I have enjoyed writing about mortgage financing, and about mortgage industry news. I will be sorry to end this chapter in my blog writing career, but I am also hopeful for the blogging industry in general, and excited about my new prospects.

My best to my readers, and I hope to see you around the blogosphere. 

kmmad 

However, time will tell whether this piece of legislation will really help the housing market problem, or whether it is just so much wasted paper and money. 

Of course, home prices are largely local; prices in my Utah home town have barely dropped. But if you are in an area that has been hit by the housing market crisis, you might look around to see if you can find a good deal.

However, it is still important to look beyond the home prices. Consider the quality of the home, as well as its location. You want something that you will be able to re-sell if the time comes.

image credit: sxc.hu

While the housing relief bill is meant to help 400,000 people avoid foreclosure, there are some things that are cause for worry, reports Wisebread:

• Underwriting standards are loose for those in trouble. This is worrying because already shaky situations are going to be further supported, while the inevitable creeps up on them. Then, when the failure does take place, taxpayers are on the hook.
• Treasury allowed to do whatever is deemed necessary -- extend credit, offer loans, buy equity -- to keep Fannie Mae and Freddie Mac afloat. This could easily result in large expenses for taxpayers.
• Congress raises the limit on national debt. Not sure why we even have a limit. As *need* arises, Congress will just keep raising the limit, in turn raising our interest payments.
• PayPal and credit card transactions all need to be reported to the IRS. This is sort of just in there. The government is obviously looking for more revenue, but there are definite privacy issues here as well.

What do you think, overall, of the housing relief bill?

The loan is repaid when you die (from your estate), sell your home, or no longer live there as your principal residence.

As an added protection the Federal Housing Administration (FHA) guarantees you will never owe more than the selling price of the "mortgaged" house.

While a reverse mortgage can be quite helpful for many retirees who need the cash flow, and can't afford the home equity loan payments, it is important to realize that it is not for everyong. And the fees can erode the money you get from your home. Some of the fees that come with a reverse mortgage include:

• Origination fees.
• Appraisal fee.
• Credit report fee.
• Flood certification fee.
• Pest inspection.
• Monthly account service fee.
• Mortgage insurance.

Before you make such a decision, carefully consult with a third party and decide whether a reverse mortgage would be best for you.

image credit: sxc.hu

For some folks, especially those in rural states like where I live, this will mean a pay raise. (In many cities and in some states, wages are already trending above even next year's increase.) But with inflation, it may not really provide as much as one could hope. Food inflation and energy prices might ensure that this move is little more than a cost-of-living increase. 

This brings up an important point. The legislators that voted this minimum wage increase in regularly vote themselves pay raises so that they can keep up with their "cost of living." What about the rest of us? Every now and again they throw us a bone, but the average American is largely the subject to the whims of inflation, watching as earning power is eroded.

Is the federal minimum wage law outdated? Do you think a law should be enacted in order to ensure cost of living increases for the American public?

A group of mortgages held in trust as collateral for the issuance of a mortgage-backed security. Some mortgage-backed securities issued by Fannie Mae, Freddie Mac and Ginnie Mae are known as "pools" themselves. These are the simplest form of mortgage-backed security.

image credit: US government

Turns out that the FDIC, the federal government's insurance agency for banks, has done its part in the current subprime mess, contributing to the number of loans that are in foreclosure right now.  It's a result of continuing subprime lending practices of a bank, Superior Bank FSB, that the FDIC took over in 2001.

Indeed, the FDIC did what many subprime lenders were doing at the time: giving out subprime mortgage loans (some of them to borrowers that were obviously unqualified), and then selling them to other mortgage lenders. The Wall Street Journal reports on FDIC subprime mortgage loans:

Hundreds of borrowers who took out Superior subprime loans on the FDIC's watch -- some with initial interest rates higher than 12% -- have lost their homes to foreclosure, data on the loans indicate.

While there haven't been any major revelations about how the FDIC was running other banks it took over, one has to wonder whether or not this sort of subprime lending was going on in other institutions as well. 

So it's not just the fault of greedy lenders and homebuyers as regulators claim; the government was involved in the subprime mortgage lending mess just as much.

Happy Friday!

Now, though, there is talk of another economic stimulus -- one that doesn't include checks so much as it does stimulation in other ways.

Barack Obama calls for investment in infrastructure, while John McCain calls for permanent tax cuts for the rich

Some economists have generally pointed out that, for the middle class, Barack Obama would be better for personal finances.

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With mortgage lenders requiring down payments of 20 percent, the average household, which puts away less than 1 percent of after-tax pay, will have to save 10 percent for 10 years to buy a home.

While I'm all for responsible mortgage lending practices, this is a bit ridiculous. We've spent almost two decades trying to make the American home more affordable for more people. Allowing a smaller down payment is one of those ways.

Instead of punishing hard working Americans with standards that may be beyond them, mortgage lenders should instead focus on:

• Verifying income.
• Credit scores that are at least above 680.
• Steering buyers toward loans that they can actually afford.

There are plenty of people with decent credit and incomes that allow them to make reasonable monthly mortgage payments. But they may only have enough for a 3% or 5% mortgage loan down payment. They should still be able to get mortgages.

He saw the shoddy lending practices that got us into this crisis first hand, and has chronicled them in his book, "Confessions of a Subprime Lender." By the time he quit, said Bitner, "Lending practices had gone from borderline questionable to almost ludicrous."

I think it's interesting that he points out that lending practices were almost ludicrous. He tells a story of someone in his company making a home mortgage loan to someone with a 54% debt-to-income ratio. Why? Because the loan investors were willing to pay it, and it meant a fat commission for the person making the loan.

True, the borrowers probably should have seen that this wasn't a wise financial decision, but it was also irresponsible of the mortgage lender -- and the mortgage investor -- to view this as an acceptable risk.

I think that the book probably proves what we've known for quite some time now: There's plenty of blame to go around for the current mess.

That's right. Many of the mortgage industry regulations are things that the industry should have been doing in the first place. If mortgage lenders and brokers had been following these guidelines voluntarily, we wouldn't be in this mess right now. 

Here are the basics of what the Fed, under the direction of chairt Ben Bernanke, is proposing for the mortgage industry:

• When making mortgage loans, lenders would be required to verify a borrower's income.
• Mortgage lenders would have to amend their practices so that they aren't exhibiting a "pattern or practice" of approving mortgage loans that borrowers can't, in fact, afford.
• Limits must be placed on penalties charged against borrowers for prepayment.
• Mortgage lenders need to put insurance and taxes in escrow accounts.

In addition to these requirements, CNN Money reports that mortgage brokers wouldn't get the same kickbacks for encouraging (read: pushing on) borrowers home mortgage loans with higher prices:

Also, for all loans regardless of rate, the regulator would ban the practice of allowing banks to pay brokers for steering homeowners into higher-priced loans, unless that compensation was disclosed in advance. And it would prohibit brokers from coercing appraisers into misstating a home's value.

Yes, it appears that part of this problem is that some mortgage brokers were overstating home's values in order to convince borrowers that they were getting a good deal. Others were pushing products that may not have been best for the borrower by concealing conflicts of interest and even concealing information that might have warned the borrower off a particular loan.

It's hard to be an informed consumer and make good decisions when you are given faulty information and don't know where to find the good information. Perhaps these Fed regulations will change that.

What do you think of the proposed Fed regulations on the mortgage industry?

image credit: US government