TOP STORIES:
Americans
Tapping Into Home Equity Again - (www.cnbc.com)
Nearly 11 million borrowers
are underwater on their mortgages, owing more than their homes are worth,
according to CoreLogic, and yet home equity lines of credit are suddenly on the
rise again. During the housing boom of the last decade Americans withdrew over
$1 trillion in home equity. They did it through cash-out refinances, home
equity loans, and home equity lines of credit. The latter allowed them to use
their homes like an ATM. They spent the money on cars, televisions, vacations
and fancy home upgrades. It was seemingly endless equity, until suddenly that
equity was gone.
E-Mails Imply JPMorgan Knew Some Mortgage Deals Were Bad -
(www.nytimes.com) When an outside analysis
uncovered serious flaws with thousands of home loans, JPMorgan Chase executives found an
easy fix. Rather than disclosing the full extent of problems like fraudulent
home appraisals and overextended borrowers, the bank adjusted the critical
reviews, according to documents filed early Tuesday in federal court in
Manhattan. As a result, the mortgages, which JPMorgan bundled into complex
securities, appeared healthier, making the deals more appealing to investors. The
trove of internal e-mails and employee interviews, filed as part of a lawsuit
by one of the investors in the securities, offers a fresh glimpse into Wall
Street’s mortgage machine, which churned out billions of dollars of securities
that later imploded.
Investors Are Being Bullied Into Buying Risky Assets, Which Are
Doomed To Crash - (www.businessinsider.com)
Legendary investor Jeremy
Grantham has just published his Q4 2012 letter to GMO clients. Much of the
letter is an extension of the extremely bearish message of his Q3 letter,
in which he predicted GDP growth to decelerate from around 0.9 percent per year
to 0.4 percent from 2030 to 2050. Those who are invested in today's markets,
however, may find one part of his letter particularly frightening. In a section
sub-titled Engineered Low Interest Rates, Grantham discusses the impact of
the Federal Reserve's ultra-easy monetary policy. He warns that asset
price inflation will work its way up from asset class to asset class until
things fall back into place through "exciting crashes."
New Mortgage Rules Could Hurt Homebuyers in California, New York – (www.thestreet.com) New mortgage rules designed to create a more responsible mortgage market might end up hurting borrowers in states such as California and New York, where the price of real estate is expensive. The Consumer Financial Protection Bureau recently issued rules that require banks to verify that the borrower has an ability to repay the loan by looking at criteria such as a borrowers' income, employment status, credit history and other debt obligations. Banks will be offered greater legal protection if they make "qualified mortgages" -- loans that do not have excess upfront points and fees, have no toxic features such as interest-only loans, negative amortization and balloon payments, and where the borrower does not spend more than 43% of his income to pay down debt.
Homeowner
Refinancing Act Resubmitted by Senators Menendez and Boxer - (www.mortgagenewsdaily.com) ``When FHFA recently expanded
HARP eligibility to underwater borrowers, they continued to require lenders to
distinguish between borrowers with less than 20 percent equity and greater than
20 percent equity in ways that left higher equity borrowers with greater costs
and administrative burden. Although the GSEs lowered up-front fees for HARP loans
with less than 20 percent equity, they left them in place for those with more
equity. This created the economically indefensible situation in which borrowers
with significant equity in their homes and presenting lower risk could face
steeper costs in refinancing than borrowers with no equity whatsoever and
therefore higher risk. These additional fees can be as high as two percent of
the loan amount, or an extra $4,000 on a $200,000 loan.
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