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Fannie Mae to unveil plan to help strapped homeowners
WASHINGTON – April 17, 2007 – Fannie Mae, one of the nation’s biggest investors in home mortgages, plans to unveil a campaign today that would allow lenders to refinance certain borrowers’ homes, and federal regulators expect to release a statement urging mortgage lenders to help financially troubled borrowers hold onto their homes.

According to testimony submitted to the House Financial Services Committee, Fannie Mae’s chief executive, Daniel H. Mudd, is expected to say that his company is altering its loan products so that lenders can qualify more high-risk borrowers for refinancing. Fannie Mae is targeting adjustable-rate mortgages, which typically offer low teaser rates that increase later. Under a campaign dubbed HomeStay, Fannie Mae would allow lenders it works with to refinance homes without first having to clear up borrowers’ unpaid bills on their credit reports.

Fannie Mae would expand products now available to 500 selected lenders to about 2,000 nationwide, Mudd is expected to tell the committee today. Mudd’s statement also says Fannie Mae will stretch the loan term for this refinancing product to a maximum of 40 years from a current limit of 30 years, which will shave monthly mortgage payments by about 5 percent.

“Altogether, we estimate that about 1.5 million homeowners who face resetting [adjustable rate mortgages] and potential payment shock this year and next could be eligible for our loan options,” Mudd’s statement said.

The testimony comes as Capitol Hill lawmakers are considering the causes and the needed responses to the unfolding mortgage crisis now that the number of missed payments and foreclosures has jumped. The problem has been largely driven by troubles in the subprime mortgage market, which caters to people with blemished credit records, little money for down payments or other credit risks.

Meanwhile, federal regulators plan to release a one-page statement today asking lenders to help keep troubled borrowers in their homes.

The statement was crafted after nearly three dozen lenders, investment bankers and consumer advocates met behind closed doors yesterday in Washington with regulators.

“The agencies encourage financial institutions to consider prudent workout arrangements that increase the potential for financially stressed residential borrowers to keep their homes,” though such arrangements may not be feasible for everyone, says the statement from the Federal Reserve, the Federal Deposit Insurance Corp., the Office of Thrift Supervision and the Office of the Comptroller of the Currency. Options include converting variable-rate loans to fixed-rate loans.

The statement was characterized by one person familiar with it, who spoke on condition of anonymity, as “friendly encouragement” meant to send a message to the industry, rather than a mandate.

Lenders and companies that manage mortgages say they are trying to do their part in remedying the problem. But some say their hands are tied because many mortgages have been packaged into huge bonds and sold to investors, so that the terms of the loans cannot be altered easily when a borrower can no longer make payments.

Rules that govern these bonds sometimes forbid lenders from reaching out to borrowers until they are 30 days late on their payments. These rules are meant to protect investors.

In today’s statement, regulators will assure lenders that “the agencies will not penalize financial institutions that pursue reasonable workout arrangements.”

© Copyright washingtonpost.com, Dina ElBoghdady

NEW YORK – April 17, 2007 – Campbell Communications this week released its fourth annual poll analyzing realty agents’ attitudes toward mortgage brokers and direct lenders.

The results showed that 42 percent of Realtors surveyed prefer “local” mortgage brokers and 57 percent view the lender as a “partner;” however, the wide majority – nearly 75 percent – do not even recommend the firm’s mortgage lender partner to customers, but instead work with a separate list of informal lending partners or with a single informal partner.

The survey found that 55 percent of non-minority borrowers accept their property agent’s suggested lender on faith and are likely to hire that lender, compared to 48 percent of minority home buyers who follow through on an agent’s lender recommendation.

Agents polled said they most often refer a lender because it is “reliable in meeting scheduled closing dates,” but they emphasized that lenders need to be ready to meet the special needs of minority home buyers – Hispanics, in particular – with such services as foreign language support and alternative sources for downpayment.

Source: Realty Times (04/17/07) Evans, Blanche
 

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