Home Loan Wholesale

Today, most mortgage brokers that have less to spend so it is imperative that they buy leads cautiously.  Internet mortgage leads can be a very cost effective form of marketing if you know how to purchase leads from lead generation companies.  Be careful of how and where you purchase leads. Ask the account executive at the lead company what their minimums are and be cautious when buying leads in bulk.  If a lead company is generating 50 leads a day and 15 leads a day that meet your filters, you have to wonder how a lead company could send you 250 leads in a 3-day span.  Clearly these are either old or brokered leads. In a recent article, Bryan Dornan the founder of mortgage lead generation company, the Lead Planet reminded mortgage companies to “Consider more than just the cost per lead.”  Dornan suggests that “the cost per funding is the bottom line.”  See the original mortgage lead buying post at the Mortgage Lead Vault > Cost to Funding Ratio Matters with Mortgage Leads

The recent mortgage meltdown caused jumbo mortgage rates to soar and the availability for non-conformning loans shrunk significantly. However signs are indicating that jumbo rates are declining and lenders are more willing to make loans that top the limits for Freddie Mac, Fannie Mae and the FHA. 

Phil Kelly had 18 more months to go before the fixed rate on his $2.5-million mortgage became adjustable.  But when Kelly, a former computer executive living in Rancho Santa Fe, learned he could knock his interest rate down by a full percentage point by mortgage refinancing, he went for it.  “It’s always tough to pick the exact bottom or top of anything,” Kelly said. “But I think this rate is about as low as you’re going to get.” For most California borrowers, jumbo mortgage refinance options have been few and far between.

Jumbo Mortgage Rates:  For home loans greater than $729,750 in counties with the highest-cost housing — shot up during the financial crisis as lenders and loan investors shunned anything tainted with even a whiff of higher risk. Rates on big mortgages were especially high relative to those on smaller loans.  But in a boon for borrowers in California’s expensive housing markets, the jumbo-home loan market is starting to return to normal.

According to rate tracker Informa Research, two weeks ago, the average interest rate on 30-year fixed-rate jumbos dropped to 5.79%, a nearly five-year low, Services of Calabasas. It edged up to 5.88% on Tuesday, still very attractive by historical standards. The average has dropped from the 7% in late 2008.  Today, fewer borrowers qualify for jumbo home mortgage loans, because stated income loans have disappeared.

Jumbo rates are even lower on hybrid adjustable mortgage loans. With these hybrid ARM’s, the interest rate is fixed for three, five, seven or ten years before it becomes an adjustable rate loan. (ie. 3/1, 5/1, 7/12, 10/1 ARM)

Banks are also relaxing slightly some of their requirements for jumbo mortgage loans. That’s an encouraging sign because the market for jumbos, in contrast with the rest of the mortgage business, isn’t being supported by government backed bonds.  Unfortunately million dollar home loans are not supported by the Obama Administration.

The lower jumbo mortgage rates and somewhat easier terms reflect newfound confidence among banks in the housing market. That’s because, jumbos loans exceed the maximum loan amounts that Freddie Mac and Fannie Mae have agreed to insure.  In addition, the private market for mortgage-backed bonds dried up when the meltdown hit. So mortgage lenders offering jumbo mortgage loans in today’s market are willing to take the risk of servicing them in their portfolios.

The maximum amounts for Freddie Mac and Fannie Mae “conforming” mortgages, and for FHA mortgages, are set by Congress. The cutoff for single-family homes was $417,000 from 2006 until February 2008, when lawmakers increased it temporarily to $729,750 in certain high-cost areas, including Los Angeles, Orange and Ventura counties. Conforming loans top out at $500,000 in Riverside and San Bernardino counties and $697,500 in San Diego County.

The increased upper limits, which have been extended until the end of this year, have created a three-tier system in expensive areas, mortgage professionals say: loans of up to $417,000, which are the easiest to obtain and carry the lowest rates; “conforming jumbos” from $417,000 to $729,750, which are somewhat harder to get and have slightly higher rates; and true jumbos, with the toughest standards and highest rates.

