Wednesday, January 27, 2010

Activity Down but so are Rates....

An apparent lack of borrowers eligible to take advantage of the near record-low mortgage rates is pushing mortgage demand lower, according to the Mortgage Bankers Association.

Refinance activity fell 15.1 percent last week compared to the previous week, while the seasonally adjusted purchase index slipped 3.3 percent.

On an unadjusted basis, purchase applications were up 2.8 percent compared with the previous week, but 4.5 percent lower than the same period a year ago.

Overall, mortgage applications were off 10.9 percent on a seasonally adjusted basis (-10.1% unadjusted) for the week ending January 22, and 19.8 percent compared with the same week a year earlier.

“Refinance activity fell substantially last week,” said Michael Fratantoni, MBA’s Vice President of Research and Economics, in the release. “Although rates remain low, there appears to be a smaller pool of borrowers who are willing and able to refinance at today’s rates.”

This could be the case because many homeowners are now underwater, owing more on their mortgage than the current value of the property.

It may also be attributable to income loss and/or unemployment for a number of borrowers, or a desire to take advantage of a potentially more favorable loan modification.

Or the fact that most who planned to refinance did so already, back in 2009.

The popular 30-year fixed averaged 5.02 percent up last week, up from 5.00 percent even, while the 15-year fixed increased just a single basis point to 4.34 percent.

The one-year adjustable-rate mortgage increased to 6.84 percent from 6.72 percent, making it a very undesirable choice for homeowners.

The MBA’s weekly survey covers more than half of all retail, residential home loan applications, but does not factor out duplicate or declined apps.

Any questions or concerns don’t hesitate to contact me, Gene Neal your Mortgage Expert.

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G to the ame Over

The FHA continued its crackdown of approved mortgage lenders today, withdrawing three from the program and suspending another.

FHA approval was withdrawn for:

- Strategic Mortgage Corporation (Strategic)
- ProMortgage Inc.
- Americare Investment Group Inc. (dba Premier Capital Lending and TopDot Mortgage)

Additionally, the FHA Mortgagee Review Board (MRB) suspended the FHA approval of Home Mortgage, Inc. (HMI) of Burr Ridge, Illinois.

Offenses ranged from charging borrowers excessive fees to making false certifications to keeping owners in place that were accused of bank fraud.

ProMortgage allowed borrowers to submit verification of employment directly to the lender, which is a huge no-no, as it pretty much allows you to manipulate and falsify documents.

Just another day in the mortgage industry, really…

“FHA takes its oversight role very seriously and will move swiftly and decisively to protect borrowers from unscrupulous lenders,” said FHA Commissioner David Stevens, in a statement.

“Any lender who refuses to comply with FHA requirements will simply no longer enjoy the privilege of participating in FHA programs.”

And by enjoy, he means exist, because most of these lenders rely on the origination of FHA loans to stay in business.

Two other lenders, Action Mortgage Corp. of Cranston, Rhode Island and Cooper and Shein, LLC (dba Great Oak Lending Partners) of Timonium, Maryland, were placed on probation for a period of six months for misleading advertising.

Look for continued enforcement as the FHA works to protect its dwindling insurance fund.

FHA Borrowers Eligible for Help Before Delinquency

Struggling homeowners with FHA mortgages are now eligible for loss mitigation assistance before falling behind on payments, according to the U.S. Department of Housing and Urban Development.

In the past, homeowners couldn’t receive assistance until they had missed payments, a rule that has since been updated thanks to the Helping Families Save Their Home Act of 2009.

Effective immediately, loss mitigation options such as forbearance and the FHA’s own Home Affordable Modification Program (FHA-HAMP) may be used to assist borrowers facing “imminent default.”

By imminent default, they mean FHA borrowers current or less than 30 days past due on their mortgage obligations who are “experiencing a significant reduction in income or some other hardship that will prevent” them from making their next mortgage payment.

The borrower must be able to document the cause of imminent default, whether it’s unemployment, loss of income, or a change in household financial circumstances, such as illness or disability.

Those able to prove such circumstances will be eligible for things like forbearance, where payments are postponed or suspended for a limited period of time, or a HAMP loan modification, where payments are slashed to more affordable levels via a partial claim.

