Real LI

Drive along any average neighborhood on Long Island and one sees for-sale signs here and there.

But in the upscale communities, wealthy homeowners’ mortgage woes may not be so evident.

“They don’t necessarily want to have the neighbor see them switch from the Beemer to the Ford or have to pull their children from riding classes or sailing classes or whatever,” Richard Murphy, a Wells Fargo sales manager based in Hauppauge, said during a managing-money seminar organized by the Long Island Council of Churches. “When it finally comes to a head, it’s going to be serious.”

Manhasset, with the tony Americana Shopping Center and a six-figure median household income, is not the first place that comes to mind on the subject of emergency food.

But the Unitarian Universalist Congregation there is getting more and more people asking for food, according to the Long Island Council of Churches. The council, which has been organizing regular seminars on surviving hard times and fixing mortgage woes, will hold one for the Unitarian congregation from 9 a.m. to 12:30 p.m. April 4. It’s open to the public.

- ELLEN YAN

In the legislative fight to allow bankruptcy court judges to change mortgages, some in the Senate want to limit the power to only subprime and "exotic" loans, but one key negotiator on the bill doesn't want to hear it.

"Limiting this bill to subprime and other exotic mortgages would reduce the bill’s effectiveness by up to 50 percent," Sen. Charles Schumer (D-N.Y.) said Monday. "We want to find a compromise that can gain support, but we will not water down this proposal for the sake of picking up a few additional votes.”

The measure is a cornerstone of President Barack Obama's plan to help struggling homeowners by pushing lenders to modify more mortgages. The House last week passed a bill to grant judges the power to change mortgage terms on a primary home, but the original idea had been narrowed to existing mortgages in which the borrower can show efforts to modify loans had failed.

Lenders have been against the bill for various reasons and said having mortgages modified by judges would force them to cover risks by raising everyone's cost of getting mortgages. Critics said lenders have no reason to balk because judges already have the power to change terms on second homes.

Years ago, formal attire was foreign to business executive David Samber as he sat in his office buying, managing and liquidating distressed businesses and securities.

But now, the mortgage crisis has given the "retired" Samber a new part-time work identity and a new dress code in a scene far from Wall Street and big businesses going bust -- the world of landlord-tenant disputes at Nassau County District Court in Hempstead.

"I had to buy a suit in retirement to go to court," said the Roslyn Harbor resident, 59, who retired in 2007 by closing his SBZ Select Investments firm and who once headed Kimco Realty Corp., an asset management firm and liquidator based in New Hyde Park. "It makes you feel young," he said of his suit-wearing code. "I haven't done it in a while."

Continue reading "Roslyn Harbor retiree finds way to help in mortgage crisis" »

Houses listed for $400,000 or less, says Linda Albo, a Rocky Point Realtor in discussing the tough market sellers are currently experiencing. "The market is strong in that range," she says. "Younger and older people are returning from the Sun Belt because the house they couldn't afford two or three years ago is now in their sights." The problem, she and other agents say, is that even the most qualified buyers can't get a mortgage.

The Home Affordable Refinance Program is supposed to help up to 4 million homeowners who are at risk of losing their houses to foreclosure and up to 5 million homeowners having trouble refinancing. Here's a guide to who's eligible.

- VALERIE KELLOGG

Levittown has always symbolized the dream of homeownership – and has always represented so much of what happens on Long Island as a whole. Perhaps that’s most evident nowadays in how Levittown is affected by the recession, and to the declines in home prices.

Real estate experts say house after house on block after block is “upside down” – meaning that the mortgage debt on the property is higher than its value. A quarter of those who bought in Levittown in 2006 used 100 percent financing – or higher. And now that property values have fallen 12 percent over those two years, they’re all upside down.

That’s trouble on a variety of fronts, from people who end up in foreclosure to those who continue to make their payments but cannot sell even when they want to move on. That leaves a community like Levittown -- and residents like magician John Reid, above, who is in foreclosure -- in an economic stalemate.

And beyond the confines of the historic hamlet, Levittown’s story speaks to Long Island at the start of 2009, as residents and businesses are now on a roller coaster of uncertainty. No one is sure how steep the decline will be, or when the track may turn upward again.

-- RANDI F. MARSHALL

Newsday / Audrey C. Tiernan

The Obama White House is expected to roll out a $50 billion homeowner relief package this week, one that could subsidize lenders who make interest rate cuts on troubled loans.

But the big thing to watch is how the package would establish industry standards for modifying loans and also how it might be used to get the financial industry’s support to pass a bill allowing bankruptcy judges to modify loans.

Both points have been big worries for lenders and servicers, because some of the power in redoing contracts would be taken away from them, with the potential of big revenue losses, and because future borrowers may not respect the sanctity of mortgage contracts.

But the relief package is expected to take a carrot-and-stick approach that would convince critics that it’s the best alternative to the growing numbers of foreclosures, despite the $700 billion bailout passed last year for the financial industry and this week’s $790 billion stimulus package.

Setting standards for loan modifications has been the demand from homeowners’ advocates, who say the case-by-case, time-consuming approach by lenders and servicers has gotten borrowers deeper into foreclosure.

So far, the powerful Mortgage Bankers Association is not stepping on the idea of modification standards.

