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October 10, 2013

Will the Government Shutdown Hinder Mortgage Financing and the Housing Recovery?

Category: Published Articles – admin – 2:53 pm

Lending professionals and banking executives have begun to consider the repercussions of the government shutdown. Could this political theater cause the housing recovery to retract? The initial reaction was good as most home loan rates fell which spurred many homeowners to begin the refinance process.

In a recent Wall Street Journal article, Nick Timiraos contemplates the ripple effect in progress. the shutdown means that hundreds of thousands of federal employees have been furloughed. Lenders are unlikely to approve home mortgages for people who are furloughed unless they can qualify for the mortgage without their government salary.

Second, the shutdown could undermine the economy, hindering the real estate recovery. Of course, this aspect of the shutdown will be harder to quantify and it won’t be decipherable from official housing statistics for several weeks.

Third, home loan processing is more difficult for some types of mortgages. In many cases, loan companies require borrowers to sign a form processed by the Internal Revenue Service so that they can verify incomes. The IRS is not currently processing those forms, which means mortgage companies have to decide whether they are willing to process loans without them. If you didn’t know, the FHA is still insuring mortgages, however they are operating with less employees, which means loans that need extra attention may be delayed until the government reopens. According to the Mortgage Bankers Association, home loan applications were up last week from the prior week, but, government applications for FHA mortgage refinance loans dropped. The USDA, is not approving home mortgages for its rural lending program, which means mortgages that did not close before October are on hold until the Federal government reopens. Read the original W.S.J. article.

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September 9, 2013

House Financing Requests Rise with Rates Up and Down

Category: Mortgage Rate News – admin – 11:04 am

As the housing market improves we have seen the demand rise again for home purchase loans. Yes interest rates have been rising but people need loans in order to buy properties across the U.S. Applications for U.S. home loans increased for the 1st time in the last month as mortgage interest rates dropped from their highest level this year.

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The Mortgage Bankers Association said its seasonally adjusted index of residential loan application activity, which includes both refinancing and home purchase demand, rose 1.3% in the week ended August 30th, after sliding 2.5% the prior week. The rise came as 30-year mortgage rates fell to 4.73% versus 4.80% the prior week, which was its highest this year, according to MBA data. Borrowing costs, however, have climbed by more than a percentage point since late May on the view that the Federal Reserve will soon reduce its monthly bond purchases, which have kept a ceiling on rates.

A sign that rising mortgage rates have taken some steam out of America’s housing market recovery was reflected in a separate report last week that showed contracts to purchase previously owned U.S. homes fell for the 2nd straight month in July. Economists largely expect the Fed to announce a pull back at its policy meeting later this month, though some say the central bank will think twice about higher long-term interest rates if there is evidence that they are making a significant impact on housing.  Read the original article now.

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May 13, 2013

MERS Predicts Another Home Loan Crisis

Category: Published Articles – admin – 10:39 am

Just as the dust settles from the recent home mortgage crisis, several credible mortgage advisory companies are predicting more trouble in the mortgage industry. You would think with the Dodd-Frank rules being implemented we would not be hearing this talk so soon. The fact is that not many lenders are offering programs for bad credit home loans so you would think with tighter lending guidelines we would be hearing more good news.

For almost 15 years, MERS and its members have avoided paying recording fees in order to boost the profitability of their operation in the name of creating greater efficiencies. The unpaid fees owed to numerous counties across the nation tally up to millions of dollars to individual counties and billions of dollars in local revenues lost. Some officials estimate banks have avoided paying over $200 billion in recording fees, depriving counties of important revenue.

Several states, including New York and Delaware, have sued The Mortgage Electronic Registrations Systems, Inc. over the last year alleging fraud for using an electronic mortgage database that resulted in “deceptive and illegal practices.” Under the lawsuits, the states claim MERS used false documents in foreclosure proceedings and questions its standing in foreclosure cases.

Now new lawsuits targeting MERS are targeting the rights of jurisdictions to collect fees from MERS members. Minnesota’s Ramsey and Hennepin counties are suing the Mortgage Electronic Registration Systems Inc. and a dozen financial institutions, claiming the use of MERS to avoid paying mortgage-assignment filing fees violates state law. The case is County of Ramsey v. Merscorp Holdings Inc., 13- cv-474, U.S. District Court, District of Minnesota (St. Paul). The District of Columbia and counties in Florida are now conducting due diligence to prepare lawsuits against MERS if the Minnesota lawsuit is successful.

