Nothing is new under the sun. When I read things like this I just see more fuel to the fire. Perhaps this will replace the welfare lady driving a Cadilac story in someones mind.
How good God is to the upright,
to those who are pure of heart!
But as for me, my feet nearly stumbled,
my steps were on the point of going astray,
as I envied the boasters and sinners,
envied their comfort and peace.
For them there are no burdens,
their bellies are full and sleek.
They do not labour, like ordinary men;
they do not suffer, like mortals.
They wear their pride like a necklace,
their violence covers them like a robe.
Wickedness oozes from their very being,
the thoughts of their hearts break forth:
they deride, they utter abominations,
and from their heights they proclaim injustice.
They have set their mouth in the heavens,
and their tongue traverses the earth.
Thus they sit in their lofty positions,
and the flood-waters cannot reach them.
They ask, How can God know?
Does the Most High have any understanding?
Behold, then, the wicked, always prosperous:
their riches growing for ever.
I note, by the way, that I'm just assuming the new loan would be treated as a cash-out.
In the real world, if the second was closed-end (no new money drawn out of it since it was made four years ago), the new first mortgage wouldn't even be treated as cash-out, as long as all proceeds over the first lien payoff were applied directly to the second.
It's the folks with HELOCs that have recent draws that get sent to the cash-out interest rate.
Time to play hardball. I'll keep that in mind as all these lovely banks are begging for their bailout.
I guess if Mr Whittaker refuses to pay the higher interest rates, more closing costs, and higher monthly payments, he'd be one of those unreasonable "ruthless borrowers." The fact that he has been unable to pay the current payment - not a consideration.
As Tanta points out, things happen - like that entire second getting wiped out in a FC sale. I wish Mr Whittiker
good luck. The bank, not so much.
National City probably wants to force a full repayment.
Faced with such a situation, the borrower could refinance both loans at the same time. It would be a piggyback, but if the appraisal is right, the LTV wouldn't prohibit him from getting a new first lien and a new HELOC.
His wrist might get sore from signing two stacks of forms....
But National City, if capital constrained, would get all their principal back and reduce their exposure to 2nd lien US mortgages.
I think we'll start seeing more pay-downs. It probably didn't occur to the broker to ask for a paydown because they're not used to thinking that way. It's always been an all or nothing propostion on seconds - either pay it off or get it subordinated. Paying off even part of the second with 5.5% money has got to better than what his client has now.
Regarding National City - don't even get me started!!!
I agree that National City is looking for a buydown or buyout of their second. I don't blame them, but it could backfire if it causes a foreclosure. While Maryland isn't suffering as much as Florida or California, home prices have and are dropping every month.
National City services my mortgage. I suspect it's part of a GSE MBS. I have a very low interest rate and owe way less than the homes value. Even taking bubble economics into account. I wanted to pre-pay a huge amount of principal and they tried to talk me out of it. I sent them the check and they held on to it forever. I guess they were hoping I would change my mind and cancel the check. I suppose servicing loans that have little risk of default is the only sure fire way they have of making money.
Well, yes. But the facts that were presented in the story suggest that a new loan could be structured that is quite affordable to the borrower and still pays NC down.
It just blows my mind that the guy's broker didn't immediately suggest it! I mean, it's a bigger first lien loan and thus more commission for the broker! We've had quite the sea-change in broker behavior, it seems . . .
I have an extremely evil idea. How about the broker offer the first a dil. Then the first offers the house back to the former owner at 7% without that pesky second?
A ton of paperwork for sure, but that nasty second gets nothing- unless they want to pay that first off.
Once again, Tanta, pretty much proof for the layman that mortgage companies are evil.
Not true for all of them, but the bad actors surely tar the industry with the rep.
Assuming the appraisal is NOT "fruitcake on a 1004" and using the numbers given he could pay off the entire 2nd mortgage. He would have PMI. If the current second was a closed end PM mortgage then he shouldn't hit the cash-out wall.
However, if one doesn't know the guidelines it is difficult to structure financing properly. Just sayin' ...
if one doesn't know the guidelines it is difficult to structure financing properly.
BINGO!
These brokers did "fast and easy" subprimes and Alts for so many years they have forgotten, if they ever knew, how GSE loan guidelines work.
It is quite possible that a couple of different scenarios here involving a paydown would end up being a better deal for this guy than simply subordinating. But everyone including the broker and the reporter and our commenters rushed to the conclusion that it wouldn't be. Go figure.
Hint for everybody: no one has yet asked what the interest rate is on the second lien. Is it less than 5.5%?
The broker probably did not have time remaining on his rate lock to make any changes in terms on the first loan, re-sign the docs and go through rescission again. Subordinations were taking 10-15 working days in January at many lenders due to the sudden spike in refinances, and typical refi rate locks are 30 days.
If the second was not fully disbursed at the time the property was acquired, any loan amount over the first loan payoff (plus costs) would almost certainly be considered cash out. 85% LTV cash-out might be available, unless he is in a "high risk" county, in which his max LTV is 80%.
The one year seasoning rule for HEL equity withdrawal is not used by the FNMA/FHLMC lenders I work with any more.
Let's not forget it's National City, folks, widely known as a job placement program for the severely developmentally disabled.
Had a National City HELOC, never used. They refused to release the lien upon closing for many months. Happens to be contrary to state law. Attorney General got involved (there were multiple complaints). They came close to losing their privileges to do business in the state. They released the lien randomly, without warning, months later.
Seems like we're doing a lot of reading of crafty intentions into the actions of people who are, after all, the result of a decades-long human/orangutan breeding experiment.
You can't eliminate a 2nd mtg with a deed in lieu, certainly not in a title theory state. You'd have to go thru the foreclosure and eliminate the 2nd and then sell back to the guy, except in Florida this doesn't work because the 2nd pops right back on again. Others have thought of this trick before!! You get around it by adding somebody to the title, or forming a corporation to buy, but then you have a different set of credit guidelines entirely.
Financial firms are likely to face at least $600 billion of losses as the credit crisis batters banks, brokers and insurers. Federal Reserve Chairman Bernanke said yesterday some smaller banks will probably fail and unemployment will rise
I guess I'm not entirely following Tanta's line of reasoning about what National City is "really" up to. The reporter contacted a National City spokesperson, who is not quoted as saying anything about paydowns or even offering "we'll work with borrowers" generalities--nothing but a dull blank stare and a hoocoodanode drool. I'm willing to believe reporters misunderstand their own stories, but failing to include material spokesperson quotes is a much more serious charge.
I wonder what meds the doctors got Ben on these days:
NEW YORK (MarketWatch) -- Gold and crude-oil futures surged to new record highs Monday morning, propelled by sharp weakness in the U.S. dollar. Gold for April delivery hit a record of $991 an ounce, while crude oil for April delivery soared to a record of $103.51 a barrel on the New York Mercantile Exchange.
By Josh Funk, AP Business Writer
Buffett Says US Economy Essentially in a Recession, Expects Tough Ride for Insurers
OMAHA, Neb. (AP) -- Billionaire Warren Buffett said Monday that the U.S. economy is essentially in a recession even if it hasn't met the technical definition of one yet.
Buffett said in an interview with cable network CNBC the reports he gets from the retail businesses his holding company owns show a significant slowdown in purchases.
Interesting. I did watch National City completely withdraw from their home equity wholesale business not too long ago and I had heard that their own internal branch retail standards had tightened. However, at the same time, this shouldn't be a huge stumbling block to the borrower getting a new loan. There still are cash out loans to 90% under FNMA and , assuming that the guy's appraisal is legit, he could do a 90% cash out single loan with the MI built into the rate for an extra 0.25 hit to the rate. I know it sucks that Nat City is doing what they're doing but it's not the end of the road for him.
ot to be cold blooded, but the basic problem seems to me to be that--the institutions cannot 'afford' the transaction costs associated with making even an easy credit decision on a credit of this size. For all the happy talk about working with borrowers, the expense associated with a series of negotiations, compromises, analyses, etc. each addressing a workout situation with less a million dollars or so (pick your cutoff)is prohibitive in the current industry cost structure.
I've been very amused at all the pleas from politicians and lenders to 'pick up the phone and talk to us', since if even a tiny fraction of the borrowers in trouble did that, the aparatus would be overwhelmed. Right now, I suspect the level of institutional competence in servicing these situations is exhausted by the effort involved in calculating a payoff amount and sending wiring instructions. Anything more complicated than that is overwhelming. Bottom line, the business model is broken. The lenders want their money back, and to let the mess be someone else's problem. That doesn't work from a systemic perspective, of course. But individual borrowers, no matter how creditworthy, trying to work something out have about as much chance of succeeding as a 'free range' chicken in a Tyson slaughterhouse has of negotiating a different outcome.
I guess I'm not entirely following Tanta's line of reasoning about what National City is "really" up to.
I'm not saying that's what they're "really" up to. I'm saying I'd have asked them if they'd accept a paydown in this case.
You are free to believe they're simply stupid. It never pays to rule that out. But they just don't get anywhere at all by simple refusal to subordinate. As people keep pointing out, if the borrower is distressed, and the refusal to subordinate means he can't be put in more affordable loan terms, NCC is guaranteeing a foreclosure. And they'll lose more that way than if they had subordinated.
Possibly they just want the first lien, so this is predicated on that--this is suggested but not explicitly stated in the article. Yet it doesn't say that NCC is offering a much worse rate on the first lien than 5.5%.
What it does say is that NC is no longer approving these requests "nationwide." Does that mean no requests anywhere in the nation are approved, or that in some parts of the nation requests are not approved?
Whatever NC's up to, my point is still valid that a bigger first lien/paydown might very well be a better deal for this borrower over the long haul than a subordination.
I have a National City heloc loan that will be paid down in 2 months to 0. Am I to be worried that they still will have a lien recorded on my house when I will sell it?what do I need to do so that I am not surprised at the closing. This is scary stuff.
Nat City was one of the biggest buyers of home equity debt on the wholesale market for several years (until the wheels came off in 2007). They have got to have a lot of worthless paper. I wonder if they're drawing a line in the sand here.
I'm guessing that National City has come to the conclusion that all of their seconds are worth 0, and as such there is no point in spending the time and effort to do anything with them. If they take this hard line, then maybe a few of them will get bought out and they can loss mitigate a bit above the 0 value.
OT: Thornburg melted down today losing half their value at open, as they all but admitted they are out of cash to pay more margin calls on their mortgage portfolio.
wasn't thornburg supposed to be the place that only sold to rich people?
what do I need to do so that I am not surprised at the closing.
