Mortgage - Home Loan, Commercial Loan

WASHINGTON – A larger share of banks has made it more difficult for people to obtain home mortgages over the last three months even as demand has grown, the Federal Reserve reported Monday.
The Fed’s new quarterly survey found that about 50 percent of U.S. banks tightened their lending standards on prime mortgages, up from about 45 percent in the survey issued in early February.
Meanwhile, 65 percent of banks said they tightened standards on nontraditional mortgages, such as adjustable-rate loans with multiple payment options. That was up from 50 percent in the last survey.
“Even if you had a stellar credit history, banks were reluctant to lend in this environment,” said Richard Yamarone, economist at Argus Research. With unemployment rising, it raises the odds of more people defaulting on their mortgages, he said.
Demand for nearly all types of consumer and business loans continued to weaken over the last three months, with one exception. Demand for prime mortgages registered its first increase since the Fed began to track those loans separately in April 2007.
That uptick in demand comes as mortgage rates dropped, helped by a concerted effort by the Fed to drive down rates to help revive the crippled housing industry.
Rates on 30-year mortgages slid to 4.78 percent last week, trying a record low, according to figures compiled by mortgage giant Freddie Mac.
In other lending, nearly 60 percent of banks said they tightened standards on credit card loans over the last three months, the same proportion as in the previous Fed survey.
There were some spots of improvement in the latest Fed survey. About 40 percent of banks said they tightened standards on commercial and industrial loans over the last three months. That was down from around 65 percent in the last survey.
Looking ahead, however, “the vast majority” of banks said they expected deterioration in credit quality for all types of household and business loans.
More than 70 percent said the quality of their banks loan portfolio was likely to deteriorate this year with nontraditional mortgages and credit cards figuring prominently in that scenario. That response was to a special question contained in Monday’s survey not asked in the previous one.
Regulators are scheduled to release the results of “stress tests” on the nation’s 19 largest banks on Thursday, shedding light on which ones may need government support to withstand a more severe recession.
The Fed survey was based on the responses of 53 domestic banks and 23 U.S. offices of foreign banks.
Getting banks to boost lending is critical to lifting the country out of recession.
The Fed has slashed a key bank lending rate to a record low near zero and is expected to hold it there well into next year to entice businesses and consumers to spend more.
The Obama administration is counting on tax cuts and increased government spending to revive the economy. And it has put forward plans to rescue banks and curb home foreclosures, also key ingredients to turning the economy around.
Lax lending standards during the housing boom allowed some people to buy homes that they couldn’t afford. When the boom ended, dragging home values down, foreclosures skyrocketed and banks wracked up huge losses on soured mortgage investments.