In the boom years of 2005 and 2006, jumbo mortgage rates were typically no more than a quarter of a percentage point higher on jumbo loans than on conforming loans, according to Informa Research. That widened as the mortgage meltdown intensified and home prices dropped in late 2007. The spread ballooned to nearly 1.7 percentage points in early 2009 after the entire credit system froze.

But this year the rate spread has narrowed to less than a percentage point. It could shrink more if conforming-loan rates rise as expected after the Federal Reserve wraps up a $1-trillion-plus program to support the market for conforming loans next month.

In addition to lower rates, down-payment requirements are being relaxed in some cases. For example, to write a jumbo loan in coastal areas of Los Angeles and Orange counties, Wells Fargo Home Mortgage looks for a 20% down payment or that percentage of equity, down from 25% last year, said Brad Blackwell, a national mortgage sales manager at the lender.

The reason: Wells believes high-end home prices are stabilizing in those coastal counties. But the bank still requires higher down payments in the Inland Empire and other battered housing markets such as Florida, Nevada and Arizona, where prices for jumbo-size homes don’t appear to be stabilizing, he said.

Jumbo loans remain much harder to get than before the credit crunch and recession. Borrowers typically must have a credit score of at least 700, compared with boom-era minimums in the 600s, though Laguna Niguel mortgage broker Jeff Lazerson said at least one lender was again making sub-700 jumbos available.

What’s more, unless their down payments are very large, borrowers must provide evidence of high income, have sizable bank accounts as a cushion against the unforeseen and occupy the houses themselves.

But there are clear signs that the jumbo market has loosened. One is an increasing availability of “stated income” loans — those that don’t require proof of income — of as much as $2 million to borrowers with at least a 40% down payment, said mortgage broker Gary Bluman, owner of Real Estate Resources in Brentwood.

Also, instead of a true jumbo loan, some “piggyback” second mortgage loans are available again to help certain borrowers with 25% down payments pay for high-priced homes, Lazerson said.

Of course, adjustable, stated-income and piggyback loans were big contributors to the mortgage meltdown. But such provisions are less risky if a borrower has 25% to 40% equity.  Despite the confidence in the market that such terms imply, lenders and mortgage investors are still dealing with piles of bad jumbos made during the boom.

Delinquencies of 60 days or more on prime jumbo loans that were packaged into securities jumped to 9.6% in January, up from 3.7% a year earlier, Fitch Ratings reported this month.  The jumbo delinquency rate in California climbed to 11.3% from 4.1% a year earlier.

For now, the jumbo market remains limited to the volume of loans that banks are willing and able to keep on their books. But there is hope for a return to private outside funding. Although no jumbo loans have been turned into securities for at least two years, packages of delinquent jumbos have begun to be sold again to “vulture” investors, a sign that the secondary market for the home loans may revive, said Michael Fratantoni, vice president of research at the Mortgage Bankers Assn.  “The ice sheet,” he said, “is starting to crack here and there.”

According to data released by the Commerce Department’s Census Bureau and the Department of Housing and Urban Development, the expansion to the homebuyer tax credit, an exceptional government stimulus measure was passed to boost housing activity, new home sales took a 7.6% decline in December. The results come on the heels of National Association of Realtors (NAR) reports of similar December declines in existing home sales.  First time home buyer loans have seen a recent spike in loan application volumes since the tax credit news hit the street.

The homebuyer tax credit extended for first time homebuyers and expanded to include existing homeowners requires buyers have a contract in place by April 30 athnd close by June 30th. The problem, homebuilder insiders and real estate agents tell HousingWire, is that consumers who tried to take advantage of the tax credit too late in the fall before realizing there wasn’t enough time to close a deal by the original November 30th expiration date have yet to reengage themselves in the home loan process.  FHA mortgage lending continues to support a majority of the first time homebuyer loans.  “With new homes, the homebuilders ran out of everything they could close by the end of November,” Burns said. “There were people that wanted to buy in these communities that didn’t because they couldn’t close in time.” 

As HousingWire previously reported, the JBREC December monthly builder survey showed optimism among 264 home building industry executives from public and private companies. The belief that builders will have increased community count, better orders and slightly higher prices has 57% of respondents planning for more revenue in 2010 than in 2009.

