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Inside Nonconforming Markets

July 31, 2009

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Option ARM Performance a Concern as Servicers Modify and Liquidate Portfolios

While option ARMs are no longer being offered, adjustable-rate mortgages that allow negative amortization originated in recent years are a growing concern for servicers. The rate at which option ARMs are turning delinquent is currently higher than on any other mortgage product, except for subprime. According to a report released this week by... [Includes one chart and one graph] Read More

Fed Proposes Increased Disclosures for ARMs

An extensive revision of mortgage disclosures proposed by the Federal Reserve last week aims to help borrowers better understand ARMs. Recent testing sponsored by the Fed found that many borrowers do not fully understand ARMs, especially option ARMs. The Fed’s proposed revision of Truth in Lending Act regulations would improve the disclosures consumers receive relating to... Read More

Chaos Surrounds Implementation of Mod Program

Implementation of the Home Affordable Modification Program – announced in March – has been chaotic, to say the least. Community advocates allege that servicers are violating the program’s guidelines while the Government Accountability Office suggests the Treasury Department is not adequately prepared to manage the program.A major meeting this week between servicers and federal regulators... Read More

OTS Opposes ‘Vanilla’ Mortgage Proposal

The mortgage industry received support from a federal regulator last week in the fight against a proposal to create a category of “plain vanilla” mortgages. Meanwhile, Congress’ consideration of the Consumer Financial Protection Agency was delayed slightly but still could be sent to President Obama by the end of this year. In testimony last week before the House Financial Services... Read More

AIG Unit Sells Subprime MBS at 40% Discount

Subprime lender American General Finance this week sold approximately $1.6 billion of mortgage-backed securities at a 40.0 percent discount to pay down some debt. Credit Suisse purchased the majority of the securities to resell to institutional investors. The mortgages in the MBS are reportedly at least four years old and are mostly performing. The MBS was not rated by a rating service... Read More

Lack of Mods Revives Congress’ Cramdown Quest

Democrats in Congress are considering pursuing cramdown legislation again as they warn that servicers’ loan modification efforts are lacking. However, cramdown approval by the Senate is far from certain. The mortgage industry continues to lobby strongly against cramdowns. In May, the Senate rejected a cramdown proposal on a 51-to-46 vote after the House approved of cramdowns in March... Read More

Undetected, Subprime Problems Snowballed

The causes of the subprime mortgage crisis were more complicated than many common theories suggest, according to new research by the Federal Reserve Bank of Cleveland. “Many of the most popular explanations that have emerged for the subprime crisis are, to a large extent, myths,” said Yuliya Demyanyk, a senior research economist at the Cleveland Fed. “On close... Read More

News Briefs

The House Appropriations Committee last week approved legislation to extend current high-cost... Tighter underwriting standards were prevalent for residential mortgage and home-equity... Approximately 1.6 million of the 14.4 million non-prime mortgages originated between... This month, the IRS ruled that incentive payments made under the Home Affordable... The House this week approved legislation that would allow depository... Read More

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