Loan Perspective

Is Your Business Protected from Credit Risks?

ncoblogger — Thu, 25 Oct 2012 13:00:38 +0000

Earlier this month, Forbes published a great article on “protecting a business against partners’ credit woes”. The article eluded that, while commercial bankruptcies have decreased the past three years, they are still on pace in 2012 to eclipse pre-recession levels. In many cases, these bankruptcies are caused, or at least influenced, by poor credit decisions companies make regarding their customers, vendors and other business partners.

According to a study referenced in the article, accounting professionals revealed that approximately two-thirds of business clients don’t do enough to ensure creditworthiness before extending credit. That’s where we come in.

Commercial Credit Reporting Solutions
In addition to the credit reports NCO Credit Services offers on mortgage borrowers, did you know we are also a provider of Experian commercial credit reports? These reports can go a long way toward assessing and mitigating your risk when extending credit to commercial clients, vendors, etc. We offer a variety of reports to evaluate both businesses and their owners. Contact us for more info.

What’s Your Story?
What have been your experiences, positive or negative, when extending credit to commercial entities? Have you been as thorough as you should have, or could you have done more? Comment below to share your story!

How does home debt reduction impact the real estate industry?

ncoblogger — Wed, 12 Sep 2012 13:52:23 +0000

The Federal Reserve Bank of New York reported at the end of last month that U.S. households are reducing the amounts they owe on their homes. More specifically, during the second quarter of 2011 household debt fell by 0.5% to $11.38 trillion. The Federal Reserve Bank primarily attributed the drop to falling mortgage balances, including homeowners paying down home loans and completing foreclosure processes.

What we want to know is…
In a recent article from The Wall Street Journal, the publication indicated that home debt reduction has weighed on recovery; however, it could gain momentum in the future. As a real estate or lending professional, what are your predictions for the future? Do you agree that continued reduction in home debt will help the industry, or could it decrease the need for homeowners to borrow from institutions like yours?

Share your thoughts with us!

Principal Reduction Program: Good or Bad?

ncoblogger — Tue, 28 Aug 2012 13:51:17 +0000

By now you may have heard that at the end of last month, the Federal Housing Finance Agency (FHFA) announced that Freddie Mac and Fannie Mae would not be lowering mortgage principals for struggling homeowners. The reason? An analysis completed by the FHFA concluded that principal reductions would not prevent foreclosures while saving taxpayers money. Some of their specific concerns and arguments against the “bailout” include:

Mortgage companies would need to spend time and money implementing a principal reduction program.
The time it takes to implement the program would delay a resolution for some homeowners.
Some borrowers may feel enticed to fall behind on their mortgage payments so they can receive assistance from the program.
Credit availability could be compromised in the future due to added uncertainty by investors.

What’s Your Take?
Following the FHFA’s decision, Treasury Secretary Tim Geithner argued that such a program would actually save taxpayers up to $1 billion and urged the FHFA to reconsider their stance. Whose side are you on? Do you think a principal reduction program would be good or bad for the housing market and economy? Share your thoughts with us!

Read more about this topic in a recent article from CNNMoney.com.

Should the Supreme Court have used common sense in its ruling?

ncoblogger — Wed, 13 Jun 2012 12:34:51 +0000

Last month, on May 24^th, the U.S. Supreme Court issued its ruling in the case Freeman et al. v. Quicken Loans, Inc. The final decision was that the defendant, Quicken Loans, did not violate Section 8(b) of the Real Estate Settlement and Procedures Act (RESPA) as alleged by the plaintiff in three separate instances. What gained notoriety for this case was that the Supreme Court followed the exact wording of the law, as written by Congress, which could have a significant impact on future mortgage brokerage practices.

Background on Section 8(b)
According to Section 8(b) of RESPA, “no person shall give and no person shall accept any portion, split, or percentage of any charge made or received for the rendering of a real estate settlement service… other than for services actually performed.” Simply put, the law is designed to prevent servicers from charging fees for services not performed.

