Hennepin County Suing Fannie Mae & Freddie Mac for $10mil.

Fannie Mae

Fannie Mae (Photo credit: Matti Mattila)

Get Ready to Rummble!   (you need to read that in the old WWF voice.. has more of an impact..)

Minneapolis / St Paul Business Journal reports that Hennepin County is suing Fannie Mae & Freddie Mac for failing to pay deed transfer tax.

Hennepin County has filed a civil lawsuit against Fannie Mae and Freddie Mac, seeking more than $10 million, for allegedly shorting deed transfer tax payments to the state’s 87 counties, Hennepin County Attorney Mike Freeman said Friday.

Read Full Story from Mpls/St Paul Business Journal

 

At this point I am only speculating what actually happened here.  According to the article, Fannie Mae and Freddie Mac were “shorting” Deed Tax payments to the Counties upon “Acquiring” the properties.  So by that I would take that to mean that when they foreclosed on the property, they did not pay all or some of the State Deed Tax of .0033% in out lying Counties or .0034% in Hennepin County and Ramsey County.

So on a Home Price of $200,000, the Deed Tax would be $660 and that same Home in Hennepin or Ramsey County the Deed Tax would be  $680.

What would the value be upon the Foreclosure?  What the bank initially lent on the property, tax assessed value, or what is REALLY worth in today’s market?   Who would determine that?  Maybe that is the real battle here.

I will try to track this story as it progresses.  I have a feeling this will be loaded with “Fun & Laughs” as these 2 entities duke it out while the only parties who will end up paying will be struggling taxpayers regardless of the outcome.

You can’t make this stuff up…

 

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If Fannie or Freddie were a horse, we would have shot it…

I read this article earlier in the week with intentions of digging deeper into the mess of Fannie and Freddie.  It is Sunday evening now and I don’t have the energy to dig into this mess…

So I thought I would throw this out to you and see what your opinions are on this.  It is a well written article, about a topic that is very confusing and messy to say the least…   About all I can come up with is “if Fannie or Freddie were a horse, we would have shot it..”

 

Fannie, Freddie No Longer Have to Borrow from the U.S. to Pay the U.S.

The country’s two secondary mortgage market companies Fannie Mae and Freddie Mac will no longer have to borrow money from the U.S. Treasury to make their quarterly dividend payments to the federal government….

Read Full Article from NAR

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HARP 2.0 – MN Refinancing Options for underwater mortgages

The HARP program has been enhanced to help borrowers who’s value has dropped significantly. With the new harp loan borrowers have the ability to refinance without worrying about the value of there home. Take a look at some of the features of this program that will help borrowers take advantage of the low interest rates available today. Below are a few highlights for you to consider.

  • Borrowers must be current on there mortgage payment and the mortgage must be held by fannie or freddie
  • Appraisals are not required on most of the refinances saving you time and money
  • Most transactions require no income documentation
  •  LTV requirements are relaxed to allow borrowers to take advantage of the great rates even if there value is negative. Borrowers with 1st and 2nd mortgages are a great example of people who can now be helped
  • Occupancy – many borrowers have elected to rent there previous home and buy a new primary residence. The rental property can now be refinance with HARP 2.0, where it previously would not qualify

 

 

Determine whether your mortgage is owned or guaranteed by Fannie Mae or Freddie Mac by visiting their respective Loan Lookup Tools.

 

 

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Get your mortgage before January 1 2012 to beat the new fees

The Payroll Tax Extension was funded by new fees on FHA, Fannie Mae, and Freddie Mac mortgages.  To avoid the new fees you will want to get your mortgage before January 1, 2012.  This was signed into law under the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010. The plan is to stimulate the

My Mortgage Docs to be Reviewed by an Expert

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national economy by lowering taxes.

This does not apply to Existing Mortgages.

 

Quit Waiting for Rates to drop further, because Fees are going up…

 

My first reaction was, why are they putting more burden on the struggling housing market?  As I thought further about this, I am beginning to think this not such a bad thing.  I’ll try to explain my logic; these new fees are only on FHA, Fannie Mae, and Freddie Mac mortgages.  These new fees will likely put consumer demand onto private mortgages which I believe would help out the real estate market.  Or at least it will make the private mortgages a little more competitive.

 

How much are these new fees:

 

From The Mortgage Reports:

 

From Title IV of the bill’s final form, these costs will be recouped via the mortgage market. The section is titled “Mortgage Fees And Premiums“. In it, Congress instructs Fannie Mae and Freddie Mac, and the FHA to take following specific measures :

  • Fannie Mae and Freddie Mac : Increase loan guarantee fees by 10 basis points or more versus current levels, and do not decrease other costs to compensate
  • FHA : Increase mortgage insurance premiums by 10 basis points

The extra fees amount to roughly $10 per month per $100,000 borrowed.