“The partial claim defers the repayment of a portion of the mortgage principal through an interest-free subordinate mortgage that is not due until the first mortgage is paid off. The remaining balance is then modified through re-amortization and in some cases, an interest rate reduction,” HUD said.

The move is intended to help keep borrowers in their homes and protect the FHA insurance fund from unnecessary losses.

Any questions or concerns don’t hesitate to contact me, Gene Neal your Mortgage Expert.

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Monday, January 25, 2010

Housing Data Down

Stocks dipped briefly after the National Association of Realtors released data showing that existing-home sales plunged in December after three straight-increases that were aided by a fat government tax credit.

Home resales fell by 16.7% to a 5.45 million annual rate from an unrevised 6.54 million in November, a bigger drop than the 11.6% decrease in sales expected by economists surveyed by Dow Jones Newswires. See story on home sales.

However, prices rose year over year for the first time in more than two years the percentage of distressed home resales, including foreclosures, has declined to 32%, after nearing 50% in late 2008 and early 2009.

Investors breathed calmer on Monday as officials over the weekend reiterated support for the re-confirmation of Fed Chairman Ben Bernanke. In the previous session, the Dow closed down 4% for the week, as investors fretted over Bernanke's prospects, U.S. bank restrictions posed by President Barack Obama and the potential for monetary tightening from China.

Any questions or concerns don’t hesitate to contact me, Gene Neal your Mortgage Expert.

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Friday, January 22, 2010

Big Bank Slickery?

FDIC chief Sheila Bair, who spearheaded loan modification efforts early on at failed institutions such as Indymac, received a rather interesting mortgage from Bank of America last summer, according to a report from The Huffington Post Investigative Fund.

Her family reportedly purchased a $1.1 million home in the Maryland suburbs in July, borrowing $898,000 from Bank of America.

At the same time, they refinanced their former home in Amherst, Massachusetts as a second home (or vacation property).

Only problem is the “second home” is a duplex, and Bank of America doesn’t seem to permit financing on multi-unit second homes.

It would need to be declared as an investment property, which is subject to a higher interest rate and more financing restrictions that may have killed the deal entirely.

If you think the duplex issue is a simple oversight, consider the fact that she also rents out the “second home,” bringing in between $15,000 and $50,000 annually as a result, per her most recent financial disclosure.

The loan documents tied to the “second home” included a rider stating it was to be used for their “exclusive use and enjoyment” and could not be used as a rental property.

Also consider that this type of scenario is a common type of occupancy fraud, whereby borrowers claim a property is a second home instead of an investment property to qualify or obtain a lower rate.

Not only that, but she met with the Charlotte-based bank regarding bailout talks in the weeks between the closings of her two mortgages (Bank of America wound up with $45 billion, the second most of any bank).

To resolve that issue, the FDIC gave her a retroactive waiver, as the agency prohibits employees from participating in any matters involving a bank seeking a loan.

Oh, and Bair landed a 5.62 percent interest rate on the 30-year fixed tied to the “second home” in Amherst, and six percent even on the jumbo loan attached to the primary residence in Maryland.

It works from the top down folks…

Any questions or concerns don’t hesitate to contact me, Gene Neal your Mortgage Expert.

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Thursday, January 21, 2010

Rates are at 5%

Mortgage rates decreased for a third straight week, sliding below the all-important psychological five-percent threshold, according to mortgage financier Freddie Mac.

The widely popular 30-year fixed averaged 4.99 percent during the week ending January 21, down from 5.06 percent last week and 5.12 percent a year ago.

The 15-year fixed continued to move lower, averaging 4.40 percent this week, down from 4.45 percent last week and 4.80 percent last year.

Fixed mortgages rates continue to follow bond yields lower (how mortgage rates work).

“Similarly, ARM rates eased along with shorter-term rates, as the federal funds futures market indicates no increase in the Federal Reserve’s target rate following its upcoming committee meeting on January 26th and 27th,” said Frank Nothaft, Freddie Mac chief economist, in a statement.

The five-year adjustable-rate mortgage slipped to 4.27 percent from 4.32 percent, and sits nearly a point below the 5.24 percent seen last year.

