7/11/08 Mortgage News

Freddie, Fannie and You

How does the "meltdown" of Freddie Mac and Fannie Mae, home loan purchasers and bond sellers, affect you? Probably not in a large way but it could in many small ways.

Freddie and Fannie faced a stock market swoon on Friday that left many folks worried they could collapse or cause the government to come to the rescue. Henry Paulson, Treasury secretary, discounted the government as savior possibility, but a complete collapse might have the government thinking again.

Now back to you. Mortgage rates could rise a quarter of a point in the next week or so as well as for loans in the larger market. Education loans are a big question mark as many tuition checks are just about ready to go out.

If you are thinking about getting a mortgage loan, now is the time to lock a rate in. However, a quarter point rise should not be a deal breaker for buying a home. If you are at the financing point where that could make a huge difference, then you should rethink your plans.

In an election year, (isn't that pretty much every year any more), large financial sectors tend to stay pretty consistent as the feds will do everything in their power to tamp down large swings. So is this a media frenzy or a harbinger of things to come?

6/21/08 Mortgage News

No money? No problem -- good credit's all you need
BY TARA-NICHOLLE NELSON

First, get clear on your numbers -- your financials. What is your credit score? How much cash do you have in the bank? What is the worth of your liquid assets (money market accounts, CDs, etc.) and other assets (stocks, bonds, etc.)? What is your gross income (before taxes) and your net income (after taxes) on an annual and monthly basis? What are your current monthly minimum obligations (add up all the minimum payments on your credit cards, car payments, student loans, etc.)?
With this information, find a solution-oriented and creative real estate and/or mortgage broker with a coaching style. Ask your friends and family -- especially anyone who you know had a tough time buying his or her home, but was successful -- for a referral. During your consultation, ask them about their familiarity with government loans and/or first-time home buyer programs. When the subprime mortgage offerings virtually disappeared last year, many governmental and nonprofit programs amped up their offerings to continue to make home ownership possible to those who aren't flush with tons of cash. Some of these programs still enable 100 percent financing -- for example, many first-time home buyers are now using 97 percent FHA (Federal Housing Administration) mortgages in conjunction with 3 percent down-payment-assistance programs like Nehemiah and AmeriDream to buy a home with no money out of their pocket.
Inman News, JUNE 19, 2008

6/10/08 Mortgage News

F.H.A. Faces $4.6 Billion in Losses
By Rachel L. Swarns, New York Times

The Federal Housing Administration expects to lose $4.6 billion because of unexpectedly high default rates on home loans, officials said Monday.
Brian D. Montgomery, the F.H.A. commissioner, attributed the unanticipated losses primarily to the agency’s seller-financed down payment mortgage program, which has suffered from high delinquency and foreclosure rates in recent years.
Housing officials said the agency was also hurt by poor performance in its traditional mortgage portfolio. Deteriorating economic conditions led some of its core clients — first-time buyers, minorities and lower-income owners — to default, they said.
The projected loss is the highest in the home loan program since 2004, and officials said the F.H.A. had to withdraw $4.6 billion from its $21 billion capital reserve fund in May to cover the costs. They said the agency, which is self-sustaining, would not need appropriations from Congress to remain solvent. Published: June 10, 2008

6/3/08 Mortgage News

New Study Finds What Leads to Higher Closing Costs

Many American consumers overpay by thousands of dollars in total closing costs when they purchase their homes, according to a new nationwide report from the Urban Institute. The study found that there are significant and unsupported variations in loan charges, title fees and other closing costs charged to homebuyers, and that minority borrowers pay hundreds of dollars more in total loan origination fees than do non-minority home buyers.
In A Study of Closing Costs for FHA Mortgages, noted economist Dr. Susan Woodward analyzed more than 7,500 mortgages originated in May and June of 2001, a period of relative interest rate stability. The Urban Institute’s study found significant disparities in closing costs even when it compared borrowers with identical credit scores, loan terms and mortgage amounts. In addition, variations appeared to be based on education level, geography, race and ethnicity. Even after accounting for these factors, there remain very substantial variations in what consumers pay at settlement. RISMEDIA, June 2, 2008

5/27/08 Mortgage News

National Association of Realtors and the DOJ Settle Lawsuit

The Department of Justice's Antitrust Division and the National Association of Realtors have settled a 3-year-old civil suit that bolsters the position of online real estate firms such as Redfin, Trulia and Zillow.