Do a title search before you list it to make sure the old liens are really clear.
Even better: write NC and request a copy of your mortgage stamped "Paid in Full" plus a copy of the release of lien sent to the county. If you haven't gotten it in 90 days, keep bugging them for another 90 days, then go the AG's office.
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Given how ridiculously stupid National City was on the way up, why isn't it logical to assume they will be pretty stupid on the way down? Did everyone in Cleveland just get a lot brighter in the last year?
I can understand the perplexity and anger. There are people who actually believe it when the mortgage companies say they want to "help." Perhaps the company management does.
The problem is the attitude never makes it down to the operations staff. Somehow I don't think morale is all that good inside "Nasty City."
I can see who ever process requests like this mentally asking "OK, what procedures fit this? The brain replies "none." They might ask a supervisor who will then quote an internal memo that translated says "No, we do not do this." OK, good enough for me and it gets moved to the Ignore pile.
Bad systems do not get better. Bad systems are not flexible. Bad systems usually just get worse.
Hmmm well NCC's refusal seems to make sense if you look at the payments.
Orginally the 1st was an interest-only. Now it would be an interest + principal loan. That means the payment will be going up.
Possibly the 2nd-lender is concerned about his ability (or desire in a falling market) to handle the payments with the 1st mortgage payment increasing due to the addition of principal to the payment.
He will just have to suck it up and
(1) refi completely through NCC (and live with their rates) or
(2) do the 80% LTV Tanta suggested and a pay down of the 2nd - and live with the rates.
BTW, "credit rating" does not equal income cash-flow.
I do buy the notion that the infrastructure is simply not there for mass workouts. I don't think it's there for mass foreclosures, either.
My layman's suspicious is that, as the writing on the wall becomes clearer, banks, lenders, services, and investors will start doing bulk sales of mortgages at a discount to another party who can and will work them out. The discount will drive the business model to permit working with borrowers.
The narrative is that any return to sanity is going to get labelled as "unfair," because we're all still captive to the belief that loan terms that were never explictly guaranteed, like the "right" to get a refi or the "right" to demand subordination, really were guarantees.
Lumping this guy in with folks who are desperately trying to get a workout is bothering me. If he is desperate, then we can save all the nattering on about his $55K in equity and his great credit score. If he isn't desperate, he just needs to learn that you don't always get your lender to act against its interests for you.
This just reminds me of those OMG! news articles about how those mean nasty lenders are now requiring down payments of five percent! How grossly unfair!!
A lot of the problem here is that the game keeps changing and many companies can't keep up. Based on the anecdotes about dunderheads at NCC it sounds like they're part of that group. If we had time this could get worked out but we don't. For this borrower, his rate has probably gone up and since he was in a toxic I/O to start with he's probably at the limit of his DTI ratio. Depending on how toxic that first loan is the banks might do just fine on this if the borrower can survive ramen noodle debt slavery. With 15% equity he still has motivation to stick it out.
For this borrower, his rate has probably gone up and since he was in a toxic I/O to start with
I am fascinated at how you read that into what got written.
How do you know he didn't get a prime 5/1 IO ARM 4 1/2 years ago? He might well have gotten 5.50% on that. If it's LIBOR plus 2.50, which was typical back then for prime ARMs, he would adjust to 6.50% or thereabouts with LIBOR currently under 4%. You notice it implies he was "waiting" for rates to get under 6.0%.
If he got the second lien at the same time and it was priced at 1.50 over prime, then his second lien is 5.50%. (Prime rate was 4.00% in that period.)
You do not have enough information here to assume that he's anything other than someone who took the rock-bottom lowest rate he could get back in 2004, and now wants the rock-bottom lowest rate he could get today.
Nobody can ever say without better reporting of details, but your case is no more likely than mine. I know for a fact that a whole lot of people did take prime 5/1 IOs back then for 5.50% and are now looking to refinance them. In fact, about once every couple of weeks we get a commenter who did and wants us to tell him if he should refi yet.
This just reminds me of those OMG! news articles about how those mean nasty lenders are now requiring down payments of five percent! How grossly unfair!!
Tanta | 03.03.08 - 10:33 am | #
Funny you should mention that. One of the guys I work with just closed on a place 2 weeks ago. 5-6 times income. 100% financing. Absolutly zero outta pocket expense. I mean the doctor selling the place paid every single penny to get the guy into the house. He seemed very pround of himself on how he scored a good deal so I just kind of smiled and walked away.
He did mention the bank officer told him Friday the 29th the loan he got was no longer offered as of the 28th.
that's probably what it will say in NC's 10-K footnote commentary about their portfolio of seconds.
I wish. 10-Ks are never that fun.
But you bring up a great point. If NCC publishes financials showing that they're still carrying these seconds at close to par, all hell will break loose. Those cheaters!!! They need to carry those loans on the books at ZERO! Etc. etc.
But as Al point out, if they have already written them down to zero, what motivates them to process subordinations for every Tom, Dick & Harry who asks for one?
You can't expect anyone to take the write-downs like a big kid and then to do workouts as if they carried the loan at par.
Left out a "no more than." I got stuck by the "four years" in the article. Nobody I know of offered a 4/1 ARM, so either it's a 5/1 that hasn't reset yet or he refi'd it into a 3/1 or 2/28 at some point after purchase.
Anway, if he resets this month that's using January's LIBOR. If he has already reset recently he could have gotten December LIBOR.
If he could reset with index = 2.63 plus 2.50, I can't see why he would.
Tanta: "You can't expect anyone to take the write-downs like a big kid and then to do workouts as if they carried the loan at par."
Why not? The write-down is presumably a non-cash transaction. The workout would still bring in cash. I would think people would be happier working out a loan what had been written off - that's a pure gain, while a workout for a loan at par is a loss.
Not if the lender just resubordinated. Then it would be a loan with a book value of zero moving to a loan with a book value of zero, less the cost of processing the subordination.
Hence my suggestion that they may be hoping to get a paydown offer.
My point was you can't have it both ways: if you want NC to come out with the "on paper" loss today, which they should, then you can't call them stupid for trying to get paid something to subordinate this loan in a case in which there is money.
However, having banks write the second lien portfolio down to zero does create this problem with the true "foreclosure prevention" short-refi kind of borrower.
I don't know Maryland law, but what happened to the doctrine of equitable subordination? That holds that a lender refinancing an existing lien without increasing it or otherwise further endangering the subordinated lienholders "steps into the shoes" of the departing lender and maintains the same lien priority automatically.
They don't have this there or the new lender or title company requires a formal resubordination agreement anyway and that's what's gone wrong?
Hello Everyone
My friend sent me this link in reading it seems that the conversations are all over the place.
Just for the record I am not in possible default of ether my first or my second, my scores are in the 700's and have never fell behind. Yes I have an adjustable rate mortgage that was a tool for me to get into my house with the intention on changing rate and term later on.
It was time, My scores were good, rates were good and my house appraisal came in good I'm not upside down in my house even in this market.
We had approval in hand for a 5.5% fixed for 30 years on the first with no cash out just rate and term, and a settlement date.
We submitted our subordination agreement on Feb 1st
Feb 18th they rejected our subordination
We have a copy of an internal memo that was sent to us by an unknown source that effective Feb 18th they would reject all subordination agreements well if that was there deadline then what about the 17 days in between when they received it and policy change.
They have cost me a great rate, put me at risk of mortgage rate increase, and taken away my right as a consumer to refinance.
We asked them to do a case by case study they refused.
Allowing me to do this would have put Them and I in a better situation
You did hear that Merrill is shuttering First Franklin, didn't you?
There are always degrees of "ridiculously stupid."
Tanta
Buying First Franklin was stupid, but National City was forced to keep the horrendous portfolio built up under their management. They didn't get bailed out with that sale.
Ah - I had been assuming they got something (cash, obviously). Agreed that it makes no sense to do workouts for free on a zero-value loan. Thanks for the clarification.
but what happened to the doctrine of equitable subordination
There are no secondary market mortgage investors I know of who accept "equitable subordination." You show the lien paid off or you produce a subordination agreement.
Washington, DC OFHEO Director James B. Lockhart announced agreements with OFHEO, New York State Attorney General Andrew Cuomo, Fannie Mae and Freddie Mac (the Enterprises) to strengthen the independence of the appraisal process. For mortgages the Enterprises buy or guarantee, the agreements seek to enhance appraisal and evaluation services that are critical to the residential mortgage process. Flawed appraisals artificially inflate home prices and are often a sign of mortgage fraud and undue influence on appraisers.
There are many significant provisions in the agreements that are designed to strengthen the independence of appraisers, including eliminating broker-ordered appraisals, prohibiting appraiser coercion, and reducing the use of appraisals prepared in-house or through captive appraisal management companies in underwriting mortgages. The agreements also enhance quality control in the appraisal process and establish a complaint hotline for consumers. The agreements include a Home Valuation Code of Conduct that the Enterprises will apply to lenders selling mortgages to Fannie Mae or Freddie Mac. The Code becomes effective on January 1, 2009.
The parties also agreed to establish and the Enterprises fund an Independent Valuation Protection Institute designed to supplement current efforts to provide an appraisal complaint process, mediation of appraisal disputes, and mortgage fraud reporting. The agreement seeks the comments and concurrence of the federal banking agencies and solicits the comments of market participants that will be considered in making amendments to the Code during the implementation process.
Do you know what recourse they have against you if you stop paying the second loan? It's about the only leverage you have, and it could be worth while exercising it if the penalties aren't too steep.
Well, I can see no reason why Nat City would agree to this hyar "routine" request. Property values are trending down in most of MD. The initial years of principal payments on the new first don't help Nat City very much.
If they subordinate, the guy's first payment goes higher, so Nat City is taking on increased risk. Surely it is not unreasonable for them to want at least a partial pay down. Presumably their second has a relatively high rate, so probably something could be done to keep the whole payment doable for the borrower.
What happens if they subordinate and in a couple of years this guy can't make the higher payments and goes BK? They'll probably get crammed down and stuck for a good portion of their current second. Alternatively he could try to sell and Nat City might find themselves with a short sale request. They have their best leverage now.
People have to realize that underwriting is about exactly these sorts of choices. If Nat City refuses and the guy decides to sell, right now Nat City gets paid. If Nat City agrees, they are taking on more risk at a time in which they shouldn't.
And I am not running the borrower down, but when you get an I-O first and second, you really should not be surprised by finding yourself in this position when you seek to refi. If Nat City agrees and the man has difficulties paying the second, Nat City is going to be the one asked to modify.
