Housing officials criticize 20% down-payment proposal
Down-payment requirement angers senators
Down payment proposal could make a mountain out of a mortgage
Regulators, mortgage servicers agree on reforms
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Under the plan, banks would have to retain a stake in the home purchase loans they make to borrowers who put down less than 20 percent. The banks say that the requirements would be costly and that those costs would be passed on to borrowers in the form of higher interest rates. That would effectively shut millions of families out of homeownership.

At a House subcommittee hearing Thursday, Rep. Barney Frank (D-Mass.) said the arguments against setting such a high threshold are “persuasive.” A 20 percent down payment “does seem very high,” Frank said.

Bob Ryan, acting commissioner of the Federal Housing Administration, agreed that the proposal has the potential to deny affordable loans to creditworthy borrowers. Ryan urged serious consideration of another option in the proposal that would set the down payment at 10 percent.

“We are definitely concerned about 20 percent and the impact,” Ryan said.

Since the proposal was unveiled last month, a coalition of consumer groups and civil rights advocates has joined the real estate industry to lobby against the high-down-payment initiative. They say saving the upfront cash is an especially tough hurdle for first-time buyers and minorities, who rely heavily on low-down-payment loans.

The six federal agencies involved in crafting the proposal — including the Federal Deposit Insurance Corp. and the Federal Reserve — will gather public comment on it through June 10. The plan would take effect a year after it is finalized.

But differences among the participating agencies surfaced at the hearing.

Ryan, whose agency is part of the Department of Housing and Urban Development, aligned himself with the 10 percent alternative. He argued that down payments alone are not the most reliable predictor of a borrower’s ability to sustain a loan, and he pointed to other factors, such as a borrower’s credit score. His agency insures low-down-payment loans and caters to low-income borrowers and first-time buyers.

But the Federal Housing Finance Agency — which oversees mortgage financiers Fannie Mae and Freddie Mac — analyzed loans sold to both companies from 1997 to 2009 and concluded that lowering the down payment to 10 percent would not greatly boost the share of loans exempt from risk retention.

The share of home purchase loans would have increased by just 5 percentage points, from 27 percent to 32 percent and those additional loans would have been riskier, Patrick Lawler, FHFA’s chief economist, told lawmakers.

Some consumer advocates reached similar conclusions. To buy a home for $172,100, the median national price, a borrower making a 10 percent down payment would have to come up with nearly $26,000, including closing costs, according to the Center for Responsible Lending. It would take a middle-income family about nine years to come up with the cash.

“Even a 10 percent down payment would put homeownership beyond the reach of many creditworthy families who would otherwise have succeeded in homeownership,” Ellen Harnick, senior policy counsel at the center, said in her testimony.

“In the face of the deepest economic recession and housing crisis in decades, the Obama Administration has taken unprecedented action to promote stability in the market – keeping millions of families in their homes and helping millions more to save money by refinancing. But the data clearly show that the market remains extremely fragile,” said HUD Assistant Secretary Raphael Bostic. “While we cannot stop every foreclosure, we know that many responsible homeowners are still fighting to make ends meet. Through the broad range of programs this Administration has put in place, we can put help in reach to those homeowners as early as possible.”

“Our housing market remains fragile. We know this from data, but homeowners across the country can feel it too. That’s why this Administration remains committed to helping eligible homeowners avoid foreclosure where it makes economic sense to do so,” said acting Assistant Secretary for Financial Stability Tim Massad. “Every month, HAMP continues to help tens of thousands of additional families in a cost-effective manner. And by setting affordability standards and developing a framework for how mortgage servicers provide assistance to struggling families, HAMP has established critical protections for homeowners and has catalyzed improvements in modifications industry-wide.”

Available online at www.hud.gov/scorecard, the February Housing Scorecard features key data on the health of the housing market including:

Housing market remains fragile as data through January paint a mixed picture of recovery. Existing home sales ticked upward in January, but remained below levels seen in the first half of 2010. Mortgage delinquencies continued a downward trend compared to early 2010 and foreclosure starts and completions remain below peak. However, as lenders review internal procedures related to foreclosure processing, many foreclosure actions have been delayed. The decline is likely to be temporary as lenders eventually revise and resubmit foreclosure paperwork in the coming months.

Administration efforts have been effective in blunting the effects of the deepest economic crisis since the Great Depression. Since April of 2009, record low mortgage rates have helped more than 9.5 million homeowners to refinance, resulting in $18.1 billion in total borrower savings. However, home prices remain unsettled at this fragile stage of the recovery. More than 4.2 million modification arrangements were started between April 2009 and the end of January 2011 – including nearly 1.5 million HAMP trial modification starts, more than 730,000 FHA loss mitigation and early delinquency interventions, and more than 2 million proprietary modifications under HOPE Now. While some homeowners may have received help from more than one program, the number of agreements offered was more than double the number of foreclosure completions for the same period (1.8 million). View the January HAMP Servicer Performance Report.
Given the current fragility and recognizing that recovery will take place over time, the Administration remains committed to its efforts to prevent avoidable foreclosures and stabilize the housing market.

Each month, the Housing Scorecard incorporates key housing market indicators and highlights the impact of the Administration’s unprecedented housing recovery efforts, including assistance to homeowners through the FHA and HAMP. The Obama Administration’s complete Housing Scorecard is available at: www.hud.gov/scorecard.