WASHINGTON – Trying to curb home foreclosures, the Senate voted on Wednesday to make it easier for homeowners with risky credit to switch to a lower-cost mortgage backed by the government.
The bill, passed 91-5, also would give banks a break by encouraging reduced fees they must pay for the government to insure deposits.
While both steps put taxpayer money on the line, lawmakers say the legislation is needed to prevent the economy from getting worse.
“Given the size and scope of the struggles too many Nevadans and Americans endure, it will take more time before housing normalizes again,” said Senate Majority Leader Harry Reid, D-Nev. “But with this bill, we are working to hasten that day so that no family will ever accept losing its home as the way it is.”
Absent from the measure was a bankruptcy provision that President Barack Obama had promised to push through Congress, but backed down amid stiff opposition from banks. The provision, rejected by the Senate last week in a 45-51 vote, would have allowed bankruptcy judges to lower a person’s mortgage payment.
While the House included the provision when it passed its version of the bill in March, lawmakers said it didn’t have enough support to insist it be included in the final compromise bill. The two chambers have to iron out their differences in the legislation before it can be sent to Obama to sign.
“That issue is a dead letter,” said Sen. Christopher Dodd, D-Conn., chairman of the Banking Committee.
Also on Wednesday, the House agreed to a Senate-passed bill that would hire hundreds more FBI agents and prosecutors to investigate mortgage fraud. The legislation, expected to reach the president’s desk soon, also would establish a $5 million, independent commission to investigate the cause of the financial crisis and chart a path forward.
The Senate housing bill would expand an existing $300 billion program called “Hope for Homeowners,” which encourages lenders to write down an individual’s mortgage if the homeowner agrees to pay an insurance premium. The program, which is set to expire in 2011, is intended to swap out a homeowner’s high-interest rate for a 30-year fixed loan backed by the Federal Housing Administration.
So far, the program has been a dud.
When it was established last year, Congress envisioned helping some 400,000 troubled homeowners. But because eligibility requirements were so strict, one borrower has completed the refinancing process and only 51 more are in the works, according to statistics released last week.
The Senate bill would expand eligibility. For example, the program currently bans participants who intentionally defaulted on the mortgage or other substantial debt. The Senate bill would narrow that prohibition to defaults within the last five years.
Republicans swung behind the proposal to expand the program using $2 billion from the $700 billion Wall Street bailout fund. Sen. Richard Shelby of Alabama, the top Republican on the Banking Committee, co-sponsored the bill with Dodd.
Still, some Republicans warned that increasing the burden of the government to insure risky mortgages — even if it saves people from foreclosure — could backfire. Sen. David Vitter, R-La., who called the Federal Housing Administration a potential “ticking time bomb,” proposed letting the administration suspend any programs that threaten its solvency.
His effort was defeated 36-56.
Another issue is whether Hope for Homeowners will be enough to keep people in their homes, considering other voluntary efforts haven’t provided homeowners steep discounts. According to a report released last month by federal regulators, fewer than half of the loan modifications made by lenders at the end of last year reduced payments by more than 10 percent.
The Senate housing bill also would permanently increase the borrowing authority for the Federal Deposit Insurance Corporation from $30 billion to $100 billion. Increasing the FDIC’s credit would allow the agency to reduce large new premiums it has begun charging banks to insure deposits.
In addition, the bill extends through 2013 an increase in deposit insurance by the FDIC from $100,000 to $250,000.
(This version CORRECTS in 8th graf that fraud bill doesn’t go to president yet because Senate has to agree to minor changes made.)

People who lose their jobs can skip their mortgage payments if the mortgage is owned by Associated Bank.

The bank says it will defer mortgage payments for up to a year for people who are laid off and qualify for unemployment insurance. Homeowners still will have to pay their taxes and home insurance.

The Wisconsin-based bank holds $2.5 billion in mortgages, and operates branches in Fairview Heights, Millstadt, East St. Louis and Columbia, Ill.

Associated Bank joins General Motors, Ford, Hyundai and even the occasional landlord and clothing store in offering a break on financial obligations for the newly jobless.

But Associated is rare among banks for making such a flat promise of loan deferral. Citibank and JP Morgan Chase are known for waiving payments for the unemployed, said Chris Krehmeyer, director of the nonprofit group Beyond Housing. But most banks decide whether to grant relief on a case-by-case basis, and they have been criticized for forcing too many

homeowners into foreclosure.

Krehmeyer praised Associated’s forgiveness policy. “It’s certainly a good move to make, so that your loss of a job won’t immediately throw you into foreclosure,” he said.

Under the Associated plan, interest keeps accumulating on the loan while payments are waived. When the homeowner finds a job, the skipped payments are added to the loan amount. The length of the loan can be extended to keep payments affordable, or the loan can be refinanced.

“This program gives these homeowners hope by helping them keep their homes without draining their personal savings they need for other expenses,” Associated President Lisa Binder said.

The program applies only to loans Associated owns. Like many banks, Associated also collects payments for loans that are owned by others.

Mortgages crept up this week, but just a little. They have been pretty steady for the past month.

The benchmark 30-year, fixed-rate mortgage rose 4 basis points, to 5.27 percent, according to the Bankrate.com’s national survey of large lenders. A basis point is one-hundredth of 1 percentage point. The mortgages in this week’s survey had an average total of 0.38 discount and origination points. One year ago, the mortgage index was 6.13 percent; four weeks ago, it was 5.2 percent.

The benchmark 15-year, fixed-rate mortgage rose 5 basis points, to 4.78 percent. The benchmark 5/1 adjustable-rate mortgage rose 2 basis points, to 5.07 percent.

Bankrate’s weekly rate survey is a snapshot of what’s happening with mortgage rates every Wednesday. That means it misses the ups and downs that can occur on the other days of the week. But judging by day-to-day mortgage bond prices, it looks like mortgage rates have been calm for about a month.