A lot of the seconds had 5 year resets in them anyway, so I bet Nat City expects him to refi up to 80% on the first and pay them mostly down, and I think they should hold out for something like that.
A number of years ago, you took an ARM with a second lien combo, in order to get a great rate. You accepted some risk to get that, no?
Now you want "the right" to have that risk erased. The fact is you could refinance enough in the first lien to pay off Nat City, but you don't want to.
You should have taken a fixed rate loan all those years ago, Whittaker. Then you would not face a rate reset. But you accepted that risk to get the low start rate.
Why are you blaming Nat City for the consequences of your own decision?
Interesting editorial. That's how to sell newspaperz, yo!!11!
The theory that women are the dumber sex -- or at least the sex that gets into more car accidents -- is amply supported by neurological and standardized-testing evidence.
I think Borat should sue for plagerism...
"Everyones, even an Uzbeki, knows that woman has smaller brain than man. Some mens do not know, woman with yellow hairs has smallest brain of all."
If I am reading this right, NCC is already in a subordinate position, so their rights don't change if they agree to resign the subordination to the new loan. Since it is a second, if the house if foreclosed by the primary mortgage holder NCC won't likely get anything out of the process. It is in NCCs best interest to keep Whittaker paying as long as possible, which seems more likely with the new primary mortgage.
So, the trick seems to be to convince NCC that accepting the new subordination is the only way they'll see another penny. With holding payment could get them talking, or they could jump straight to pushing for BK proceedings. Not sure what to expect.
but had they told me they would never subordinate I would have not taken the risk with them
Did you ask at the time? Surely if you had they would have told you that subordination is not an obligation of the lender, it is an option.
You still haven't shown that Nat City wouldn't have denied your request for subordination even before this memo came out. All lenders reserve the right not to subordinate. That's why it's something you have to request. Like approval of a loan.
Whittaker, if you are really the borrower described, you are a little confused. I posted above before you had appeared on this thread.
First, any decently run financial institution does not automatically approve subordination requests, so the memo of the 18th is a bit of a distraction. The fact that the law gives them the right to refuse to subordinate should clue you in to that.
If Nat City agreed it looks to me like they would wind up in a worse position. You would be appropriately indignant if Nat City came to you and told you that they wanted to unilaterally change the terms of the original agreement with you, right? The law protects you from that, just as the law protects Nat City from having to agree to this subordination. They have the right to decline.
Try to refi with FNMA to 80% and offer Nat City a partial pay-off.
If you are the borrower described, what are the terms of the Nat City loan? You might well be better off overall doing what I have described.
You should under no circumstances stop paying the second, because they will foreclose if you do, and you will wind up losing money.
Um, appraisal.
Yeah, sure.
NCC had better start getting their house in order, after all, those appraisals will soon show they have no equity left in the second;-}
I can hardly wait.
Remember when I was making jokes about buying mortgage bonds for mills?
If Nat City agreed it looks to me like they would wind up in a worse position.
MoM - not really, the amount of the loan is not increasing, and the rate would, in fact, decrease. Perhaps the new payment is higher since it would be amortizing versus I/O, but this remains a rather routine subordination request which would have usually been granted in such circumstances.
If you're not gone yet Whittaker, pls have a read.
You may not have a right to a refinance, but you and the lender have the right to do the best for yourselves. If you're headed for foreclosure under the current terms of your combined mortgages, let NCC know this and that payments will stop coming in the very near future. Also let them know that the new mortgage will keep payments on both loans coming. Win win.
There is also the possibility that the subordination rule is supposed to apply to new loans and someone has misinterpreted. Keep working your way up the food chain with the same message, that they play or you don't pay.
Hmmm, guess he's gone. If I had some of the best mortgage minds in the country talking to me, I'd be asking for a list of options and prioritizing desirability,...but that's just me.
If you're headed for foreclosure under the current terms of your combined mortgages
Al, he's telling you that he's not headed for foreclosure.
He wrote:
Just for the record I am not in possible default of ether my first or my second, my scores are in the 700's and have never fell behind. Yes I have an adjustable rate mortgage that was a tool for me to get into my house with the intention on changing rate and term later on.
I'm willing to take the statement at face value.
He doesn't want to pay down or pay off the Nat City loan because it's a below-current-market interest rate.
That limits his options on refinancing the first mortgage. Which is a risk you take when you put a second lien on top of an ARM that you intend to refi someday.
To recap: he wants a better rate on his first mortgage and no change to the rate on his second mortgage.
He is not claiming he's in danger of FC, but you are trying to lump him in with borrowers in danger of FC. Why are you doing that?
"For this borrower, his rate has probably gone up and since he was in a toxic I/O to start with
I am fascinated at how you read that into what got written."
I was referring to the loan he could get now, as opposed to the rate he locked in a few weeks ago. By the time he can finish negotiations with NCC he will almost certainly being paying more than he would have if they'd just signed off.
I was making the assumption that his loan payments with a new loan are likely to be more than his I/O payments, and that his old payments were relatively onerous. I acknowledge these aren't guaranteed, but I think both assumptions are well justified. Rates four years ago were very low and it would be hard to better them. In addition, he's moving to an amortizing loan and that bumps up his payments. In term of onerous payments, almost everybody has been taking them lately and the fact that he's in a toxic I/O is just further evidence that he was stretching. Somebody able to make payments comfortably is more likely to have taken an amortizing mortgage, or at least to have dodged a toxic one.
So unless his credit has improved, I think it's very likely his proposed loan payment is already high enough to make the lender say "wait a minute, I'm not sure about this". That could make dealing on the second tough, and possible explain why the deal didn't originally involve the second.
Well if the Dunning Effect has any relevance, I'm willing to bet that there are at least four in the top 95 percentile nationwide. I won't name any names, don't want them getting swelled heads. Caveat: The brokers I've dealt with are holding down the bottom of the curve severely.
Shnaps - I repeat - no decently run financial institution routinely approves subordination requests. You approve most of them, but not without a thought and with a rubber stamp. And yes, Nat City is getting in a worse position if it approves. Overall payments are going up, its reset is approaching, and Nat would be giving without receiving. I still want to know the terms of the second. There is something a bit odd about this.
They should not approve this request. Sorry, but they shouldn't. In general, clearing out those seconds should be good for the borrower and the lenders.
Maybe Tanta and I are just dinosaurs, and what you are seeing is a sketched-in-writing appearance of two wrinkled reptilian snouts rising from the marshwaters and poking through the ferns, but let me tell you that back in the late Cretaceous, we knew how to lend such that neither borrowers, lenders nor investors ended up on the street stripped to their skivvies.
In this case, the reptiles are going to take back over the earth.
Whittaker, if that is really you, keep paying on the second. Believe me, KEEP PAYING ON THE SECOND. Follow my advice about trying to refi to 80% on the first and paying down the second.
During the boom, lenders made optimistic assumptions when making loans, i.e., they believed everything that was disclosed on the loan app.
Now, NCC wants to assume worse case scenario. NCC has no optionality on the loan contract. So it is using the pre-payment exercise by the owner to dictate its own tersm. Should NCC believe the due diligence done by the new bank taking the first position? What kind of assumptions should NCC make about the future price of the house under question? What about the intention of the buyer to keep paying the second mortgage despite deteriorating house prices?
Also, credit spreads have widened, esp. for a second mortgage, esp. close to the 80% LTV (yea, someone might argue that NCC has a 20% cushion before their position is wiped out, but they that's the worse case scenario assumption working).
If the owner is really motivated to refi, they should try to close out the second position. Then NCC can not do anything about it.
Fair Economist, it doesn't sound like a toxic I-O. Not all of them are, by any means. I can see why he'd want to go amortizing.
In this case, it looks like a decent borrower who didn't keep refinancing and blowing out equity. The original transaction worked out as planned. Appreciation substituted for lack of downpayment. If the appraisal is correct, now he's got equity and is in a much better position overall.
What's odd is the idea that the second is automatically going to allow everyone else's position to improve without improving theirs.
Maybe Tanta and I are just dinosaurs, and what you are seeing is a sketched-in-writing appearance of two wrinkled reptilian snouts rising from the marshwaters and poking through the ferns, but let me tell you that back in the late Cretaceous, we knew how to lend such that neither borrowers, lenders nor investors ended up on the street stripped to their skivvies.
My wrinkled reptilian snout SO has hot coffee in it.
I still think the real issue is that the rate on that second lien is below current market. So NC wants to be paid off or at least paid down. They are using the leverage they have--refusal to subordinate--to get somebody to pay them principal.
Folks may like that or not, but "stupid" doesn't seem reasonable to me in this particular case.
Whittaker may be in good shape and he may not. The quote says he's not in danger now, but he also mentions later that an increase in rate is coming. If he's still on solid footing after the rate change, then he should definitely keep paying the second. If not...
Haha!! We just received a message from National City stating the note is due and payable because we changed our mailing address. Talk about desperate!!!
There is no chance in heck this in enforceable (per the note).
"If he thinks he faces future payments he can't handle in a falling value environment, he should SELL TODAY"
He could sell today, or he could try to refinance. If his first attempt at refinancing doesn't work, he can try again using whatever leverage he has available to him. It's looking like missing a payment is a bad idea, but threatening it could work. NCC has plenty of reason to believe him.
I changed the address to my office just to consolidate where the bills are sent. No big deal.
I did read through the note and their is no mention of occupancy status changes nor acceleration due to moving.
Tanta,
Edit: There is no mention of occupancy status AFTER THE FACT. Of course at origination (escrow) I did have to sign an occupancy cert. stating this is my primary residence. No mention of implications should i change my mind down the road.
You should be aware that lenders have heard the "just want bills to go to the office" story a lot over the years from speculators.
So offer them proof that you live there.
Do you happen to own any other real estate? Did you own a home when you bought this one? Perhaps NC is getting a little confused by what a current title search shows?
Could it be NCC (and others) and running title reports on all their Notes? If so, a lot of people who purchased, occupied, moved up, rented the original w/out occupancy change notifications are gonna get hammered.
If so, a lot of people who purchased, occupied, moved up, rented the original w/out occupancy change notifications are gonna get hammered.
Why? If they purchased a new home with the intention of renting out the original home, and they told the new purchase-money lender they were doing that, then when the new purchase-money lender sees in a title search (which they don't do unless you send in that change of address form) that you still own the old home, they aren't surprised.
If you claimed you were selling the old home, and the lender qualified you on that basis, and you were lying about that, they'll nail you.