Another confidence booster is the tax credit many builders are receiving from the temporary extension of the terms of net operating carry-back laws, which let builder recoup losses from taxes paid in profitable years.  “It’s given them more confidence in their cash balances and they want to start more speculative homes because of the extra cash that they now have,” Burns said.

The average mortgage rate on a 30-year home loan with fixed rates climbed to 5.02% last week from 5%, MBA said.  The mortgage rate reached 4.61% at the end of March, the lowest since the group’s records began in 1990.  At the current thirty-year mortgage rate, monthly borrowing costs for each $100,000 of a home loan would be $538.04 which is about $12 less than a year ago when the rate was 5.22%.

A report later today may show sales of new homes rose 3% in December to a 366,000 annual rate, according to the median projection in a Bloomberg News survey.   Sales of existing U.S. homes plunged last month, reflecting the expected expiration of the government’s first-time buyer tax credit on November 30th.

The average rate on a 15-year fixed mortgage rose to 4.34% from 4.33 % a week earlier. The rate on a one-year adjustable mortgage increased to 6.84% last week.   The share of applicants seeking to refinance a loan dropped to 67.6% last week, the lowest level in almost three months, from 71.7% the prior week.

Mortgage lenders continue to see muted demand for financing.   “The residential mortgage and home equity line portfolios also continued their downward trend,” SunTrust Banks Inc. Chief Financial Officer Mark Chancy said on a conference call January 22nd. The Atlanta-based lender said it lost $248.1 million in the fourth quarter as loans soured in the Southeast real estate market.  The Washington-based Mortgage Bankers Association’s loan survey, compiled every week, covers about half of all U.S. retail mortgage loan originations.

FHA announced they will continue to allow borrowers to finance the upfront mortgage insurance premiums.  FHA will pursue legislative authority to allow flexibility to bring the annual premium, which borrowers pay on a monthly basis, higher. Also, seller concessions will be reduced to 3% from 6%.  In a recent blog post, the FHA Mortgage Lending Blog stated that the Administration will expand mortgage refinance guidelines sometime in 2010.

Frank Black, who managed a Wells Fargo branch in California said, “After reviewing the changes to the FHA requirements, I believe FHA mortgage lenders will agree that the new rules make sense and are needed to keep the government financing alive. A few years ago, many brokers and lenders took advantage of FHA underwriting by pushing the envelope with risky home loans.”  See the original article > FHA Loan Guidelines Require 10% Down for Low Fico.

The home mortgage industry added 200 full-time employees to their payrolls in November, the first jump in industry employment since July. The U.S. Bureau of Labor Statistics reported that employment in the mortgage broker/ bankersector rose to 255,700, compared to 255,500 in October. The BLS data shows the increase is entirely due to more mortgage brokers having jobs. Employment at mortgage broker and banking firms was flat in November. Overall, the home loan industry experienced a 10% drop in its workforce over the past 12 months. Major mortgage lenders have relied on outsourcing and temporary workers to deal with fluctuating demand. Meanwhile, the nation’s unemployment rate held steady at 10% in December, but 85,000 workers were laid off, according to the new jobs report. This disappointed analysts who were looking for a sign that the job market had finally turned the corner.

Slowly rising mortgage interest rates along with relatively sluggish home sales will have repercussions in the mortgage industry over the next few quarters according to the Mortgage Bankers Associations Mortgage Finance Forecast for the Fourth Quarter of 2009.  “The most important factor driving recent declines in real estate market activity and increases in home loan delinquencies and foreclosures has been the ongoing job losses and rising unemployment rates stemming from the most severe recession the country has experienced in a generation.

Current mortgage interest rates, home prices, and household incomes all impact affordability. Today, mortgage rates remain near record lows, and with the continued decline in home prices, for those with resources, it is a buyers’ market like we haven’t seen in years. Obviously, the problem is that there are not enough potential homebuyers who have the income and down-payment, and who feel confident both that the housing market will recover, and that their job situation is secure, to boost demand despite the improvements in affordability.”

