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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.


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. 


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.


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.


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.


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 


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.


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.


December 9, 2011

Fannie and Freddie Lobbying for Payroll Tax Cuts

Category: Fannie Mae News,Freddie Mac News,Published Articles – admin – 3:52 pm

Just when you thought you heard enough of Fannie Mae and Freddie Mac in the finance home news, the government sponsored enterprises make headlines again. Congress and the Obama administration are turning to an unlikely source to pay for the proposed extension of the payroll-tax cut: mortgage-finance giants Fannie Mae and Freddie Mac. The revenue source proposed by both Senate Democrats and House Republicans would boost fees that Fannie and Freddie collect from lenders. But that is raising hackles in the real-estate industry. Builders, Realtors and lenders say it would amount to a tax that would be passed on to mortgage borrowers.

Fannie Mae and Freddie Mac do not originate home loans, but instead buy them from mortgage lenders. They bundle those loans into securities that are sold to investors, and promise to make investors whole if the loans default. To cover any defaults, Fannie and Freddie charge “guarantee” fees to lenders when they buy the home loans. These government entities are not throwing all their eggs in the baskets of mortgage lenders for poor credit any more. Yes they both want to provide financing for borrowers with a range of credit scores, but they are seeking lower risk borrowers.

Lenders pass the home loan-guarantee fees on to borrowers in the form of higher rates. Last year, those fees averaged around one-quarter of one percent of the home loan amount. The Senate proposal directs Fannie and Freddie’s regulator to raise those fees by at least one-eighth of one percent over the next two years. The House proposal calls for an increase of one-tenth of one percent over the same period.

The proposal also would change who receives the fees. Instead of allowing those additional funds to flow to Fannie and Freddie, the plan would send them straight to the Treasury Department, which effectively owns the companies.

The provision wouldn’t have a significant effect on mortgage demand because the home loan rate is at the lowest levels in decades, said Guy Cecala, publisher of Inside Mortgage Finance. Still, he added, “All you’re doing is putting another tax on the homeowner.”

The proposal is the latest example of how the open-ended federal stewardship of Fannie and Freddie is moving in new and unforeseen directions. The companies were taken over three years ago, and Congress and the White House have made no progress figuring out how to revamp them.  ”It’s the precedent here that is troubling,” said Anthony Sanders, a professor of real-estate finance at George Mason University in Fairfax, Va. “This isn’t going to help Fannie and Freddie pay back what they owe and almost adds a permanency to Fannie and Freddie as a slush fund for Congress and the administration.”

An Obama administration official, along with a spokeswoman for Sen. Bob Casey (D., Pa.), who introduced the Democratic proposal, said raising the fees is consistent with the goal of attracting new sources of private capital back to U.S. mortgage markets. That’s because doing so would raise the cost of loans backed by Fannie and Freddie—currently the cheapest in the market —and allow non-government-backed sources of money to emerge.

Still, raising the home loan-guarantee fees could instead steer more borrowers to seek mortgages from the Federal Housing Administration if that agency didn’t take similar steps to raise its mortgage-insurance premiums. Many real estate groups have objected to the home loan-fee provisions because they say it’s largely unprecedented for revenues that Fannie and Freddie collect to be diverted for other purposes.

In a letter to lawmakers Thursday, the Mortgage Bankers Association, the National Association of Realtors, and the National Association of Homebuilders said it is “counterproductive” to direct revenue from Fannie and Freddie “for purposes unrelated to the safety and soundness of the housing finance system.”

Read the original WSJ article, > Fannie and Freddie Fighting for Payroll Tax Entitlements


October 3, 2011

Are FHA Mortgage Programs Performing?

Category: FHA,Published Articles – admin – 10:14 am

According to Paul Miller of FBR Capital Markets, the largest home loan lenders and servicers could be hit with another government loan default fiasco.  It seems that even with the low FHA rates, borrowers are still making payments late and defaulting.

In the wake of the Federal Housing Finance Agency’s mortgage lawsuits against Bank of America, Citigroup, JPMorgan Chase and a dozen other lenders, the nation’s largest banks could be facing a wave of losses on insurance claim denials by the Federal Housing Administration, or FHA.  Miller cited “conversations with industry and Washington contacts,” there is “a growing concern over the risk that FHA mortgages pose to originators and servicers,” since the agency “only a $4.7 billion capital buffer against a $1 trillion portfolio, which translates into a reserves to insured loan ratio, or capital ratio, of 0.50%, well below the 2% mandated minimum.”

