BofA gets sued for the "Hustle"

     Bank of America has been hit with a $1 billion lawsuit from federal prosecutors in regards to their "Hustle" scheme. The "Hustle" refers to a period from 2007 to 2009 in which the bank allegedly had a program in place to push along the process of mortgage applications quicker than usual. This program allegedly disregarded checking for certain aspects in mortgage applications such as mortgage fraud, misstatements, and wrongdoings in the applications. The loan origination program was started under Countrywide Financial and Countrywide Home Loans which were acquired by BofA in 2008. According to the lawsuit many of the loans that originated in this program were sold to Fannie Mae and Freddie Mac and later defaulted upon which caused many foreclosures and a billion dollars in losses (Hence the billion dollar lawsuit.) One of the spokesman for BofA reported to USA Today that the bank has already repurchased some of these loans that have gone wrong, attempting to resolve this matter responsibly. The spokesman continued to say that the bank cannot “compensate every entity that claims losses that actually were caused by the economic downturn."

"Countrywide and Bank of America made disastrously bad loans and stuck taxpayers with the bill," said Preet Bharara, Manhattan U.S. attorney.

"Countrywide and Bank of America systematically removed every check in favor of its own balance — they cast aside underwriters, eliminated quality controls, incentivized unqualified personnel to cut corners and concealed the resulting defects. These toxic products were then sold to the government sponsored enterprises as good loans."

source: USAToday

More Buyers Less Homes

     Hey everyone, there seems to be a continuing issue out there in regards to Real Estate. Buyer demand continues to increase, but the amount of available homes does not match up, which indicates a shortage of homes in the market. The National Association of REALTORS® has credited the drop in home sales to a diminishing inventory in for sale homes. “Recent price increases are not deterring buyer interest,” notes Lawrence Yun, NAR’s chief economist. “Rather, inventory shortages are limiting sales, notably in parts of the West.” The prices of homes have been consistently rising, and the buyers are ready and willing to pay these increasing prices, but the problem lies with the sellers. If people are not comfortable listing their property just yet, then these ready, willing, and able buyers will be left unsatisfied. CNBC has reported that current home owners are not putting their homes on the market fast enough to compensate for the decrease in distressed volume. In the past two years, distressed sales have been responsible for upwards of one third of home sales, as opposed to the recent numbers where distressed home sales are down to 24% of overall home sales. Sellers are still awaiting a more substantial recovery before they list their home in order to gain back more of the equity they had lost during the collapse.
     One possible way to overcome this unbalanced buyer/seller availability is the construction of new homes. We need more new home construction in this market in order to gain some equality or balance, and we have actually seen a 43% increase in new home construction compared to a year ago. Although this increase is definitely a positive sign, the overall number of new home construction is still approximately half of what it needs to be in order to be considered "normal" for this sector.



source: realtormag

ARMs Becoming More Popular Again with Luxury Home Buyers

• ARM - adjustable rate mortgage

An ARM is a mortgage loan on a note that is periodically adjusted based on an index that reflects the cost of the mortgage lender for borrowing on the credit markets. They can have a fixed mortgage rate for a number of years beginning the mortgage term, such as five or seven, before they begin to fluctuate with the market and the monthly payments start increasing. ARMs were once to blame for the inundation of foreclosures in the past few years, however they are becoming appealing once again, especially among luxury home buyers. ARMs are currently offering very low interest rates, at least for a  certain period, compared to fixed rate mortgages. ARMs make up 30-40% of the private jumbo market at Bank of America and almost half of all private jumbo loans by NASB financial.

“Lenders say high-net-worth buyers face relatively little risk because they can tap liquid assets to pay off a loan should a sudden spike in rates occur,” according to The Wall Street Journal.

Buyers at the higher end are putting a lot of thought into ARMs because of the potential savings on interest. For a jumbo 5/1 ARM the rate could be as low as 2.82% compared to the rate on a 30 year fixed rate jumbo loan of 4.06 according to the mortgage information website HSH.com. 

“Over the first five years, borrowers with the 5/1 ARM would save nearly $90,900 in interest on a $1.5 million mortgage compared with a fixed-rate jumbo,” according to The Wall Street Journal.

If you are in the market for high end homes it would be in your best interest to ask your mortgage lender about an ARM and if it would benefit you.