Any questions or concerns don’t hesitate to contact me, Gene Neal your Mortgage Expert.

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The one-year ARM also improved, falling to 4.32 percent from 4.39 percent, 60 basis points lower than the 4.92 percent average of a year ago.

The mortgage rates above are good for conforming loan amounts at 80 percent loan-to-value with no pricing adjustments factored in.

Jumbo loans continue to price a percentage point or so higher than conforming loans.

Wednesday, January 20, 2010

Adjustable Rate Mortgage Share Lowest on Record in 2009

Last year, just three percent of purchase-money conventional loans were adjustable-rate mortgages, according to Freddie Mac’s 26th Annual Adjustable-Rate Mortgage (ARM) survey of prime loan offerings.

That’s the smallest annual share since the Federal Housing Finance Agency began keeping track in 1982, and nowhere close to the 62 percent share seen in 1984 when inflation and long-term interest rates were high.

Only 1 percent of FHA loans issued during its fiscal year ending September 30, 2009 were ARMs.

“Fixed-rate lending has dominated the home mortgage market over the past year because of the 50-year low in interest rates for this product and the comfort that a fixed principal-and-interest payment assures the consumer,” said Frank Nothaft, Freddie Mac chief economist.

“While ARM lending has been limited, those consumers who prefer an ARM generally have many lenders and products to choose from. The most offered product in the survey was the 5/1 ARM, where more than four out of five ARM lenders quoted rates. The 5/1 hybrid has a fixed rate for five years and then adjusts annually afterwards.”

The one-year ARM used to dominate the mortgage market, with all banks and mortgage lenders who originated ARMs offering it back in 1997.

In 2009, only 23 percent of ARM-lenders carried the product; a similar number of lenders offered a one-year jumbo loan product, down from 35 percent in 2008.

Any questions or concerns don’t hesitate to contact me, Gene Neal your Mortgage Expert.

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Tuesday, January 19, 2010

Modification Woes

Nathan Reynolds is something of an expert on the government’s foreclosure prevention program. A mortgage broker who’s worked in the Chicago area since 1998, he’s seen both his business and his home’s value plummet in the past few years. After receiving his own trial loan modification from JPMorgan Chase, he’s helped others apply for modifications through the program on his own time.

But in November, after Reynolds had made trial loan payments for seven months, Chase told him his mortgage would not be permanently modified. Chase had determined that his personal financial troubles were only temporary — because Reynolds had expressed optimism that the administration’s policies might rescue the housing market, boosting his income.

That’s not a legitimate reason for a loan servicer to deny someone’s modification, according to the Treasury Department’s guidelines for the program. And Reynolds’ experience — along with the cases of two other homeowners examined by ProPublica, shows how servicers have created unnecessary hurdles that, in some instances, violate the loan program’s rules.

Housing advocates say they frequently see homeowners rejected or kept in a trial modification for questionable reasons. “There’s a real resistance on the servicers’ part to making permanent modifications,” said Diane Thompson of the National Consumer Law Center.

The administration set a goal of helping up to 4 million homeowners through the $75 billion mortgage modification program as a way to blunt the boom in foreclosures. Treasury has produced a growing number of mandatory guidelines for banks and other loan servicers to review applications and perform the modifications. In exchange for tailoring loan payments to 31 percent of the homeowner’s monthly income, both the servicer and the owner of the loan receive incentive payments.

Servicers representing 85 percent of the housing market have signed up to participate. Applicants must first go through a trial period before their mortgage payments can be permanently reduced. But servicers have been slow to convert hundreds of thousands of trials into permanent modifications — as of November, only about 31,000 had been made permanent . That spurred Treasury to publicly criticize the servicers’ performance and to put out new guidelines in recent months to speed up the process.

Treasury said recently that the effort has resulted in a “significant increase” in offers of permanent modifications, but numbers demonstrating how significant won’t be available until February.

ProPublica has reported since last June on homeowners’ frustrations in receiving a prompt answer from servicers, particularly the program’s largest servicers — Bank of America, JPMorgan Chase, Wells Fargo and CitiMortgage. In response to widespread complaints, those servicers have dramatically increased staffing and touted other improvements, such as new document management systems.