Home Valuation Code of Conduct
Borrowers haven’t been so calm. They’re frustrated about a lot of the changes that have occurred lately in the world of mortgages. The most recent change is the imposition of something called the Home Valuation Code of Conduct, or HVCC. It’s a set of rules governing appraisals for loans that can be sold to Freddie Mac or Fannie Mae, and it went into effect May 1.

There’s something old-fashioned about the Home Valuation Code of Conduct. If you’ve ever watched The Dick Van Dyke Show from the early 1960s, you noticed that the married main characters, Rob and Laura Petrie, slept in separate beds. The network apparently believed that a realistic bedroom arrangement would have scandalized Baby Boomers and their fecund parents. Similarly, the HVCC was conceived in the belief that mortgage lenders and appraisers should never get in bed together. Heck, they shouldn’t even flirt.

The new code of conduct forbids mortgage brokers from hiring appraisers, or even talking to them. Mortgage lenders may hire independent appraisers directly, or through middlemen called appraisal management companies, which take a cut of appraisers’ fees. Major appraisal management companies are owned by big banks. Critics of the HVCC charge that banks’ ownership of appraisal management companies creates a conflict of interest that could raise prices paid by consumers.

More demand for appraisals
In e-mails to Bankrate, consumers complain about having to pay up-front for expensive appraisals. “Now they are telling me I have to pay $475 for an appraisal!” one reader writes indignantly. And if the appraised value is too low to qualify the borrower for a loan, there will be no refund.

“Paying for appraisals up front has become a lot more standard,” says Dan Green, loan officer for Mobium Mortgage in Cincinnati.

The HVCC aims to prevent brokers and lenders from pressuring appraisers to “hit a number” — to appraise a house at a certain value that will allow the loan to be approved. But it also forbids more innocent conversations between appraisers and loan originators.

Previously, brokers and loan officers could call appraisers informally and describe a prospective deal and ask, “is this going to work out or not?” says Brian Koss, managing partner for Mortgage Network, a mortgage bank based in Danvers, Mass. “That’s how we saved a lot of time” by weeding out unsupportable loans from the get-go.

Now that call can’t be made. As a result, Koss says, “we’re going to do a lot of work on loans that aren’t going to close.”

When a lender calls an appraiser to ask if a certain property will be valued high enough to qualify a loan deal, it might seem like a benign conversation to the lender, but a threatening one to the appraiser. If an appraiser answers “no” too often, that appraiser’s business could dry up. The HVCC’s goal is to decrease the pressure on appraisers to “hit a number” just to remain in business.

Green isn’t sure that the HVCC is necessary. Lenders already have beefed up their fraud-prevention departments, and inflated appraisals have little chance of getting through. Besides, Green says, “a good loan officer works with a good appraiser because the appraiser is open and honest and provides quick service.”

A city committee is set to consider dueling proposals about funding a citywide home improvement loan program.

The Kenosha Plan Commission, which meets at 5 p.m. today in the Municipal Building, 625 52nd St., will hear two proposals to fund the Housing and Economic Loan Program (H.E.L.P.) by taking $450,000 out of the existing Capital Improvement Plan.

One option would reduce funding for the Redevelopment Authority, and the other proposal would take money from plans to create a frontage road on 60th Street and a spray park.

The City Council has already approved the concept of the home improvement program, which would provide loans of up to $7,500 for homeowners to address interior and exterior improvements.

Aldermen Anthony Nudo, David Bogdala, G. John Ruffolo and Michael Orth have proposed moving $225,000 from the Redevelopment Authority’s funding in both 2008 and 2009 to pay for the loan program. The 2008 funds include as of yet unused money designated for use in that year. Nudo said he felt these funds would address similar problems in either function.

“This is a line item allocated to eliminate blight and improve properties, so it should obviously be taken from that line item,” Nudo said.

Kenosha Mayor Keith Bosman offered his own proposal to take $400,000 budgeted to build a frontage road on the west side of I-94 to 60th Street and $50,000 budgeted to create an additional spray park in the city.

The future frontage road will not be needed until development necessitates that road, at which time it will be paid for by that developer, Bosman said. And Bosman said current state regulations that require staffing at splash pools and spray parks make a new facility financially impractical.

“We’re taking away from two line items where there is no need for the money to be there anymore,” Bosman said.

Both sides see flaws with the opposing plans.

Nudo said he felt that, even if the two specific projects in Bosman’s proposal do not need funding at this time, he would like to see those funds stay in road and parks projects.