 

 

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Fannie Mae requests another $7.8 Billion from Taxpayers to cover losses

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Fannie Mae posted another $5.1 Billion loss in the 3Q  and is requesting another $7.8 Billion from the Treasury Department.   This brings the total Bailout to $112.6 Billion.  Their total required annual dividend payment to the Government is now up to $11.3 Billion which is more than Fannie Mae has ever earned in annual net revenue.

If you saw an earlier post of mine with the interview of Professor Karl Case, he had alluded to the potential risk to the housing market by Fannie Mae.  I felt like he wanted to come right out and say something but was kind of dancing around the direct point.  If you would like re-play that interview, click here. (clip 2:30 – 2:53) It would be interesting to sit down with Professor Karl Case in a one on one conversation off the record to hear what he really thinks.

To be honest, my eyes gloss over when I hear Billions and Trillions and sort of tune out.  It is hard for me to comprehend what a Billion is.  To put it in some perspective: If you sat down to count from one to one billion, you would be counting for 95 years.  Click Here for other perspectives on a Billion.  With that in mind, now take 95 years  x  112.6 = 10,697 years to count to every dollar Fannie Mae has needed in bailouts.

The market is making a slow recovery, but I am getting a little nervous on the potential risk of having one entity hold all the risk.  If I understood Professor Karl Case correctly by reading into what he did say, I think I am in agreement with him.

NEW YORK (CNNMoney) — Losses widened at mortgage giant Fannie Mae in the third quarter, forcing the government-controlled firm to request another $7.8 billion from the Treasury Department.

The company reported Tuesday a net loss of $5.1 billion, compared to a net loss of $2.9 billion in the second quarter. A year ago, Fannie Mae reported a net loss of $1.3 billion.

Read Full Article

 

 

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Fannie Mae serious delinquencies lowest since 2009

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HousingWire reports good news from Fannie Mae.  The serious delinquency rate dropped to 4%, the lowest level since June 2009.  This is a promising sign.  If we can start seeing this trend continue we may be on our way to housing market recovery.

The serious delinquency rate on mortgages backed byFannie Mae dropped to 4%, the lowest level since June 2009.

The rate fell every month since the 5.59% peak in February 2009 except for July when it went unchanged. Fannie said the rate fell 3 basis points from August.

Read Full Article

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HARP, The Ins and Outs of Obama’s New Mortgage Refi Plan from the National Association of Realtors

It appears many people are interested in the “new plan” to bail out the housing market.  I have been reluctant to jump on board this one, it is getting to the point of insanity.  We keep doing the same thing over and over again expecting different results.

My opinion on the housing market is: let it correct and leave it alone.  By artificially throwing programs at it, it is only prolonging the pain and preventing the correction from taking place.

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Apparently CNN is not to excited about this plan either, check out this Article titled “Refinancing Plan won’t help housing market.

I would love to hear your opinion on this.  Do you think these programs are helping people or making everyone suffer?

Here is the National Association of Realtors article on the new program.  What I am calling  ”HARP 3.0″

President Obama announced Monday a plan to ease eligibility rules for home owners who want to refinance to take advantage of ultra-low mortgage rates and lower their mortgage payments. The administration hopes that by broadening its requirements for the Home Affordable Program that about 1 million home owners will now be able to qualify….

What’s changing?

Many of the extra fees to participate in the program have been waived, and home owners’ eligibility won’t be contingent on how far their home’s value has fallen.

Who’s eligible?

  • Home owners with loans backed by Fannie Mae or Freddie Mac can participate. (Home owners can visit: freddiemac.com/mymortgage or fanniemae.com/loanlookup to determine if their mortgage is owned by either).
  • Home owners must be current on their mortgage.

When will it take effect?

The changes could take effect by Dec. 1. HARP also is being extended through 2013 to allow more home owners the opportunity to qualify.

Read Full Article

 

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Bill allows tax-free use of retirement funds for mortgage payments

Bill allows tax-free use of retirement funds for mortgage payments.

This is interesting, a bill that would allow a homeowner to tap into their retirement funds without the normal 10% penalty to cover their mortgage payments.  Interesting how it is only for Fannie Mae and Freddie Mac  mortgages…

We will have to see if this bill becomes law.

FHFA Lawsuit against Banks, Update

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I am not sure where this lawsuit is going yet, I don’t understand what can be gained by it other than politically.  At the same time, I’m not sure that FHFA doesn’t have a case. 