A preliminary study conducted by the Minority Business Enterprise Legal Defense and Education Fund in Washington DC estimates that over the 9 year period from 2002 to 2010, approximately 350,000 mortgages were originated and MERS is estimated to have had a market share of roughly 60%. Of the estimated 210,000 mortgages that were controlled by MERS and its members, Washington, DC’s lost recordation fees are estimated to be in excess of $230,000,000. Chairman Tony Robinson believes these fees, if recaptured, could assist in developing affordable housing in the District of Columbia. Read the original article at the Washington Times. 

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May 6, 2013

Borrowers Migrating to 15 Year Home Loans with Record Low Rates

Category: Mortgage Rate News – admin – 10:58 am

Once again interest rates fell to record lows on Friday. The fixed 15-year mortgage rate dropped to 2.56%. Last year at this time, it averages 3.07%. The fixed 30-year mortgage rate fell to 3.35%.  For the most part, these rates are available to applicants with good credit scores. Some borrowers may qualify for a home loan with bad credit under the government programs if they have the ability to demonstrate significant compensating factors.

According to Frank Nothaft, Freddie Mac’s chief economist. “Residential fixed investment added to overall economic growth over the past eight consecutive quarters and contributed more than 0.3 percentage points in growth over the first three months of this year,” he said. “Near record low interest rates should further drive the housing market recovery over the near term.”

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November 16, 2012

What More Can the Federal Government Do to Revive Mortgage Markets?

Category: Published Articles – admin – 11:53 am

Over the last four years, the Federal Reserve and the Obama Administration has increased their commitment buying mortgages on the secondary market, printed more money and bought the interest rates down to their lowest levels in history. Obama convinced Fannie Mae and Freddie Mac to ditch loan to value requirements completely under the Home Affordable Act.

Needless to say, Barrack Obama has supported federal mortgage relief for distressed real estate markets across the country. The U.S. housing market, despite nascent signs of revival, is still plagued by tight credit, underwater borrowers and overdue loans, Federal Reserve Chairman Ben Bernanke said in a speech Thursday that expressed a great deal of caution about the progress of the U.S. economic recovery.

The comments were notable because the Fed in September launched a program to buy $40 billion per month of mortgage-backed securities, a plan designed in part to ease mortgage lending to support a housing rebound.  The central bank said it would keep buying bonds until it saw substantial progress in the economy, most notably in the job market. But the Fed chairman played down how much progress has been achieved in the critical housing sector. “Although there are good reasons to be encouraged by the recent direction of the housing market, we should not be satisfied with the progress we have seen so far,” Mr. Bernanke said at a housing conference in Atlanta.  Read the complete WSJ post.

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Less Underwater Homeowners Arizona but Negative Equity Levels Remain High

Category: Published Articles – admin – 11:12 am

According to the latest report by Zillow Inc, almost 50% of homeowners throughout metro Phoenix are underwater on their home loans. This is the fifth highest rate in the country. According to the report, about 45% of homeowners in Maricopa and Pinal counties or 352,444 homes were upside-down during the third quarter, a 13%-drop from the two previous quarters when slightly more than half had negative equity in their home, the report said.

Underwater, or negative equity, is when a homeowner owes more on their mortgage than their home’s present assessed value. Zillow calculates the negative equity rate as the percentage of all houses with a mortgage balance in an area that are underwater. Arizona mortgage rates remain affordable at the national average of 3.375% on 30-year fixed loans.

One of the highest negative equity loans in the Valley was in the south Phoenix ZIP code of 85043, where 74% of homeowners were underwater in the third quarter; about 40% of those homeowners were underwater by a whopping 200 %. Read the original Biz Journal article.

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November 14, 2012

What Are the Real Costs of No Closing Cost Home Loans?