Governor Signs Buyer’s Choice Act into Law
Measure to take Effect Immediately as Urgency Statute

The Governor signed AB 957 (Galgiani), also known as the Buyer’s Choice Act, over the weekend amidst a spate of political gamesmanship that put its passage into question. While the bill had almost no opposition in the Legislature before its signing, it nevertheless faced an uncertain future as one of hundreds of bills that could have been vetoed by a Governor unhappy with the progress of talks over water legislation.

The bill, which takes effect immediately as an urgency statute, prohibits a seller who acquired title to residential real property at a foreclosure sale from requiring a buyer to purchase title insurance, or escrow services from a company chosen by the seller as a condition of receiving offers or selling the residential real property. A transaction subject to the act would not be invalidated solely because of the failure of any person to comply with any provision of the Act. The measure is effective only until January 1, 2015, unless extended by the Legislature.

For commonly asked questions surrounding AB 957, please see the CLTA’s Buyer’s Choice Act FAQ.

Buyer’s Choice Act

Frequently Asked Questions

Q. What is the Buyer’s Choice Act?

A. The Buyers’ Choice Act is a new law that prohibits a seller who acquired property as a foreclosure sale from requiring a buyer to purchase title and escrow services from a company chosen by the seller as a condition to receiving offers or selling the property. It was enacted by Assembly Bill 957 (Galgiani).

Q. Who is a seller under the Buyer’s Choice Act?

A. A seller is defined as a mortgagee or beneficiary under a deed of trust who acquired title to the property at a foreclosure sale, including a trustee, agent, officer or other employee of any mortgagee or beneficiary.

Q. When does the Buyer’s Choice Act become law?

A. On October 12, 2009. The law is an urgency measure and became effective when it was signed by the Governor on October 12, 2009.

Q. Can a buyer agree to accept the recommendations of the seller as to which title or escrow provider to use?

A. Yes, provided that a written notice of the right to make an independent selection of those services is first given by the seller to the buyer.

Q. Does the new law apply to all real estate transactions?

A. No. The law only applies to residential property improved by four or fewer dwelling units.

Q. What settlement services are covered by the law?

A. The law covers title insurance and escrow services.

Q. Are there penalties for violating the Act?

A. Yes. A seller who violates the new law is liable to the buyer for three times all charges made for the title insurance or escrow service. In addition, a seller who violates the law is also considered to have violated their licensing law.

Q. If a person violates the law can the sale be set aside?

A. No. A transaction cannot be invalidated solely because of the failure to comply with the law.

Q. What is the reason the Legislature passed the Buyer’s Choice Act?

A. The Legislative findings and declarations state that the recent troubled real estate market has resulted in a concentration of the majority of homes available for resale within the hand of foreclosing lenders and has dramatically changed the market dynamics affecting ordinary home buyers. The act declares that the potential for unfairness occasioned by the resale of large numbers of foreclosed home requires that protections against abused be made effective immediately.

Q. Does the Act continue indefinitely?

A. The Act is only effective until January 1, 2015 unless it is extended by the Legislature.

President Obama on Thursday touted his administration’s efforts to lower mortgage rates in a round-table discussion with Washington, D.C.-area homeowners who have benefited from refinancing into more affordable loans.

NANCY STONE / MCCLATCHY NEWSPAPERS

President Obama meets with Treasury Secretary Timothy Geithner and homeowners on Thursday during a housing-refinance round table at the White House.

WASHINGTON — President Obama on Thursday touted his administration’s efforts to lower mortgage rates in a round-table discussion with Washington, D.C.-area homeowners who have benefited from refinancing into more affordable loans.

Their stories were intended to serve as testimonials for the masses who have not called a mortgage broker, whether they are in danger of foreclosure or simply looking for extra money.

Applications for refis have increased 88 percent since February, according to the Mortgage Bankers Association. And Fannie Mae, a mortgage-financing company, has said its refinancing volume jumped to $77 billion in March, twice the level of the previous month.

“The main message we want to send today is that the programs that have been put in place can help responsible folks who have been making their payments, who are not looking for a handout, but this allows them to make some changes that will leave money in their pockets and leave them more secure in their homes,” Obama said.

Obama said new housing programs would be presented soon, following last month’s plan to provide $275 billion to help distressed homeowners, of which $75 billion would subsidize the mortgage industry to help borrowers avoid foreclosure. But he offered no details Thursday.

The refinancing boom has been fueled by lower mortgage rates. The average rate on 30-year fixed notes was 4.87 percent Thursday, slightly higher than the 4.78 percent last week. Still, it was the lowest level since 1971, which the president used to bolster his two-pronged argument for why refinancing is so important.

First, families will have more money to spend, which will boost the economy. If that happens, home values likely will rise, which will begin rehabilitating the beleaguered housing market that contributed significantly to the economic collapse.

Despite the uptick in refis, the administration’s housing program has yet to have a significant impact, and homeowners with jumbo mortgages still struggle to take advantage of lower rates.

Obama’s focus was intended simply to draw attention to a government Web site that tells people if they are eligible to refinance their mortgages.

“We hope that everybody takes advantage of it. The Web site is makinghomeaffordable.gov — is that right?” Obama said, repeating the address five times in five minutes. “So get on the Web site, find out what’s available.”