Tag Archives: mortgages.

Another scandal: Wells Fargo accused of falsely overcharging mortgage borrowers

Wells Fargo, the largest mortgage lender in the country, portrays itself as a stalwart bankthat puts customers first. That reputation shattered in September, when it was fined $185 million for illegally opening as many as 2 million deposit and credit-card accounts without customers’ knowledge.

Now four former Wells Fargo employees in the Los Angeles region say the bank had another way of chiseling clients: Improperly charging them to extend their promised interest rate when their mortgage paperwork was delayed. The employees say the delays were usually the bank’s fault but that management forced them to blame the customers.

The new allegations could exacerbate the lingering damage to the bank’s reputation from the fictitious accounts scandal. Last week, Wells Fargo reported declining earnings. In the fourth quarter, new credit card applications tumbled 43 percent from a year earlier, while new checking accounts fell 40 percent.

Read on.

Nonbanks dominate FHA-backed mortgages

Housingwire:

Nonbank’s share of Federal Housing Administration-backed mortgages crossed $1 trillion for the first time in November 2016, according to an article in The Wall Street Journal by Annamaria Andriotis.

From the article:

Ginnie Mae head Ted Tozer, who is leaving his position Friday, has said nonbank lenders may lack the financial wherewithal to withstand future stress in housing. In the worst-case scenario, problems could saddle taxpayers with losses.

“This is the biggest shift in mortgage lending since the savings-and-loans debacle in the 1980s,” Tozer said in a recent interview with The Wall Street Journal. The biggest nonbank FHA lenders include companies such as Quicken Loans Inc., Freedom Mortgage Corp. and Guild Mortgage Co.

However, not everyone agrees with Tozer.

From the article:

Mortgage bankers say Tozer’s concerns, while well meaning, are overblown. “It would take a significant rise in delinquencies to get to the place he’s talking about,” said Pete Mills, senior vice president of residential policy and member engagement at the Mortgage Bankers Association.

Tozer’s “concerns are valid in general because banks do have deeper pockets than nonbanks,” said David Battany, executive vice president of capital markets at Guild Mortgage. But he added, “We view that we are adequately capitalized to make advances in high-default scenarios.”

Source: WSJ

Borrowers: This is how the FHA mortgage insurance premium suspension impacts you

Housingwire:

For borrowers looking to buy a home now or soon, Tim Manni, mortgage expert atNerdWallet, helped explain how this news impact their situation.

“With the annual premium now remaining at 0.85% for most FHA borrowers, it renews the debate among first-time buyers whether an FHA or conventional loan makes the most sense,” said Manni.

Manni stated that the impact depends on a borrower’s credit situation.

Here’s what is means for borrowers with good credit:

If you’re a borrower with good credit, today’s announcement should motivate you to consider multiple home loan options, not just an FHA loan, even if you don’t have much saved for a down payment. It’s important to remember that while FHA interest rates tend to be lower than some conventional mortgages, the insurance premiums could cost you more over the life of the loan. With both an upfront premium, as well as an annual premium that never goes away, comparing the insurance costs alone between an FHA and conventional loan could make your decision a lot easier.

Here’s what is means for borrowers with poor credit:

“On the other hand, if you’re a borrower with poor credit, an FHA loan is likely to be your only option. Since Obama’s reduction hadn’t yet gone into effect, it simply means it’s back to business as usual in terms of what an FHA loan will cost you. The reduction was slated to save new FHA borrowers about $42 a month in the first year. That amount should not be a make-or-break number for any homebuyer. If you’re in the process of applying for a mortgage and your housing costs leave you little financial wiggle room each month, you need to adjust the amount of income you’re dedicating to your home loan and shop for cheaper homes.”

Private lenders lobbied heavily for suspension of the reduction of Mortgage Insurance Premiums. Trump’s HUD adviser? Shawn Krause, Quicken Loan lobbyist

NY Times:

In the years since the crisis, many of the nation’s largest banks pulled back their mortgage-lending activities. Quicken Loans pushed in. Today, it is the second-largest retail mortgage lender, originating $96 billion in mortgages last year — an eightfold increase from 2008.

Privately held Quicken, like some of America’s largest banks before it, has also landed in regulators’ cross hairs. In a federal false-claims lawsuit filed in 2015, the Department of Justice charged that, among other things, the company misrepresented borrowers’ income or credit scores, or inflated appraisals, in order to qualify for Federal Housing Administration insurance. As a result, when those loans soured, the government says that taxpayers — not Quicken loans — suffered millions of dollars in losses.

Quicken Loans today is the F.H.A. insurance program’s largest participant.

Executives at Quicken Loans deny the charges, maintaining, among other things, that the government “cherry-picked” a small number of examples to build its case. In an aggressive move, the company pre-emptively sued the Department of Justice, demanding a blanket ruling that all of the loans it had originated met requirements and “pose no undue risks to the F.H.A. insurance fund.”