“We support the idea of finding one workable standard that can be used across the industry to modify loans and help keep borrowers,” MBA spokesman John Mechem said.

A lot of dough has been sent to local agencies to help troubled homeowners, but the number of people in danger of losing their homes still grows.

New York State last year allocated $23.8 million to nonprofits to provide foreclosure prevention counseling and help, according to the year-end report publicized today from HALT, the governor’s interagency task force to stop abusive lending.

RealtyTrac, an online foreclosure market, also publicized its year-end report today, saying the number of homes with foreclosure-related filings in the state went up by 29 percent compared to 2007. That’s 50,032 last year and 38,688 in 2007.

The report rehashes a lot of the federal and local statistics that had reported throughout the past year, but one interesting note is the declining percentage of loans closed by institutions supervised by the state compared to those that operate with federal charters. In 2006, state-chartered and regulated banks and lenders had 40 percent of new mortgages in the state. In 2007, it was 27 percent.

As the mortgage crisis ballooned over the past two years, state officials have been complaining that federal charters give institutions more leeway and less oversight than state law and charters. That has influenced lenders to apply for federal charters, making it harder for New York State to police predatory lenders.

"With the aggressive assertion of preemption by federal regulators, the percentage of mortgage loans subject to state consumer protection laws has also been contracting," the report said.

In 2007, the number of new loans stemming from state-chartered banks and institutions was 108,051, according to the report of the latest statistics. Federally-approved banks and institutions accounted for 290,588 loans, data shows.

Rebellion, outrage and death colored a Hofstra University symposium, and it wasn't even about the Revolutionary War.

The $700 billion bailout and the post-subprime future of housing were being aired recently at the "Forging a New Housing Policy" symposium from the National Center for Suburban Studies.

Continue reading "At Hofstra housing symposium, a call for outrage" »

New York state has the lowest percentage of mortgages with negative equity, according to report on single-family homes from First American CoreLogic, a leading firm that analyzes real estate data.

The company, which covers about 80 percent of the nation's mortgages, said 4.4 percent of the 1.6 million mortgages it monitors in New York were negative equity cases - that's just under 104,000 loans. That means homeowners owe more than the house is worth because they paid little or no money down or have high interest rates, delinquent payments and properties that depreciated. The Mortgage Bankers Association of America estimated there are about 2 million mortgages in New York state.

Nationally, negative equity mortgages represented about 18.3 percent of almost 42 million mortgages on single-family homes, said the California-based company, whose data covers about 80 percent of the nation’s home loans. Nevada led with 48 percent of its mortgages with jeopardized equity.

New York’s mortgages cover more than $699 billion in properties, with $333.6 billion still owed and $365.5 billion in equity.

A cottage industry has sprung up to cater to troubled homeowners and to get around the tight credit market, especially companies offering to do loan modifications for a fee, as Newsday reports.

Entrepreneurs and businesses have found a niche offering a variety of services, from mental de-stressing counseling to pulling the equity out of homes. Some mine public documents for homeowners in foreclosure proceedings and hire refugees from the mortgage and real estate world to make calls; others network at churches to spread the word about their services or pay for leads to new customers.

“The market created an opportunity and now people are going to exploit it,” said Bill Desane, who said he was a millionaire business consultant years ago, then went bankrupt through bad investments and now has launched a Hauppauge company to rescue homeowners before foreclosure proceedings start.

Desane’s start-up, Stablefooting Inc., would offer a pre-loan, “prenuptial agreement” that allows both sides to get out of the mortgage in case of trouble and lays out a rescue plan for the homeowner, from job placement to counseling.

The company would charge the homeowner 1 percent of the loan for the prenuptial and then a lot more later if it must launch into rescue mode by paying off the mortgage, taking the house deed and providing services -- job training, counseling and more -- to get the homeowner financially stable enough to get a new loan.

“We call it social capitalism,” Desane said. “It’s assurance, not insurance.”

Now all he needs is $25 million. Desane said four groups of investors, including three hedge funds courted since April, are close to delivering.

The problem in a lot of these new companies and products is they don't have a track record. It's tough to determine if they'll be reliable and their products good for them or good for the homeowner or perhaps both.

These are heavy, heavy times -- when Wall Street giants hold their hands out, the little guys end up carrying the bill and lawmakers in Congress rush to wrap up a $700 billion bailout so they can go home to campaign for re-election.

Now, for a little levity.

It comes from mortgage industry veteran Jonathan Pinard, the guy who last year noticed that Citi Residential Lending had started offering what it called “nonprime” loans after the subprime bust.

With investors even scared of investing in performing mortages, reducing the supply of money available for new loans, Pinard this month joked that lenders could have a better time by putting a new, catchy name on something old.

He noted that less traditional loans had their place in the lending world, fitting certain borrowers, depending on expected changes in their financial lifestyles and how long they want to stay in the home before selling.

But now, such things as options arm loans, which give the borrower various payment options but can hike up the total bill, have become dirty words.

“If they are offering it, they’re calling it something different,” said Pinard, the Long Island-based head of the Empire State Mortgage Bankers Association.

“Non prime plus,” he joked. “How about this – the Non-Prime Patriot Loan? We’ll bring in Americanism. For patriots only. No pinheads need apply.”