MBA economists expect long term mortgage interest rates to raise slowly from the average of 4.9 % expected for the fourth quarter to 5.2% in the first quarter of 2010 and 5.7% in the fourth quarter.  Rates will climb to 6.0% during the second quarter of 2011.  One year adjustable rates are projected to be almost completely flat over the next year.  At 4.6% this quarter, they will trade between 4.7 and 4.8% throughout 2010 and rise to an average of 5.3% in 2011.  At the same time, sales of existing homes, estimated at nearly 5 million this year will continue at that pace through the first three quarters of 2010 before increasing in the fourth quarter for total of 5.55 million sales for that year.  Sales are expected to reach 6 million in 2011.  New home sales, projected to reach an estimated annualized rate of 442,000 in the fourth quarter and 391,000 for the year will move around in a narrow annualized range of 468,000 to 508,000 during the four quarters of 2010 and finish the year with around 483,000 sales. New home sales will total 609,000 in 2011.  All of the above outlined circumstances are expected to result in a slow year for home mortgage originators with home loan originations increasing but not strongly enough to make up for a plunge in home refinancing.  It is expected that purchase mortgages will total 718,000 for this year; 804,000 in 2010 and 896,000 in 2011.  FHA refinance activity is forecasted to be strong, even though HUD recently announced new FHA mortgage lending revisions.

During the fourth quarter it is expected that 238,000 households will seek refinance loans.  This will be the slowest quarter of the year, down substantially from the 426,000 transactions in the second quarter and 296,000 in the third.  The estimate for the entire year is 1,246,000 mortgage refinance loans.  However, next year with interest rates up and much of the demand for refinancing wrung out of the system the number of refinances is expected to plummet to little more than half the 2009 number; 2010 will be even worse.  Refinancing in the first quarter of 2010 will be 175,000 units compared to 287,000 during the first quarter of this year and the total in Q4 will be 140,000 compared to 238,000 this quarter.  MBA is projecting a total of 693,000 refinances in 2010 is estimated at 693,000 and in 2011 the total will be 591,000.  

Fannie Mae provides several refinance options including the Home Affordable Refinance Program.  Fannie Mae refinance solutions are only available eligible borrowers who have a mortgage balance less than $417,000 that is owned by Fannie Mae.  125 mortgage options are available for no equity home refinancing.

Fannie Mae Refinance Plus simplifies the refinancing process for loans that are already in a mortgage lender’s servicing portfolio. This Fannie Mae mortgage program allows refinancing to 125% LTV. The Home Affordable Refinance Programs offers a unique refinance alternative because no equity is required.  Fannie Mae pledges to provide home refinancing with increased efficiencies for the origination and underwriting of Fannie Mae.   Fannie Mae allows limited cash-out refinance transactions up to 125 percent loan to value.

Steve Park of Mortgage Brokers Network was asked about Encompass and this is what he had to say. “Encompass certainly has made a dent in the loan origination software market that Calyx’s Point has dominated for so long.”  Lead Planet, a mortgage lead generation company have confirmed a surge in Encompass users with their lead buying clients.  “We’ve been using Encompass very successfully for quite some time, and this integration has made it exponentially easier for us to access what we feel is the most accurate product and pricing information available on the market,” says Craig Willis, chief technology officer for Amerifirst Financial, an Encompass and Mortgage Pricing Systems user. Read the complete article > Mortgage Lead Companies See Rise Encompass Use for Mortgage Management Solutions

New hirings at mortgage companies in the United States outpaced layoffs by more than 8,000 in 2^nd Quarter according to a recent report outlining employment analysis. One mortgage company had more impact on mortgage employment than any other.

Mortgage lenders laid off 3,229 employees between April 1 and June 30, according to the analysis. Layoffs were about 71 percent fewer than in the first quarter and 31 below the same period last year. “The latest period reflected consolidation as a result of several high-profile mergers during the past year,” MortgageDaily.com Founder and Publisher Sam Garcia explained. “Much of the layoff activity was concentrated at financial institutions.”

Mortgage rates in the U.S. fell to the lowest since May as mortgage refinance loans surged on reduced borrowing costs. The average thirty-year rate fell to 5.14% from 5.20%, mortgage buyer Freddie Mac of McLean, Virginia, said today in a statement. The fifteen-year mortgage rate was 4.63%.   “It’s been stuck in this low-five range for a number of weeks,” Donald Rissmiller, chief economist at New York-based Strategas Research Partners, said. “This is still a good interest rate.”  

