Home Loan Wholesale

The National Association of Mortgage Brokers took the RESPA fight to a new level.  It’s bad enough that the banks and lenders have gotten away with slandering brokers for predatory lending.  HUD should be comparing home loans to home loans…The fact that HUD thinks it’s ok for mortgage lenders and banks no to disclose the yield spread premium paid by the investors, yet mortgage brokers should have be required to disclose the YSP, is nothing short of astonishing! 

NAMB’s argument is that HUD has overlooked the rights of mortgage brokers and bankers in helping the consumer at the closing table. The lawsuit against HUD states that the Final Rule is “arbitrary and capricious,” contrary to the intent of Congress, and fails to offer any rational reasons for its rejection of alternative approaches. NAMB says the Final Rule discriminates against mortgage brokers with the required broker-only disclosure of yield spread premium (YSP), placing them at a permanent disadvantage in the marketplace.  Read the complete article > NAMB Sues HUD Over RESPA

A frequent question we get from homeowners is “When is the best time to take out a second mortgage?” Obviously we respond to that question by asking more questions like, What do you need the money for?  Cash out?  Debt Consolidation?  Home improvements?  What would your home be appraised at?  What is the outstanding mortgage amount on your existing home loan?  How is your credit?  How long do you plan to live in your home?  Depending on how the loan applicant answers those questions will dictate how we advise them. 

For example, If you have bad credit and no equity, the likelihood of qualifying for a home equity loan or equity line of credit is very minimal.  Typically to get approved for a bad credit second mortgage, the borrower will need to have 25% -30% home equity available to satify the lender’s underwriter.   Read the complete article > When is the Time Right for a Second Mortgage?

The Federal Reserve made more bold moves today when he announced key interest rates that reach historic levels.  Home loan lenders reported interest rates as low as 5% for mortgage refinancing and home financing. Many mortgage brokers believe the rumors are true that the government will induce lenders to offer mortgage rates in the 4.5% range.”

Demand for government bonds surged and the yield on the benchmark ten-year Treasury note, which moves opposite its price, dropped to 2.27 % from 2.53 % late Monday. The yield on the thirty year dropped to 2.78% from 2.99% late Monday.  The yield on the three-month Treasury-bill whose yield has at times gone below zero due to crazy buying — was at 0.02, flat with late Monday.  The dollar was mostly lower against other major currencies, particularly the euro. Gold prices rose.  Read the full article > Fed Makes History by Cutting Interest Rates to the Lowest Level

Reverse mortgages have long been a way for seniors to turn the equity in their homes into extra cash in their pockets. Now, a higher lending limit is making it possible for some seniors to get more money out of a reverse mortgage than before.  The new $417,000 lending limit for reverse mortgages insured by the Federal Housing Administration was rolled out nationwide (except for parts of Hawaii, which have higher home loan limits) on Nov. 6. To qualify for the lending limit, a home has to be appraised at $417,000 or higher. The actual amount of the reverse mortgage would be a percentage of the $417,000 lending limit or appraised value of the home, whichever is lower.

The higher limit made it possible for Oakland resident Michael Goldsmith to receive a reverse mortgage that was $50,000 larger than he would have under the old loan limit of $362,790 that applied in the Bay Area and other high-cost regions.  “It made a difference of about $50,000 … It’s pretty significant,” said Goldsmith, the 74-year-old owner of a transportation management business.  Goldsmith and his wife, Dorothy, took out a reverse mortgage with Bank of America so they would have funds available to remodel their Oakland condo.  The Goldsmiths were able to qualify for a reverse mortgage loan of about $275,000 on their $450,000 condo. After using most of the proceeds to pay off an existing $180,000 home equity line of credit, they were left with a $95,000 line of credit to draw from when they choose to use the money. “We’ll still have some money left over in case we need it sometime in the future,” Michael Goldsmith said. “I don’t have to use it all but it’s sitting there anytime I want it.”

Seniors who are 62 years or older and have a good portion of equity in their home or have paid off their mortgage can apply for a reverse mortgage, which amounts to a home loan made by a mortgage lender to the homeowner that has to be paid back eventually along with interest payments and other fees that are tacked on.   The homeowner retains title to the house while the loan is active. Interest rates on federally-insured reverse mortgages are adjustable and linked to an index based on one-year yields derived from a basket of various Treasuries. And while the adjustable-rate interest has a built-in cap, the product does not provide the certainty of a fixed-rate loan. The actual cost of repaying the loan will vary depending on whether the proceeds are taken out as monthly payments, a lump sum, or a line of credit. Also, the homeowner has to keep on paying homeowner’s insurance and property taxes.