There is a difference between saying "I'll try to sell this property, or maybe rent it" and saying you have a sale pending. If you said you were just thinkin' about selling the old home, the lender would qualify you on both payments. If you said you had a sale pending, you might have been qualified only on the new home payment. These things matter.
So, if one purchased lets say a condo while single. Got married and crapped out a few monkeys. Proceeded to move to a bigger house but wants to hold onto the condo and turn it into a rental. On the loan appl. condo was disclosed and lease was provided, etc.
Would the lender who provided funds for the condo's purchase under the auspices this would be an owner occupied dwelling now come back and call the note?
Hint: you would have to be able to produce children, plural, a whole lot faster than any other human being I know of to get in trouble in the scenario you outline.
What are your thoughts on my last question? This is a natural (life) progression for many professionals. You buy something small when your able. You eventually start speed dating, post your profile on match.com, spend countless hours at the gym, attend seminars on how to meet your significant other, blame your single'hood on the idea "it's so hard to meeting someone in this city", etc, etc, etc......low and behold you meet the person of your dreams (or atleast you thought so) and eventually have a family.
If the condo lender will call the note, I know of a few people right off the bat who are in deed trouble.
I assume what you discovered is that you are required to occupy for at least a year.
Kid, if you're busy trying to get married and produce children all in the next 12 months, starting from scratch, it isn't a good time to buy a little condo.
What is it, National Eggs In Your Beer Day, and nobody told me?
I would be real curious if Nat. City had a five year prepay, and was trying to use the leverage of holding up a refi to bump their yield. Otherwise, it's hard to see this as anything other than gross stupidity.
They have undoubtedly decided to pursue this blanket "no subordinations" policy to accelerate portfolio rundown, despite the fact that it damages many borrowers and may in fact lead to greater losses down the line by forcing borrowers to keep undesirable first mortgages.
I've been doing loans for almost thirty years, and have seen a blanket refusal to subordinate exactly once before, from a small credit union that probably just didn't have the procedures in place to accommodate it. This is a "black swan" kind of event, probably one of many to come as lenders struggle to come to grips with their situation.
"kid"
alright...take it easy .....I finished reading the DOT twice... No mention of 12 months occupancy "seasoning" before being able to move on but it does say changes in occupancy status......
FYI....i also obtained an easement (24 inches to install a stair) without notifying the NCC, which according to the note, technically they can also call the note....
I'm already multi-tasking, but lemme see what I can do.
Short version: I do think CC's disclosures were awful and probably misleading. They asked for this.
OTOH, we have people who believe that a lender would offer a way-below-market-rate for five years with no other costs involved. That, I can't quite explain. "It sounded perfect," said the borrower.
Yep. You wonder why everybody in the universe didn't get one of these loans, dontcha?
It sounds so perfect that nobody is motivated to check for any fine print, like the BIG CAPITALIZED BOLD FACE PARAGRAPH AT THE TOP OF THE NOTE.
Slimy lenders. Gullible borrowers. My wrinkled reptilian snout is surrounded.
alright...take it easy .....I finished reading the DOT twice... No mention of 12 months occupancy "seasoning" before being able to move on but it does say changes in occupancy status......
The standard first-mortgage DOT used in CA, published by Fannie & Freddie, allows acceleration if you don't occupy for 12 months. You're looking at a HELOC note?
How long was it between the day you closed the Nat City loan and the day you asked to have the address change?
My trouble is that you're talking about your own situtation, plus this hypothetical condo buyer. I'm getting confused. Kid.
Wow, what a change. First it is how stupid the lenders are for lending the money and how justified it is for specuvestors to just walk away, now people are pissing and moaning how lenders are considering to "just walk away". Gotta love it.
P.S. I didn't realize you had to be an AARP member to participate.
You don't. One of the frequent commentors here is only, like, 17 years old. But then again, that individual taught himself how to play 'Stairway to Heaven' on the sousaphone at 14, and was building his own OAS models 'just for fun' at 16. Look for him in next year's Guiness Book of World Records for builing the longest and most intricate domino sequence using only fig newtons.
haha, have fun cleaning your room, Shnaps, Tanta and i are going to build a fort in the kitchen and then we might just sneak some cookie dough and juice boxes before dinner!
I'd argue that we are seeing the return of basic caution in the second lien market here.
There have always been down markets that prompted such care, but they used to be very localized. Sigh. What you do as a servicer is strongly related to risk.
I'll take my reptilian snout and go fossilize some more until I become fashionable again.
Shnaps, I get you now. It's just that to me "routine" in a banking environment has a different, more precise meaning. It denotes stuff that can be reduced to procedures and that don't require decision-making. It's a saurian way of looking at the world.
I'm still blown away by your opening comment. The "coincidence" that it was the reading of the day of the Universalis doesn't detract from it's perfection. Thanks for turbocharging the thread!
We tried to get NCC to sub a second that monday following their decision to flatline the country. In this case it was a 100k behind a 1.5M first. It had zero balance. They said NO. We ended off giving the borrower a new one from Citi...Yesterday CHase said sub's were taking 20 Biz days...try that on a 45 day lock.....
The consumer attitude of the "right to refi" is utter crap. Typical attitude. He just got a lesson in what his "rights" really are.
National City probably is hurting so badly, they have laid off the people who were working in the subordination dept and don't want the expense of hiring people for what may just be blip on the screen as far as refis go.
National City may want to examine their risks and options on risk management more closely in my opinion.
I had the same thing happen to me with NCC. My broker asked the NCC person what we would have to do to get them to subordinate (we had planned on paying down most of the NCC HELOC with the new first mortgage) and they said that there is nothing that we could do to get them to subordinate. The real kick in the pants is that the HELOC has a pre-pay penalty fee, so if I want to just pay the whole thing off and get rid of them, I have to pay for the privelage.
Nothing is new under the sun. When I read things like this I just see more fuel to the fire. Perhaps this will replace the welfare lady driving a Cadilac story in someones mind.
How good God is to the upright,
to those who are pure of heart!
But as for me, my feet nearly stumbled,
my steps were on the point of going astray,
as I envied the boasters and sinners,
envied their comfort and peace.
For them there are no burdens,
their bellies are full and sleek.
They do not labour, like ordinary men;
they do not suffer, like mortals.
They wear their pride like a necklace,
their violence covers them like a robe.
Wickedness oozes from their very being,
the thoughts of their hearts break forth:
they deride, they utter abominations,
and from their heights they proclaim injustice.
They have set their mouth in the heavens,
and their tongue traverses the earth.
Thus they sit in their lofty positions,
and the flood-waters cannot reach them.
They ask, How can God know?
Does the Most High have any understanding?
Behold, then, the wicked, always prosperous:
their riches growing for ever.
Wow, NoVa. What's in your coffee?
Courtesy of Drudge (i.e. common-folk are catching on)
"The Federal Reserve's Rescue Has Failed"
The Federal Reserve's rescue has failed - Telegraph
I note, by the way, that I'm just assuming the new loan would be treated as a cash-out.
In the real world, if the second was closed-end (no new money drawn out of it since it was made four years ago), the new first mortgage wouldn't even be treated as cash-out, as long as all proceeds over the first lien payoff were applied directly to the second.
It's the folks with HELOCs that have recent draws that get sent to the cash-out interest rate.
Time to play hardball. I'll keep that in mind as all these lovely banks are begging for their bailout.
I guess if Mr Whittaker refuses to pay the higher interest rates, more closing costs, and higher monthly payments, he'd be one of those unreasonable "ruthless borrowers." The fact that he has been unable to pay the current payment - not a consideration.
As Tanta points out, things happen - like that entire second getting wiped out in a FC sale. I wish Mr Whittiker
good luck. The bank, not so much.
Of course, National City is offering a new 1st also to secure their position?
National City probably wants to force a full repayment.
Faced with such a situation, the borrower could refinance both loans at the same time. It would be a piggyback, but if the appraisal is right, the LTV wouldn't prohibit him from getting a new first lien and a new HELOC.
His wrist might get sore from signing two stacks of forms....
But National City, if capital constrained, would get all their principal back and reduce their exposure to 2nd lien US mortgages.
I think we'll start seeing more pay-downs. It probably didn't occur to the broker to ask for a paydown because they're not used to thinking that way. It's always been an all or nothing propostion on seconds - either pay it off or get it subordinated. Paying off even part of the second with 5.5% money has got to better than what his client has now.
Regarding National City - don't even get me started!!!
What's in nova's coffee?
As Stephen Colbert would say... TRUTH!
Several stories going around the office here about people who tried and failed to refinance a few weeks back when the 30-year was was close to 4.1%.
In these cases it seems that negative equity was the culprit.
I agree that National City is looking for a buydown or buyout of their second. I don't blame them, but it could backfire if it causes a foreclosure. While Maryland isn't suffering as much as Florida or California, home prices have and are dropping every month.
National City services my mortgage. I suspect it's part of a GSE MBS. I have a very low interest rate and owe way less than the homes value. Even taking bubble economics into account. I wanted to pre-pay a huge amount of principal and they tried to talk me out of it. I sent them the check and they held on to it forever. I guess they were hoping I would change my mind and cancel the check. I suppose servicing loans that have little risk of default is the only sure fire way they have of making money.
but it could backfire if it causes a foreclosure.
Well, yes. But the facts that were presented in the story suggest that a new loan could be structured that is quite affordable to the borrower and still pays NC down.
It just blows my mind that the guy's broker didn't immediately suggest it! I mean, it's a bigger first lien loan and thus more commission for the broker! We've had quite the sea-change in broker behavior, it seems . . .
I have an extremely evil idea. How about the broker offer the first a dil. Then the first offers the house back to the former owner at 7% without that pesky second?
A ton of paperwork for sure, but that nasty second gets nothing- unless they want to pay that first off.
Once again, Tanta, pretty much proof for the layman that mortgage companies are evil.
Not true for all of them, but the bad actors surely tar the industry with the rep.
I pointed out the CFC problems Friday night.
Someday this war's gonna end...
Tanta,
I meant it could backfire if the borrower stays with his current loan because of National City's actions.
Assuming the appraisal is NOT "fruitcake on a 1004" and using the numbers given he could pay off the entire 2nd mortgage. He would have PMI. If the current second was a closed end PM mortgage then he shouldn't hit the cash-out wall.
However, if one doesn't know the guidelines it is difficult to structure financing properly. Just sayin' ...
if one doesn't know the guidelines it is difficult to structure financing properly.
BINGO!