As part of the settlement, NAR will not be able to exclude online brokerage firms from joining Multiple Listing Services. Nor will it be able to withhold listings from those brokerage firms that do business over the Internet. John Cook, Seattlepi.com

5/15/08 Mortgage News

House OKs housing rescue despite veto threat
Would allow refinancing for $300 billion of mortgages for homeowners

The House on Thursday passed a massive homeowner rescue plan to provide cheaper, government-backed mortgages to half a million debt-ridden borrowers and bolster an economy crippled by the housing crisis.
Defying veto threats from President Bush, the House approved the measure by a vote of 266-154, with 39 Republicans — mostly from areas suffering worst from housing woes — supporting it.
It would let the Federal Housing Administration take on up to $300 billion in new mortgages so that financially strapped borrowers facing foreclosure could refinance. AP News

5/2/08 Mortgage News

Mortgage rates rise to highest level in 7 weeks
Rates on 30-year mortgages remained above 6 percent, edging up to the highest level in seven weeks and reflecting continued financial market concerns about inflation.

Mortgage giant Freddie Mac reported Thursday that 30-year fixed-rate mortgages averaged 6.06 percent this week, up slightly from 6.03 percent last week. It marked the second week that 30-year rates have been above 6 percent and was the highest level since these mortgages averaged 6.13 percent the week of March 16.

Analysts noted the Federal Reserve, which cut a key interest rate on Wednesday, expressed concerns that the uncertainty over whether inflation will moderate remains at a high level.

A year ago, rates on 30-year mortgages stood at 6.16 percent, 15-year mortgage rates averaged 5.87 percent, five-year adjustable-rate mortgages were 5.87 percent and one-year adjustable-rate mortgages were at 5.42 percent.
Associated Press

5/1/08 Mortgage News

House Panel Approves Bill to Assist Borrowers
By DAVID M. HERSZENHORN

The House Financial Services Committee pushed forward on Thursday with an aggressive effort to help troubled homeowners, approving legislation that would make up to $300 billion in federally insured loans available to refinance the mortgages of borrowers in danger of foreclosure.

The Democrats’ legislation seeks to help homeowners by requiring lenders to reduce the principal balances for borrowers at risk of default. The bad loans, typically with high adjustable rates, would be refinanced into more affordable 30-year fixed-rate loans insured by the F.H.A.

The new loans would be limited to no more than 90 percent of a property’s value, based on an updated appraisal. The government would retain a stake in any future sale of the property, worth 3 percent of the initial loan balance or 50 percent of net profit from a sale, whichever is greater.

Borrowers would have to demonstrate the ability to repay the new loan, and if they default, they will forfeit the property. Democrats say the plan could help as many as 1.5 million homeowners.
New York Times 5/2/08

4/23/08 Mortgage News

The trillion-dollar mortgage time bomb
By Chris Isidore

Risks are rising that Fannie Mae and Freddie Mac may need a government bailout that could cost far more than previous rescues.

Among the nightmares lurking around the corner for the already battered housing and credit markets would be a meltdown at mortgage financing giants Fannie Mae and Freddie Mac.

Although few are predicting an imminent need for a bailout just yet, credit rating agency Standard & Poor's recently placed an estimated price tag on this worst case scenario -- $420 billion to $1.1 trillion of taxpayer's money.
CNNMoney.com April 22, 2008

No help for 70% of subprime borrowers
State regulators say efforts to help at-risk borrowers are barely keeping pace with rising delinquencies. Many borrowers are left out. By Les Christie

Seven out of 10 seriously delinquent subprime mortgage borrowers are still not getting the help they need to keep their homes, according to a report released Tuesday by state officials working to stem the foreclosure crisis.

The report showed that 28.5% of subprime adjustable rate mortgages that won't reset until spring 2009 are already delinquent. About 21% of these same loans were delinquent in October.
CNNMoney.com, April 22, 2008

4/11/08 Mortgage News

Senate passes watered down Foreclosure Prevention Act
By Matt Carter, 4/3/08, Inman News

The Senate passed legislation Thursday that would provide billions in tax cuts for home builders, banks and other businesses hit by losses in the housing downturn and a smaller amount of assistance for state and local governments and individual homeowners.

Although the 84-12 vote to approve the Senate bill appears to lessen the threat of a veto by the Bush administration, the House of Representatives is considering competing legislation that would provide more help for individuals but no tax breaks for businesses.

The bill would allow homeowners to claim a standard property tax deduction of $500 for single filers and $1,000 for joint filers. The tax code currently allows only those who itemize deductions to deduct state and local property taxes from their income.

The bill would also create a $7,000 tax credit to be claimed over two years for home buyers to purchase a property in foreclosure.