Category: Published Articles – admin – 1:49 pm

In a recent article posted on Yahoo by Zillow, the question of evaluating the actual costs on the “no cost mortgage” was introduced. Are there hidden costs with no cost loans that are properly disclosed by a licensed lender under the Federal Truth in Lending Act? The answer is no. Of course it cost a mortgage lender to operate an office with a professional staff of loan originators and processors but the fees are not charged in this case by the lender. The borrower receives a no cost mortgage refinance because the lender is paying the closing cost from his compensation that bank pays the lender.

Where are the hidden costs when comparing mortgages with no closing costs?

I would answer that question with another question. Who cares? If McDonald’s gives away “free burgers” in front of the restaurant in a promotion to increase their local business, would you question the hidden cost on the free burger? No, of course not. Most consumers would assume that McDonald’s has enough money to extend some burgers in an effort to increase their popularity within their growing competition.

In Zillow’s editorial they are quoted saying, “There’s no such thing as a free lunch.” They continued to make their case that a “no cost mortgage” has an expense to borrowers. “Such words have never been more relevant to consumers being pitched no-cost mortgages, which offer borrowers the ability to pay no closing fees.”

No-cost mortgages do in fact offer people another choice in world of mortgage financing. On the other hand, the lender fees associated with processing these mortgages still need to be paid, and the cost comes in the form of a higher interest rate, costing the borrower more over the life of the loan. This is actually a good point that Zillow makes. If you do keep the loan for the entire 15 or 30-year term than you would be wise to pay the $2,500 in lender fees and closing costs on a mortgage with a lower rate. However in this kind of market, how many people are keeping their loan for the duration of the agreed terms. According to Mortgage Business Daily, the average borrower is refinancing nearly two times over a 24 month period.

Zillow Break Down on No Closing Cost Loans: The 30-year fixed mortgage at 3.5% contains total interest paid over the life of the loan in the amount of $184,968, so the total cost of the mortgage (computed by adding the closing costs to the interest paid over the full term) is $187,568. With the 30-year fixed rate no-fee loan at 4%, the total interest over the full term of the loan comes to $215,609. The total cost difference is $28,041, or about $85 per month. So if the closing costs are $2,500, you would actually break even in nearly 30 months by paying the closing costs yourself and forgoing the no-cost option. Read the original Zillow article from Yahoo.

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Frequently Asked HARP Mortgage Refinance Questions

Category: Home Affordable Loans – admin – 12:29 pm

The HARP 2.0 has been one of the few government programs that have actually succeeded in its goal to provide aid for homeowners stuck with an underwater mortgage. For many years, people with negative equity were unable get qualified for mortgage rate refinancing because their loan to value was too high. The latest program from Fannie Mae and Freddie Mac removed the loan to value ratio completely so the ban on underwater refinancing was lifted for any borrower that had a mortgage owned by Fannie or Freddie that was closed prior to the May 31, 2009 deadline.

Will the Homeowners Continue to Seek the Government for Underwater Refinance Solutions in 2013 and 2014?

Lead Planet founder, Bryan Dornan published an article worth reading called, How to Refinance an Underwater Mortgage. There are many indications that President Obama will push a measure that will roll out HARP 3.0 to the pool of borrowers that were outside the boundaries of HARP 2.0.

Question: Can I qualify for a HARP refinance if I am presently delinquent on my mortgage?

Answer:  No, Homeowners who are currently delinquent or have been more than 30 days overdue during the past 12 months generally will not qualify. Contact your servicer to see if a modification under the Home Affordable Modification Program is an option for you

Question: Can I get cash out of a HARP refinance to pay other debts?

Answer: No. The Home Affordable Refinance will not return cash to the borrower for the purpose of paying other debts.

Question: I have both a first lien and a second lien mortgage. Do I still qualify for a refinance under HARP?

Answer: Your eligibility will depend, in part, on two additional requirements:

•The lender that has your junior lien mortgage must agree to remain in a junior lien position.

•You must be able to demonstrate your ability to meet the new payment terms on the first lien mortgage.

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October 31, 2012

Home Loan Limits with Fannie Mae

Category: Fannie Mae News,Home Loan News,Published Articles – admin – 10:23 am

Money News published a good report on conventional loan amount limits with respect to Fannie Mae. Both government sponsored companies are looking to protect taxpayers as many new mortgage lenders have engaged to do business with them. This is also helping many of the largest banks realize more revenues, but Fannie Mae has been forced to set 2013 loan limits on conforming mortgages at a conservative level to minimize risks. It is no secret that the Federal Reserve has committed a significant amount of money and resources in an effort to stimulate the housing sector in the United States.