These brokers did "fast and easy" subprimes and Alts for so many years they have forgotten, if they ever knew, how GSE loan guidelines work.
It is quite possible that a couple of different scenarios here involving a paydown would end up being a better deal for this guy than simply subordinating. But everyone including the broker and the reporter and our commenters rushed to the conclusion that it wouldn't be. Go figure.
Hint for everybody: no one has yet asked what the interest rate is on the second lien. Is it less than 5.5%?
it means deep down, everybody knows the appraisals are waaaaay OFF...
We don't know the interest rate on the existing second, but I don't fault National City for trying to better its position in some manner.
What the bank should do, of course, is propose whatever alternative it seeks. The story doesn't tell us that either.
. . . and its truthiness.
The broker probably did not have time remaining on his rate lock to make any changes in terms on the first loan, re-sign the docs and go through rescission again. Subordinations were taking 10-15 working days in January at many lenders due to the sudden spike in refinances, and typical refi rate locks are 30 days.
If the second was not fully disbursed at the time the property was acquired, any loan amount over the first loan payoff (plus costs) would almost certainly be considered cash out. 85% LTV cash-out might be available, unless he is in a "high risk" county, in which his max LTV is 80%.
The one year seasoning rule for HEL equity withdrawal is not used by the FNMA/FHLMC lenders I work with any more.
Let's not forget it's National City, folks, widely known as a job placement program for the severely developmentally disabled.
Had a National City HELOC, never used. They refused to release the lien upon closing for many months. Happens to be contrary to state law. Attorney General got involved (there were multiple complaints). They came close to losing their privileges to do business in the state. They released the lien randomly, without warning, months later.
Seems like we're doing a lot of reading of crafty intentions into the actions of people who are, after all, the result of a decades-long human/orangutan breeding experiment.
"Never ascribe to malace what can be explaine...." oh the frell with it.
This is illistrative of one thing if nothign else: The bursting of the RE bubble "changed everything".
You can't eliminate a 2nd mtg with a deed in lieu, certainly not in a title theory state. You'd have to go thru the foreclosure and eliminate the 2nd and then sell back to the guy, except in Florida this doesn't work because the 2nd pops right back on again. Others have thought of this trick before!! You get around it by adding somebody to the title, or forming a corporation to buy, but then you have a different set of credit guidelines entirely.
Financial firms are likely to face at least $600 billion of losses as the credit crisis batters banks, brokers and insurers. Federal Reserve Chairman Bernanke said yesterday some smaller banks will probably fail and unemployment will rise
Citigroup...Getting smaller every day.
I guess I'm not entirely following Tanta's line of reasoning about what National City is "really" up to. The reporter contacted a National City spokesperson, who is not quoted as saying anything about paydowns or even offering "we'll work with borrowers" generalities--nothing but a dull blank stare and a hoocoodanode drool. I'm willing to believe reporters misunderstand their own stories, but failing to include material spokesperson quotes is a much more serious charge.
I wonder what meds the doctors got Ben on these days:
NEW YORK (MarketWatch) -- Gold and crude-oil futures surged to new record highs Monday morning, propelled by sharp weakness in the U.S. dollar. Gold for April delivery hit a record of $991 an ounce, while crude oil for April delivery soared to a record of $103.51 a barrel on the New York Mercantile Exchange.
By Josh Funk, AP Business Writer
Buffett Says US Economy Essentially in a Recession, Expects Tough Ride for Insurers
OMAHA, Neb. (AP) -- Billionaire Warren Buffett said Monday that the U.S. economy is essentially in a recession even if it hasn't met the technical definition of one yet.
Buffett said in an interview with cable network CNBC the reports he gets from the retail businesses his holding company owns show a significant slowdown in purchases.
The Oracle has spoken. It's official now.
Interesting. I did watch National City completely withdraw from their home equity wholesale business not too long ago and I had heard that their own internal branch retail standards had tightened. However, at the same time, this shouldn't be a huge stumbling block to the borrower getting a new loan. There still are cash out loans to 90% under FNMA and , assuming that the guy's appraisal is legit, he could do a 90% cash out single loan with the MI built into the rate for an extra 0.25 hit to the rate. I know it sucks that Nat City is doing what they're doing but it's not the end of the road for him.
ot to be cold blooded, but the basic problem seems to me to be that--the institutions cannot 'afford' the transaction costs associated with making even an easy credit decision on a credit of this size. For all the happy talk about working with borrowers, the expense associated with a series of negotiations, compromises, analyses, etc. each addressing a workout situation with less a million dollars or so (pick your cutoff)is prohibitive in the current industry cost structure.
I've been very amused at all the pleas from politicians and lenders to 'pick up the phone and talk to us', since if even a tiny fraction of the borrowers in trouble did that, the aparatus would be overwhelmed. Right now, I suspect the level of institutional competence in servicing these situations is exhausted by the effort involved in calculating a payoff amount and sending wiring instructions. Anything more complicated than that is overwhelming. Bottom line, the business model is broken. The lenders want their money back, and to let the mess be someone else's problem. That doesn't work from a systemic perspective, of course. But individual borrowers, no matter how creditworthy, trying to work something out have about as much chance of succeeding as a 'free range' chicken in a Tyson slaughterhouse has of negotiating a different outcome.
OT, but where to post...
Plosser thinks economy trumps inflation - rate cuts worthwhile - I think he's nuts. The two are tied and the Fed is a bunch of namby-pamby sellouts.
Fed official: weak economy trumps rising inflation - Mar. 3, 2008
CR is # 1
EconDirectory | Gongol.com
I guess I'm not entirely following Tanta's line of reasoning about what National City is "really" up to.
I'm not saying that's what they're "really" up to. I'm saying I'd have asked them if they'd accept a paydown in this case.
You are free to believe they're simply stupid. It never pays to rule that out. But they just don't get anywhere at all by simple refusal to subordinate. As people keep pointing out, if the borrower is distressed, and the refusal to subordinate means he can't be put in more affordable loan terms, NCC is guaranteeing a foreclosure. And they'll lose more that way than if they had subordinated.
Possibly they just want the first lien, so this is predicated on that--this is suggested but not explicitly stated in the article. Yet it doesn't say that NCC is offering a much worse rate on the first lien than 5.5%.
What it does say is that NC is no longer approving these requests "nationwide." Does that mean no requests anywhere in the nation are approved, or that in some parts of the nation requests are not approved?
Whatever NC's up to, my point is still valid that a bigger first lien/paydown might very well be a better deal for this borrower over the long haul than a subordination.
I have a National City heloc loan that will be paid down in 2 months to 0. Am I to be worried that they still will have a lien recorded on my house when I will sell it?what do I need to do so that I am not surprised at the closing. This is scary stuff.
Nat City was one of the biggest buyers of home equity debt on the wholesale market for several years (until the wheels came off in 2007). They have got to have a lot of worthless paper. I wonder if they're drawing a line in the sand here.
I'm guessing that National City has come to the conclusion that all of their seconds are worth 0, and as such there is no point in spending the time and effort to do anything with them. If they take this hard line, then maybe a few of them will get bought out and they can loss mitigate a bit above the 0 value.
OT: Thornburg melted down today losing half their value at open, as they all but admitted they are out of cash to pay more margin calls on their mortgage portfolio.
wasn't thornburg supposed to be the place that only sold to rich people?
what do I need to do so that I am not surprised at the closing.
Do a title search before you list it to make sure the old liens are really clear.
Even better: write NC and request a copy of your mortgage stamped "Paid in Full" plus a copy of the release of lien sent to the county. If you haven't gotten it in 90 days, keep bugging them for another 90 days, then go the AG's office.
Late:v(lllll-aaaattttteeeee)
ie...
9:35 AM Apple Briefing.com
RBC Capital Mkts reiterates Outperform. Target $200 to $175. RBC cut their tgt on AAPL to $175 from $200. Firm believes that pending contributions from Smartphone market expansion, new iPhone versions (incl 3G), 3rd party applications, expanded global distribution, enterprise server integratio
Given how ridiculously stupid National City was on the way up, why isn't it logical to assume they will be pretty stupid on the way down? Did everyone in Cleveland just get a lot brighter in the last year?
they take this hard line, then maybe a few of them will get bought out and they can loss mitigate a bit above the 0 value.
Yep.
That is, actually, why I suspect that if you offered partial paydown you'd get something for your trouble.
Given how ridiculously stupid National City was on the way up
You did hear that Merrill is shuttering First Franklin, didn't you?
There are always degrees of "ridiculously stupid."
I can understand the perplexity and anger. There are people who actually believe it when the mortgage companies say they want to "help." Perhaps the company management does.
The problem is the attitude never makes it down to the operations staff. Somehow I don't think morale is all that good inside "Nasty City."
I can see who ever process requests like this mentally asking "OK, what procedures fit this? The brain replies "none." They might ask a supervisor who will then quote an internal memo that translated says "No, we do not do this." OK, good enough for me and it gets moved to the Ignore pile.
Bad systems do not get better. Bad systems are not flexible. Bad systems usually just get worse.
Hmmm well NCC's refusal seems to make sense if you look at the payments.
Orginally the 1st was an interest-only. Now it would be an interest + principal loan. That means the payment will be going up.
Possibly the 2nd-lender is concerned about his ability (or desire in a falling market) to handle the payments with the 1st mortgage payment increasing due to the addition of principal to the payment.
He will just have to suck it up and
(1) refi completely through NCC (and live with their rates) or
(2) do the 80% LTV Tanta suggested and a pay down of the 2nd - and live with the rates.
BTW, "credit rating" does not equal income cash-flow.
YA, but what is the pre-payment penalty for discharging the second?
Did everyone in Cleveland just get a lot brighter in the last year?
i don't know...do they still have Skyline Chili there?
OK, now I see your point, Tanta.
I do buy the notion that the infrastructure is simply not there for mass workouts. I don't think it's there for mass foreclosures, either.
My layman's suspicious is that, as the writing on the wall becomes clearer, banks, lenders, services, and investors will start doing bulk sales of mortgages at a discount to another party who can and will work them out. The discount will drive the business model to permit working with borrowers.
Skyline Chili - that's a Cinci thing.
Ann, you're messing with the narrative.
The narrative is that any return to sanity is going to get labelled as "unfair," because we're all still captive to the belief that loan terms that were never explictly guaranteed, like the "right" to get a refi or the "right" to demand subordination, really were guarantees.
Lumping this guy in with folks who are desperately trying to get a workout is bothering me. If he is desperate, then we can save all the nattering on about his $55K in equity and his great credit score. If he isn't desperate, he just needs to learn that you don't always get your lender to act against its interests for you.