The bill would also provide billions in "carry-back" provisions that allow home builders and other companies to apply losses from 2008 and 2009 to taxes they've paid in the last four years.

4/10/08 Mortgage News

Chances of Homeowner Relief Losing Momentum in Senate
By DAVID M. HERSZENHORN

WASHINGTON — A bipartisan effort in the Senate on tax breaks to stabilize the housing market and other aid for homeowners at risk of foreclosure began to crumble on Tuesday, as the White House threatened a veto, saying the bill would only make things worse.

But even as the White House reiterated its opposition to government help for irresponsible lenders and speculators, there were signals that it was prepared to endorse broader aid for struggling homeowners — provided that it did not involve new legislation sought by Democrats.

Looming Deficit Impedes Federal Housing Agency
By RACHEL L. SWARNS

WASHINGTON — The Bush administration and Democratic leaders in Congress are counting on the Federal Housing Administration to rescue hundreds of thousands of homeowners from foreclosure by helping them refinance from risky subprime loans to stable government-backed mortgages.

But the F.H.A., the government agency that insures home loans for many first-time, minority and lower-income buyers, is grappling with financial woes of its own.

Housing officials say the agency will face a deficit for the first time in its 74-year history, starting in the fiscal year that begins in October. And they blame a rapidly growing and increasingly troubled sector of the F.H.A.’s mortgage portfolio, known as the seller-financed down payment loan program, which has suffered from high delinquency and foreclosure rates in recent years.

Under the program, a home seller arranges to cover the buyer’s down payment — using financial help from a nonprofit company — but typically adds that sum or more to the total cost of the house. The arrangement has been particularly attractive to financially struggling buyers and to owners in depressed housing markets, according to Congressional officials.

In 2000, such mortgages made up less than 2 percent of F.H.A.-insured loans, officials say. By 2007, statistics show, they accounted for 35 percent of F.H.A. loans.

Housing officials say these mortgages have foreclosure rates two to three times those of others, leaving the agency reeling from the losses.

If the program continues without any changes, Congressional officials say, the F.H.A. would face a $1.4 billion shortfall in fiscal 2009. This would mean that Congress — and American taxpayers — would have to subsidize the F.H.A. for the first time.

3/28/08 Mortgage News

Government Bailouts?

A new Rasmussen Reports Opinion study shows that more Americans support helping stretched homeowners than the banks who wrote and carried the loan. Between March 19 and March 20, they surveyed 1,000 adults to see how many Americans think homeowners and banks should be helped out by the federal government. Here's what they found:

The majority said that the federal government should not help out homeowners who borrowed more than they could afford. Twenty-nine percent disagreed, saying the government should offer assistance, and 17 percent didn't know how to respond to the question.

But what about the lenders? Sixty-one percent those who answered the question thought banks should not be helped out by the federal government. Fifteen percent of people felt government action was appropriate and 23 percent were undecided.

3/21/08 Mortgage News

Solving the Mortgage Puzzle
By Robert Freedman

Lenders are no longer tripping over one another to hand 100 percent loan-to-value loans to borrowers as they did during the housing boom. ... Although it’s possible to put together a first and a second loan to cover 100 percent of the purchase, lenders’ guidelines are in a state of flux. So a 100 percent deal that would work one week might not be accepted the next week, says Michael D’Alonzo, president of Creative Mortgage Group in Willow Grove, Pa... “If your credit score is below 680 today, you won’t be able to get more than 90 percent financing,” says Kundinger. And to get even that high an LTV, “you pay the price for it” in increased points, he says. Realtor® Magazine

3/20/08 Mortgage News

A Break for Freddie and Fannie
By STEPHEN LABATON

Officials hope that by unshackling Fannie and Freddie they can begin to reduce the cost of borrowing for prospective home buyers or refinancing for people who already own homes, help unlock the credit markets and possibly reduce some of the downward pressure on home prices.

But critics said that if the housing market continued to decline, the move could put the two companies on a less sure footing and ultimately require a huge taxpayer bailout.
New York Times Published: March 20, 2008

3/19/08 Mortgage News

Can’t Grasp Credit Crisis? Join the Club
By DAVID LEONHARDT

... the overwhelming majority of homeowners are doing just fine. So how is it that a mess concentrated in one part of the mortgage business — subprime loans — has frozen the credit markets, sent stock markets gyrating, caused the collapse of Bear Stearns, left the economy on the brink of the worst recession in a generation and forced the Federal Reserve to take its boldest action since the Depression? New York Times Published: March 19, 2008

3/8/08 Mortgage News

Mortgage Rates Change In the Blink of an Eye
By Dina ElBoghdady

In the words of more than one mortgage broker, fluctuating interest rates on traditional fixed-rate home loans have been "crazy" this week...