Behind the Ruling
The Supreme Court ruled that a violation of RESPA did not occur in this case because the fees assessed by Quicken Loans, including a “loan processing fee” and “loan discount fee”, were not divided between two or more parties. Furthermore, violation of the law cannot be based upon a fee retained by only one service provider.

What’s Your Take?
While the Supreme Court followed the exact law as written, some in the industry believe it failed to use common sense in its decision. There is also concern that Section 8(b) of RESPA is deceiving and morally questionable and could work against borrowers in the future. We would like to know YOUR thoughts on this matter; share your opinions with us here!

To view the Supreme Court’s syllabus of this case, click here.

Will House Prices Ever Recover?

ncoblogger — Tue, 08 May 2012 19:59:39 +0000

In an article last week on SmartMoney.com, author Jack Hough made some surprising, almost inconceivable, predictions and observations regarding the U.S. housing market. His hypothesis is that housing prices will never recover to pre-recession levels.

Data Shows
According to the latest S&P/Case-Shriller reports, home prices in 20 major markets across the U.S. have declined 3.5% over the past 12 months (through February). That means prices are back to 2002 levels, and when inflation is factored into the equation, back to 1998 levels.

The big shocker: Hough points out that when subtracting inflation, home prices can also be compared to those in 1986, 1955 and 1895. That’s due to the fact that the natural rate of price appreciation for houses is zero after inflation.

The Moral of the Story
Hough points out that just because house prices may not return to their peak levels doesn’t mean people should stop buying. He predicts that prices will eventually stop falling and start rising; however, they are unlikely to start rising faster than inflation.

What’s Your Theory?
Do you agree with Hough’s prediction that home prices won’t recover? If not, what do you anticipate happening with the market, and when do you expect them to recover? Share your thoughts with us!

$25 Billion National Mortgage Settlement is Finalized

ncoblogger — Tue, 03 Apr 2012 13:35:26 +0000

As you have likely heard by now, 49 of the 50 U.S.states recently reached agreement on a mortgage settlement which will pay $25 billion to borrowers and federal and state governments. The settlement will be paid by the nation’s five largest lenders: Ally/GMAC, Bank of America, Citi, JPMorgan Chase and Wells Fargo. Most of the payout ($20 billion) will be distributed to borrowers to help them avoid foreclosure, while the other $5 billion will be paid to the government.

What’s the point?
The primary goals of the historic $25 billion settlement are to force lenders to provide more assistance to struggling borrowers, as well as compensate those who were allegedly improperly foreclosed upon from 2008 to 2011. The five lenders part of the settlement, which did not admit any wrongdoing, must complete their settlement payouts within three years.

New Standards in Place
According to USA Today, banks are now required to make foreclosure the last possible resort. That includes not being allowed to foreclose on borrowers who are being considered for a loan modification. The new standards are also designed to prevent common foreclosure abuse practices such as lost paperwork or “robo-signing”.

What’s your perspective?
We’d love to know your thoughts on this settlement and how it might impact your business, as well as the industry as a whole. Please share your commentary here!

For more information about this mortgage settlement, visit www.nationalmortgagesettlement.com.

10 Real Estate Markets to Watch

ncoblogger — Wed, 29 Feb 2012 18:03:07 +0000

Inman News recently released its second annual report on the “10 Real Estate Markets to Watch in 2012”. The report gives a glimmer of hope to the real estate industry by identifying ten markets that are showing signs of recovering quicker than others across the nation.

Inman News’ list was formulated based on several determining factors and metrics, including:

Above-average price appreciation
Flourishing job market
High rate of sales in proportion to population
High level of home affordability
Low foreclosure activity
Below-average share of distressed sales
Low vacancy rate

Markets in theMidwestand South regions make up the majority of this year’s list. In particular, Inman News suggests the following markets could turn things around this year:

Raleigh-Cary,North Carolina
Wichita,Kansas
Rochester,New York
Des Moines-WestDes Moines,Iowa
Chattanooga,Tennessee-Georgia
Peoria,Illinois
Amarillo,Texas
Binghamton,New York
Waterloo-Cedar Falls,Iowa
Bloomington-Normal,Illinois

What are you seeing?
Inman News has created their list, but we want to know what you think. Is your market showing signs of improvement, too? Or do you regularly work with other markets that meet the factors listed above? Share your observations with us!