But when homeowners do get an answer, the reasons don’t always jibe with how the program is supposed to work. Housing advocates say this is a direct result of a lack of effective oversight of servicers in the program, something [7] ProPublica has focused on before .

‘An Excuse to Deny Someone’

Reynolds was a prime candidate for a loan adjustment and was among the earliest homeowners to receive a trial modification.

His mortgage brokerage business had followed the market downward, and as a result, he’d fallen three months behind on his interest-only mortgage. Area real estate cratered. His own home, bought in 2001 for just over $400,000, had rocketed up to about $1.2 million in value in 2006, and then down again to about $350,000. With a refinancing in 2005 and a home equity line of credit with Countrywide, his mortgage debt exceeded his home’s value by more than 70 percent.

Soon after the loan program was announced last February, Reynolds applied. He received an application in late April and was accepted, making his first payment of about $2,400 (down from $3,300) in May. He made six more payments. Like many borrowers in the program, he says he was asked over and over to send the same documents and later, updated versions of those documents. Finally, in late November, he received an answer: He was denied a permanent loan modification.

The reason? A Chase employee explained to Reynolds that they’d determined his financial difficulties weren’t permanent. In his application, he’d written that he believed that the government’s rescue efforts would “save the U.S. housing market” and that his business “will once again be profitable.” The Chase employee told him that statement indicated his hardship was only temporary.

“That’s just nonsense,” said Thompson of the consumer center. “To me, that sounds like an excuse to deny someone.”

Chase spokeswoman Christine Holevas told ProPublica that Reynolds had been denied “because the skill and ability is still there to earn the income.” Since he’d “stated in his letter that business would be picking up,” it was “not considered a permanent hardship,” Holevas said.

Such a determination contradicts Treasury’s guidance to servicers for the program. A FAQ issued to servicers says the program does not “distinguish between short-term and long-term hardships for eligibility purposes.”

When ProPublica asked about this guideline, Holevas did not directly respond. She did offer another reason for denying Reynolds: Chase’s review of financial information showed his income had not decreased.

Reynolds, who has a wife and two small children, says no Chase employee had made such a claim to him and that the documents he provided show that his mortgage business dropped more than 50 percent in 2009. He submitted a new hardship statement in December, in which he tried to make clear that his troubles are real and lasting. Holevas said those documents would be reviewed.

Now, Reynolds says his finances are at the breaking point and bankruptcy appears unavoidable if Chase denies him again. “I did everything that was asked of me, but Chase has me backed into a corner that I cannot get out of.”

The Nine-Month Trial

Six months into a trial modification, Gary Fitz of California still doesn’t know whether or when his mortgage will be permanently modified, and he’s been told he’ll have to wait for a few more months.

Under the program’s design, the trial period was supposed to last three months, giving time for the servicers to collect and evaluate the homeowner’s financial information. At the end of the trial, if the homeowner fit the program’s criteria and had made all three modified payments, the servicer was supposed to promptly make the modification permanent.

Instead, trial modifications routinely last more than six months, homeowners and housing advocates say.

There are a number of adverse consequences of a trial period’s dragging on, said the consumer law center’s Thompson. Because a homeowner is not making a full payment, the balance of the mortgage grows during the trial period. The servicer reports the shortfall to credit reporting agencies, so the homeowner’s credit score can drop. And most important, says Thompson, the homeowner isn’t saving money in case the modification fails and the home is foreclosed. “Keeping someone in a trial modification really does not do them a favor,” she said.

Fitz’s case shows why some homeowners have remained in limbo so long.

He sought a loan modification in the spring of 2009 because his wife’s salary had been cut. Like millions of others, he applied soon after the administration announced the program last February. He was accepted for a trial modification and made his first payment in July.

Fitz was prepared for an uphill struggle. A Wells Fargo customer service representative told him early in the application process that he should make seven copies of his financial information — because Wells Fargo would likely lose it more than once. He says he’s sent the same paperwork in five times.