This means the FHA could be forced to tap into its credit line with the Treasury in order to continue paying out on FHA lenders and servicers’ claims.

Since “the FHA needs to avoid tapping into its credit line to prevent comparisons to Fannie Mae and Freddie Mac,” according to Miller, the agency has increased its mortgage insurance premiums and increased borrowers’ down payment requirements. If those measures fail to shore-up the FHA’s finances, the analyst said “the agency could turn to widespread claim denials in order to reduce losses to its insurance fund.”  Miller said that the FHA’s focus in its efforts to deny more claims “will likely be on missteps made in the hyper technical servicing process,” although “the possibility remains that the agency could be looking for any mistakes made throughout the loan’s life, therefore exposing the lenders to losses as well.”  While providing detailed loss estimates for the largest mortgage lenders and servicers, the analyst said that “until there is more widespread evidence of FHA claim denials, we believe that the risk is more of a headline risk than a capital concern.” Read the original FHA Mortgage Mess article.


May 4, 2011

Best Practices for Home Loan Financing

Category: Published Articles – admin – 1:22 am

There are a few important steps you need to follow to make sure you are getting the best mortgage at the lowest possible home loan rate. Getting your income documentation ready and cleaning up your credit report should be top priorities befoes shopping online for home loan programs. Most lending companies will want your debt to income ratio to be below 30% after factoring in the perspective home purchase loan payment and housing expenses. Depending upon which home loan program you choose will dictate how much you will need for a down payment.

  • Conventional loans need 20% of the sale price
  • FHA mortgage programs require a 3.5% down payment
  • VA mortgages require no down payment

Read the original article online > Home Financing Tips for First Time Home Buyers.


April 20, 2011

3 Tips for Getting the Right Home Loan Online

Category: Home Loan Market,Published Articles – admin – 2:01 am

Shopping for a home loan online has suddenly become an important step in getting the best mortgage on the market. Were you aware that consumers spend almost twice as much time researching the purchase of a car than they do a home loan?  Yet in the U.S., the average house costs five times more than the average automobile? A recent Zillow survey revealed that American consumers spend ten hours shopping for a car online, while only researching mortgage loan options for about five hours.  Home loan rates are near record lows, so you stand to save a significant amount of money my choosing the best mortgage for your situation.

As a result, people miss opportunities to get lower mortgage rates and better home loans costing them thousands of dollars over the years. To avoid losing out on your hard-earned dollars, here are a few tips to help you take control of the mortgage shopping process:

1. Get your home finances in order. Before you even start shopping for a home loan assess your finances. Determine what you can afford. As a rule of thumb, the total cost of your mortgage payment — including any taxes and insurance—should not exceed 30 percent of your take-home pay. You’ll also want to get a good ballpark estimate of your credit score. Your credit score impacts your interest rate as well as your eligibility to get a loan. Currently, one-third of Americans cannot get a mortgage because their credit score is below 620.  FHA mortgages

2. Pick the type of home loan that meets your needs. There two main types of home mortgages: Adjustable-rate mortgage (ARM) and the fixed-rate loan. ARMs have fixed rates for a short period (usually 3, 5 or 7 years) and then readjust. These mortgages are generally considered riskier because the interest rate and payments can increase when the loan adjusts. However, if you are only planning on living in your house for a shorter period, these loans may make sense for you, especially because you’re likely to obtain lower rates.

A home loan with a fixed rate is just that—the interest rate is fixed. Many people like this type of loan because the interest rate stays constant throughout the period of the mortgage. With both fixed and adjustable rate loans you can select various repayment periods. The most common term is 30 years, but if you can afford the higher monthly payments of a 20- or 15-year term loan, you will save money with the lower interest rate and quicker payoff period. The most important factors in selecting your mortgage type is the length of time you plan on staying in your home and your risk tolerance.

3. Take advantage of your 30-day window. There is no such thing as too many loan quotes. Borrowers may shy away from getting multiple loan quotes, fearing their credit will be impacted when multiple parties check their credit within a short period of time. However, you have 30 consecutive days in which multiple pulls of your credit score, or “rate shopping,” won’t affect your credit. With that in mind, take advantage of the 30-day window and get as many loan quotes as possible to get the best rates and terms. Note that in order to compare quotes apples-to-apples, it is important to get quotes from lenders around the same time as rates can change daily. It is always wise to double-check the rate you get from a single broker or bank to make sure you really are getting a good rate and that you find a lender that you trust.