Gulf Coast Associates' Blog: Lending News

In a historic, yet widely anticipated, move yesterday Secretary Henry Paulson announced plans to put Fannie Mae and Freddie Mac under government custody. The unprecedented move by the Treasury includes replacing both company's CEOs, ending all stock dividends, and creating a new preferred stock that will be senior to all other outstanding shares.

The authority for such a move was granted to the U.S. Treasury in the recently passed Housing and Economic Recovery Act and was included in the bill to help protect the $5.4 trillion in outstanding mortgages the companies currently hold. Both Government Sponsored Entities (GSEs) have been under severe pressure over the last year. Their stock shares have fallen over 90% and the markets have had severe doubts about…

The Department of Veterans Affairs (VA) is raising ceilings on its no down payment home loans from the current $417,000 to as much as $729,000. The increases are effective immediately under legislation recently enacted by President Bush's signing of the Housing and Economic Recovery Act of 2008.

The new law also improved the VA’s Specially Adapted Housing Program. It raises primary grants from $50,000 to $60,000 toward constructing a new home or modifying an existing home to meet the needs of veterans or active duty service personnel with certain service-connected disabilities. Additional new features to this program are a provision that allows veterans with certain service disabilities arising from severe burns to receive the adaptive housing grants and…

Well, our illustrious leaders in Washington have finally passed the long awaited new housing bill (H.R. 3221 - Housing and Economic Act of 2008). While we're not positive how much it will help the overall housing market (other than ensuring the GSE's won't fail), it is chock full of new regulations and sure to cost taxpayers millions of dollars. You can read about provisions included in it at - New Housing Bill Set to Become Law This Week.

Now that it's ready to become law, the questions are "who is eligible" and "what are the requirements" ailing homeowners must follow in order to take advantage of the Foreclosure Prevention Act of 2008. The following is a synopsis of the requirements that must be met.

Eligibility:

• Qualified borrowers must live…

In another sign of the times for the lending industry, Wachovia Mortgage announced last evening it is going to discontinue its wholesale lending operations for third party originations. The decision will be effective July 25, 2008, which will be the last date on which Wachovia Mortgage will accept any new loan applications for wholesale funding.

The announcement came via email and was not only a surprise to its lending partners but also to its wholesale lending account executives and staff. The memo stated that Wachovia has "evaluated its business model" and as a result of a new strategic direction the company "will primarily focus on customers who have relationships with the bank, and who are located in geographies where Wachovia branches are…

The Federal Reserve Board announced yesterday morning it has approved the long awaited final rule amending Regulation Z (Truth in Lending) which it believes will help protect consumers by promoting responsible lending practices. According to Fed Chairman Bernanke, "the new rules will apply to all mortgage lenders and should protect consumers by prohibiting unfair, abusive or deceptive home mortgage lending practices." In addition the new rule also sets additional advertising standards and requires certain disclosures to be given to consumers earlier in the mortgage transaction process.

Highlights of the final rule include the following:

1.  The definition of "higher-priced mortgage loans" (secured by a consumer's principal dwelling). This new defined…

In one of the largest bank failures ever, IndyMac Bank was seized this afternoon by federal regulators. The Office of Thrift Supervision said it transferred IndyMac's operations to the Federal Deposit Insurance Corporation because it did not think it could meet its depositors' demands. The bank will reopen on Monday morning under government supervision and regulators will begin a complete investigation into the bank's operations.

IndyMac Bank was one of the largest savings and loans in the country with about $32 billion in assets; it specialized in making subprime loans and has been reeling from losses on defaulted mortgages it made during the peak of the housing boom. The failure had been widely expected as its stock price fell to mere pennies a share…

Fannie Mae announced today it will be scrapping its extra 5% down payment requirement for properties identified as being located in a declining market. The change will affect conventional, conforming mortgages that the company will purchase or guarantee and is an additional part of the company's recent Keys to Recovery initiative.

The company had been under pressure from both Realtors® and industry insiders alike since it adopted the policy in December, 2007. Marianne Sullivan, one of Fannie Mae's senior vice presidents said "This new down payment policy reinforces our goal to support successful home-owning, not just home-buying, as we seek to bring liquidity to all communities and help the housing market recover."

The new policy will take effect June 1,…

For those of you who follow our blog, you know we try very hard to keep you up to date with all the changes that are occurring in the mortgage lending industry on an ongoing basis. Unfortunately, since around the beginning of March, we have had our hands full trying to keep up with the overwhelming increase in our real estate business due to the fact it was the height of our "season" here in Southwest Florida and business is booming again. Our belief is that what has occurred for us here in our real estate markets this winter will also show up and spread across the rest of the country as we move into summer. At least we hope so!

So, in order to keep you up to date, we have decided to do a synopsis of what has occurred over the last 45 days that should be…