When the trial stage lasts so long, servicers commonly ask homeowners for updated financial information months into the trial period. Fitz, for example, submitted his paperwork for the first time last spring. But when Wells Fargo requested an updated package in December, it showed that he’d received a pay raise last June of about $80 per month.

Because of that, Wells Fargo started him over on a new trial period – even though his trial payments climbed just $27, from $1,733 to $1,760. His first payment on the new trial period is due Feb. 1, meaning that by the time he completes it, he will have been making trial payments for nine months.

Wells Fargo spokesman Kevin Waetke said the company does not comment on individual borrower’s cases. He did say, however, that “the federal guidelines require a final review of updated financial documents before moving any Home Affordable Modification from trial status to complete.”

That’s not true. A Treasury guidance to servicers issued in October, meant to streamline the review process, says there is “no requirement” to “refresh” the homeowner’s documentation as long as it was up-to-date when it was originally received.

Wells Fargo also appears to have begun Fitz’s second trial period contrary to Treasury guidelines. A Treasury guidance last April said that a servicer should not begin a new trial period if a homeowner has only a minor income change (defined as exceeding the “initial income information by 25 percent or less”). Guidelines issued laterare even more restrictive about starting a new trial period. The reason is clear: The purpose of the trial period for the homeowner is to demonstrate the ability to pay, and such a small change in income is unlikely to affect that.

Asked to respond, Waetke said that “given the complexity of the program, the volume of calls we receive and the number of modifications currently in process, there is the potential for a mistake to be made.” He added that Wells Fargo would continue to review the case.

Buying Time

Sometimes there seems to be no reason at all for a trial period to drag on.

Cynthia Mason of Texas, another homeowner with a Wells Fargo mortgage, also recently restarted her trial period after several months.

Last spring, she sought a loan modification because medical and other expenses had made it impossible for her to afford her mortgage payment on a fixed alimony income. She’d planned to supplement that income with a job, but has been unable to find anything. Like Fitz, she began the program in July.

In October, good news came with a phone call: She’d been accepted for a permanent modification. She waited for the final paperwork to arrive, but it never did. Instead, while speaking to a Wells Fargo employee about an unrelated issue six weeks later, she found out that she’d in fact been denied. When Mason inquired why, she says she was told some documentation was missing, but the employee could not tell her what it was. She also learned she owed late fees because she’d paid the modified payment, not the original, full payment, in November and December.

When she complained about the late fees (which were eventually canceled), she was passed to a different employee, who told her she was being put back into a trial period. She didn’t understand why. Another representative finally told her that she’d been denied because of a negative “Net Present Value” test. The test is the calculation at the center of the Treasury Department’s program: It determines whether the loan’s owner (sometimes the lender, sometimes a mortgage-backed security’s investors) is likely to make more money modifying the loan or not. A negative result means the servicer has no obligation under the program to modify the loan and is a common reason for denial.

But in Mason’s case, a Wells Fargo employee told her she’d nevertheless been put back into the trial period in order to “buy time.”

Wells Fargo spokesman Waetke declined to speak about Mason’s case but did say that the bank sometimes extends the trial period “to allow customers time to get the documents so we can complete the review.” Mason says she doesn’t know of any documents that might be missing, and she’s not optimistic about receiving a permanent modification. By extending the trial, Mason told ProPublica, Wells Fargo is “just prolonging the inevitable” – denial.

Straight from the source.

Any questions or concerns don’t hesitate to contact me, Gene Neal your Mortgage Expert.

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Monday, January 18, 2010

Homes Owned Less than 90 Days Soon to be Eligible for FHA Financing

Soon it will be easier to finance foreclosed properties with FHA loans.

HUD Secretary Shaun Donovan announced today that FHA financing will be permitted on homes owned by sellers for less than 90 days in a bid to stabilize home prices and accelerate the sale of vacant properties.

The agency currently prohibits insuring a mortgage on a home owned by the seller for less than 90 days, making it difficult for those who acquire foreclosed properties to resell them, as FHA loans are the most widely used nowadays.

“As a result of the tightened credit market, FHA-insured mortgage financing is often the only means of financing available to potential homebuyers,” said Donovan, in the release.

“FHA has an unprecedented opportunity to fulfill its mission by helping many homebuyers find affordable housing while contributing to neighborhood stabilization.”