Will 2013 Loan Limits Stay High on Fannie Mae Mortgage Products?

Fannie Mae, has begun limiting how many mortgages annually it will guarantee or buy from certain firms. Limited competition in the industry and a lack of capacity to meet demand is helping JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon get “very high” home loan margins. That’s frustrating central bankers such as William Dudley, the Federal Reserve Bank of New York president, who said this month that rates on 30-year mortgage refinancing were higher than they could be after the Federal Reserve said it plans to acquire $40 billion of mortgage securities a month. “More direct access to Fannie would end up in more mortgage companies getting a better price and consumers would benefit,” said John Robbins, head of Bexil American Mortgage Inc., who founded two lenders later sold to banks now part of JPMorgan and Wells Fargo & Co. “The problem is, if you’re Fannie you just can’t let all these companies have unlimited access. You don’t want to give a high-speed, temperamental race car to someone who just got a driver’s license.”

Fannie Mae and Freddie Mac were seized by the government that year and have received $137 billion of aid since then, enabling them to finance about two-thirds of new loans. Even with steps to reduce their dominance, including increases to how much they charge for mortgage guarantees, there are few signs of progress. “Reform is not going to happen next year and probably not until 2015,” said Isaac Boltansky, a Washington-based policy analyst for Compass Point Research & Trading LLC.
The future of Fannie Mae and Freddie Mac has been on the backburner this year amid a presidential election and a recovery in housing, including higher prices, home sales and construction. That’s being driven in part by the Fed’s policy of buying mortgage bonds to push down borrowing costs. The Obama administration also adjusted rules to allow more borrowers to tap record-low rates. Refinancing applications soared to a three-year high with 30-year mortgages reaching 3.36 percent this month, straining staffs of lenders, which held rates higher than they could offer in part to reduce demand.

Fed Governor Elizabeth Duke said this month the economy needs more small lenders and that new regulation may drive more out of business. These firms historically have been willing to give more consideration to good borrowers with unusual situations that bigger lenders don’t want to deal with, she said. “You need to make sure you can still make the irregular loan, the one that doesn’t fit exactly in a box,” Duke said.

Regulators are writing rules such as national servicing guidelines that will be relatively more costly for smaller lenders to comply with, said Robert Bostrom, who served as general counsel for Freddie Mac for five years through 2011.“There’s just not enough capacity in the marketplace,” said Bostrom, who is now at law firm SNR Denton. “And we all know who’s going to end up paying for it: the consumer.” Read more: Fannie’s Mortgage Limits Help Banks 

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October 29, 2012

Orange County Homeowners Seeking Cash Loans

Category: California Home Loans,Published Articles – admin – 3:37 pm

Most applicants are unaware that only a few mortgage companies are offering home equity loans. Just a few years back, nearly every loan company was offering a wide variety of 2nd mortgages. It was very common for new home buyers to use a home equity line of credit to by-pass the mortgage insurance requirements for borrowers that had less than a 20% down-payment. With a huge a default rate on these 80-20 loans and the high LTV loans that were consistently delinquent it made it easy for banks to put their home equity products on hold. With Orange County mortgage rates falling to their lowest point of the year, many local residents have been inquiring about 2nd mortgage liens and cash out refinancing because the money is cheap.

Is it getting easier to qualify for a home equity loan in Orange County? Yes and No. Not that many banks or credit unions are offering any substantial home equity programs of late. However, more borrowers are becoming eligible because home prices are rising slightly. There are no banks offering upside-down loans to borrowers that would exceed the 100% LTV plateau.

According to the O.C. Register, “A small fraction of banks are actually reporting they’re seeing stronger demands for home equity lines of credit over the last 3 months,’’ says Keith Leggett, vice president and senior economist at the American Bankers Association. “The home equity lenders are still going to be cautious, but the fact that you are seeing lenders actually tip toe back into that water is an indication that the housing market has probably stabilized and is actually beginning to recover,” he says. “Lenders would not be going into this market if they viewed (that) housing prices were scheduled to drop further.”