On Labor Day, many provisions in the state’s new subprime lending reform law kicked in, but some protections apply to homeowners in general.

In lenders' letters notifying nonsubprime borrowers that foreclosure proceedings will be started, lenders must advise homeowners to consult an attorney or legal aid. The notice must also say that nonprofits and government agencies are available to discuss options and negotiate with lenders. It must say that information is available from the New York State Banking Department. In addition, the letter must warn against foreclosure prevention scams.

In comparison, subprime borrowers must get preforeclosure notices at least 90 days before the lenders begin to take action. The letters must tell them to consider going to housing counseling and list at least five nonprofit counselors in the borrowers’ region; those counselors must be the list of nonprofits approved by the federal Department of Housing and Urban Development or the New York State Division of Housing and Community Renewal.

The law also attempts to deter foreclosure prevention scams. Distressed property consultants must have written contracts before performing any services for the homeowners and cannot charge or accept fees before services are completed. Also, such consultants cannot accept power of attorney from homeowners, except in limited circumstances. Homeowners have the right to cancel the consulting contracts within five business of both parties agreeing to the contract.

Several restrictions have also been placed on subprime loans. Lenders will no longer be able to charge prepayment penalties and offer teaser rates of less than six months. “Loan flipping” will be illegal – that’s when loans are refinanced without any tangible benefit to the borrower. Also, lenders will have to put taxes and insurance in escrow.

State banking superintendent Richard Neiman recently sent a letter to mortgage bankers and brokers, mortgage-related industry groups and loan servicers across the state.

The $1,000 down payment program at Continental Home Loans lives on borrowed time, but the Melville company’s chief, Mike McHugh, knew his idea might have a short life.

He started the program about eight months ago, but now, the crux of the idea - seller-funded down payment funneled through nonprofits – will no longer be legal on loans backed by the Federal Housing Administration, which requires up to a 3 percent minimum down payment for buyers, depending on the FHA program. The Housing and Economic Recovery Act, signed into law last month, bars such seller-funded down payments on new FHA-backed loans starting Oct. 1.

So far, the $1,000-down program has led to about 100 or so home sales as well as closings under other loan programs, McHugh said. “The product itself got them interested and maybe gave them the impetus to go look at a house and say ‘Yeah, I can do this,’ “ he said.

But using housing nonprofits to funnel help from sellers has been controversial. Lenders around the country have been getting around the minimum down payment rule when sellers agree to help on down payment to lure buyers. Sellers to “donate” money to the nonprofit, which would then “grant” the money to the buyer and also get a donation that it keeps from the seller.

FHA said this practice led to inflated prices and higher default rates. It tried to shut down that practice but was sued by the nonprofits last year.

McHugh, who said his $1,000 program sought qualified buyers, believes there should be seller-funded help on down payments but also thinks there should be restrictions, including higher credit scores for such buyers as a way of limiting risks.

Some lawmakers agree and have already introduced bills to allow seller-funded assistance on FHA loans.

Continental’s chief said he’s got about 30 to 40 loans in the pipeline to be approved. He’s sent interested buyers, sellers, agents and others in the program emails and letters about the Oct. 1 deadline; the loans have to be approved by then but the closings can take place later.

McHugh’s doesn’t think Congress will pass any change before the new law’s provision kicks in, but he’s optimistic his $1,000 down program will come back to life one day.

“Do I think it’s the end?” he said. “No, I don’t think it’s the end. There’ll be something to take its place somewhere down the road. Our point is if it’s done well, it can be a viable program.”

IndyMac Bank is the latest addition to the failed bank list from the Federal Deposit Insurance Corporation, the fifth collapse so far for 2008.

With the mortgage crisis deepens, this year could be the latest banner year for bank and savings and loan failures as defaults and foreclosures rise due to bad lending, economic jitters and greedy investors and homeowners who took risks without thinking.

In the past eight years, 2002 has been the banner year for its 12 failed institutions, according to the FDIC.

That’s when Sept. 11 woes and the dot com bust caught up with the banking sector, said Ross Waldrop, a senior banking analyst at the FDIC.

The FDIC rates banks on a 1 to 5, with higher numbers indicating higher risk of failure.

The agency’s list of problem institutions grew from 76 at the end of last year to 90 in the first three months of the year, an 18 percent jump. Those 90 institutions represent $26.3 billion in assets, according to the FDIC’s latest quarterly report. It’s the sixth consecutive quarter that the number has grown since a historic low of 47 at the end of the third quarter in 2006, Waldrop said.

The list of who’s good and bad is confidential, the analyst said, because the FDIC does not want good ratings to be used as a marketing tool and bad ratings to further sink the institution.

“We strive not to do anything that would harm public confidence or lead to problems for an institution, other than enforcement-type action,” Waldrop said.

It’s what California-based IndyMac and the Treasury Department’s Office of Thrift Supervision feel happened after Sen. Charles Schumer (D-N.Y.) publicized a June 26 letter to regulators warning of IndyMac’s possible collapse. That sent throngs of depositors to IndyMac branches to demand all their money, and more than $1.3 billion were withdrawn in 11 days, federal officials said. It stressed out an already-financially-unstable bank, suffering from its focus on subprime and no-documentation mortgages.