…………………………………………..

Late last year, Donald J. Trump named a former Quicken Loans lobbyist, Shawn Krause, to his H.U.D. transition team. A Trump spokeswoman did not respond to an email asking about potential conflicts of interest. In an emailed statement, Quicken Loans said the fact that Ms. Krause had come from the largest F.H.A. lender in the country “bodes well for the positive impact she has, and will, make on H.U.D.”

In the years since the financial crisis, Quicken has emerged as a leader in the nation’s shadow-banking system, a network of nonbank financial institutions that has gained significant ground against its more heavily regulated bank counterparts in providing home loans to Americans. Increased regulation and decreased profits sent the nation’s banks packing.

Nonbanks, like Quicken, have filled that gap. Today, Quicken is the nation’s second-largest retail residential mortgage lender, behind Wells Fargo, but ahead of banking giants like J. P. Morgan, Bank of America and Citigroup, according to Mortgage Daily.

Spanish Banks Ordered to Repay Billions to Mortgage Borrowers

A full reimbursement for clients who had ‘mortgage floors’ could cost banks billions in back payments

WSJ-

Spanish lenders might have to pay billions of euros back to borrowers after the European Union’s top court Wednesday ruled against the banks in a disputeover variable-rate mortgages.

The European Court of Justice ruled that borrowers in Spain are entitled to be fully reimbursed for excess interest payments on variable-rate mortgages. The ruling follows a 2013 decision by Spain’s top court that outlawed so-called “mortgage floors,” deeming them unfair to clients because banks didn’t clearly explain to borrowers the economic and legal consequences of having a downward limit on how far interest payments could fall.

However, the Spanish court ruling said banks had to stop enforcing the mortgage floors but didn’t have to reimburse clients for any excess interest payments before the date of the 2013 ruling. A full reimbursement, the judges wrote at the time, would have meant “a risk of serious disruption” to Spain’s economy.

[WALL STREET JOURNAL]

 

Will Trump ax mortgage interest tax deduction?

Business Insider:

The deductions for mortgage interest and charitable giving are “apple pie and baseball for the tax code,” Richard Auxier, a research associate at the Tax Policy Center, told Business Insider.

That’s why neither plan eliminates these deductions; that would be a political disaster.

However, “Trump’s tax plan does effectively limit two itemized deductions without explicitly doing so,” Kyle Pomerleau, director of federal projects at the Tax Foundation, told Business Insider. “By increasing the standard deduction, it reduces the number of itemizers.”

Here’s what Pomerleau means:

Let’s say a single filer pays about $10,000 in mortgage interest in the first year she owns a home. That far exceeds the current $6,300 standard deduction, so she itemizes her deduction to claim a greater tax break. It’s one reason she decided to buy rather than rent.

But under Trump’s plan she’s better off taking the standard deduction. Her taxes are simpler, but they’re no longer significantly different than if she had rented. That’s why industry groups are watching closely.

Nominating Mnuchin for Treasury Will Dredge Up Mortgage Meltdown Controversies

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Is Oswald Chesterfield Cobblepot, Mayor of the city of Gotham, on Trump’s list?

  • Former Goldman partner ran bank dubbed a ‘foreclosure machine’
  • He’s said to be leading candidate for Treasury secretary

Dubious lending practices. Bailouts. Foreclosures. Robo-signing. Huge executive paydays. If Steven Mnuchin is nominated for Treasury secretary, his confirmation process promises to dredge up every controversy of the U.S. mortgage meltdown almost a decade ago.

Mnuchin is a former Goldman Sachs Group Inc. partner and movie financier with no government experience who spent the past six months working as Donald Trump’s chief fundraiser. Trump’s transition team recommended Mnuchin for the Treasury job, people with knowledge of the matter said last week, and a decision could come any day. The part of his background that’s likely to get the most scrutiny is the six years he spent running OneWest Bank, a Southern California lender.

In 2009, during the depths of the financial crisis, Mnuchin joined with a group of former Goldman Sachs colleagues and billionaires to buy the remnants of IndyMac, which had collapsed after bingeing on reckless home loans during the frenzy of California’s subprime-mortgage boom. They changed the name to OneWest, turned it around and sold the bank for a big gain last year. Mnuchin may have personally gotten more than $200 million in proceeds from the sale, according to Bloomberg calculations. That doesn’t count any dividends or payments he might have received as chairman and chief executive officer of OneWest’s parent company.

The bank carried out more than 36,000 foreclosures during Mnuchin’s reign, according to the California Reinvestment Coalition, a San Francisco-based nonprofit whose deputy director, Kevin Stein, dubbed the bank a “foreclosure machine.” The group has accused OneWest of shoddy foreclosure practices and avoiding business in minority neighborhoods, claims the bank has denied.

Read on.