Mortgage Shopping, Made Easier - Economic View

The following is an excerpt from an article in 

The New York Times
Sunday, August 19, 2012

Mortgage Shopping, Made Easier - Economic View

By RICHARD H. THALER

MORTGAGE rates are very low, but some people who could qualify for cheap refinancing are procrastinating. That may be because shopping for a mortgage can make root canal surgery seem fun.

Choosing a home and mortgage is probably the largest financial decision that most Americans ever make. Yet perhaps because the loan process is so onerous and opaque, many take the first quote they are offered. In fact, research shows that people typically spend more time shopping for a car or vacation than for a mortgage, and I suspect that many families spend as much or more time picking out a microwave oven.

Shirking on mortgage shopping is a costly type of sloth. Other research, done for the Department of Housing and Urban Development, finds that most borrowers could save several thousand dollars by getting just one more quote.

Now is a propitious time for raising these issues because the new Consumer Finance Protection Bureau is undertaking a Congressionally mandated revision of some disclosure forms that are required by law. (Disclosure: Along with John G. Lynch Jr., a professor at the University of Colorado, I met with bureau staff members last month to discuss this proposal from a behavioral science perspective.)

The bureau’s goals should be to make mortgage shopping easier and more efficient, and to make the industry more transparent and competitive, all while reducing the kinds of bad loans that helped create the financial crisis.

One form is of particular importance. It’s the “loan estimate,” a paper copy of which must go to borrowers within three days of application for a loan.

The bureau’s research team did extensive testing to decide what data should be included on this new form. It proposed a three-page version containing more than 100 pieces of information, including the interest rate, charges for various services and whether features like prepayment penalties or balloon payments were part of the deal.

For more, visit www.nytimes.com.

Home Builder Stocks at Highest Point in 2 Years After 6-Month Rise

Excerpt from an article in

The New York Times

Thursday, March 22, 2012

Home Builder Stocks at Highest Point in 2 Years After 6-Month Rise

By CHRISTINE HAUSER

After a bullish report on housing at a late summer investment conference in Dallas, the officials at Federated Investors decided to sink a few million dollars into the shares of the home builder Lennar.

Philip J. Orlando, Federated’s chief equities market strategist, was hoping for a return of 20 percent to 30 percent, confident in an improving jobs market and upticks in housing construction and sales data.

Like many other stocks in the home building industry, Lennar surged, nearly doubling in price.

Home builder stocks are at their highest level in two years, with the Standard & Poor’s index of 11 home builder stocks rising 80 percent since October, the most recent low for the industry.

Investors looking to ride the wave from the last six months, however, may be too late. Home builder shares typically increase before the spring and summer home-selling season. And while housing reports have shown some improvement in recent months, data this week has been mixed. A report on Wednesday showed that the sales of existing homes declined slightly in February, while median sales prices rose for the first time in more than a year.

Irresistible Mortgage-Backed Securities

Excerpt from an article in The New York Times
Sunday, February 19, 2012

Prices of Mortgage-Backed Securities Prove Irresistible

By AZAM AHMED

Some Wall Street investors made money as the mortgage market boomed; others profited when it fell apart.

Having reaped big gains during both of those turns, Greg Lippmann, a former star trader at Deutsche Bank, is now catching the next upswing: buying the same securities built from mortgages that he bet against before the financial crisis erupted.

Mr. Lippmann is joined by other big-money investors - mutual funds like Fidelity as well as hedge funds - in riding a wave of interest in the same complex loan pools that nearly washed away the financial system.

The attraction is the price. Some mortgage bonds are so cheap that even in the worst forecasts, with home prices falling as much as 10 percent and foreclosures rising, investors say they can still make money.

"Given its significant underperformance in 2011, we believe the product is as cheap to broader markets as it has been in a long time," Mr. Lippmann, whose portfolio is heavy with subprime mortgage securities, wrote in a recent letter to investors.

More broadly, the nascent recovery in the mortgage bond market supports a view that the housing slump may have bottomed out. Sales of existing homes are picking up. State and federal authorities have reached a $26 billion settlement with the big banks that is expected to provide some mortgage relief. And the Federal Reserve Bank of New York has been able to auction off billions of dollars of mortgage securities that it acquired as part of the financial crisis bailouts.

"There is light at the end of the tunnel," said Kenneth J. Taubes, the head of United States investment for Pioneer Investments, a global investment manager that owns these securities. "The mortgage crisis is getting behind us, and things are getting back to some semblance of normality."

That optimism is an about-face from 2006 and 2007, when Mr. Lippmann and others told investors that housing was a bubble ready to burst. On Wall Street, Mr. Lippmann became known as "Bubble Boy," and one of his traders wore a joking T-shirt that read, "I Shorted Your House."

His exploits were chronicled in Michael Lewis's best seller "The Big Short," which described him as somewhat brash and crass. He was known for maintaining a sushi spreadsheet, where he ranked the top Japanese restaurants in Manhattan on ambiance, quality and cost. (He still maintains the spreadsheet.)

These days, industry competitors describe Mr. Lippmann, who runs LibreMax Capital, as a more mellow presence. And he is much more positive about the market, telling investors that his fund is reducing its hedge against a potential market crash. Through a spokesman, Mr. Lippmann declined to comment.