IndyMac has two Long Island two retail loan offices but no bank branches.

“This institution failed today due to a liquidity crisis,” OTS director John Reich said in a statement Friday, when the government took over the bank. “Although this institution was already in distress, I am troubled by any interference in the regulatory process.”

In his defense, Schumer said the company had been in trouble for months and that regulators were lax in taking action to protect consumers from a possible failure. “The regulators should have done more sooner,” Schumer said in a statement last week before the takeover. “The home loan bank system, for instance, should not bankroll abusive lending. Going forward, the regulators should consider ways to implement stricter oversight over the lending system so that there isn’t another IndyMac.”

In what might be the lowest loan rate around, 2 percent fixed-rate mortgages are being offered to Section 8 voucher recipients.

New York state and federal officials hope their new program will not only allow low-income renters to buy homes but free up resources of nonprofits that give out home-buying grants. Section 8 is the government program that helps pay housing costs that exceed 30 percent of recipients’ household income.

“Our new voucher homeownership mortgage initiative will promote sustainable affordable home ownership, which is our agency’s mission,” said Priscilla Almodovar, president and chief executive of the State of New York Mortgage Agency. “It helps voucher recipients transition into home ownership. And it enables public housing authorities and nonprofits to help more Section 8 recipients achieve the American dream of homeownership.”

Under the "SONYMA Section 8 Voucher Homeownership Mortgage Program,” the rent vouchers will be turned into homeownership vouchers, which would go toward paying off a SONYMA-approved mortgage lender. That voucher money will be combined with nonprofits’ grants to help Section 8 participants buy homes.

SONYMA will finance up to 99 percent of a home sale and offer loans without purchases of points and a $400 limit on bank fees.

"Our families are hard workers who contribute to the local economy,” said Marianne Garvin, president of the Community Development Corp. of Long Island. “They have the financial skills to achieve healthy homeownership, but they need an appropriate mortgage to turn the dream into a reality.”

There’s also the option of borrowing up to $5,000 to pay for closing costs or 5 percent of the SONYMA mortgage, whichever is higher – but certain homeowners won’t have to pay back such aid. There are no monthly bills for the closing cost loan, and those who keep up with mortgage payments will have their closing cost loan “forgiven” after 10 years. Payments on closing costs kick in if the home owner falls behind on mortgages or lives in the house less than 10 years.

In high-cost areas such as Long Island, loans on closing cost could go up to $10,000.

SONYMA-approved nonprofits and housing agencies determine whether the applicants are financially self-sufficient enough to keep homes for the long term. The applicants must also complete home owner counseling courses and meet credit criteria.

The homeownership voucher program is also being sponsored by the New York State Division of Housing and Community Renewal and the federal Department of Housing and Urban Development (HUD).

Details are available at nyhomes.org or 1-800-382-HOME (4663).

It’ll be a long Saturday.

From noon to 7 p.m. June 7 in Westbury, Long Island homeowners will be able to have their mortgages examined one-on-one by representatives of their lenders or their mortgage servicing companies. Nonprofit mortgage counselors, attorneys, Nassau County officials and state banking employees will also be at hand to help.

Continue reading "Westbury seminar for homeowners facing foreclosure" »

Back in another era, subprime was not the bad word it is now but a legitimate part of the mortgage industry.

There were people who wanted homes but didn’t qualify for traditional mortgages, which called for good credit record, assets and income. The requirements were like a three-legged stool; if one leg was slightly wobbly -- say someone self-employed without full proof of income or someone who couldn’t pay 20 percent down -- the other two legs had to be stable for the borrower to get a loan.

Lenders would make rational risks and come out with reasonable loan-to-value mortgages.

What contributed big time to the subprime collapse in August was "creative financing." Some lenders gave two loans to cover everything, including closing costs, as a way of getting the business of borrowers who obviously couldn’t pay. Others lured customers with low introductory interest rates, only to smack them with high ones a year or so later.

Now, the old management crew at Delta Financial Corp., a subprime lender that filed for bankruptcy in December, is returning with a new mortgage company, Reliance First Capital. On the surface, that may sound foolhardy in today’s still wobbly lending industry, but there may be a niche for the newcomer, as Newsday reports.

Loan limits for mortgages insured by the Federal Housing Administration have been temporarily raised to $729,750 for Long Island.

The new maximum, which took effect March 6 and lasts until Dec. 31, will make it easier for families to get mortgages in high-cost areas like Long Island. The change was part of the Economic Stimulus Act, signed last month by President George W. Bush in response to an economy weakened by the mortgage mess, record-high gas and oil prices and other problems.

The change is expected to relax the tight credit market and help lenders feel safer in giving out loans because the government will come to the rescue if anything goes wrong. In the past, many lenders avoided FHA loans because they required a lot of paperwork and documentation; but since the subprime mess, in which "creative" financing were given to people who clearly could not afford to pay, lenders are once again pushing FHA loans.

Before March, the cap was $362,790 for the nation's highest cost regions, including Nassau and Suffolk. That's the limit returning for Long Island next January unless Congress and the president extend the higher cap or make it permanent.

The Nassau County Bar Association may be offering some free legal advice to borrowers caught in the mortgage crisis.