This just reminds me of those OMG! news articles about how those mean nasty lenders are now requiring down payments of five percent! How grossly unfair!!
Skyline Chili - that's a Cinci thing.
There's a Skyline Chili just down the way from NC's mortgage company HQ in Dayton. Been there. Done that. Still burpin'.
why did i bring this up, i ruined my own appetite. nuts.
A lot of the problem here is that the game keeps changing and many companies can't keep up. Based on the anecdotes about dunderheads at NCC it sounds like they're part of that group. If we had time this could get worked out but we don't. For this borrower, his rate has probably gone up and since he was in a toxic I/O to start with he's probably at the limit of his DTI ratio. Depending on how toxic that first loan is the banks might do just fine on this if the borrower can survive ramen noodle debt slavery. With 15% equity he still has motivation to stick it out.
Been there. Done that. Still burpin'.
that's probably what it will say in NC's 10-K footnote commentary about their portfolio of seconds.
For this borrower, his rate has probably gone up and since he was in a toxic I/O to start with
I am fascinated at how you read that into what got written.
How do you know he didn't get a prime 5/1 IO ARM 4 1/2 years ago? He might well have gotten 5.50% on that. If it's LIBOR plus 2.50, which was typical back then for prime ARMs, he would adjust to 6.50% or thereabouts with LIBOR currently under 4%. You notice it implies he was "waiting" for rates to get under 6.0%.
If he got the second lien at the same time and it was priced at 1.50 over prime, then his second lien is 5.50%. (Prime rate was 4.00% in that period.)
You do not have enough information here to assume that he's anything other than someone who took the rock-bottom lowest rate he could get back in 2004, and now wants the rock-bottom lowest rate he could get today.
Nobody can ever say without better reporting of details, but your case is no more likely than mine. I know for a fact that a whole lot of people did take prime 5/1 IOs back then for 5.50% and are now looking to refinance them. In fact, about once every couple of weeks we get a commenter who did and wants us to tell him if he should refi yet.
If it's LIBOR plus 2.50, which was typical back then for prime ARMs, he would adjust to 6.50% or thereabouts with LIBOR currently under 4%.
12L is 2.63% today.
Dammit, bacon dreamz, now I have coffee all over my computer!!
This just reminds me of those OMG! news articles about how those mean nasty lenders are now requiring down payments of five percent! How grossly unfair!!
Tanta | 03.03.08 - 10:33 am | #
Funny you should mention that. One of the guys I work with just closed on a place 2 weeks ago. 5-6 times income. 100% financing. Absolutly zero outta pocket expense. I mean the doctor selling the place paid every single penny to get the guy into the house. He seemed very pround of himself on how he scored a good deal so I just kind of smiled and walked away.
He did mention the bank officer told him Friday the 29th the loan he got was no longer offered as of the 28th.
Chris
P.S.- The bank was 5th3rd
that's probably what it will say in NC's 10-K footnote commentary about their portfolio of seconds.
I wish. 10-Ks are never that fun.
But you bring up a great point. If NCC publishes financials showing that they're still carrying these seconds at close to par, all hell will break loose. Those cheaters!!! They need to carry those loans on the books at ZERO! Etc. etc.
But as Al point out, if they have already written them down to zero, what motivates them to process subordinations for every Tom, Dick & Harry who asks for one?
You can't expect anyone to take the write-downs like a big kid and then to do workouts as if they carried the loan at par.
12L is 2.63% today
Left out a "no more than." I got stuck by the "four years" in the article. Nobody I know of offered a 4/1 ARM, so either it's a 5/1 that hasn't reset yet or he refi'd it into a 3/1 or 2/28 at some point after purchase.
Anway, if he resets this month that's using January's LIBOR. If he has already reset recently he could have gotten December LIBOR.
If he could reset with index = 2.63 plus 2.50, I can't see why he would.
I can't see why he would refi.
Perhaps I should stop try make sense.
wawawa writes: CR is # 1
link
I liked: If it were a newspaper, it would be: USA Today
Talk about hitting the big time!
Perhaps I should stop try make sense.
you've been reading teh WaPo i see.
you've been reading teh WaPo i see
Actually I'm just trying to type and eat at the same time, even as you do your best to make one of those activities unappealing.
I take it you saw the "chicks are just dumb" editorial?
Tanta: "You can't expect anyone to take the write-downs like a big kid and then to do workouts as if they carried the loan at par."
Why not? The write-down is presumably a non-cash transaction. The workout would still bring in cash. I would think people would be happier working out a loan what had been written off - that's a pure gain, while a workout for a loan at par is a loss.
Am I missing something?
yes. my head is still shaking involuntarily.
The workout would still bring in cash.
Not if the lender just resubordinated. Then it would be a loan with a book value of zero moving to a loan with a book value of zero, less the cost of processing the subordination.
Hence my suggestion that they may be hoping to get a paydown offer.
My point was you can't have it both ways: if you want NC to come out with the "on paper" loss today, which they should, then you can't call them stupid for trying to get paid something to subordinate this loan in a case in which there is money.
However, having banks write the second lien portfolio down to zero does create this problem with the true "foreclosure prevention" short-refi kind of borrower.
I don't know Maryland law, but what happened to the doctrine of equitable subordination? That holds that a lender refinancing an existing lien without increasing it or otherwise further endangering the subordinated lienholders "steps into the shoes" of the departing lender and maintains the same lien priority automatically.
They don't have this there or the new lender or title company requires a formal resubordination agreement anyway and that's what's gone wrong?
Or maybe National City is trying to get the customer to call them so they can get that new 1st mortgage and the fees that go along with it!
It wouldn't surprise me.
Hello Everyone
My friend sent me this link in reading it seems that the conversations are all over the place.
Just for the record I am not in possible default of ether my first or my second, my scores are in the 700's and have never fell behind. Yes I have an adjustable rate mortgage that was a tool for me to get into my house with the intention on changing rate and term later on.
It was time, My scores were good, rates were good and my house appraisal came in good I'm not upside down in my house even in this market.
We had approval in hand for a 5.5% fixed for 30 years on the first with no cash out just rate and term, and a settlement date.
We submitted our subordination agreement on Feb 1st
Feb 18th they rejected our subordination
We have a copy of an internal memo that was sent to us by an unknown source that effective Feb 18th they would reject all subordination agreements well if that was there deadline then what about the 17 days in between when they received it and policy change.
They have cost me a great rate, put me at risk of mortgage rate increase, and taken away my right as a consumer to refinance.
We asked them to do a case by case study they refused.
Allowing me to do this would have put Them and I in a better situation
It's just wrong
Thank You for all your help and support
Whittaker
You did hear that Merrill is shuttering First Franklin, didn't you?
There are always degrees of "ridiculously stupid."
Tanta
Buying First Franklin was stupid, but National City was forced to keep the horrendous portfolio built up under their management. They didn't get bailed out with that sale.
Ah - I had been assuming they got something (cash, obviously). Agreed that it makes no sense to do workouts for free on a zero-value loan. Thanks for the clarification.
but what happened to the doctrine of equitable subordination
There are no secondary market mortgage investors I know of who accept "equitable subordination." You show the lien paid off or you produce a subordination agreement.
They have cost me a great rate, put me at risk of mortgage rate increase, and taken away my right as a consumer to refinance.
There you have it.
Tanta, you called it!
from OFHEO:
Washington, DC OFHEO Director James B. Lockhart announced agreements with OFHEO, New York State Attorney General Andrew Cuomo, Fannie Mae and Freddie Mac (the Enterprises) to strengthen the independence of the appraisal process. For mortgages the Enterprises buy or guarantee, the agreements seek to enhance appraisal and evaluation services that are critical to the residential mortgage process. Flawed appraisals artificially inflate home prices and are often a sign of mortgage fraud and undue influence on appraisers.
There are many significant provisions in the agreements that are designed to strengthen the independence of appraisers, including eliminating broker-ordered appraisals, prohibiting appraiser coercion, and reducing the use of appraisals prepared in-house or through captive appraisal management companies in underwriting mortgages. The agreements also enhance quality control in the appraisal process and establish a complaint hotline for consumers. The agreements include a Home Valuation Code of Conduct that the Enterprises will apply to lenders selling mortgages to Fannie Mae or Freddie Mac. The Code becomes effective on January 1, 2009.
The parties also agreed to establish and the Enterprises fund an Independent Valuation Protection Institute designed to supplement current efforts to provide an appraisal complaint process, mediation of appraisal disputes, and mortgage fraud reporting. The agreement seeks the comments and concurrence of the federal banking agencies and solicits the comments of market participants that will be considered in making amendments to the Code during the implementation process.
The page cannot be displayed
They have cost me a great rate, put me at risk of mortgage rate increase, and taken away my right as a consumer to refinance.
A Right to Refinance?
He's either kidding or delusional.
He has the right to pay off the loan.
It's called an endorsement to the entitlement policy.
My right as a consumer is not to use any banking institution I choose if qualified
Whittaker, you still have the right to refinance your second loan with National City, don't you?
to Whittaker,
Do you know what recourse they have against you if you stop paying the second loan? It's about the only leverage you have, and it could be worth while exercising it if the penalties aren't too steep.
yes but the rate and term was so good I didnt
I have worked so hard to have good credit im scared that something like that would hurt my credit
If I dont pay cant they take my house?
Well, I can see no reason why Nat City would agree to this hyar "routine" request. Property values are trending down in most of MD. The initial years of principal payments on the new first don't help Nat City very much.
If they subordinate, the guy's first payment goes higher, so Nat City is taking on increased risk. Surely it is not unreasonable for them to want at least a partial pay down. Presumably their second has a relatively high rate, so probably something could be done to keep the whole payment doable for the borrower.
What happens if they subordinate and in a couple of years this guy can't make the higher payments and goes BK? They'll probably get crammed down and stuck for a good portion of their current second. Alternatively he could try to sell and Nat City might find themselves with a short sale request. They have their best leverage now.
People have to realize that underwriting is about exactly these sorts of choices. If Nat City refuses and the guy decides to sell, right now Nat City gets paid. If Nat City agrees, they are taking on more risk at a time in which they shouldn't.
And I am not running the borrower down, but when you get an I-O first and second, you really should not be surprised by finding yourself in this position when you seek to refi. If Nat City agrees and the man has difficulties paying the second, Nat City is going to be the one asked to modify.