The move came after FHA research revealed that “acquiring, rehabilitating and the reselling these properties to prospective homeowners often takes less than 90 days.”

Consequently, prohibiting the use of FHA loans for subsequent sales would adversely affect the seller’s ability to move the property, leading to higher holding costs, a drag on home prices in the surrounding area, and an increased risk of vandalism.

At the same time, HUD noted that it understands the risk of predatory practices related to the rule change, which is why the waiver is limited to sales meeting a number of conditions.

The transactions must be arms-length, with no identity of interest between buyer and seller, forward mortgages (no reverse mortgages), and in cases where the sales price of the property is 20 percent more than the seller’s acquisition cost, more conditions must be met.

“FHA borrowers, because of the restrictions we are now lifting, have often been shut out from buying affordable properties,” said FHA Commissioner David H. Stevens. “This action will enable our borrowers, especially first-time buyers, to take advantage of this opportunity.”

The rule change is being implemented on February 1, and will be effective for one year, unless extended or withdrawn earlier.

Any questions or concerns don’t hesitate to contact me, Gene Neal your Mortgage Expert.

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Atlantic Home Capital, Corp.

Thursday, January 14, 2010

Refinancing Boosts Mortgage Applications

Refinancing pushed mortgage applications higher during the week ending January 8, according to the latest weekly survey from the Mortgage Bankers Association.

The home loan application index increased 14.3 percent on a seasonally adjusted basis from one week earlier, and 66 percent on an unadjusted basis, as the previous week included the New Year’s holiday.

The refinance index jumped 21.8 percent on a seasonally adjusted basis from one week earlier, while purchases increased a meager 0.8 percent.

As a result, the refinance share of mortgage activity increased to 71.5 percent of total apps from 68.2 percent a week earlier.

Meanwhile, interest rates saw a bit of improvement after a month-long run up.

The 30-year fixed dipped to 5.13 percent from 5.18 percent, while the 15-year fixed decreased to 4.45 percent from 4.62 percent.

Conversely, the one-year adjustable-rate mortgage skyrocketed to 6.83 percent from 6.42 percent.

The MBA’s weekly survey covers more than half of all retail residential mortgage applications, but does not factor out multiple or declined apps, which have surely risen in the past year or two.

Any questions or concerns don’t hesitate to contact me, Gene Neal your Mortgage Expert.

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Atlantic Home Capital, Corp.

Tuesday, January 12, 2010

Over $47 Billion in Prime and Alt-A Interest-Only Loans to Recast Over Next Year

More than $47 billion in prime and Alt-A mortgages where borrowers are currently making interest-only payments are set to recast to fully-amortizing payments over the next year, according to Fitch Ratings.

“This recast exposes borrowers to an average payment increase of 15% and possibly higher if interest rates increase,” the company said in a release. “Over the next two years, a total of $80 billion of prime and Alt-A loans, and a total of $50 billion Subprime loans are due to recast.”

The news is worrisome considering the fact that 60-day delinquency rates have risen more than 250% in the 12 months following previous recasts for prime and Alt-A loans.

“While only 3.3% of prime loans are 60 or more days delinquent prior to recast, delinquencies the year after recast increased to 9.3%. Similar effects have been seen in Alt-A and subprime, with delinquencies increasing from 12% to 29% for Alt-A, and from 20% to 58% for subprime.”

Then there’s the negative equity issue, which further exacerbates the situation; essentially many that could avoid a recast by refinancing into low rate mortgages are out of luck.

Fitch said the current loan-to-value (LTV) ratios for prime and Alt-A loans are 118 percent, with 64 percent of borrowers underwater.

Additionally, the vast majority of interest-only loans set to recast are adjustable-rate mortgages, adding to the severity of payment shock.

“Of those IO loans recasting in the next two years, 99% of prime, 94% of Alt-A, and 90% of subprime are ARM loans.”

Oh, and most of these borrowers qualified for the loans based on their ability to make the initial interest-only payments rather than the fully amortized principal and interest payments, often while simply stating income.

When your life changes, your mortgage should, too.

For Information regarding your situation

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