One idea that’s been floated is a sort of hotline where attorneys would donate their time to answer questions, such as whether borrowers have grounds to sue and what step to take next, said Abraham Krieger, co-chair of newly-created subprime subcommittee, which falls under the real property law committee.

“One of the things that we’re trying to do is integrate a program within the bar association itself, where borrowers might be able to have a place to go and at least a call to make and maybe the opportunity to interview or speak with an attorney initially to get some direction as to how and what to do with their loans,” said Krieger, a partner in the Meyer, Suozzi, English & Klein firm, based in Garden City.

For many troubled borrowers, they're so in debt or short of money that they can't afford to pay a lawyer for advice.

Krieger said help from lawyer volunteers can be like initial consultations. The borrower and attorney can decide if a lawsuit should be filed, Krieger said, but that would be done outside the bar association’s purview. The trade group’s role does not cover filing and fighting suits on behalf of people, he said.

It’ll take about a month or two to set up any hotline and organize help efforts, the subcommittee head said. Retired judge Samuel Levine is the other co-chair.

“We certainly want to move quickly on this because the list of borrowers in the middle of this subprime turmoil is only growing,” Krieger said. “It’s not being reduced. So the sooner we come up with something more formal, the sooner we can act on it.”

Continental Home Loans has created a $1,000 down payment loan and is publicizing the workings of their month-old program.

That’s because the design of the loan can be complicated, with participating sellers funneling down payment for the buyer through a nonprofit and businesses, from title search companies to attorneys, cutting fees, as a Newsday story today details.

But Mike McHugh, head of the Melville lender, wants to make it clear that it’s all legitimate, with full-documentation loans backed by the Federal Housing Administration -- not a return to the “smoke and mirror” creative financing that cause the subprime collapse last year.

That’s why the lender has bought ads in legitimate media to market the $1,000 and scheduled several public seminars in legitimate places.

Company officials will be at the Huntington Hilton in Melville from 10 a.m. to noon Saturday and 7 to 9 p.m. Jan. 24. Plus, they’ll hold another seminar from 7 to 9 p.m. Tuesday at the Islandia Marriott and 7-9 p.m. Wednesday at the The Chateaubriand in Westbury.

Potential buyers can fill out applications there and are encouraged to bring their pay stubs and other documents. Continental promises to approve or deny loans within two working days.

Continental has set up www.SmarterRealEstateSolutions.org, expected to be turned on Friday for the public. It will show houses whose sellers have agreed to participate in the program, as well as a list of real estate agencies and other businesses that signed up for the program.

How low can mortgage rates go?

Mortgage rates posted their largest three-week decline in 20 years as economic worries mounted, Bankrate.com reported today.

The rate on a 30-year fixed-rate mortgage fell to 5.75 percent, down from 5.88 percent a week ago. Less than six months ago, the rate was a full percentage point higher, which would add an additional $130 a month on a $200,000 loan.

The rate on a 15-year fixed-rate mortgage fell to 5.28 percent, down from 5.45 percent, while the rate on a fix-year adjustable rate mortgage came in at 5.67 percent, down from 5.81 percent.

The rate decline has spurred increased interest in mortgages, according to the Mortgage Bankers Association. The group today said that mortgage applications jumped 28.4 percent last week.

Economic worries have sent mortgage rates plummeting to their lowest levels since September 2005, according to Bankrate.com.

The rate on 30-year fixed mortgages dropped to 5.88 percent, down from 6.14 percent last week, while the rate on 15-year fixed rate fell to 5.45 percent, down from 5.76 percent last week. A five-year adjustable rate mortgage slipped to 5.81 percent, down from 6.14 percent a week ago.

Mortgage rates have sank nearly a half percentage point since Christmas, the biggest two-week decline since May 1995. Weak economic indicators, such as declining new home sales and a disappointing employment report, contributed to the decline.

When people are worried about the economy, they flee to safer investments such as Treasury securities. This pushes down the Treasury rates, which in turn sends fixed-rate mortgage rates tumbling.

Looking for jobs, according to an article in today's Newsday. That's what Farmingdale resident Robin Rosenberg has tried to do every morning for the past six months since losing her job at the bankrupt Melville company. "I know I could go into almost any job in any company and do a fantastic job, because I'm diligent, I'm a hard worker and I'm willing to learn," Rosenberg says. "But no one wants to give me that chance." Real more here.

The state banking department today released details of a long-awaited licensing system for mortgage loan officers and expects to process about 40,000 applications within two years.

New York will join about 40 other states in putting names of licensees onto the National Mortgage Licensing System, set up by the Conference of State Banking Supervisors and the American Association of Residential Mortgage Regulators. Starting April, consumers will be able to look up brokers and employees allowed to offer mortgages, an effort at tracking employees who have been fired, unbeknownst to potential borrowers and employers, and try to jump from company to company.

The lack of licensing in a profession that can affects borrowers’ savings and credit has been under a microscope during the subprime collapse, in which loan officers and lenders have been blamed for some of the problems.

Under the licensing law passed last year in New York, applicants will have to attend 18 hours of classes, including three hours on ethics. The licensing process will covers a federal and state criminal background check, credit history and copy of applicants’ fingerprints.