“I will not take money out of the roads to fund this program,” Nudo said. “And that $50,000 should go toward parks.”

Bosman said he opposes taking funds from the Redevelopment Authority, because that loss of funding could affect plans to purchase property and remove blight from the Wilson Heights neighborhood.

Bruce McCurdy, a member of the Plan Commission and chairman of the Redevelopment Authority, agreed with Bosman.

“It will cripple us for at least the next year and very heavily affect the project in the Wilson neighborhood,” McCurdy said. “The community of Kenosha is the loser if you do not keep the Redevelopment Authority moving forward.”

Nudo said he felt the city is addressing needs in the Wilson area through other means, such as funding roads for a future subdivision and a new baseball complex in the area.

“In my opinion, there is a real strong effort to help out the Wilson Heights neighborhood,” Nudo said. “This $450,000 (for the loan program) will provide some equity throughout the city.”

Though the Plan Commission is scheduled to hear both proposals, Department of City Development staff has recommended denying the Redevelopment Authority option and approving the mayor’s proposal.

Jeff Labahn, director of City Development, said the reasoning was based on the potential hampering of the Redevelopment Authority.

“That would really limit the impact that the city can make on the Wilson neighborhood, and we have a city-adopted redevelopment plan for that neighborhood,” Labahn said.

The Plan Commission can only recommend action on these proposals. Both options are also scheduled to go before other city committees and the City Council.

ATLANTA, GA - May 5, 2009 - YourKasa.com, a real estate marketing website providing informational and financial services to both buyers and sellers, announces a unique, well-timed resource for real estate agents and mortgage lenders – refinancing assistance, home loan modification (for those that cannot refinance), and short sale services for their existing home owning clients. With the number of foreclosures on the rise, helping homeowners remain in their homes and maintaining cash flow for their own property and lending organizations is a major concern.

“By extending this service to real estate agents and mortgage lenders, YourKasa is offering useful tools to the industry – helping their customers keep their properties while continuing to bring in revenue through home loan modification, short sale, and refinancing services,” said Neil Terc, President of YourKasa. “YourKasa’s timely resource is a helpful real estate marketing tool to ensure leads close daily.”

In many cases, potential clients are no longer qualifying due to strict lending guidelines and homes that are now worth less. YourKasa’s responsive team of skilled underwriters, who have high rates of success negotiating home loan refinancing, can help real estate agents and mortgage lenders find more attractive rates for their clients and keep their business. For more details on YourKasa’s real estate marketing assistance and home loan modification, short sale, and refinancing services, please visit www.yourkasa.com to learn more.

LONDON–British Treasury minister Alistair Darling has been throwing money at the economy like there’s no tomorrow, sending the U.K.’s fiscal deficit to a whopping 90.0 billion pounds ($130.0 billion) last year. But those efforts don’t seem to be translating into any improvement in the ability of companies and consumers to pay back their loans.

Figures from Barclays ( BCS - news - people ) and Lloyds Banking Group ( LYG - news - people ) on Thursday highlighted the big problem that rising rates of default on consumer and corporate loans is having on their balance sheets.

Barclays’ impairment charges rose by 79.0% to 2.3 billion pounds ($3.5 billion) in the first quarter, and the bank is expecting the figure to continue to rise this year. Meanwhile Lloyds Banking Group, which also reported a sharp rise in bad debts, warned that corporate bad debts would rise at least 50.0% in 2009.

Shares of Lloyds Banking Group fell 8.5%, or 9.60 pence (15 cents) to 103.60 pence ($1.56), while Barclays shares were up 0.7% in morning trade.

Barclays remains the preferred British domestic bank for Nomura analyst Robert Law. He points out that the bank’s wholesale and investment banking division, Barclays Capital, has seen a surge in its fixed-income revenues, thanks to the growing new issuance of government and corporate debt. This is helping offset problems at Barclays’ retail and commercial banking division. Profits before tax at BarCap rose to 1.0 billion pounds ($1.5 billion), from 365.0 million pounds ($551.3 million) in the first quarter.

Nevertheless, Thursday’s default figures are a wake up call: while Lloyds’ problems stemmed from its takeover last year of HBOS, a aggressive property lender in Britain, Barclays’ loan losses ate sharply into its commercial and retail banking division, where profits fell 45.0% despite a 16.0% surge in revenues.