The Mortgage Bankers Association’s index of home loan applications rose 4.3% to 514.4 in the week ended July 10. Purchase applications fell 9.4 % while requests to refinance gained 18%, indicating prospective buyers are still wary of falling home prices while property owners are taking advantage of low rates to reduce their monthly payments.  Kelly Media Group Founder, Jason Cardiff of the Mortgage Lead Company, said, “The result of lenders cutting fees will trickle down to homeowners and eventually provide a hedge against inflation for the rest of 2009.”

Federal Reserve Chairman Ben S. Bernanke is trying to reduce lending costs with a $1.25 trillion program to purchase securities backed by home loans. According to data compiled by Bloomberg, the worldwide credit crunch spurred by bad credit mortgages has cost the world’s financial firms almost $1.5 trillion in losses and more asset write-downs.

Last month, the Federal Reserve left the size of its buying program intact and kept the benchmark rate for federal funds at between 0 and 0.25 %. The rate will stay at “exceptionally low rate levels” for an “extended period,” the Federal Open Market Committee said in a statement June 24th.   “We’re going to see more of the same out of the Fed,” Rissmiller said. “They’ve been happy with what’s happened.”

April’s Record Low

Mortgage rates reached a record low 4.78 % twice in April after the central bank announced its plan to boost buying of both mortgage securities and Treasuries.   Those purchases brought down yields on government debt and mortgage-backed bonds issued by Fannie Mae, Freddie Mac and Ginnie Mae, allowing lenders to reduce mortgage rates on new home loans and still sell the securities at a profit. Home loan rates started climbing in May along with Treasury yields on investor concern that ballooning government debt would fuel inflation.

In a recent article, California mortgage broker, Jeff Morris, formerly with GMAC and Ditech estimated that one in ten of homeowners who visit him online are able to get approved for a conventional or FHA refinance.  Morris said, “People simply don’t qualify with the mortgage lenders tighter guidelines and lack of home equity.“ Borrowers seeking home refinancing, outside of California, Arizona and Nevada may have a better chance because fewer borrowers in the mid-west and south are under water with their mortgages being greater than their home’s value.  Even with mortgage lenders extending 97% FHA and 105% mortgage refinancing, California homeowners have little opportunities to be approved because home values have declined so significantly since they bought their properties years ago.   

The goal should be for homeowners to invest in a home that they can afford and if refinancing with a lower mortgage payment is an option, then borrowers would be foolish not to seize the savings opportunity. Morris added that “the demand for loan modifications has not waned and he sees an increase in loan workout requests for borrowers who are stuck in jumbo mortgage loans that have interest rates set to adjust.” The banks just aren’t handing out loan modification agreements to just anyone anymore.  Homeowners seeking foreclosure prevention alternatives from their mortgage lender must be able to document that they have the income to support the modified home loan payment. 

In Maui, Caleb Palmer, a broker, said “Consumers should stop whining about things they can’t control and focus the affordable home buying opportunities that have become available since the housing market crashed in 2006.” Palmer continued, “Mortgage rates were under 5% for thirty year fixed rate loans and inventories were beginning to open up in neighborhoods that haven’t been available for years.”  Palmer believes that 2010 will see more buying opportunities in Hawaii and California before the market shifts back to appreciation mode. 

In addition, if you’re older than 40, shortening your mortgage term now could help leave you mortgage-free in retirement, reducing the income you’ll need to generate from your battered 401(k).
But before you jump in, you should know that most single-family home loans today need to fall within Fannie Mae and Freddie Mac limits — up to $417,000 in most places, and up to $729,750 in certain high-cost cities such as San Francisco and New York. “Jumbo” mortgages, or those larger than those limits, are still very hard to find. Then you’ll need two crucial and tough-to-acquire bits of information: your credit score and your home’s current value. Those will determine whether you can refinance at all and how close you can get to the lowest rates available. Even then, you may find the process unusually long and unpleasant; some banks are taking up to 90 days to complete a refinancing.  If you got your current mortgage in the past few years, when less documentation was needed, you may be surprised by the financial colonoscopy that awaits you. You need pay stubs, bank statements, brokerage statements and maybe tax returns to convince the lender that you can and will repay the loan. If you’re self-employed, you may be asked for a profit-and-loss statement for this year; if you rely on bonus income, expect the lender to assume this year’s bonus will be a lot less than last year’s.