The banking department will require current “mortgage loan originators” to send in applications by July 1 and those hired next year to send in paperwork as soon as possible. New hires will have priority in processing, while current employees are expected to be licensed or turned down by January 2010.

The banking department has hired extra workers to cope with the deluge of paperwork.

Although a state banking department spokeswoman said mortgage banking and broker groups have been kept up to date on details, some in the industry have worried about lack of details and the work involved in complying by the deadlines. For example, mortgage bankers and brokers will have to send in the names and addresses of each loan originator employee to the department by Jan. 15.

Mortgages are likely going to get pricer, thanks to a recent surcharge from Fannie Mae.

Fannie Mae, which purchases mortgages from lenders, is adding the charges to loans of more than 70 percent of the home's value. The amount varies with credit score. Loans with scores below 620 will be slapped with a 2 percent charge; scores of 620 to 639, 1.75 percent; 640 to 659, 1.25 percent, and 660 to 679, 0.75 percent. The surcharges go into effect on March 1.

Many lenders will likely pass along the charges to borrowers. So this means that a lenders could charge borrowers with scores less than 620 a rate of 6.375 percent instead of 5.875 percent, said Sheldon Glatt, a certified mortgage planning specialist at SAS Consultants in Rockville Centre. That adds $100 a month to a loan of $300,000. The borrower could escape the charge by paying $6,000 upfront, but Glatt doubts many would do that.

"It will make it more difficult for [borrowers] to get loans for houses," Glatt said.

Fannie Mae is also adding charges of up to 0.50 percent on second mortgages, depending on loan-to-value ratio and credit score.

Fannie is taking these steps "to ensure that what we charge aligns with the risk we bear. These changes reflect the ongoing turmoil in the mortgage finance markets," according to a spokesman.

Prodded by the mortgage crisis, the Senate this morning overwhelmingly passed a bill to update the Federal Housing Administration, which backs certain mortgages but had been strapped by outdated loan limits that hurt high-cost areas such as Long Island.

The Senate's FHA Modernization Act would raise the current loan limit of $417,000, lower down payment required of low- and middle-income borrowers and increase penalties for fraud committed against the FHA programs.

Several of the proposed changes are aimed at stemming foreclosures and drawing in more minorities and low-income families. It would allow borrowers whose rates are due to reset to refinance into federally-insured loans. The bill would expand pre- and post-purchase mortgage counseling programs. It also would set up a five-year pilot program to test alternative credit rating systems for borrowers with little credit history at traditional credit bureaus; the new system could include rent, utility and insurance payments.

The next step is for House and Senate negotiators to reconcile differences between their bills. Then lawmakers would vote on the final version and if it passes, send it to the president for signing.

The Senate version passed 93 to 1, with six not voting. Sen. Charles Schumer (D-N.Y.) voted yes, while Democratic presidential candidate and senator Hillary Clinton (D-N.Y.) did not vote. Her office did not call back by press time.

The FHA market share of loans taken by low-income families and minorities has dropped sharply in recent years, replaced by subprime and exotic loans.

Many lenders and mortgage brokers avoided FHA-backed loans because they require more documentation, paperwork and eligibility requirements for the borrower.

But since the mortgage mess has led to lenders losing money and shutting down, FHA loans have made a huge comeback, because if the borrower defaults, the government is the safety net for the lender. FHA loans are so popular now that the federal agency has started cracking down on loan officers who make federally-backed loans without FHA approval.

"Countrywide continues to pursue marketshare where we believe we can grow," regional senior vice president Robert Donovan tells Newsday of its decision to open an East Hampton office, even during the credit crisis. Ironically, the Newton Lane location once belonged to now-banktupt American Home Mortgage of Melville. Countrywide Home Loans will offer mortgages up to $6 million.

Muses real estate columnist Heather Buchanan at Plum Hamptons: "With the Fed Rate cut coming to shore up the stock market, are we simply Teflon out here in the Hamptons? We think of Countrywide Home Loans as a company in the center of the subprime firestorm, yet they’ve just opened an office in East Hampton."

Some say what happened during the mortgage crisis is a crime. But is it a sin?

A yes comes from the Rev. Tom Goodhue, executive director of Long Island Council of Churches, which has been getting many calls from members asking for help for their parishioners.

“The whole mortgage-backed securities industry is a prime example of people not taking sin seriously,” said Goodhue, who took economics courses in college and has been organizing help seminars for borrowers. “There is within this industry a brokenness that is a manifestation of sin.”

In last month's council newsletter, Goodhue tackled the topic in a column titled “Restoring Trust and Taking Sin Seriously.” He raised the question of why people didn’t expect sin to be committed when lenders and mortgage brokers pushed exotic loans; investors bought packaged loans but didn’t know what was in them; and credit ratings agencies, who rated the loans as solid investments, are paid by the deal makers rather than investors.

Continue reading "Thou shalt not lend easy money" »

New York Gov. Eliot Spitzer said today the Bush administration's effort to help troubled subprime borrowers is too narrow in scope. The administration last week unveiled a plan to freeze interest rates for some homeowners with adjustable rate loans, but it only applies to a narrow slice of borrowers.

So what is New York doing to assist borrowers here? Speaking at an awards luncheon for the New York Housing Conference, the governor pushed a multistate initiative that's in the works. The plan calls for servicers to restructure loans of troubled borrowers on a mass basis.