Commercial real estate loan delinquencies seen putting major strain on nation’s smaller banks

By Michael Oneal | Tribune newspapers
May 7, 2009
Treasury Secretary Timothy Geithner signaled Wednesday that the nation’s biggest banks may be able to raise the billions of dollars they need to get healthy again without further taxpayer money.

But even as he tried to ease anxiety about the big-bank “stress test” results due Thursday, some experts warned that government efforts to unlock the lending market may well face another hurdle not being addressed by that exercise.

The smaller banks that make up a large part of the nation’s commercial lending, they say, are under growing strain due to the deepening recession, exposure to the faltering commercial real estate market and demands that they also shore up their capital. Faced with such an uncertain outlook, many are hunkered down and reluctant to take risk, which is helping to thwart efforts by Treasury officials to jump-start the lending needed to fuel an economic recovery.

“You go into sell-preservation mode. You stop lending and no amount of pressure [from Washington] will change that,” said Brian Battle, vice president of Performance Trust Capital Partners, which advises middle-market banks.

Banking experts applaud the government’s efforts to shore up the system’s giants.

The stress tests involved the country’s 19 largest banks and were designed to identify which institutions must raise their capital levels. Geithner said in a television interview that the results “will be, on balance, reassuring,” and that “none of those 19 banks are at risk for insolvency,” Bloomberg News reported.

That’s important because hulks like Bank of America and Citigroup are so intertwined with each other and the rest of the global financial system that failure could well be catastrophic.

“If the big banks were still screwed up, it wouldn’t matter if the small banks were all fine,” said Anil Kashyap, a professor of economics and finance at the University of Chicago Booth School of Business.

But that doesn’t mean smaller banks are somehow inconsequential. The nearly 8,300 banks with less than $100 billion in assets, the stress test cutoff, fill a vital role in the growth and prosperity of the U.S. economy.

Data from research company Foresight Analytics LLC show that while these banks make up 28 percent of the industry’s total assets, they are responsible for about 60 percent of the nation’s commercial real estate lending and roughly a third of the general business lending that local economies thrive on.

That makes them especially vulnerable to what many believe will be the next phase of the real estate crisis — a sharp downturn in commercial real estate values. Deepening unemployment and business strife have begun to push up commercial delinquency rates, said Foresight partner Matthew Anderson. And that is putting pressure on banks with heavy concentrations of commercial loans.

The result has been a spike in the number of bank failures. Foresight reports that 56 banks have collapsed since 2007, and the firm expects the number to jump to 150 by the end of this year. The Federal Deposit Insurance Corp.’s list of “problem banks” swelled past 250 in the fourth quarter, and the number of failures and “assistance transactions” in 2008 was at a 15-year high.

These numbers still trail the devastation the banking industry suffered during the savings and loan crisis in the early 1990s. But the issue is this: More failures indicate growing stress in the broader banking market, stress that could become acute if the recession continues to undermine the commercial real estate market. Bankers are clearly worried. An April survey of lending officers by the Federal Reserve showed that 70 percent of them were anticipating deterioration in all types of commercial and household loans.

Bankers complain that despite the pressure from Washington to lend, examiners in the field are tougher to please than ever.

“When you make loans, you are subject to scrutiny, so why make loans?” said Jeffrey Taft, a regulatory attorney with Mayer Brown in Washington, D.C. “The joke is, regulators want you to make responsible loans, but they’ll tell you what responsible is.”

The result isn’t funny. Though indications are that the economy is reaching a bottom, many experts say this ongoing lack of lending by smaller banks is one reason a real recovery may be a long time in coming.

After being upgraded to “Group A” commercial bank of national level, Kist Merchant and Finance Limited has started to provide its services in the name of Kist Bank Limited from Thursday.

Kamal Prasad Gyawali, Managing Director, Kist Bank, said that his institution will move ahead by doing the best in various aspects like capital structure, branch expansion, employment generation, deposit mobilization, loan portfolio and customer base in order to contribute to the national economy of the country.

Kist commenced its operation as merchant and finance limited some six years back with seven employees and paid-up capital of Rs 30 million.

But after being transformed to commercial bank, it boasts of some 300 employees, paid-up capital t o the tune of Rs 2 billion, 24 branch offices and 22 ATM counters.

