revised procedures do not apply to jurisdictional delineations involving isolated waters, which are subject to the 21-day review period described in the agencies’ joint memorandum of June 5, 2007.
For further information please contact Keith Garner. Keith Garner, AICP, is an associate in the Real Estate, Land Use and Environmental Practice Group in the firm’s San Francisco office.
New Freedom Mortgage Corporation filed a contractual indemnification claim against Lawyers Title Insurance Corporation. New Freedom brought the action against Lawyers Title to recover indemnity under the closing protection letter for an attorney’…
We’ve been away from the blogging desk for most of the day dealing with a laptop casualty. Scrambling to catch up, but wanted to leave everyone with a thought to ponder: The Fed has now cut rates by 1.25% in the last 8 days, and mortgage rates are unchanged to slightly worse as a result. Today’s Fed Statement [Federalreserve.gov] Fed Cuts Rate by 1/2 Point [NYT]
Deborah Martell, Livonia, Michigan, filed suit against 17 defendants for allegedly fraudulent conduct that induced her to hold sole title to what was supposed to be an investment group purchase. The subject residence is located at 28560 Swan Isla…
Via Commenter Nate (and sure to be all over the rest of the interweb at lightspeed): www.youwalkaway.com
In our previous post we pointed out the fact that many homeowners have an economic incentive to walk away from a property if they owe more than it’s value. What we didn’t add, due to time constraints, was a discussion about how this this behavior (which we will see more of in 2008 than ever before,) is not without consequences. What are they? When the shooting is over, we will see lenders attempt to adjust their pricing and underwriting standards to account for the fact that if properly incented, borrowers will simply walk. This means higher rates, down payments, and tougher underwriting standards in the future. From Calculated Risk, Tanta style: Ultimately, there is no way anyone can mobilize “social acceptability” as a defense against the ruthless put (even if you wanted to). The industry has, in fact, created the conditions in which it’s rational, and as long as it’s rational it will go on. Just as it was rational to buy at 100% LTV. The only possible way to get back to an environment in which ruthless default is rare is to abandon the “innovations” that give rise to them: no-down financing, wish-fulfillment appraisals, underpriced investment property loans, etc. The administration is currently pushing for increasing the FHA loan amounts and the FHA maximum LTV up to 100%. This is not likely to remove the incentive to take another reckless loan on a still-too-high-priced house. If we aren’t going to ration credit with tighter guidelines and loan limits, then it will have to be rationed with pricing: eventually the models will “solve” the problem by increasing the costs of mortgage credit. You cannot simply keep writing “free puts.” Options Theory and Mortgage Pricing [Calculated Risk]
A post sure to terrorize lenders already having a puke-fest over the growing “social acceptability” of walking away from an upside down home, via Paul Kedrosky: I get irritated at the line of argument that says the world was a better place when consumers let burdensome loans wreck their families, and drive them personally into the ground like over-sized tent pegs. Enough. Yes, people used to be much more nervous about defaulting. But so what? If a loan no longer meets your requirements, or if it’s crushing you financially, or if your circumstances have changed, there is no need to go leaping off bridges about it. The world has changed and the consequences of loan defaults & loan renegotiations are no longer need be as dire as they once were. People who pretend otherwise are selling something — usually an over-rosy picture of an imaginary past. It’s about time individuals caught up with countries and companies. Both have always had more flexibility with respect to loan defaults/renegotiation than individuals have. While I’m not suggesting that loan commitments should be as fickle as, say, high school relationships, I am saying that imagining they they need to remain financial straightjackets is not rational. It is a mindset that prevents some appropriate people from getting loans who might appropriately get them (they may have the resources but are afraid of the commitment), and it keeps some people in loans who should have long ago been let out. We agree completely. Much of the lunacy in residential mortgage lending over the past few years was based in part on the belief that Americans would pay their mortgage no matter what - even if it was economically irrational to do so. Looks like this premise is going to be tested, and many lenders will find out that the American homeowner can be just as financially ruthless as the business world has always been.