When will it be unveiled? Spitzer said at a press conference after the luncheon that these negotiations take time. It remains to be seen how effective the multistate initiative will be.

Meanwhile, he said to look for more details about his administration's efforts in the subprime arena in his State of the State address next month.

Mortgage rates on 30-year fixed-rate mortgages have fallen into the 5-percent range for the first time in more than two years.

"Loans are available in the 5's," said Richard Biondi, principal with RJB Financial Consultant in Farmingdale. "That's certainly a possibility."

Freddie Mac reported Thursday that conventional 30-year mortgages -- those less than $417,000 -- dropped to an average of 5.96 percent, down from 6.10 percent a week earlier. A year ago, these mortgages carried an average of 6.11 percent. Mortgages are now at their lowest rate since September 2005.

Meanwhile, a 15-year fixed-rate mortgage can be had for an average of 5.65 percent, the lowest since October 2005. And the average rate for a five-year adjustable-rate mortgage is 5.75 percent.

Rates have drifted up slightly in the last few days, Biondi said, but they are still the lowest they've been in recent years. Interest rates on 30-year mortgages are linked to rates on 10-year Treasuries...these have been falling in recent weeks as people fearing an ecomonic downturn flock to safer investments

That's what Newsday's analysis shows today. Read the full package here.

After buying her childhood home from her mother's estate, Kari Sessa and husband, Keith, were in danger of losing the Huntington Station house until the lender agreed to a two-year extension of the 6.1 percent teaser interest rate on their loan, Newsday reports. "Freezing the lower, introductory rates is just the mortgage crisis fix being negotiated by the Bush administration on a bigger scale with banks and lenders, but some Long Islanders said the effort could have a wide-ranging impact far beyond today. It would relieve the short-term burden of current borrowers and keep some from losing their homes yet could also hurt future homeowners by making it harder to get loans." Read more here.

Newsday photo / Ken Sawchuk

The Merrill Lynch Center at Hofstra University's Frank G. Zarb School of Business is hosting a roundtable tonight on "The Subprime Mortgage Crisis: How the Housing Market Bubble Shook the Global Financial System."

It runs from 6:15 to 8:30 p.m. in Room 246 of the Scott Skodnek Business Development Center in Axinn Library.

Speakers include Hofstra Professors Robert Campbell and Ronald Silverman, as well as Marie Pedraza of HSBC and Matthew Miller of Lehman Brothers. Hofstra Professor Sinan Cebenoyan will moderate.

Topics for discussion will be the subprime mortgage market, its origin and consequences for the housing market and the economy; predatory home mortgage lending as a credit option for the underserved; the securitization of subprime mortgages and how the subprime mortgage market "virus" infected the financial industry.

There will be a Q&A after the roundtable discussion.

In an effort to clamp down on predatory lending, the House of Representatives on Thursday approved a bill that would establish some sweeping standards, from a national licensing system for mortgage loan officers to protection for renters living in homes to be foreclosed.

The Mortgage Reform and Anti-Predatory Lending Act, which passed by a vote of 291 to 127, will go to the Senate, but its fate is uncertain because the powerful mortgage industry, including the Mortgage Bankers Association, and the Bush White House are against it. Critics say regulatory efforts have been under way to address the mortgage crisis, and they fear the bill would pave the way for more litigation and scare lenders from offering mortgages.

The bill would set several protections, liability definitions and penalties for the first time.

For the industry, the bill would hold Wall Street firms liable if they buy, sell and back loans given to borrowers who clearly could not pay, and it would give borrowers the right to have their loan terms rewritten. Also, a national licensing and registration system would be created for mortgage loan officers, who will be licensed for the first time in New York next year.

On first-time protections for consumers, the bill would set notification procedures for renters in foreclosed homes to give them enough time to find new shelter.

Also, the legislation tackles prepayment penalties, which Bush administration and industry officials don’t want to outlaw. One provision bars prepayment penalties on high-cost subprime mortgages, while another, from Rep. Carolyn Maloney (D-NY), limits how much lenders can charge in prepayment penalties.

Continue reading "Anti-predatory-lending bill now goes to Senate" »

During the subprime mess of the past months, mortgage lenders liked to say they didn’t deal in subprime loans. Now, even the word has been relegated to the back room; what’s in vogue is “nonprime.”

“It just seems they’re calling a Chevy a Cadillac,” said Jon Pinard, the Long Island-based head of the Empire State Mortgage Bankers Association.

Pinard saw the term for the first time in many years after clicking into an e-mailed advertisement from Citi Residential Lending.

“Our line of Alt-A and non-prime programs give you the flexibility to meet your clients’ diverse needs,” the Web site's main page said. Alt A is considered just below prime.

But in August, when Citi announced it had acquired a mortgage origination and servicing business, the word was subprime.

Spokeswoman Danielle Romero-Apsilos said the company uses "nonprime" to refer to loans that don't conform with Fannie Mae and Freddie Mac guidelines.

That explanation gets a laugh from Pinard, because . . .

he knows lenders usually say "nonconforming" when loans don't meet Fannie and Freddie's requirements.