ComericA bank reports a recent surge in HELOC applications in Orange County. The bank had a 55% rise in applications for them as of mid-October this year compared with the full year 2011 and a 36% increase in money taken out by borrowers, bank spokeswoman Nancy Tovar Huxen said. There was a 74% jump in equity loan applications in September year to date over the same period ending September 2011, and a 68% increase in cash taken out.

According to Orange County mortgage brokers, in most cases, borrowers need at least a 720 credit score, at least 20% equity in the property, and income documentation that proves stability. And home equity lines of credit don’t come cheap: Average fixed interest rates were 6.68 % as of October 5th, down from 7.06% a year ago, according to HSH Associates, which collects data on the mortgage market. Read the original article from the OC Register.

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October 26, 2012

MBA Forecasts a Rise for Rates on Home Mortgages in 2013

Category: Mortgage Rate News – admin – 4:03 pm

One of the Wall Street Journal’s blogs posted a great article that considers the direction of mortgage rates in the near future. It’s widely known that the Federal Reserve’s commitment to buy mortgage securities at a high volume will help to keep conforming and government mortgage rates at record levels.

Rates Will Remain Low but May Inch Up in 2013

Mike Fratantoni, the vice president of research and economics at the Mortgage Bankers Association believes that the fixed 30-year mortgage rates will stay between 3% and 4% through 2013. According to Fratantoni, “The Federal Reserve has committed to purchasing $40 billion of mortgage-backed securities per month until the labor market shifts beyond the recovery mode.” Based on MBA’s estimate of loan origination, the Fed will be buying 36% of all home loans originated in 2013, and a much higher percentage of those swapped into agency mortgage-backed securities.”

MBA’s chief economist, Jay Brinkman believes that we should expect a high volume of refinancing activity will more than likely continue throughout the coming year. This year the HARP and no cost mortgage refinancing programs have been the most requested type of loans.

Indeed, things are looking at least somewhat better for the industry. Mortgages to finance a home purchase are expected to rise by 16% in 2013, compared with 2012, as the economy grows modestly and more owner-occupied home sales occur, as opposed to cash purchases by investors, Brinkmann said. Also helpful to driving home purchases are the 1.5 to 1.8 million private-sector jobs expected to be created next year, though the growth is below what would be needed for a “robust” home-sales market, he said.

Single-family housing starts are expected to reach 586,000 in 2013, up from 527,000 in 2012, according to the forecast. The median existing-home price is expected to rise to $186,000 next year, from $179,400. While the improvement may be slow, it’s also worth pointing out that the country has added 4.8 million renter households since the end of 2006, while losing 1.7 million owner households, according to the MBA. Read the original Market Watch article discussing the trend of mortgage rates.

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October 8, 2012

Communication with Consumers in Today’s Mortgage World

Category: Published Articles,Subprime Home Loans – admin – 5:34 pm

One of the most critical aspects of adequate client communication is advising applicants of the risks associated with riskier products like adjustable rate mortgages and hybrid ARMs.

According to the ECOA, these risks include:

  • Payment shock when amortizing payments starts
  • Loss of equity in the house used to secure the home loan if the payment agreement enables negative amortization
  • The inclusion of pre-payment penalty terms being disclosed up-front
  • Additional fees associated with no income mortgages.

By practicing ethical loan origination, borrowers will appreciate the wise financial counsel and are more likely to refer business your way.  The Interagency Guidance on Nontraditional Mortgage Product Risks that federal agencies drafted includes three model forms for disclosures for consumers who are considering nontraditional mortgage products. The State Guidance did not incorporate these model forms, but they are an excellent resource for lending companies that are trying to create a program for consumer protection.

The first document is a narrative description of interest-only mortgages and payment-option mortgages and a description of what happens to the loan balance under these types of lending arrangements. The second sample document is a chart that compares the impact of different home loan  features on principal balance and monthly payments. The third sample document is a monthly statement for payment-option loans that shows the impact of each payment choice on the amount owed on the lien. The use of these or similar disclosures shows a commitment to the goal of helping consumers make informed choices about nontraditional mortgages and subprime lending products.

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