The average rate on a 30-year, fixed-rate mortgage to people with sound credit was 6.875 percent on Thursday, up from 6 percent on Feb. 29, according to Palm Beach Financial Network of Stuart, Fla., which tracks rates nationally. Rates edged down to 6.5 percent yesterday...

"We're accustomed to seeing daily movements, but in my 17 years in the business, I've never seen anything this crazy," said Mark Fegani, president of OlympiaWest Mortgage Group in Vienna. "We can't assure our customers that the same rate we quote them at any given time will be available if they took one hour to think about it." Normally, rates may shift by a few hundredths of a percentage point during a day.
Saturday, March 8, 2008; Page D01

3/7/08 Mortgage News

As Foreclosures Rise, Investors Pull Back
By VIKAS BAJAJ

While more than a quarter of loans made to people with blemished, or subprime, credit were past due or in foreclosure, the number of prime adjustable-rate loans in trouble also rose rapidly, to 8.1 percent from 4.3 percent in 2006. By contrast, only 3.1 percent of prime fixed-rate loans were past due or in foreclosure, up from 2.7 percent a year earlier.

The Mortgage Bankers figures are based on a survey of 46 million first mortgages, about 85 percent of all home loans. Among the loans surveyed, about 3.6 million were past due or in foreclosure. New York Times (3/7/08)

Loan Limits Raised

WASHINGTON (AP) — The government on Thursday raised the limits for loans that can be purchased by the mortgage companies Fannie Mae and Freddie Mac in more than 220 cities and counties.

As result of the economic stimulus package signed by President Bush last month, the limits have been temporarily raised to a new maximum of $729,750 for the continental United States. (3/7/08)

3/1/08 Mortgage News

A ‘Moral Hazard’ for a Housing Bailout: Sorting the Victims From Those Who Volunteered (reg.req)
by EDMUND L. ANDREWS

Over the last two decades, few industries have lobbied more ferociously or effectively than banks to get the government out of its business and to obtain freer rein for “financial innovation.”

But as losses from bad mortgages and mortgage-backed securities climb past $200 billion, talk among banking executives for an epic government rescue plan is suddenly coming into fashion.
New York Times 2/08

Mortgage Insurance Reserves: A Lesson in Managing Risk
By Jack Guttentag, The Mortgage Professor

An enormous amount of ink has been spilled on the mortgage market crisis, and I have contributed my share. Yet I am now convinced that the most important factor underlying the crisis has been overlooked, even though it has been in plain view all along.

It is the way in which the mortgage industry manages default risk.
The Washington Post 3/1/08

In Parts of U.S., Foreclosures Top Sales (reg.req)
By FLOYD NORRIS

Mortgage foreclosure notices are going out so fast that in some states the number of new foreclosure proceedings each month is greater than the number of homes sold that month...

...The states with the lowest rates of foreclosures tend to be states that missed the boom in housing prices and now have reasonably good economies. In South Dakota, there were only 50 homes involved in foreclosures last year, a minuscule 0.007 percent of homes in the state. Vermont, Maine, West Virginia and North Dakota also turned in rates below 0.1 percent.
New York Times March 1, 2008

Mortgage News 2/22/08

Lenders Fighting Mortgage Rewrite, Measure Targets Bankrupt Homeowners

The nation's largest lending institutions are lobbying hard to block a proposal in Congress that would give bankruptcy judges greater latitude to rewrite mortgages held by financially strapped homeowners.

The legislation would allow bankruptcy judges for the first time to alter the terms of mortgages for primary residences. Under the proposal, borrowers could declare bankruptcy, and a judge would be able to reduce the amount they owe as part of resolving their debts.

Rescues for Homeowners in Debt Weighed

Not since the Depression has a larger share of Americans owed more on their homes than they are worth. With the collapse of the housing boom, nearly 8.8 million homeowners, or 10.3 percent of the total, are underwater. That is more than double the percentage just a year ago, according to a new estimate of the damage by Moody’s Economy.com.

No Lull in Mortgage Pitches

Despite rising foreclosures, defaults, lawsuits and investigations by state and federal regulators, the mortgage industry has not reduced its ad spending.

Mortgage experts say spending will be strong into the spring, a prime buying time for the housing market. But consumer advocates say the ads continue to be misleading.