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Breaking the financial crisis

By Jack Guttentag, Friday, November 21, 2008.

The main objective of our proposal is to break the back of the financial crisis by sharply reducing mortgage foreclosures while liquefying a major part of the existing mortgage stock. A second purpose is to provide the foundation for a more stable housing finance system in the future.

Proposal For Mortgage Payment Insurance more...

The good and bad about Mortgage Marvel

By Jack Guttentag, Monday, November 17, 2008.

My first impression of Mortgage Marvel (MM) was that it was a multi-lender shopping site, which would make it the fourth new one I have reviewed in 2008; the others are Loan.com, Mortgage Grader and Zillow Mortgage. My second impression was that MM was more of a referral site than a multi-lender shopping site. more...

Loan modifications hard to come by

By Jack Guttentag, Monday, November 10, 2008.

"I have been giving my clients an article you wrote about a year ago advising borrowers having payment problems how to request a modification in their loan contract ... Could you bring it up to date?"

A lot has happened since that article was written. Very shortly thereafter, the HOPE NOW program promoted by Treasury Secretary Henry Paulson began as an effort by housing counseling agencies and mortgage servicers to modify loans on a strictly voluntary basis. Since then, the first recourse of borrowers in trouble has been to call them at 1-888-995-HOPE. I have sent many people to HOPE NOW, with mixed feedback. more...

Mortgage fright spreads like wildfire

By Jack Guttentag, Monday, November 3, 2008.

The mortgage world has suddenly become very frightening to many people who have no real reason to be frightened. Their mortgages are in good standing, and they are not having any trouble meeting their payments, yet they are in distress -- in large part, because so many around them are in distress. Fear is contagious. The only antidote I know is good information.

One important thing that people suffering from mortgage fright often forget is that a mortgage loan is a contract between two parties, and it cannot be violated by either without the permission of the other. If the loan is sold, the purchaser replaces the originating lender as the contracting party and is subject to the contract in the same way. If the servicing of the loan is sold, the servicer as the agent of the owner is required to abide by the terms of the contract, and the same holds if the loan is placed in a pool as collateral for a mortgage-backed security. more...

Regulation couldn't prevent mortgage crisis

By Jack Guttentag, Monday, October 27, 2008.

When a presidential election falls in the middle of a financial crisis, it is not surprising that we are besieged with misinformation. Much of it is finger-pointing about responsibility for the absence of effective regulation that would have stopped or moderated the crisis. This article aims to provide some perspective on this issue.

Political responsibility for inadequate regulation: There are two sectors where more extensive regulation might have made a difference. These are the investment banks and the government-sponsored enterprises (GSEs) of Fannie Mae and Freddie Mac. more...

Will Treasury's purchase plan work?

By Jack Guttentag, Monday, October 20, 2008.

This article was written the day after the House approved the revised version of the Treasury/Federal Reserve bailout plan, which had already been approved by the Senate. more...

New title insurer undercuts competitors

By Jack Guttentag, Monday, October 13, 2008.

In the midst of the worst financial crisis since the 1930s, one that originated in and owes its severity to developments in the home mortgage market, it is nice to be able to report some good news about this market. The newly chartered EnTitle Insurance Co. is now offering title insurance directly to borrowers through its Web site, www.entitledirect.com. The premiums charged by EDI undercut those of existing insurers by about 35 percent. more...

Americans rush to judgment on 'bailout'

By Jack Guttentag, Monday, October 6, 2008.

Whenever government is involved in a program to assist a private firm in trouble, much of the press reports it as a "bailout." Back in the 1980s when the savings and loan industry was in trouble, the operations of the Resolution Trust Corporation (RTC), which the federal government chartered to manage and liquidate the assets of failed associations, were frequently, yet erroneously, described in this way, and they still are.

For readers who don't bother absorbing the details, the term "bailout" suggests that everybody connected to the troubled enterprise is being rescued, including those who were responsible for its plight. more...

Some borrowers get more aid than others

By Jack Guttentag, Monday, September 29, 2008.

"Is it true that mortgage servicers will not help borrowers in trouble until they stop making their payments? I am a home retention counselor and I keep hearing from people referred to me that they have received no response from their servicer because they have not yet missed a payment. I would hate to advise people that they have to stop paying if they expect to get any help if it is not true." more...

Federal plan 'a disaster in the making'

By Jack Guttentag, Wednesday, September 24, 2008.

The Treasury and Federal Reserve to date have doused financial fires at Bear Stearns, Fannie Mae, Freddie Mac and AIG, taking a tough line in every case to protect taxpayers. In the case of AIG, for example, the government has the right to acquire a major equity interest in the firm as a quid pro quo for a loan of $80 billion, and the CEO was forced out. more...

Falling prices can be bad for buyers

By Jack Guttentag, Monday, September 22, 2008.

The home mortgage market is devilishly difficult to navigate in normal times. During a period in which home prices are declining, the difficulties are compounded. Problems I had never thought about before now pop up regularly in my mailbox. Here are a few of them.

Constructing a Home Becomes More Hazardous: Constructing a home to one's own specifications is enormously appealing to many people. It is also a time-consuming process with many pitfalls that can cause delay, cost extra or both. more...

Don't be too quick to co-sign mortgage

By Jack Guttentag, Monday, September 15, 2008.

The economic distress of the last year has battered the credit scores of many potential borrowers, while causing lenders to increase the scores they are willing to accept. The result is a growing number of co-signing requests. Co-signing arises when one party with good credit agrees to be liable for the debt of another party with no or poor credit.

Some co-signers have had their lives severely disrupted when the borrower for whom they co-signed stopped paying, leaving it up to the co-signer to make the loan good. Most of the mail I get on the subject is from co-signers in this situation. more...

When shopping for mortgage, know how to bargain

By Jack Guttentag, Monday, September 8, 2008.

A consumer negotiating the terms of a mortgage with a lender or mortgage broker (henceforth "loan provider") is in what economists term a "bilateral bargaining process." Only two parties are involved, and the terms arrived at depend in part on their respective bargaining power. more...

Credit pinch forces buyers to save

By Jack Guttentag, Tuesday, September 2, 2008.

Over the last 18 months, the mortgage market has changed more rapidly than in any comparable period since the Great Depression of the 1930s. From the standpoint of borrowers, two changes are of paramount importance. The first is an increase in day-to-day price volatility, which I wrote about a few weeks ago. The second is a tightening of underwriting requirements, with higher down-payment requirements the centerpiece. That is the subject of this article.

Underwriting requirements are the rules lenders impose to assure that loans will be paid off, and the down payment has always been the most important of them. more...

Why do most lenders sell their mortgages?

By Jack Guttentag, Monday, August 25, 2008.

"Why do most home mortgage lenders sell their mortgages instead of keeping them? I have a problem with negotiating my mortgage deal with one firm over a week, then having my loan sold to another firm that I did not select, and with whom I am obliged to deal for as long as 30 years. Is it possible for me to find a lender who will promise not to sell my loan?" more...

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