A lot of the seconds had 5 year resets in them anyway, so I bet Nat City expects him to refi up to 80% on the first and pay them mostly down, and I think they should hold out for something like that.
yes but the rate and term was so good I didnt
So here's the deal:
A number of years ago, you took an ARM with a second lien combo, in order to get a great rate. You accepted some risk to get that, no?
Now you want "the right" to have that risk erased. The fact is you could refinance enough in the first lien to pay off Nat City, but you don't want to.
You should have taken a fixed rate loan all those years ago, Whittaker. Then you would not face a rate reset. But you accepted that risk to get the low start rate.
Why are you blaming Nat City for the consequences of your own decision?
Interesting editorial. That's how to sell newspaperz, yo!!11!
The theory that women are the dumber sex -- or at least the sex that gets into more car accidents -- is amply supported by neurological and standardized-testing evidence.
I think Borat should sue for plagerism...
"Everyones, even an Uzbeki, knows that woman has smaller brain than man. Some mens do not know, woman with yellow hairs has smallest brain of all."
I don't think that is our Whittaker. Whittaker, what's your middle initial?
I understand the risk but had they told me they would never subordinate I would have not taken the risk with them
And that still was not there policy until Feb 18th
If I am reading this right, NCC is already in a subordinate position, so their rights don't change if they agree to resign the subordination to the new loan. Since it is a second, if the house if foreclosed by the primary mortgage holder NCC won't likely get anything out of the process. It is in NCCs best interest to keep Whittaker paying as long as possible, which seems more likely with the new primary mortgage.
So, the trick seems to be to convince NCC that accepting the new subordination is the only way they'll see another penny. With holding payment could get them talking, or they could jump straight to pushing for BK proceedings. Not sure what to expect.
failed to refinance a few weeks back when the 30-year was was close to 4.1%
30-year Treasury rate is NOT the 30-year mortgage rate.
but had they told me they would never subordinate I would have not taken the risk with them
Did you ask at the time? Surely if you had they would have told you that subordination is not an obligation of the lender, it is an option.
You still haven't shown that Nat City wouldn't have denied your request for subordination even before this memo came out. All lenders reserve the right not to subordinate. That's why it's something you have to request. Like approval of a loan.
I'm curious: how did Ken Harney find you?
Whittaker, if you are really the borrower described, you are a little confused. I posted above before you had appeared on this thread.
First, any decently run financial institution does not automatically approve subordination requests, so the memo of the 18th is a bit of a distraction. The fact that the law gives them the right to refuse to subordinate should clue you in to that.
If Nat City agreed it looks to me like they would wind up in a worse position. You would be appropriately indignant if Nat City came to you and told you that they wanted to unilaterally change the terms of the original agreement with you, right? The law protects you from that, just as the law protects Nat City from having to agree to this subordination. They have the right to decline.
Try to refi with FNMA to 80% and offer Nat City a partial pay-off.
If you are the borrower described, what are the terms of the Nat City loan? You might well be better off overall doing what I have described.
You should under no circumstances stop paying the second, because they will foreclose if you do, and you will wind up losing money.
Since it is a second, if the house if foreclosed by the primary mortgage holder NCC won't likely get anything out of the process.
Come on. He's got an appraisal showing there's $55,000 in equity there!
I read about a similar situation on another blog about two weeks ago. The stubborn 2nd? Countrywide is my guess.
They wouldn't subordinate unless they could do the first.
Um, appraisal.
Yeah, sure.
NCC had better start getting their house in order, after all, those appraisals will soon show they have no equity left in the second;-}
I can hardly wait.
Remember when I was making jokes about buying mortgage bonds for mills?
The day has come for that.
Someday this war's gonna end...
If Nat City agreed it looks to me like they would wind up in a worse position.
MoM - not really, the amount of the loan is not increasing, and the rate would, in fact, decrease. Perhaps the new payment is higher since it would be amortizing versus I/O, but this remains a rather routine subordination request which would have usually been granted in such circumstances.
the broker said he not had a rejected subordination in over 12 years it has just been common practice
If the new mortgagor wants to work with the mortgagee, then it should be no problem to be subordinate to the $70K second.
Let's see the new guy be subordinate to tohe older, though smaller, existing loan.
What is so hard about what National is doing?
the broker said he not had a rejected subordination in over 12 years it has just been common practice
I don't doubt it.
But you are still accusing Nat City of taking away a "right" you never contractually had.
This is why you're not getting a lot of sympathy from MOM and me.
May ask if you originally made a downpayment? I'm just curious.
I guess people will never understand until they walk in your shoes or have it hit home.
I wish you all luck and have great day
Whittaker
If you're not gone yet Whittaker, pls have a read.
You may not have a right to a refinance, but you and the lender have the right to do the best for yourselves. If you're headed for foreclosure under the current terms of your combined mortgages, let NCC know this and that payments will stop coming in the very near future. Also let them know that the new mortgage will keep payments on both loans coming. Win win.
There is also the possibility that the subordination rule is supposed to apply to new loans and someone has misinterpreted. Keep working your way up the food chain with the same message, that they play or you don't pay.
Hmmm, guess he's gone. If I had some of the best mortgage minds in the country talking to me, I'd be asking for a list of options and prioritizing desirability,...but that's just me.
I don't know if it's the best minds around here or not, but a bunch of average monkeys typing away could come up with the next great financial save.
If you're headed for foreclosure under the current terms of your combined mortgages
Al, he's telling you that he's not headed for foreclosure.
He wrote:
Just for the record I am not in possible default of ether my first or my second, my scores are in the 700's and have never fell behind. Yes I have an adjustable rate mortgage that was a tool for me to get into my house with the intention on changing rate and term later on.
I'm willing to take the statement at face value.
He doesn't want to pay down or pay off the Nat City loan because it's a below-current-market interest rate.
That limits his options on refinancing the first mortgage. Which is a risk you take when you put a second lien on top of an ARM that you intend to refi someday.
To recap: he wants a better rate on his first mortgage and no change to the rate on his second mortgage.
He is not claiming he's in danger of FC, but you are trying to lump him in with borrowers in danger of FC. Why are you doing that?
Sometimes a good bluff is all it takes.
"For this borrower, his rate has probably gone up and since he was in a toxic I/O to start with
I am fascinated at how you read that into what got written."
I was referring to the loan he could get now, as opposed to the rate he locked in a few weeks ago. By the time he can finish negotiations with NCC he will almost certainly being paying more than he would have if they'd just signed off.
I was making the assumption that his loan payments with a new loan are likely to be more than his I/O payments, and that his old payments were relatively onerous. I acknowledge these aren't guaranteed, but I think both assumptions are well justified. Rates four years ago were very low and it would be hard to better them. In addition, he's moving to an amortizing loan and that bumps up his payments. In term of onerous payments, almost everybody has been taking them lately and the fact that he's in a toxic I/O is just further evidence that he was stretching. Somebody able to make payments comfortably is more likely to have taken an amortizing mortgage, or at least to have dodged a toxic one.
So unless his credit has improved, I think it's very likely his proposed loan payment is already high enough to make the lender say "wait a minute, I'm not sure about this". That could make dealing on the second tough, and possible explain why the deal didn't originally involve the second.
best minds around here or not
Well if the Dunning Effect has any relevance, I'm willing to bet that there are at least four in the top 95 percentile nationwide. I won't name any names, don't want them getting swelled heads. Caveat: The brokers I've dealt with are holding down the bottom of the curve severely.
Shnaps - I repeat - no decently run financial institution routinely approves subordination requests. You approve most of them, but not without a thought and with a rubber stamp. And yes, Nat City is getting in a worse position if it approves. Overall payments are going up, its reset is approaching, and Nat would be giving without receiving. I still want to know the terms of the second. There is something a bit odd about this.
They should not approve this request. Sorry, but they shouldn't. In general, clearing out those seconds should be good for the borrower and the lenders.
Maybe Tanta and I are just dinosaurs, and what you are seeing is a sketched-in-writing appearance of two wrinkled reptilian snouts rising from the marshwaters and poking through the ferns, but let me tell you that back in the late Cretaceous, we knew how to lend such that neither borrowers, lenders nor investors ended up on the street stripped to their skivvies.
In this case, the reptiles are going to take back over the earth.
Whittaker, if that is really you, keep paying on the second. Believe me, KEEP PAYING ON THE SECOND. Follow my advice about trying to refi to 80% on the first and paying down the second.
Tanta:
I agree w/ your position.
During the boom, lenders made optimistic assumptions when making loans, i.e., they believed everything that was disclosed on the loan app.
Now, NCC wants to assume worse case scenario. NCC has no optionality on the loan contract. So it is using the pre-payment exercise by the owner to dictate its own tersm. Should NCC believe the due diligence done by the new bank taking the first position? What kind of assumptions should NCC make about the future price of the house under question? What about the intention of the buyer to keep paying the second mortgage despite deteriorating house prices?
Also, credit spreads have widened, esp. for a second mortgage, esp. close to the 80% LTV (yea, someone might argue that NCC has a 20% cushion before their position is wiped out, but they that's the worse case scenario assumption working).
If the owner is really motivated to refi, they should try to close out the second position. Then NCC can not do anything about it.
Fair Economist, it doesn't sound like a toxic I-O. Not all of them are, by any means. I can see why he'd want to go amortizing.
In this case, it looks like a decent borrower who didn't keep refinancing and blowing out equity. The original transaction worked out as planned. Appreciation substituted for lack of downpayment. If the appraisal is correct, now he's got equity and is in a much better position overall.
What's odd is the idea that the second is automatically going to allow everyone else's position to improve without improving theirs.
Maybe Tanta and I are just dinosaurs, and what you are seeing is a sketched-in-writing appearance of two wrinkled reptilian snouts rising from the marshwaters and poking through the ferns, but let me tell you that back in the late Cretaceous, we knew how to lend such that neither borrowers, lenders nor investors ended up on the street stripped to their skivvies.
My wrinkled reptilian snout SO has hot coffee in it.
I still think the real issue is that the rate on that second lien is below current market. So NC wants to be paid off or at least paid down. They are using the leverage they have--refusal to subordinate--to get somebody to pay them principal.
Folks may like that or not, but "stupid" doesn't seem reasonable to me in this particular case.
Whittaker may be in good shape and he may not. The quote says he's not in danger now, but he also mentions later that an increase in rate is coming. If he's still on solid footing after the rate change, then he should definitely keep paying the second. If not...
no decently run financial institution routinely approves subordination requests. You approve most of them
That's why I used the word 'routinely', not the word 'automatically'.
Whittaker - if you're still there, can you tell us who your existing first mortgage is with?