Since the higher loan limit was announced in October, Bank of America has seen a 40 percent increase in reverse mortgage loan applications compared to October 2007, said Steve Boland, a Bank of America reverse mortgage executive based in Thousand Oaks.   “We really see this as an instant ability to help people who need the additional access to equity,” Boland said. “A number of people see their retirement assets declining and they are finding they are less prepared to meet their cost of living in retirement. A reverse mortgage can really play a big role in supplementing that.”  Even Seniors with homes appraised below the $417,000 mortgage limit can benefit from the reduced loan origination fees, he said. For example, a borrower with a $335,000 home would get $1,350 more in net proceeds due to being charged $1,350 less for the loan origination fee.

While a reverse mortgage loan may offer tax-free income for some seniors, it is not always the best solution. Reverse mortgage loans can be complicated and may not meet the needs of all seniors seeking cash out from their home equity.  There are substantial costs for home financing and mortgage insurance that can run into thousands of dollars that have to be paid on top of principal and interest. Also, the interest that’s due on the loan can erode the equity in a home. Taking out the loan while in your sixties can result in getting a reduced mortgage amount and owing more on the loan when it is repaid than if you waited until you’re in your seventies. Heirs who inherit the home can end up with a substantial home loan to pay off if they want to keep the property.  More than 90% of reverse mortgages are FHA-insured products known as Home Equity Conversion Mortgages (HECM) loans. That number is bound to get higher given that the market for so-called jumbo reverse mortgages, which are above the FHA loan limit of $417,000 and not insured, had dried up in response to the ongoing credit crunch.

The higher loan limit for federally insured reverse home loans was made possible by the passage in July of the Housing and Economic Recovery Act, which among other things included provisions to help struggling homeowners of all ages avoid foreclosure. The legislation also lowered lender origination fees for reverse mortgages while setting a $6,000 cap on origination fees.  The higher lending limit comes at a time when some seniors are using reverse mortgage loans to help avoid foreclosure in addition to the more traditional reasons such as tapping a home’s equity, said Ray Fry, an East Bay certified senior advisor and a specialist in reverse mortgages who goes by the name “Mr. Reverse.”

Some seniors who been caught up in negative amortization mortgage loans — which is when a loan’s outstanding balance gets bigger while monthly payments stay the same — are turning to reverse mortgages to pay off the balance, he said. (A reverse mortgage requires that it be the only home loan on a property so existing mortgages are automatically paid off from the proceeds).  “The key thing right now is that the (falling) value of the home is preventing people from refinancing existing mortgage loans,” said Fry, adding that some seniors then turn to reverse mortgages.

There are many factors that go into figuring out whether a reverse mortgage loan is the right move. How long a homeowner intends to stay in the home is a key factor as is the age of the borrower.  “You are really talking about individuals who want to age in place; they want to remain in their home. If someone was thinking of moving in a few years, a reverse mortgage is not the right product,” Boland said.  The borrower’s age, current interest rates and equity held in the home are used to determine the size of the loan.  “Age is the real determining factor. The older person qualifies for more than the younger person and the interest rate is the second factor. A lower rate means you qualify for more money,” Fry said.  “It is true you get more money when you are older and you have less of a period of time your loan is going up in value, that is in accrued interest,” said Judy Schwartz, a principal at San Carlos-based Reverse Mortgages Only.  Still, Fry and Schwartz point out that age should not be the only consideration.  “It’s really borrower specific,” she said. “You really have to look at the amount of money you are trying to get access to in exchange for the (reverse mortgage) costs.”

A consumer might also want to consider a reverse mortgage now instead of later since home values are falling and the proceeds available from a reverse mortgage would be lower, she said.   Another reason to consider taking out a reverse mortgage now is that mortgage rates are very low — starting in the 3% range when mortgage insurance is included — at a time when the stock market is falling, she said.  “It may make sense to tap the equity in your home rather than deplete an already decimated portfolio,” Schwartz said.  -Article written by Eve Mitchell

One in ten American homeowners fell delinquent on their mortgage loan payments or were in foreclosure during the 3rd quarter as the world’s largest economy shed jobs and real estate prices tumbled.  The share of home loans thirty days or more overdue rose to a seasonally adjusted 6.99 % while mortgage loans already in foreclosure rose to 2.97 %, both all-time highs in a survey that goes back 29 years, the Mortgage Bankers Association said in a report today. The increase in mortgage delinquencies was driven by an increase of home loans with payments 90 days or more overdue.   “Until we see a turnaround in the job situation, we’re not going to see these numbers improve,” said Jay Brinkmann, chief economist of the Washington-based bankers group, in an interview. “We’re seeing more home loans build up in the 90-days bucket as lenders move to offer loan modifications and states put in place programs that delay foreclosures.”   