Is Freddie Mac Betting Against Homeowners?

ncoblogger — Wed, 08 Feb 2012 14:15:28 +0000

In a surprising story that came to light just last week on npr.org, National Public Radio (NPR) shared the results of its investigation, conducted along with ProPublica, on mortgage company Freddie Mac. The findings of the investigation revealed that Freddie Mae has been, as recently as 2011, utilizing complex mortgage securities that generated more money for the taxpayer-owned agency whenever homeowners were unable to qualify for new loans with lower interest rated.

Defying their mission?
While it’s important to note that Freddie Mac’s investments are legal, they do appear to be working against homeowners and especially those which are struggling to pay their existing mortgages. And according to Freddie Mac’s website, the company’s mission is to “stabilize the nation’s residential mortgage markets and expand opportunities for homeownership”.

Given the information presented, there are now concerns about Freddie Mac’s investment activity being a conflict of interest. That is, they are essentially betting against struggling homeowners when they are supposed to be looking out for their best interests.

Your turn to weigh in
Do you feel Freddie Mac has the right to be involved with investments of this nature? Do you think anything should be done to regulate this kind of activity? We want to hear what you have to say!

Is a bailout on tap for the FHA?

ncoblogger — Wed, 25 Jan 2012 14:36:41 +0000

As reported by CNNMoney earlier this month, there have been growing concerns among economists that the Federal Housing Administration (FHA) will require a taxpayer bailout due to the agency’s lacking reserve fund.

Reasons for Concern
According to an independent audit conducted in November 2011, the FHA’s fund had been reduced to 0.24% ($2.6 billion). By comparison, the FHA’s fund stood at 7% in 2006 and even higher than 3% as recently as 2008. Congress requires a reserve fund of at least 2%.

In addition to the insufficient reserve fund, there has also been concern stemming from a recent FHA monthly outlook report. The report showed the percentage of delinquent loans (those with at least three missed payments) in the agency’s portfolio rose to 9.3% in November 2011. That’s an increase from 8.4% in August.

Potential Impact
Economists and real estate experts predict the bailout nightmare could become reality in three to five years. Meanwhile, estimates to rescue the FHA range from $20 billion to $50 billion.

What does this mean for you?
As a mortgage servicer or professional, what would a bailout of this magnitude mean for the industry, your business and your customers? We want to know what you think!

Strategic Default is Becoming More of a Trend

ncoblogger — Wed, 11 Jan 2012 14:00:22 +0000

As reported by msnbc.com, strategic defaults are becoming much more common in today’s struggling housing market. In fact, according to one recent survey, approximately three out of 10 mortgage defaults in 2010 were done “strategically”. That’s an increase of 8% (up from 22%) in 2009.

So, what is a strategic default?
Simply put, a strategic default is when a borrower intentionally walks away from their mortgage loan. These borrowers are typically people who can afford to make their monthly payments; they just choose not to.

The reason they walk away is usually because they owe more on their mortgages than their homes are worth. Some borrowers see this as an opportunity to escape the “negative equity” in their homes, especially during a time when many industry analysts don’t anticipate homes’ values to recover for another decade or so.

Of course, strategic defaults do result in loan defaults, and ultimately, a negative impact on borrowers’ credit scores. Borrowers who opt for this strategy, however, see the credit hit as just a temporary consequence and feel it is worth the opportunity to get out from under their loans.

What’s your perspective?
As a lender, do strategic defaults have you concerned? Do you blame the borrowers for going this route? And what can be done to fix this problem?