What is home equity? Having some equity in your house is essential to qualifying for a new mortgage loan. If your current mortgage is less than 80% of the value of your home or less than 75% of your condominium, you should have refinancing options as long as you don’t have late mortgage payments and bad credit scores.  Subprime refinancing and bad credit mortgage options have disappeared with the exception of VA and FHA loans.  VA home loans are only offered to military veterans and FHA mortgage guidelines require full income documentation and most bad credit home loan applicants need a stated income program.

If your mortgage is between 80% and 105% of your home value, you’re current on your payments and your loan was bought by Fannie Mae or Freddie Mac, you may be able to refinance under a two-month-old government program called “Making Home Affordable.” Some kinks are still being ironed out, and Fannie and Freddie have different requirements, so go to the program’s Web site at MakingHomeAffordable.gov or contact your mortgage servicer to see if you qualify.

Sometimes under this program, Fannie and Freddie will waive appraisals and other underwriting steps. And if you’re refinancing a Veterans Administration or Federal Housing Administration loan, a new appraisal isn’t needed. 

Mortgage brokers continue to report that FHA mortgage and VA home loans are the hottest products in the home financing sectors of the U.S.  The VA provides low mortgage rates for streamline programs to veterans who currently have a loan guaranteed by the U.S. Department of Veterans Affairs.  In addition to the VA streamline refinancing, Mortgage Related News reports that and VA loan officers are originating the Interest Rate Reduction Loan at a high volume than previous years because this VA loan has no “seasoning” requirement.

In the mortgage industry, this type of seasoning refers to borrowers who recently completed a mortgage refinance transaction.  In addition, these VA loans entail very little documentation and usually do not require an appraisal. In order to qualify, borrowers must have a VA home loan that is not delinquent. In a recent VA mortgage article, Tom Kelly highlights the opportunity that military veterans and their families have financing and refinancing with VA home mortgage loans.  He points out that one of the simplest ways for homeowners who have a VA mortgage is with the VA streamline refinance. 

 
VA mortgage lenders will assess that veteran borrowers meet basic program requirements including:

·         The new monthly mortgage loan payment must be for less than the original loan.

·         The VA mortgage rate must be for less than the original loan (unless refinancing from an adjustable interest rate).

·         The term cannot exceed thirty years or ten years more than the original mortgage term (up to a max of 360 months).

After 50 years of offering loans only to vets who served active duty, the VA changed its rules in 1992. Men and women who have completed six years in the Army, Navy, Air Force, Marine Corps or Coast Guard Reserves, or the Army National Guard or Air National Guard, are eligible for VA home loans, including programs with zero down required. >Read the complete VA home loan article online.

C.D. Davies discusses the difference between subprime home loans and Alt A mortgage financing.

The video talks about home mortgage industry and how mortgage lenders made bad subprime loans to risky borrowers that could not afford the mortgage payment as soon as it adjusted. Alt-A home loans were not much better because many of these loans were stated income with no income documentation required. Who could forget the ridiculous 1% teaser rate on loans that had negative amortization features that actually caused mortgage balance to rise.  Many of the foreclosures came from the no-money down home loans made from Alt-A and subprime lenders.

Irwin Financial Corp. here took a $54 million loss in the third quarter, or $1.85 per share, compared to a $107 million loss in the third quarter of 2007, and cut losses in half by implementing charges that included reduced exposure to its nationwide home equity portfolio. These charges were made possible through the securitization of $268 million of these home equity loans. Commenting on the “substantial progress” on its strategic restructuring during the third quarter, despite the economic crisis, Irwin Financial chairman and CEO Will Miller, said, “We securitized 85% of our remaining home-equity whole loans, thereby capping our credit loss exposure on those loans. With the home-equity portfolio in runoff mode, our credit exposure to the national home-equity industry is shrinking.”