The U.S. economy has lost 1.91 million jobs this year, while falling house prices have made it difficult for homeowners who are unable to pay their mortgage loans or sell their property without incurring a loss in a short sale. Payrolls declined in each month of 2008 through November, the Labor Department said today in Washington.  New home foreclosures dropped to 1.07 % from 1.08 % in the 2^nd quarter as some states enacted laws to temporarily stop home repossessions and mortgage lenders increased efforts to modify the terms of loans, Brinkmann said.

First American CREDCO has replaced eCREDCO.com, the company’s dedicated e-commerce site, with an all new integrated online ordering and marketing website. The new site features expanded functionality that allows mortgage lenders and loan officers to order and track products more efficiently and the company to develop and deliver new products faster. The newly upgraded platform-http://www.CREDCO.com features a totally improved customer purchasing experience, supported by Direct-Connect customer support, simplified account administration and real-time product tracking. The new CREDCO.com features include streamlined ordering, direct-connect with customer support, access to multiple accounts with one sign-in, electronic document uploading, access to detailed pricing and transactions, search functions, free credit report reprints, real-time product tracking, simplified account administration and a credit card payment option.

In a recent Bryan Dornan published article, the state of mortgage industry was defined with great rhetoric.  Dornan continued, “FHA home loans were reborn in 2007 as HUD introduced revised guidelines with new cash out requirements that allowed borrowers to get cash out for refinance loans up to 95%.”  In an effort to curb foreclosures, HUD introduced the FHA Secure refinance that enabled borrowers who were paralyzed with a high rate adjustable mortgage to lock into a fixed rate loan that they could afford.  The homeowners that had enough equity began utilizing FHA home loans for debt consolidation and home improvement funding.  In 2008, Congress finally passed an economic bill that mandated FHA mortgage loan amounts to increase nationally.  

The main stream media has grabbed hold of the foreclosure crisis and the mortgage meltdown.  Unfortunately many media sources have only been reporting the shams of the loan modification brokers and not informing the public of the mortgage relief companies that have made a difference.  

Read the complete published article Loan modifications, FHA Refinancing and No Hope for Homeowners.

US authorities launched fresh efforts Tuesday to unfreeze credit and limit the economic downturn with programs to buy up to 800 billion dollars in mortgage loans and asset-backed securities.  The initiatives call for up to 600 billion dollars in Federal Reserve purchases of home loan securities, and a separate 200 billion dollars for asset-backed securities to assist consumers with more credit lines.  The Federal Reserve and Bush administration continue efforts to stimulate the economy with cash injections intended to jump-start American credit markets that have nearly been frozen shut since October.   The government has not made their intentions to increase liquidity while decreasing the home loans costs for borrowers looking to refinance or purchase a home.  Last month, HUD introduced FHA home loans for distressed homeowners who were 90 days or more delinquent on their mortgage, but after thousands of borrowers completing the applications for this Hope for Homeowners program, only a few actually were approved by FHA mortgage lenders. 

With the housing sales plummeting and the foreclosure crisis worsening, the government wants mortgage lenders to provide loan modification to prevent foreclosures.  According to mortgage marketing executive, Bryan Dornan, “Clearly, the sub-prime mortgage meltdown ignited sparks through the financial markets and has spread like wild fires burning our economy and many American’s home equity in the process.”  Dornan continued, “The lure of low mortgage rates has faded because the traditional refinance has completely disappeared because lenders continue to tighten credit guidelines beyond Main St. America.”

Economist Marie-Pierre Ripert noted in a recent article, “Both these measures are clearly a significant step in the action implemented by the Fed in trying to avoid a deeper recession and to prevent the economy to fall in a deflationary spiral.”  The US central bank said it planned to buy up to 100 billion dollars of bad mortgages and debt obligations of housing-related government-sponsored entities like Freddie Mac and Fannie Mae in the next week and purchase 500 billion more in a home loan modifications scheduled to roll out by the end of this year.  The 500 billion dollars in mortgage securities is said to be bought by asset managers selected in a competitive mortgage servicing process “with a goal of beginning these purchases before year-end,” the Federal Reserve said.  These purchases “are expected to take place over several quarters.”  Many real estate analysts believe that we have not seen the bottom of the housing market and this foreclosure crisis and lending drama may just be the beginning of a much more severe decline with no real solutions achieving any measurable success rectifying the lack of credit. 