Man Indicted for Hurricane Katrina Fraud

News release from the FBI, Honolulu Division:

Kailua Man Indicted for Hurricane Katrina Fraud

U.S. Attorney’s Office January 25, 2012

District of Hawaii (808) 541-2850

— filed under: Fraud, Honolulu Top Stories, Press Release

HONOLULU—A federal grand jury returned a 28-count indictment today against Kailua (Oahu) resident Dan Doyle, age 54, for an investment fraud scheme marketed primarily on AM radio financial shows airing in California. Florence T. Nakakuni, United States Attorney for the District of Hawaii, and Frank Montoya, Jr., Honolulu FBI Special Agent in Charge, announced the indictment of Doyle on 27 counts of wire fraud and one count of mail fraud relating to real estate projects designed to rebuild affected areas of Mississippi following the destruction of Hurricane Katrina.

The indictment describes a program known as the “Gulf Opportunity Zone” (“GO Zone”) implemented by the federal government to provide tax incentives to real estate investors and developers seeking to build affordable housing in the Gulf region following the August 2005 devastation of Hurricane Katrina.The indictment also alleges:

• Doyle owned and operated a business in Kailua using names including Investment Real Estate Network and Investment Radio Network. From late 2007 through December 2009, DOYLE allegedly purchased air-time on California talk radio stations to broadcast “radio infomercials” that he hosted and produced touting the benefits of Mississippi “GO Zone” real estate investments. Listeners to the programs were encouraged to call DOYLE’s office in Kailua for investment information.
• When potential investors called Doyle’s Kailua office, they were allegedly encouraged to wire transfer a refundable deposit to Doyle’s business bank account in Hawaii.
• Seventeen individuals wire transferred or mailed over $890,000 to DOYLE in Hawaii as deposits for “GO Zone” investments that were never built.
• Instead of preserving the money for potential refunding, DOYLE spent investor money on unrelated personal and business obligations including mortgage payments on his Kailua home and yachting expenses, according to the indictment.

For each of the wire and mail fraud counts, DOYLE faces a maximum period of imprisonment of 20 years, plus possible fines of up to $250,000 and terms of supervised release of up to three years. The court issued a penal summons for DOYLE to appear in federal court for arraignment An indictment is only an accusation and the defendant is presumed innocent until and unless proven guilty beyond a reasonable doubt.

Companies Face Fines for Lead Paint Disclosure Violations

News Release from EPA Region 1:

Companies Face Fines for Lead Paint Disclosure Violations at Two Navy Bases in New England

Release Date: 01/10/2012

Contact Information: David Deegan, 617-918-1017


(Boston, Mass. – Jan. 10, 2012) – Two companies face significant penalties for violating federal lead paint disclosure laws at the Portsmouth Naval Shipyard in Kittery, Maine and the Naval Submarine Base New London in Groton, Conn. 


A complaint filed by the U.S. Environmental Protection Agency asserts that Northeast Housing, LLC, and Balfour Beatty Military Housing Management, LLC failed on multiple occasions over several years to notify prospective tenants, including families with young children, about potential lead paint hazards in housing managed by the companies on the two Navy bases in New England.  Notifying prospective tenants and purchasers of housing units helps parents protect young children from exposure to lead-based paint hazards.


The companies face a possible fine of $153,070 for alleged violations of the Lead Based Paint Disclosure Rule.  EPA’s complaint asserts that the two companies failed to comply with the Disclosure Rule when they entered into 13 contracts to lease target housing for military personnel during the years 2007, 2008, 2009 and 2010 at the Portsmouth Naval Shipyard and the U.S. Naval Submarine Base.


The housing at both bases is owned by Northeast, a joint venture limited liability company between the Department of the Navy and a wholly-owned subsidiary of Balfour Beatty Communities, LLC, of which the BBC affiliate is the managing member.  There are approximately 25 target housing units located at Portsmouth Naval Shipyard, where housing was built in the 1800s and early 1900s.  There are approximately 735 target housing units at the Naval Submarine Base in Groton, which was built in the early 1960s.


"Exposure to lead paint is a serious public health concern here in New England because of how much older housing we have.  Further, military families make significant sacrifices to protect our Nation, and the health of those families, as well as all families, should not be jeopardized by not being notified of potential lead hazards in the housing where they reside," said Curt Spalding, regional administrator of EPA's New England office. "Property managers and owners play an important part in helping to prevent lead poisoning by following lead paint disclosure requirements and making sure families are aware of potential lead hazards in homes."
The EPA complaint details that the companies failed to provide available records and reports regarding lead-based paint and/or lead-based paint hazards to 13 lessees (10 lessees at Portsmouth and three lessees at the Conn. base).  Nine of the lessees were families with children, including seven families with children under the age of six.


Infants and young children are especially vulnerable to lead paint exposure, which can cause intelligence quotient deficiencies; reading and learning disabilities; impaired hearing; reduced attention span, hyperactivity and behavior problems. Adults with high lead levels can suffer difficulties during pregnancy, high blood pressure, nerve disorders, memory problems and muscle and joint pain.


The purpose of the Lead Disclosure Rule is to provide residential renters and purchasers of pre-1978 housing with enough information about lead-based paint in general and known lead-based paint hazards in specific housing, so that they can make informed decisions about whether to lease or purchase the housing.

Federal law requires sellers and landlords selling or renting housing built before 1978 to:

- Provide a lead hazard information pamphlet to inform renters and buyers about the dangers associated with lead paint;
- Include lead notification language in sales and rental forms;
- Disclose any known lead-based paint and lead-based paint hazards in the living unit and property and provide copies of all available reports to buyers or renters;
- Allow a lead inspection or risk assessment by home buyers; and
- Maintain records certifying compliance with federal laws for a period of three years.