“Nonprime” was widely used about 10 years ago but was increasingly replaced over the years, at least publicly, by the better-sounding “subprime,” which dangled the possibility that a customer was mostly prime or a bit prime but never no prime.

While invisible to the public eye, "nonprime" was still used by industry insiders and in internal documents from lenders.

“If you read their manuals, they were saying it was nonprime,” Pinard said, “but when they advertised it, it was "subprime".

Subprime loans have gotten a bad rap -- not entirely fair, some say -- after lenders created “exotic” loans for those who clearly could not pay and borrowers gambled on making money from the housing boom. The number of foreclosures and defaults is expected to grow as more loans' rates reset with higher interest.

"It’s coming back into use just now or in the last few months," Pinard said about "nonprime". "Everybody’s writing about how bad subprime loans are. Maybe it’s a way to make it more palatable.”

-- ELLEN YAN

A coffee with Bear Stearns bankers last week left Robert Campbell, a real estate finance professor at Hofstra University, even more concerned about the mortgage crisis.

Campbell met with the investment bankers in Cleveland to prepare for a conference on mortgage-backed securities being held at Hofstra later this month. He came away very concerned after hearing that Wall Street financial institutions likely have even greater exposure to these securities than they've admitted so far. In recent weeks, multibillion-dollar writedowns related to these securities cost the heads of Citigroup and Merrill Lynch their jobs.

Continued problems on Wall Street will lead to increased foreclosures on Long Island and across the nation, while the ongoing liquidity crisis will make it tough to get new mortgages to purchase homes or refinance out of high-rate loans.

"It's going to continue to hit us," Campbell said.

Read all about it here.

Now that the Federal Reserve has cut its interest rate a quarter-point, look for an uptick in mortgage rates.

But unlike the last rate cut in September, when mortgage rates climbed from 6.31 percent to 6.42 percent, this time rates should stay more stable, said Michael McHugh, head of Continental Home Loans, a Melville-based mortgage banker.

Rates fell last week to 6.33 percent in anticipation of today's rate cut.

Homeowners, however, may benefit indirectly from the rate cut. Wednesday's Fed move makes it cheaper for banks to borrow money, so they may be more willing to lend it out. Banks have been hesitant to make certain mortgages -- those that don't meet Fannie Mae's criteria -- after delinquencies and defaults started to spike earlier this year.

"It will give them a little more liquidity to make deals," McHugh said.

Will the Federal Reserve cuts rates again this week? Mortgage rates certainly indicate that it will.

Though not directly tied to the Federal Reserve's interest rate, mortgage rates usually fall ahead of a Fed rate cut. The Fed is meeting today and tomorrow, when it is widely expected it will lower rates.

Last week, the rate on a 30-year mortgage fell to 6.33 percent, the lowest since Sept. 13. That was the week before the last rate cut and was the lowest mortgage rates had been since mid-May.

Embattled mortgage lender Countrywide Financial announced today that it will change the terms on $16 billion of adjustable-rate mortgages to help people stay in their homes.

Countrywide, the nation's largest lender which is also active on Long Island, will start calling borrowers at risk of default to refinance or modify their loan terms through the end of 2008. It plans to contact 52,000 subprime borrowers who have been paying their bills and another 10,000 borrowers who are delinquent because of a rate reset. The company will also reach out to an additional 20,000 homeowners with prime and subprime loans who are current but will likely have difficulty affording an upcoming reset.

Many people who took out ARMs with super-low teaser interest rates that are now resetting to much higher rates. They are finding they can't afford the new rates, which is driving up delinquencies and foreclosures nationwide.

But not everyone is convinced the company is being altruistic.

“Given Countrywide’s track record, a lot of questions must be answered before they get a pat on the back," said Sen. Charles Schumer (D-NY) "What are the fees they will be charging borrowers to refinance or restructure their loans? Who will qualify for help? And are they putting these borrowers into safe, affordable products or another unsuitable loan?”

Nassau and Suffolk lead the state in percentage growth of delinquent subprime mortages, according to a recent report from NeighborWorks America, a national nonprofit focused on community revitalization.

Delinquent loans increased 5.09 percent between December 2005 and December 2006, according to the report, citing statistics from First American LoanPerformance. Some 11.7 percent of subprime borrowers on Long Island were at least 60 days late in their payments.

Homeowners who are having trouble paying their mortgage can call NeighborWorks America's toll-free foreclosure prevention hotline 888-995-HOPE for round-the-clock counseling. You can also be connected to counselors on Long Island.

Mortgage bankers' profits on loan production fell from $258 per loan in 2005 to minus $50 last year, according to the annual cost study from the Mortgage Bankers Association.

Revenues per loan actually increased but that did not cover the production cost of $3,416 per loan, a 17 percent increase, the report said. The higher costs stemmed partly from fewer new loans and also personnel costs.

Continue reading "You guessed it: Mortgage bankers are making less" »

Read about the bankrupt Melville company and more signs of a mortgage market in retreat here.

New York and other states have called on lenders and loan servicing companies to provide data and other proof that they're reaching out to at-risk borrowers and adjusting their loans.

"We want to be sure there's no disconnect between what we're hearing from servicers and what we're seeing in practice," said Richard Neiman, New York's state banking superintendent.

Continue reading "Are lenders really trying to help borrowers?" »