The government’s program to refinance delinquent mortgages into affordable government-insured loans has been enhanced. Among the improvements are increased loan-to-values, extended loan terms and immediate compensation for second mortgage companies.  More than ever before FHA home loans have been the backbone supporting mortgage brokers and lenders with subprime and foreclosure prevention products. 

The maximum LTV on the HOPE for Homeowners program has been raised to 96.5%, the U.S. Department of Housing and Urban Development announced today. The LTV was previously limited to 90, an October mortgagee letter from HUD said.  Many FHA mortgage lenders had indicated that the Hope for Homeowners Programs simply did not connect with the average homeowner that need mortgage refinancing.

In La Jolla California home sales rose unseasonably last month from September as buyers shook off gloomy financial news and took advantage of often-steep discounts. The median sale price fell to $300,000 – a 67-month low – as foreclosures once again accounted for half of all resales, a real estate information service reported.  Last month’s record annual sales increase reflects two things: Very weak sales a year ago on the heels of the August credit crunch and earlier subprime meltdown, and this year’s big sales gains in inland markets where prices have fallen 30% or more. Depreciation in such areas has triggered record foreclosures, which tend to sell at a discount, attracting bargain hunters.

51% of existing homes that closed escrow in October were foreclosed on at some point in the prior 12 months. That’s up from a revised 50.0% in September and 16.0% in October 2007.  At the county level, these “foreclosure homes sold” ranged from 39.2% of October existing home sales in Orange County to 67.7% in Riverside County. In Los Angeles County homes sold from foreclosure were 40.3% of sales; in San Diego 48.6%; San Bernardino 65.2% and in Ventura County 47.0 %.

High foreclosure levels may explain the Southern California’s $300,000 median sale price in October, the lowest since it was $298,000 in April 2003. Last month’s median was 2.8% lower than $308,500 in September and 32.6% lower than $445,000 in October 2007. The October median stood 40.6% below the peak $505,000 median reached in spring and summer of last year.  Several factors explain the plunge in the median price, the point where half of the house sold for less and half for more: Regionally home price depreciation; much slower high-end sales; and the rising market share of foreclosure home sold, which tend to be located in mid-to lower-cost areas.

Many of the region’s relatively affordable neighborhoods saw October sales more than double from a year ago. Use of FHA-insured loans allowing a down payment of as little as 3% represented nearly one-third of all Southern California’s home loans last month, up from 2% a year earlier.

Meanwhile, use of larger mortgages known as “jumbo mortgage loans,” common in higher-cost coastal neighborhoods, is still far below normal. Before the credit crunch hit in August 2007, 40% of Southland sales were financed with jumbos, then defined as over $417,000. Last month just 13.1% of home purchase loans were over $417,000.

The typical monthly mortgage payment that Southern California home-buyers committed themselves to paying was $1,413 last month, down from $1,458 the previous month, and down from $2,115 a year ago. After inflation adjustments, current payments are 33.9 % below typical payments in the spring of 1989, the peak of the prior real estate cycle. They are 45.8% below the current cycle’s peak in June 2006.  Indicators of market distress continue to move in different directions. Foreclosure activity is at or near record levels, financing with adjustable-rate mortgages is near the all-time low, as is financing with multiple mortgages.

DataQuick also reported Down payment sizes and flipping rates are stable, non-owner occupied buying activity appears flat but might be emerging.  MBA reported this week that home loan activity has decreased, but the home loan modification inquiries continue to soar as the foreclosure crisis worsens.

Bank of America Corp.’s recent decision to provide $8.4 billion in home loan modifications to settle charges brought by state attorneys general against Countrywide Financial Corp. was hailed as a milestone when the deal was announced this fall. But apparently nobody talked to one group that will shoulder much of the settlement’s costs: investors who hold securities backed by Countrywide home loans.  Now, some of those investors are crying foul, adding to the confusion over what is becoming a central issue in efforts to resolve the wave of foreclosures that is at the root of the global financial crisis.

J.P. Morgan Chase & Co. and Citigroup Inc. recently announced foreclosure-prevention programs that aim to lower mortgage rates, extend repayment schedules and, in the case of Citigroup, reduce loan amounts, to help borrowers keep their homes. But the programs have focused primarily on home loans wholly owned by those companies because they feel they have more authority to provide loan work-outs.  Over $2 trillion in mortgage loans were packaged into mortgage-backed securities and sold to investors by Wall Street, according to Inside Mortgage Finance. But opinions vary regarding the degree to which these mortgages can be modified.  Bank of America settled charges this fall with attorneys general from 15 states. The settlement stemmed from charges that Countrywide engaged in predatory lending practices involving borrowers who took out subprime mortgages and option-ARM mortgage loans that featured a negative amortization. Under the settlement, Bank of America, which acquired Countrywide in July, agreed to modify the mortgages of as many as 400,000 borrowers by providing mortgage refinancing, lowering interest rates and reducing principal amounts. Bank of America neither admitted nor denied wrongdoing.

