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August 17, 2010

Federal Reserve Cuts Lender Paid Yield Spread Premium

Category: Federal Reserve,Home Loan Market,Home Loan News,Mortgage Brokers,Mortgage Industry News – admin – 4:42 pm

The Federal Reserve was busy Monday eliminating commission opportunities for mortgage brokers across the nation. The Fed announced several new rules like banning YSP loan commissions in an effort to minimize abusive mortgage lending practices.  According to the Lead Planet, a mortgage marketing company in Southern California, the Fed actually said that mortgage lenders paying yield spread premium, also known as YSP led to the collapse of our housing sector.   The truth is that the Fed has had knowledge of broker paid commissions since it began well over a decade ago. 

Will Banning Mortgage Rebates Help the Mortgage Industry?

These new home lending regulations are part of the new financial reform legislation mandated by Congress.  The new rules apply to mortgage loan originators, brokers and loan companies, including banks and mortgage firms employing them. Under the new regulations loan originators may no longer be paid a increased commissions for suggesting one home loan over another.

Will this be the end of No Cost Mortgages? The rule change is intended to prevent loan originators from receiving higher compensation at the cost of damaging consumers.  Mortgage lenders can still continue to receive fees that are based on a percentage of the loan amount, however, which is common in the mortgage business.  Many loan originators have been sharing their yield spread premium commissions with their borrowers in an effort to reduce or even eliminate closing costs.  Where do you think no cost mortgage loans originated from?

Loan originators will also be prohibited from receiving compensation from both the consumer and another party such as a bank or mortgage company. Consumers were typically not informed that loan originators and brokers often received payments for their work from both parties. The new rule seeks to protect consumers who agree to pay the loan agents through a higher interest rate or through fees such as points charged up front on a mortgage are not paying more as a result.

Another rule finalized Monday would require borrowers to be notified when their home mortgage has been sold or transferred.  The Fed also proposed a rule to make it easier for consumers to learn who owns their loans. Under the provision, once a mortgage servicer is asked by a borrower for that information, the loan servicer would have to provide it within a reasonable time, which generally would be 10 business days. 

The new YSP rules are set to go into effect April 1, 2011.  Read the original article online > Fed Bans Lenders from Paying YSP to Mortgage brokers

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August 11, 2010

California Home Loan Rates Decline

Category: California Home Loans,California Mortgage Rates,Home Mortgage Rates,Published Articles – admin – 5:33 pm

Nationwide reported that San Diego mortgage rates remained at record lows for new home buying and refinancing.   From Oceanside to Chula Vista, San Diego loan applicants continued to see significant home financing opportunities because of the low interest rates that were available locally to qualified borrowers.  Nationwide published a report indicating that 30-year fixed California mortgage rates ranged from 4.32% to 5%.  Southern California home loan rates continue to rescue many homeowners from rising adjustable rates and mortgage payments that many homeowners could no longer afford.

Lenders APR Rates
National Average 4.894% 4.75%
Wells Fargo 4.848% 4.75%
Nationwide Mortgage 4.615% 4.5%

Apparently VA mortgage rates were available at 4.125% for fixed loan terms.  And for those borrowers who were comfortable with an interest rate only fixed for 5 years (5/1 ARM), California FHA loans could be found at 3.75% for qualified loan applicants.  Read the original article on San Diego mortgage rates

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August 9, 2010

Freddie Mac Reports Huge Mortgage Losses

Category: Freddie Mac News,Home Loan News – admin – 8:38 am

Freddie Mac has seen their highs and lows in the last few years, but does it make sense for taxpayers to continue to bail out this mortgage giant?  Freddie Mac was created in 1971 by the U.S. government to act as a home mortgage buyer.  After several decades of success, the government mortgage company had to bailed out.  Just a few years later, Freddie Mac is requesting for $1.8 billion in additional federal aid after posting a larger loss in the second quarter. Freddie Mac said Monday it lost $6 billion, or $1.85 per share, in the April-to-June period.  Even as home mortgage rates hit record lows, Freddie Mac continues to struggle. The company is required to pay a 10 % annual dividend to the Treasury Department on money it has received from the government. That made up $1.3 billion of the company’s second-quarter losses.  The company lost $840 million, or 26 cents a share, in the same quarter last year.  Many mortgage executives have started to wonder if Freddie Mac is struggling when home loan rates are this low -- - -- How will they do when interest rates rise?

Freddie Mac VP on Getting a Mortgage

The government rescued McLean, Va.-based Freddie Mac and sibling company Fannie Mae from the brink of failure nearly two years ago. The new request means they have needed $148.2 billion to stay afloat, about $63.1 billion of which is being used by Freddie Mac.  Freddie Mac is losing money from bad loans it backed, many of them before the housing market went bust. It had $118 billion in bad loans at the end of June, up from $103.4 billion at the end of last year. It owned more than 62,000 foreclosed properties in June, up from about 35,000 a year earlier.

Can the U.S. Afford Another Mortgage Bail-Out?

Both Fannie Mae and Freddie Mac have both lost tens of billions of dollars during the past two years and both are asking the government to prop them up. Last week, Fannie Mae requested $1.5 billion after posting a loss of $3.13 billion, or 55 cents per share, in the second quarter.  Still, the two companies are taking different approaches to their situations. Fannie Mae sounded optimistic about its future. Freddie Mac offered a more tempered view.  “We recognize that high unemployment and other factors still pose very real challenges for the housing market,” CEO Charles Haldeman said in a statement. “With that in mind, we continue to focus on the quality of the new business we are adding to our book to be responsible stewards of taxpayer funds.”  Fannie and Freddie own or guarantee about half of all U.S. mortgages, or nearly 31 million home loans worth more than $5 trillion. They buy home loans from lenders, package them into bonds with a guarantee against default and sell them to investors.

During the housing boom, Fannie and Freddie faced political pressure to expand homeownership and competitive pressure from Wall Street to back ever-riskier loans. When the market went bust, defaults and foreclosures piled up, and the government had to take them over. Over the next year, lawmakers plan to review the nation’s mortgage-lending system and consider a potential replacement for Fannie Mae and Freddie Mac. The financial overhaul signed by President Barack Obama didn’t address that issue, despite protests from Republicans that it was incomplete without a such a plan. The administration is holding a public conference on Aug. 17 in Washington to discuss the mortgage system

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