Haha!! We just received a message from National City stating the note is due and payable because we changed our mailing address. Talk about desperate!!!
There is no chance in heck this in enforceable (per the note).
If he's still on solid footing after the rate change, then he should definitely keep paying the second. If not...
Nonsense. 100% nonsense. Tanta's wrinkled reptilian snout is making snorting noises.
If he thinks he faces future payments he can't handle in a falling value environment, he should SELL TODAY.
If that appraisal is worthless, then why get another loan based on it?
If it isn't worthless, he's got $55K he'd be throwing away in a foreclosure.
Come on, folks.
There is no chance in heck this in enforceable (per the note).
I wouldn't be so sure about that.
I'll bet your mortgage says failure to occupy the property is a breach of the mortgage.
A breach of the mortgage means acceleration of the note, should the lender want to do that.
How come you changed your address?
"If he thinks he faces future payments he can't handle in a falling value environment, he should SELL TODAY"
He could sell today, or he could try to refinance. If his first attempt at refinancing doesn't work, he can try again using whatever leverage he has available to him. It's looking like missing a payment is a bad idea, but threatening it could work. NCC has plenty of reason to believe him.
I changed the address to my office just to consolidate where the bills are sent. No big deal.
I did read through the note and their is no mention of occupancy status changes nor acceleration due to moving.
Tanta,
Edit: There is no mention of occupancy status AFTER THE FACT. Of course at origination (escrow) I did have to sign an occupancy cert. stating this is my primary residence. No mention of implications should i change my mind down the road.
did read through the note and their is no mention of occupancy status changes nor acceleration due to moving.
Try reading your mortgage.
What state are you in?
CA....Mortgage meaning Note?
please advise.
Tanta,
CA......
Mortgage meaning Promissory Note?
If so, that is what I meant by note (I should have capitalized)
Please advise.
In California it's called a Deed of Trust.
Try looking for convenant #6.
You should be aware that lenders have heard the "just want bills to go to the office" story a lot over the years from speculators.
So offer them proof that you live there.
Do you happen to own any other real estate? Did you own a home when you bought this one? Perhaps NC is getting a little confused by what a current title search shows?
Nope. This is the only home.
Could it be NCC (and others) and running title reports on all their Notes? If so, a lot of people who purchased, occupied, moved up, rented the original w/out occupancy change notifications are gonna get hammered.
6 "Warranty of Title" Speaks of encumberences (sp?)
If so, a lot of people who purchased, occupied, moved up, rented the original w/out occupancy change notifications are gonna get hammered.
Why? If they purchased a new home with the intention of renting out the original home, and they told the new purchase-money lender they were doing that, then when the new purchase-money lender sees in a title search (which they don't do unless you send in that change of address form) that you still own the old home, they aren't surprised.
If you claimed you were selling the old home, and the lender qualified you on that basis, and you were lying about that, they'll nail you.
There is a difference between saying "I'll try to sell this property, or maybe rent it" and saying you have a sale pending. If you said you were just thinkin' about selling the old home, the lender would qualify you on both payments. If you said you had a sale pending, you might have been qualified only on the new home payment. These things matter.
#6 "Warranty of Title" Speaks of encumberences
So it's not a standard DOT. You'll just have to break down and read the whole thing. It is in front of you. It is not in front of me.
So, if one purchased lets say a condo while single. Got married and crapped out a few monkeys. Proceeded to move to a bigger house but wants to hold onto the condo and turn it into a rental. On the loan appl. condo was disclosed and lease was provided, etc.
Would the lender who provided funds for the condo's purchase under the auspices this would be an owner occupied dwelling now come back and call the note?
Have you read your DOT yet? The answer is there, waiting for you, in that document.
Hint: you would have to be able to produce children, plural, a whole lot faster than any other human being I know of to get in trouble in the scenario you outline.
LOL...Ok Tanta,
Just found it. I'm screwed. I'll send them proof.
What are your thoughts on my last question? This is a natural (life) progression for many professionals. You buy something small when your able. You eventually start speed dating, post your profile on match.com, spend countless hours at the gym, attend seminars on how to meet your significant other, blame your single'hood on the idea "it's so hard to meeting someone in this city", etc, etc, etc......low and behold you meet the person of your dreams (or atleast you thought so) and eventually have a family.
If the condo lender will call the note, I know of a few people right off the bat who are in deed trouble.
I assume what you discovered is that you are required to occupy for at least a year.
Kid, if you're busy trying to get married and produce children all in the next 12 months, starting from scratch, it isn't a good time to buy a little condo.
What is it, National Eggs In Your Beer Day, and nobody told me?
Tanta, can you do a post on these poster children for 1.95% mortgages?
Pretty please.
I would be real curious if Nat. City had a five year prepay, and was trying to use the leverage of holding up a refi to bump their yield. Otherwise, it's hard to see this as anything other than gross stupidity.
They have undoubtedly decided to pursue this blanket "no subordinations" policy to accelerate portfolio rundown, despite the fact that it damages many borrowers and may in fact lead to greater losses down the line by forcing borrowers to keep undesirable first mortgages.
I've been doing loans for almost thirty years, and have seen a blanket refusal to subordinate exactly once before, from a small credit union that probably just didn't have the procedures in place to accommodate it. This is a "black swan" kind of event, probably one of many to come as lenders struggle to come to grips with their situation.
"kid"
alright...take it easy .....I finished reading the DOT twice... No mention of 12 months occupancy "seasoning" before being able to move on but it does say changes in occupancy status......
FYI....i also obtained an easement (24 inches to install a stair) without notifying the NCC, which according to the note, technically they can also call the note....
Pretty please.
OK, fine, it's National Eggs in Your Beer Day.
I'm already multi-tasking, but lemme see what I can do.
Short version: I do think CC's disclosures were awful and probably misleading. They asked for this.
OTOH, we have people who believe that a lender would offer a way-below-market-rate for five years with no other costs involved. That, I can't quite explain. "It sounded perfect," said the borrower.
Yep. You wonder why everybody in the universe didn't get one of these loans, dontcha?
It sounds so perfect that nobody is motivated to check for any fine print, like the BIG CAPITALIZED BOLD FACE PARAGRAPH AT THE TOP OF THE NOTE.
Slimy lenders. Gullible borrowers. My wrinkled reptilian snout is surrounded.
alright...take it easy .....I finished reading the DOT twice... No mention of 12 months occupancy "seasoning" before being able to move on but it does say changes in occupancy status......
The standard first-mortgage DOT used in CA, published by Fannie & Freddie, allows acceleration if you don't occupy for 12 months. You're looking at a HELOC note?
How long was it between the day you closed the Nat City loan and the day you asked to have the address change?
My trouble is that you're talking about your own situtation, plus this hypothetical condo buyer. I'm getting confused. Kid.
My apologies for the confusion.
My Loan is a fixed rate second, not a heloc, closed well over 2 years ago.
I changed my mailing address two months ago.
Regarding the "condo scenario", the "process" to eventually outgrow the unit takes more than 12 months (obviously)...
P.S. I didn't realize you had to be an AARP member to participate. : )
P.S. I didn't realize you had to be an AARP member to participate. : )
Yeah, well, I didn't realize until today that I have a wrinkled reptilian snout.
I guess we all learned something.
Wow, what a change. First it is how stupid the lenders are for lending the money and how justified it is for specuvestors to just walk away, now people are pissing and moaning how lenders are considering to "just walk away". Gotta love it.
P.S. I didn't realize you had to be an AARP member to participate.
You don't. One of the frequent commentors here is only, like, 17 years old. But then again, that individual taught himself how to play 'Stairway to Heaven' on the sousaphone at 14, and was building his own OAS models 'just for fun' at 16. Look for him in next year's Guiness Book of World Records for builing the longest and most intricate domino sequence using only fig newtons.
BACON DREAMZ!!! SHNAPS IS MAKING FUN OF YOU!!! I'M TELLING MOM!!!
Umm, I am not sure that is just an egg in the beer.
haha, have fun cleaning your room, Shnaps, Tanta and i are going to build a fort in the kitchen and then we might just sneak some cookie dough and juice boxes before dinner!
sticks out his tongue
PS, i call dibs on president this time, Tanta!
So what's wrong with beery eggs?
I'd argue that we are seeing the return of basic caution in the second lien market here.
There have always been down markets that prompted such care, but they used to be very localized. Sigh. What you do as a servicer is strongly related to risk.
I'll take my reptilian snout and go fossilize some more until I become fashionable again.
Shnaps, I get you now. It's just that to me "routine" in a banking environment has a different, more precise meaning. It denotes stuff that can be reduced to procedures and that don't require decision-making. It's a saurian way of looking at the world.
This might be one result of the
fantasy-appraisal pandemic.
The Feds just now called a halt
to appraisals with a conflict of interest.
A house isn't really valued until
there's a recent sale, with some
comparables, or an interior inspection
by an squeaky-clean appraiser.
The subordinated second can be
wiped out if the other lender's
valuation is off by 15 percent
in a weak market.
Re: Whittaker
Given the guy's intellectual firepower Tanta, wasn't that rather like shooting a fly with a shotgun.
NoVa,
I'm still blown away by your opening comment. The "coincidence" that it was the reading of the day of the Universalis doesn't detract from it's perfection. Thanks for turbocharging the thread!
Given the guy's intellectual firepower Tanta, wasn't that rather like shooting a fly with a shotgun.
Yes, dear. But shooting flies wasn't my point.
Teaching some of the rest of you how to read the newspaper (skeptically) was my point.
That, some days, is a challenge.
We tried to get NCC to sub a second that monday following their decision to flatline the country. In this case it was a 100k behind a 1.5M first. It had zero balance. They said NO. We ended off giving the borrower a new one from Citi...Yesterday CHase said sub's were taking 20 Biz days...try that on a 45 day lock.....
The consumer attitude of the "right to refi" is utter crap. Typical attitude. He just got a lesson in what his "rights" really are.
National City probably is hurting so badly, they have laid off the people who were working in the subordination dept and don't want the expense of hiring people for what may just be blip on the screen as far as refis go.
National City may want to examine their risks and options on risk management more closely in my opinion.
I had the same thing happen to me with NCC. My broker asked the NCC person what we would have to do to get them to subordinate (we had planned on paying down most of the NCC HELOC with the new first mortgage) and they said that there is nothing that we could do to get them to subordinate. The real kick in the pants is that the HELOC has a pre-pay penalty fee, so if I want to just pay the whole thing off and get rid of them, I have to pay for the privelage.