The home-equity segment reported a $24 million loss, down from a $44 million loss during the second quarter. It reflects the negative effect of $27 million in loss provisions and $15 million in restructuring charges related to the exit from this market.  Thirty-day and greater delinquencies on the total portfolio increased from 6.6% at June 30 to 7.43% at Sept. 30. The allowance for loan losses totaled $155 million at Sept. 30, or 12.1% of the portfolio. This book of business continues to see “historically high levels of losses from customers who had strong credit characteristics at origination,” Irwin said, as the average FICO score of borrowers who defaulted was at 688.

Irwin has embarked in an ongoing process of liquidating second mortgage loans along with other charges associated with the company restructuring, such as provisions for credit losses in its commercial banking segment.  For example, Irwin reported $15.1 million in losses to the commercial banking segment, due to increases in loss provisions primarily for real estate related loans. “We believe that through our strategic restructuring we will return to profitability by simplifying our business,” Mr. Miller said.

Net interest income of $48 million was lower in the third quarter, “reflecting the sale of the equipment leasing portfolio, the securitization of $268 million in home equity loans and a reduced level of loans.” One of the ways to strengthen the capital base is the expansion of the company loan portfolio in the area around its headquarters in Columbus. A renewed focus in serving small businesses and customers in Irwin branch communities follows the same path that made Irwin successful for the past 137 years, he said.  “As an example of this renewed focus on our traditional branch-based business, in the third quarter we expanded our loan portfolio in our headquarters community of Columbus, Ind.,” the executive said. “We were pleased that Irwin Union Bank was the leading producer of consumer residential mortgage loans to our neighbors in the community during the third quarter producing 44% more residential loan volume than the next largest competitor locally.”

In addition, Irwin reported a consolidated total capital to risk weighted assets of 10.8% with total capital to risk weighted assets of 11.3% at Irwin Union Bank and 12.4% at Irwin Union Bank federal savings bank.  “Plans to further strengthen our capital base are moving ahead,” he said.   Irwin currently has obtained standby commitments for an additional $6 million in connection with its previously announced $50 million shareholder rights offering, “raising the total level of commitments to $37 million, or 74% of the planned offering.” Article Written By Amilda Dymi

The Associated Press Mortgage financier has Freddie Mac has reported an $821 million second-quarter loss. The AP’s David Melendy reports on that and the rest of Wednesday’s business headlines. The mortgage financier has Freddie Mac has reported an $821 million second-quarter loss. The decrease of one dollar and sixty-three cents per share was more than three-times larger than Wall Street expected. The dismal results come just weeks after the government threw a financial lifeline to Freddie and its sister company Fannie Mae to ward off fears the pair could collapse and take down the U.S. mortgage market.

Connecticut is suing Countrywide Financial, alleging it misled borrowers into taking on risky home loans they could not afford. The state alleges the mortgage giant violated its consumer protection laws and charged unjustified fees to homeowners who defaulted. Many mortgage lenders believe that Countrywide wrote more bad credit mortgages because they were the top originator in the country.  People seem to forget that Countrywide also wrote more good loans than any other mortgage company for many years.

How the Mortgage Market has Changed Lenders and Brokers

The current mortgage market mess is a direct result of the subprime mortgage meltdown and foreclosure phenomenon. It all began with the bursting of the U.S. housing bubble, which launched the high default rates on subprime adjustable rate mortgages (ARMs) and spread to the exotic hybrid ARM (negative amortization and interest-only loans). Now, even the prime mortgage market is experiencing high default rates.

Loan incentives, such as easy initial terms, in conjunction with an acceleration in rising housing prices encouraged borrowers to assume difficult mortgages on the belief they would be able to quickly refinance at more favorable terms. But, when housing prices started dropping in 2006, refinancing these loans became difficult. The default and foreclosure rate started rising dramatically upon expiration of the initial teaser rates and upon ARM interest rates adjusting higher as home prices failed to appreciate. Foreclosures accelerated in the United States in late 2006 and triggered a global financial crisis through 2007 and 2008. During 2007, nearly 1.3 million U.S. housing properties were subject to foreclosure activity, up 79% from 2006.

