NEW YORK (MainStreet) — Traditional bank mortgages are losing ground to nonbank lenders, especially in cities with a hot housing market.
Seth James Ellis, 33, and his husband, Jared Ellis, 32, along with a third investor turned to Social Finance, Inc., a San Francisco-based online lender, for a jumbo mortgage to purchase a $1.1 million, three-bedroom duplex in Berkeley, Calif.
”We didn’t expect to get this house, ” said Seth James Ellis, who works as a fundraiser in the Bay Area. “The emotional feeling in this market is that you’re never going to get the house that you want, because someone is going to come in with a higher cash offer.”
Non-traditional, non-bank lenders, such as SoFi as the online lender is commonly called, offer less conventional underwriting for residential mortgages and typically a shorter period to close because of the design of the loans, mortgage experts say.
(Image courtesy of Fannie Mae)
It appears the post-recession mantra of mortgage lenders is “better safe than sorry.”
Despite pushes from the Federal Housing Finance Agencyand the Federal Housing Administration, many mortgage lenders are still applying additional credit overlays to loans delivered to Fannie Mae and Freddie Mac, a new survey of lenders showed.
The survey, conducted by Fannie Mae’s Economic & Strategic Research Group and based on responses from senior mortgage executives in May 2015, found that approximately 40% of lenders who deliver loans to the GSEs or Ginnie Mae reported applying credit overlays that are more stringent than what the GSEs or Ginnie Mae require.
Fannie Mae’s quarterly Mortgage Lender Sentiment Survey also found that 64% of lenders who deliver loans to the GSEs or Ginnie Mae said that credit overlays are applied on a “limited basis,” which is 20% or less of their loan originations.
Even as the housing and mortgage markets are stabilizing, many borrowers with good credit remain shut out of the home-loan market or saddled with a new array of fees and extra costs.
Lending standards may have loosened since the end of the Great Recession six years ago, but mostly for buyers with excellent credit scores of more than 700, analysts say.
Borrowers with minor credit dings, or down payments of less than 20 percent, still can’t get access to federally backed loans once considered mainstream. Lenders are instead routing them into higher-cost Federal Housing Administration (FHA) mortgages, designed for low-income or bad-credit borrowers.
The cost of such FHA loans has also jumped, with hiked upfront fees for private mortgage insurance and monthly insurance payments that now are locked in for the entire loan period — regardless of the borrower’s payment record or escalating home equity.
In a case that “radically revises the law on mortgage foreclosure,”1 the Wisconsin Supreme Court recently held in Bank of New York Mellon v. Carson, 2015 WI 15, that Wisconsin circuit courts have the authority to order a sale of mortgaged premises within a reasonable period of time after the redemption period if the property has been abandoned by the borrower.2 In Carson, Shirley Carson defaulted on her mortgage multiple times, and Bank of New York Mellon, as trustee for the lender, filed a complaint seeking a judgment of foreclosure and sale of the mortgaged property.3 After Carson failed to respond to the notice of foreclosure, the circuit court entered judgment in favor of the Bank.4
Good news for Wells Fargo and OneWest, but more foreclosure trouble may be brewing if banks haven’t followed all rules
our years into what has become a protracted state review of foreclosure cases brought by New Jersey’s six largest mortgage lenders, the courts have approved the document-handling procedures of two of the big banks.
But even as he accepted the recent foreclosure practices of Wells Fargo and OneWest Bank, the special master in charge of the monitoring– retired state Supreme Court Judge Richard Williams — said the banks have only nominally cooperated on a key issue. That finding could send the matter back to where it began at the state Supreme Court.
The issue at stake is whether the lender’s lawyers have done enough to verify information supplied by the bank’s employees.
For now, though, the findings are good news for the two banks, relieving them of ongoing scrutiny of their foreclosures.
“We continue to work with the New Jersey court system to process foreclosures according to all applicable state and federal laws,” said Kevin Friedlander, regional corporate communications manager for Wells Fargo.
In the wake of an intervention by state Chief Justice Stuart Rabner in December 2010, Friedlander said, “Loans that are in the foreclosure pipeline appear to be moving through the process better and proceeding to foreclosure sale when no other options are available to borrowers.”
Still, critics of the banks are not pleased, suggesting the effort by the high court to clean up foreclosure cases has fallen short.
Troy, Michigan-based United Wholesale Mortgagelaunched its latest product which offers conventional financing on up to 97% loan to value, making it one of the first wholesale lenders to offer the low down payments
This move aligns the lender with the Federal Housing Finance Agency’s initiative to expand the credit box to first-time homeowners.
Fannie Mae announced it would soon begin offering a 97% LTV mortgages during the Mortgage Bankers Association’s annual convention & Expo in October, withFreddie Mac assumed to likely follow suit. And it did.
On Dec. 8, both government-sponsored enterprisesofficially announced their individual 97% loan-to-value products. The government-sponsored enterprise will package these loans into pools and securitize the mortgages on the secondary market.
Ruling ensures lenders comply with mortgage law
As the firm representing the homeowners in the recent Oregon Supreme Court case of Brandrup et al. v. ReconTrust et al., we would like to offer our inside analysis of the case and what it means for homeowners.
First, it is important to note that the court’s ruling is not an unequivocal win for either homeowners or lenders. While homeowners prevailed in three of the four questions before the court, lenders prevailed on one issue.
So where does this decision leave homeowners facing non-judicial (out of court) foreclosures?
First, the court completely adopted homeowners’ arguments regarding Mortgage Electronic Registration Systems Inc. (MERS). Homeowners argued that MERS could not be a beneficiary under the Oregon Trust Deed Act. The court agreed that MERS does not qualify as a beneficiary, regardless of what is stated in the trust deed.
Lenders, on the other hand, found a bit of qualified good news in the court’s ruling as well. The court agreed with lenders that an assignment of a trust deed must be recorded only when it has been written; the court also rejected homeowners’ interpretation that would have included assignments that arise automatically when the underlying note is sold.