Background: This fall, Bank of America agreed to an $8.4 billion program to modify mortgages, to settle charges by state attorneys general against Countrywide, which it now owns.  The Concern: Many of the loans covered by the settlement were packaged into mortgage-backed securities. Some investors who own those securities say Bank of America is shifting much of the cost of the settlement to investors.  The Response: Bank of America says its contracts with investors provided it with “delegated authority” to modify many of the loans. It also is talking with investors about their concerns.

Bigger Picture: The dispute comes as mortgage companies are under pressure to do more to keep borrowers in their homes. It isn’t clear just how much authority the companies have to modify loans that were packaged into securities.  Bank of America said it owns about 12% of the roughly 400,000 loans at issue in the settlement and can modify another 75% based on the “delegated authority” provided in its contracts with investors. “We believe the program benefits both customers and investors,” a Bank of America spokesman said. Bank of America didn’t seek investor approval before agreeing to the settlement “because the design of the program was based in large part on the delegated authority” in the contracts, he added.

But some investors believe they should have been contacted first. “Our view is that Countrywide Financial Corp. made this determination without consulting with a representative group of investors,” said Ralph Daloisio, managing director at Natixis SA, which owns securities backed by Countrywide loans. He agreed, though, that if done right, loan modifications can benefit investors.  Other investors said Bank of America is moving much of the cost of the settlement to investors when it should be paying those costs itself. These investors said that they don’t oppose modifying mortgages when it will increase investor returns while keeping borrowers in their homes. But they said that many of these home loans violated representations and warranties made when the mortgages were packaged into securities. As a result, they said, Bank of America should repurchase the loans before modifying them.

“This is literally an attempt to settle a dispute with state attorneys general on predatory lending claims with someone else’s money,” said one money manager. “In 10-plus years in the market, I’ve never seen anything as outrageous as this.”  The Bank of America spokesman said that “no court has made … findings” that the Countrywide loans were “either predatory or unlawfully originated.” He said Bank of America has been “responding to investor questions regarding this program. We believe that these have been positive interactions.” Bank of America believes “the program benefits both customers and investors,” he said.  Under terms of contracts with investors, mortgage companies generally have the authority to rework loans when it is likely to benefit investors. But just how much authority the mortgage companies have is open to debate.  Mortgage loan modifications also can benefit some bondholders at the expense of others. Reducing a borrower’s loan balance, for instance, may hurt holders of the riskiest piece of a mortgage securitization more than investors who bought securities that had higher credit ratings.

Citigroup Inc. announced Tuesday that it will preemptively contact 500,000 mortgage holders to restructure their mortgage terms on as much as $20 billion in home loans for borrowers who are current on their home loan payments but in danger of falling behind. Under its new program, the Citi Homeowner Assistance Program, Citi is focusing on borrowers who live in areas that are likely to face “extreme economic distress.”

“Under our new program we will preemptively reach out to help homeowners before they become delinquent, which is critical to avoiding the loss of a home and protecting their credit score and future borrowing potential,” said Sanjiv Das, chief executive officer of CitiMortgage.

Citi extended its moratorium on foreclosures, saying it won’t begin or complete a foreclosure sale on a home on which it owns the home mortgage if the borrower wants to stay in the home, which is his or her principal residence. And, Citi said it is also working with investors to expand the Citi Homeowner Assistance program to include mortgages Citi services but does not own.

It added that it recently streamlined its loan modification program to rework delinquent loans. This revamped program uses a simplified formula to figure out an affordable payment as a percentage of the borrower’s gross income. It then reduces the monthly payment to that amount by either reducing interest rates on the loan, extending the loan’s term or forgiveness of principal.  You do not have to work with foreclosure lawyers if you would rather deal with a foreclosure prevention company or the lender directly.

“We believe at-risk borrowers should not have to wait until they are facing potential foreclosure before they become eligible for a loan modification or a foreclosure pause,” said Eric Eve, senior vice president at Citi.  Since 2007, they have helped nearly 370,000 families, representing more than $35 billion in underlying loans, avoid foreclosure. Even if you’ve been turned down previously, call CitiMortgage. You may qualify under its newly announced program.