week 8


Listen live to this week’s show, replay show, or download podcast by clicking here.

LykkenMortgage Industry Update 

Mon, January 21, 2013 12:00 pm CST

Here is my contribution to this week’s program.


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Fay Servicing

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(transcript from http://www.blogtalkradio.com/lykken-on-lending/2013/01/21/lykkenmortgage-industry-update  )


Hi Dave. I have three things to discuss this week. Zombie Titles, QM really being a usury law, and a special post that I put out this morning.


There have been several articles about zombie titles in the last week. What exactly is a zombie title? It’s where a homeowner thinks that the bank foreclosed and took title to their house. The homeowner thinks that the foreclosure is over and they can get on with their life.The bank decides that it’s not worth their time and expense to do a foreclosure, because it would make them take a loss. So the title is still in the name of the homeowner and the homeowner is not off the hook, and liable for the mortgage, back taxes and fines.

I point to an article that implies that this is very unfair to the former homeowner, and to another post on my blog that implies the homeowner has some responsibility for this.



Adam Levitin is a bankruptcy professor at Georgetown University. He writes one of my favorite blogs called Credit Slips. Levitin has an interesting post implying that QM is in effect a usury law.

High cost QM loans and non QM loans do not have the legal safe harbor harbor protection found in  regular QM loans.

This lack of legal protection will severely limit the number of these loans that are originated, which in effect has the same result as a usury law: prohibiting high-cost loans, and allowing low-cost loans.

Of course there is an unintended consequence to all of this, as there always is. If you are willing to make high-cost loans and take the legal risk, this means that you will be able to charge even higher rates than before.

I have a link to another article that came from America Online Real Estate about seller financing.

Seller financing is high risk lending the homeowner will make to a buyer that otherwise could not get credit. I have seen articles implying that as many as 10% of the mortgage loans being made now are private seller finance deals. 10% interest rates, 10% down, and seven year balloons are common items of these loans which have twice the default rate of regular mortgages.

This can end up being a great deal for the seller. Not only do they receive a 10% interest rate, but if the borrower misses a payment, or is unable to obtain financing at the end of the seven year balloon., the seller gets the house back and can do it all over again.


SPECIAL POST: Your Busy Government – Latest on Servicer Reform, QM, and CFPB

First up is an article from Business Week on CFPB reforms with servicers. Here are some highlights: any servicer with more than 5000 loans is now under federal supervision. Formally private servicers were not. 

Servicers must promptly credit payments, quickly resolve errors, and provide clear statements showing fees.
Forced placed insurance and single point of contact are also discussed in this article.

The second part of the post deals with a QM update. OC Housing News goes into great detail explaining 10 arreas of these rules.

The third part of the post has to do with a CFPB press release regarding consumer protections, appraisals, and LO comp.


I am sure all the LO’s out there will want to see the CFPB press release regarding LO comp.

So that’s it for this week. We discussed zombie titles, QM being a usury law, and a special post that I put out today about CFPB Servicer Reforms, QM update, and a CFPB press release.

I have a web page for you that goes into further details and has links to all of the articles that we discussed today.

It’s easy to get there. All you have to do is go to the Lykken on lending.com website. Click today’s show and you will see a logo over on the right that has my firm, Fay Servicing and MortgageNewsClips blog. Click on that logo to get more information.

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