Subprime mortgage lenders were the first to be affected by the borrowers unable or unwilling to make their payments. Major banks and other financial institutions around the world have reported losses of approximately U.S. $435 billion as of July 17, 2008. But, as the securitized loans sold in the form of mortgage-backed securities (MBS) and collateralized debt obligations (CDO) declined in value, Corporate, individual and institutional investors holding MBS or CDO started getting hit with heavy losses, and stock markets in many countries declined.

Countrywide almost going under before being bailed out by BOFA (Bank of America) and IndyMac going under seemed to spark off a trend of mortgage companies going bankrupt that seems to be continuing. As a result of the significantly increased credit risk and decreased confidence in the financial market, lending activity decreased, credit standards tightened down and the spread on higher interest rates widened–the current “credit crunch”.

Now, in order to get a conventional mortgage loan, whether you’re looking to buy or refinance, you now have to have excellent credit. Down payment and equity requirements are now tighter, as well. And, while the interest rates have now dropped below 6%, the lending standards haven’t loosened up at all. To purchase a home with a conforming Fannie Mae or Freddie Mac loan, you need a credit score of at least 660 if you’re putting 20% down and a score of at least 700 if you’re starting with less than 20% equity. Refinancing has similar standards–you need an excellent credit score and low loan to value (LTV), typically around 75% to 80%.

As a result of the conventional loan tightened lending standards, and the new increased lending limits under the Economic Stimulus package passed earlier this year, FHA loans have been making a serious comeback. The lower interest rates that resulted from Freddie Mac and Fannie Mae being taken over by the government has also benefitted FHA because FHA rates have also decreased. But, the advantage that a home buyer has with FHA loans is that the credit standards are nowhere near as stringent for FHA loans as they are for conventional loans. You’re eligible if you have a score of around 580 and a good 12-month payment history on your bills. Plus, if you don’t have credit, FHA accepts non-traditional forms of credit like a positive rent paying history and positive payment histories with your utilities and cell phone.

For those looking to refinance, FHA allows you to refinance up to 95%, which is a lot better than the 75-80% LTV on conventional loans. Credit standards are reasonable for refinance loans, as well. As long as you have a positive 12-month payment history (particularly on your mortgage) and you are current on your mortgage, you’re eligible.

Freddie Mac, a government-chartered company, will also increase the time it gives servicers to negotiate with delinquent borrowers in Washington, D.C., and 20 states to 300 days from a range of 120 to 299 days, a spokeswoman said. The states are those with relatively fast foreclosure processes, Freddie Mac said.

Freddie Mac continues to struggle to contain billions of dollars in losses sustained since mid-2007 as the housing slump and home lending erodes more than expected. Speculation that losses will severely pinch capital positions at the company and rival Fannie Mae , the top U.S. mortgage funding company, led to sharp drops in their share prices since May and legislation this week to provide emergency financial backstops from the U.S. Treasury.  Delinquencies on home loans guaranteed by Freddie Mac more than doubled in the year through May to 0.86%.  According to Freddie Mac, the recent national delinquency rate calculated by the Mortgage Bankers Association is 6.35%.

HUD has helped fill the gap of loan purchasing from Freddie Mac and Fannie Mae with their government insured FHA home loans.  Thje FHA home loan programs have expanded to help borrowers with adjustable rate mortgages refinance into a fixed rate mortgage.  In addition, FHA announced a plan to roll out new down-payment assistance loans to help first time homebuyers get into the real estate marketplace.

Compensation to loan servicing companies that negotiate new payment plans and home loan contracts will double to $500 and $800, respectively, Freddie Mac said. For a mortgage servicer that completes a so-called short-sale, in which Freddie Mac accepts a sale price on a home below the balance of the mortgage, payments also double, to $2,200. Accepting short sales can result in less losses for mortgage lenders by ending the delinquency period and preventing ownership of the property through foreclosure.

Among new incentives, Freddie Mac said it will reimburse servicers for the cost of door-to-door programs in which lending services seek out troubled borrowers in person to discuss renegotiating their loans if that results in the borrower contacting the servicer.  Loan servicing companies have also been stung because they must advance payments to home loan investors even if the mortgage is in arrears, and as they hire more skilled workers to negotiate with borrowers and underwrite the mortgage loans again.  Loan servicing companies, often units of major mortgage lenders, this week said they increased the number of mortgages they have modified to more affordable terms last quarter.