According to the bank, it has deposit collection of more than Rs 6 billion and the same volume of amount in the form of loan disbursement. nepalnews.com May 07 09

U.S. Must Take Action, Fed Chairman Says

The government needs to move much more aggressively to help people avoid losing their homes to foreclosure, Federal Reserve Chairman Ben S. Bernanke said yesterday, trying to boost efforts that had stalled in recent weeks.

Bernanke spoke approvingly of several proposals to use government funds to help people stuck in mortgages they cannot afford. “Steps that stabilize the housing market will help stabilize the economy as well,” he said in a speech to a housing and mortgage conference at the Fed.

Bernanke was wading into a tense debate among the Bush administration, Congress and the Federal Deposit Insurance Corp. The comments were an attempt to add urgency to those discussions without specifically endorsing any one proposal. Indeed, he said the proposals were “promising options, which are not necessarily mutually exclusive.”

Lenders are on track to foreclose on more than 2 million properties this year, and losses on those loans are a major factor in the financial crisis and resulting recession.

Congressional Democrats want to use part of the $700 billion financial system bailout to buy up mortgages at risk of foreclosure, then allow people to refinance at subsidized rates; the Treasury Department has strongly resisted using that money, preferring to preserve the cash to strengthen financial institutions.

Similarly, FDIC Chairman Sheila C. Bair is advocating a plan in which private lenders would agree to lower mortgage payments to 31 percent of borrowers’ income in exchange for the government insuring them against a potential default. Bernanke approvingly suggested a variation of that program, in which the government would share part of the cost of lowering the payment.

Treasury officials have indicated that they think Bair’s approach has promise but that they see major hurdles in executing it, especially in determining who gets help and who doesn’t. The challenge for policymakers is finding a plan that does not reward bad behavior or encourage on-time borrowers to default intentionally in hopes of getting a better deal.

The Fed under Bernanke is attempting to fight the recession on all fronts. It has aggressively cut interest rates, rolled out huge programs to provide lending where private markets have shut down, and encouraged Congress to consider a massive fiscal stimulus.

Dealing with the foreclosure problem at the level of individual households is one more front in that effort.

“It has always been the justification for doing these things that there are broad economic effects,” said Alex J. Pollock, a resident fellow at the American Enterprise Institute who studies housing finance. “It’s trying to stop an adverse feedback loop in which the financial problems make the recession worse and the recession makes financial problems worse.”

Although the Fed has clout, it doesn’t have much direct authority over relief programs. To the degree that mortgage foreclosure efforts involve public money, that would probably come from the Treasury.

Much of the government effort so far has focused on using the Federal Housing Administration’s program for insuring mortgage loans. Many lenders initially refused to participate in the government’s Hope for Homeowners program, launched in October to deal with the foreclosure crisis, because it required them to take a large financial hit on each troubled loan. The FHA tweaked the program late last month to address some industry concerns.

He suggested ways for the agency or Congress to help reduce interest rates on Hope for Homeowners loans, currently at roughly 8 percent. He also said the agency might consider reducing the premiums lenders and borrowers pay.

Another option Bernanke highlighted would have the government purchase delinquent loans in bulk and refinance them into an FHA program.

The fear inside the agency and among those who follow it has been that with its current resources, the FHA may not be able to handle its expanded workload or relatively new programs that require it to take on riskier loans. The agency’s share of loans dropped sharply during the housing boom and has spiked in the past year as other sources of credit tightened. FHA officials have said staffing and technology have not kept up.

Yesterday, Bernanke acknowledged the capacity issue and raised the possibility of hiring outside contractors to ease the workload.

The desire to stem foreclosures “does not rely solely on the desire to help people who are in trouble,” Bernanke said, but rather the need to reduce the supply of these deeply discounted foreclosures, which have dragged down home prices and destabilized entire communities and the economy.

Economists highlighted the historic climb — and then drop — in home prices in many parts of the country as a key contributor to the foreclosure mess.

Paul Willen, a senior economist at the Federal Reserve Bank of Boston, said financial analysts predicted a few years ago that delinquencies would soar if there were huge price drops.

“The problem is they didn’t believe that [price drops] would happen,” Willen said at yesterday’s conference.

As home prices kept plunging, more borrowers owed more than their homes were worth. Those who suffered a financial blow, such as a job loss, defaulted on their loans because they could not refinance their way out of trouble or sell their homes.