It seems counter-intuitive to me to spend billions of dollars to bail out banks only to turn around and sue them putting them back into the same position again.  Wouldn’t it have been easier just to let them fail?  Would have saved everyone a lot of money, and with the same net result…

Basically FHFA is claiming that many of the loans in the security bonds sold by these banks were misrepresenting what was contained in the securities; summarized in 2 categories.  Category 1, LTV ratios and Category 2, Owner Occupant Status.   It seems to me the later one is probably more related to the borrower than the bank that originated the loan as far as “fraud” is concerned…  I wonder if FHFA will expand this to go after the borrowers that stated they were owner-occupying they weren’t?

I suspect this will get brushed aside with a settlement and slap on the wrist…  But in the mean time, here is some information on FHFA’s claim against the banks. (read full article from HousingWire)

Major banks and others acquired during the financial crisis allegedly misrepresented the owner occupancy and loan-to-value ratios by sometimes as many as 50 percentage points or more on securities sold to Fannie Maeand Freddie Mac, according to the lawsuits the Federal Housing Finance Agency filed last week….

…It looked at whether or not the borrower’s tax bill was sent to the property’s address or a different one, whether the borrower claimed a tax exemption or whether the mailing address of the property was reflected in credit reports, tax or lien records.

On one securitization underwritten by JPMorgan Chase (JPM: 33.44 -3.44%), owners did not occupy 2.5% of the underlying properties, according to the prospectus given to investors. After conducting the test, the FHFA found this number to be at 14.6%, more than five times the amount disclosed to investors.

“The data analysis revealed that for each securitization, the prospectus supplement misrepresented the percentage of non-owner occupied properties,” according to the lawsuits.

The FHFA also conducted retroactive automated valuation models to determine the value of the properties at the time the mortgages were originated. This was done to uncover any possible faulty loan-to-value ratios.

The prospectus for one security issued in 2007 underwritten by Bank of America (BAC: 6.99 -3.59%) stated all of the loans held a LTV ratio of less than 100%. According to the FHFA analysis, more than 8.8% of the loans in the security actually held LTVs above 100%. Another security issued by Countrywide Financial Corp. showed 27% of the loans held LTVs higher than 100%, according to the analysis, as opposed to none.

Federal Housing Financing Agency (FHFA) Sues Banks over Mortgage Backed Securities

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It is news like this that makes it near impossible to predict the market correction.  Depending on what happens here, it could either mean the mortgage business gets cleaned up or that it will shut all mortgage lending down – thus sending us into further housing slump…  Or it could just be a blip on the radar and not have any real impact.

We just spent Billions on bailing these banks now, now our Government is suing them?  Will we then need to bail these banks out after the lawsuit??  I don’t get it…

We are in uncharted waters here and I am not sure how this will play out…  I’ve got a gut feeling this is not going to help anyone out.  If we are not careful through this mess, we are heading in the direction where the only way you can get a mortgage is if the Government grants you one. (technically you give the mortgage lien on the property and receive the money or the note…)

The Federal Housing Finance Agency is ready to file suit against the nation’s largest banks, accusing the financial institutions of misrepresenting the quality of mortgage backed-securities sold in the run-up to the 2008 financial meltdown, The New York Times reported Thursday.

According to the article, the FHFA lawsuits will target Bank of America (BAC: 7.33 -7.33%), JPMorgan Chase (JPM: 34.92 -3.80%), Goldman Sachs (GS: 106.69 -4.88%) andDeutsche Bank (DB: 37.00 -4.15%) among other large MBS players.

Read Full Article from HousingWire

UPDATE:

The FHFA alleges these institutions, their executives and some lead underwriters violated federal securities laws, violated common law, failed to conduct proper due diligence and provided allegedly false information when selling these products.

What the FHFA seeks in recovery will not equal what the GSEs paid for the MBS sold. However, in each suit, the FHFA disclosed how much Fannie and Freddie bought from each particular bank and subsidiary in the case of BofA.

  • JPMorgan Chase: $33 billion
  • RBS: $30.4 billion
  • Countrywide: $26.6 billion
  • Merrill Lynch: $24.8 billion
  • Deutsche Bank: $14.2 billion
  • Credit Suisse: $14.1 billion
  • Goldman: $11.1 billion
  • Morgan Stanley: $10.5 billion
  • HSBC: $6.2 billion
  • Bank of America: $6 billion
  • BarCap: $4.9 billion
  • Citi: $3.5 billion
  • Nomura: $2 billion
  • Société Générale: $1.3 billion
  • First Horizon: $883 million
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