Mortgage Lenders Nationwide

Bankers responding to the January 2010 Federal Reserve Senior Loan Officer Opinion Survey on Bank Lending Practices indicated that home loan standards are still contracting. The report also states that consumer demand for mortgage loans continues to decline.   The survey, released on Monday, addresses changes in loan supply and demand over the last three months.  It also included three sets of special questions about delinquency rates of loans made to large and middle market firms, changes in bank policies about commercial real estate (CRE) loans over the past year, and a third set of questions about the banks’ outlook over the coming year for the credit quality of a number of categories of loans. 55 domestic banks and 23 U.S. branches and agencies of foreign banks responded to the questionnaire. Banks continued to tighten standards on residential lending, especially on nontraditional residential real estate loans. 17% of banks that make residential loans reported they had tightened standards on prime real estate loans and 30% reported such tightening of mortgage refinance products.

In addition, a moderate net fraction of banks reported weaker demand from prime borrowers for residential real estate loans. Demand from customers seeking nontraditional mortgages also weakened further over the survey period. Only a small net fraction of banks reported having tightened standards on revolving home equity lines of credit over the past three months, but a large net fraction of banks continued to report lower demand for such mortgage loans.

Demand for both businesses and households across all major categories of loans weakened on net over the past three months. 64% of respondents reported that business inquiries about new or increased credit had stayed about the same over the last three months while 13% reported an increase and 25% a decrease.  A large proportion of respondents reported that their banks were relatively unchanged in their approach to consumer lending.  Over 80% said that their banks policies were unchanged when it came to approving applications for installment, consumer, and credit card loans.  However, a substantial net fraction of banks said they had reduced credit limits on credit cards and had become less likely to issue cards to customers who do not meet credit scoring thresholds. 

Respondents to the October 2009 survey had indicated that they would tighten many of their credit card policies as a reaction to passage of the Credit CARD Act.  Home loan terms were seen as being a little more in flux but the net %ages of respondents who tightened those requirements was lower than in the previous quarter. When considering lending to large firms – those with annual sales of $50 million or more 76 % reported there had been no change in the maximum home equity credit lines, 16% reported a tightening in the maximums and 7% said those terms had eased. Maximum maturity dates were unchanged in 83% of reports. Only 64% of respondents reported no change in the cost of credit lines while over 23% reported that these standards had tightened somewhat or considerably. Close to 26% reported that the spread charged to commercial borrowers had widened over the last three months compared to 58% that reported it unchanged. About 10% reported they had tightened collateral requirements, the remainder reported no change. Figures for lending to smaller companies varied only slightly from those reported for large firms. Read the original article at Mortgage News Daily

The Federal Housing Administration is following through on promises to come down hard on FHA mortgage lenders. The federal mortgage insurer on Monday said it had pulled the licenses of three lenders and was suspending a fourth FHA lender.

The FHA said it would eject Strategic Mortgage Corp., of Oklahoma City, Okla.; ProMortgage Inc., of Claremore, Okla.; and Americare Investment Group Inc., of Arlington, Texas. It suspended Home Mortgage Inc., of Burr Ridge, Ill., for six months. The FHA said it ejected Strategic and ProMortage for failing to uphold FHA loan standards, including charging excessive fees and having poor quality controls. Americare violated terms of a previous settlement, and Home Mortgage failed to disclose the indictment of a part-owner, it said.

Representatives for Strategic and ProMortgage didn’t respond to inquiries seeking comment. Americare and Home Mortgage couldn’t be reached.  The FHA, which doesn’t make loans but insures lenders against losses, has seen its capital cushion erode sharply amid rising mortgage defaults. Officials have promised to be vigilant in cracking down on lenders it believes are putting the agency’s reserves at risk.

Mortgage rates improved a few basis points yesterday. Home loan applications have decreased across the country over the last few weeks.  Home lenders were somewhat subdued in passing along mortgage rate improvements though. This is a function of a few reasons. First, mortgage-backed securities prices have held to a tight range over the course of the week. The second reason is a bit more obvious, the FOMC meeting ended today at 2:15pm. This was a major market event, so it makes sense that mortgage lenders would be defensive ahead of a scheduled event that had the potential to move interest rates in either direction. Before getting to the impact of the FOMC on mortgage rates, allow me to recap the day’s economic data releases. 

Early this morning, the Mortgage Bankers’ Association released their weekly applications index. The MBA survey covers over 50 % of all US residential mortgage loan applications taken by mortgage bankers, commercial banks, and thrifts.  The data gives economists a look into consumer demand for mortgage loans.  A rising trend of mortgage applications indicates an increase in home buying interest, a positive for the housing industry and economy as a whole.  Furthermore, in a low mortgage rate environment, such a trend implies consumers are seeking out lower monthly payments which can result in increased disposable income and therefore more money to spend on discretionary items or to pay down other debt.

The report indicated a 3.3% decline in purchase application activity and a 15.1% decline in refinances.  Of note, the MBA issued a rare comment: “Although rates remain low, there appears to be a smaller pool of borrowers who are willing and able to refinance at today’s rates.” I agree, mortgage rates in the low 5% range are still extremely aggressive when you look back at the history of mortgage rates, but I think a more accurate statement would have been “many borrowers want to refinance to take advantage of near record low mortgage rates, but the tightening of lender guidelines has made it too difficult for borrowers to qualify.”   Maybe that’s what the MBA was really trying to say? What is your opinion?

For more on the MBA Applications Index and the potential impact on the Fed’s intentions to exit the MBS market, check out the other mortgage news stories.  We also received another look into the strength of housing: the New Home Sales survey. This survey is primarily based on a sample of houses selected from building permits. Since a “sale” is defined as a deposit taken or sales agreement signed, this can occur prior to a permit being issued. Changes in sales price data reflect changes in the distribution of houses by region, size, etc., as well as changes in the prices of houses with identical characteristics. It takes four months to establish a trend of new home purchases.

In a recent article, the Lead Planet reported a surge in demand for aged mortgage leads. The Lead Planet is a San Diego based lead generation company that specializes in internet mortgage leads.  The mortgage marketing article noted that rejected loan applicants often become very good leads when the financial consultant offers loan modifications, debt settlement, or credit repair.

Vintage mortgage leads offer discounted marketing for many alternative financial companies.  Typically aged leads are 50-60% less expensive than fresh internet mortgage leads.  View the original Lead Planet Post >Cost Effective Marketing with Aged Mortgage Leads.

The National Mortgage News reported that there may be a bit of a revolution happening with small to medium-sized mortgage loan originators that have been selling their servicing rights on a “released” basis in the secondary market. The revolution is this: more firms are thinking of keeping their SRPs with either in-house or assigning them to a sub-servicer. Why are they keeping the SRP? The short answer is that the price being paid by the mortgage cartel for SRPs bites.

Mortgage industry insiders continue to talk about the new underwriting guidelines and credit rules offering several new alternatives, but mortgage lenders are likely to extend consumers with notices including their credit scores, a bar graph allowing them to see where their scores rank against other consumers, the name and contact information for the credit bureau that provided the information, key factors that might have lowered the score, and guidance on how to correct mistakes in credit files.

During the coming months, mortgage loan shoppers should ask competing lenders how they handle pricing when scores come in low. Ask whether the lender will inform you if something in your files is dragging down your scores and raising your fees and rates. We recommend that you request a free credit report in advance to submitting home loan applications. Start by visiting annualcreditreport.com and requesting a free credit report. It is more important than ever, because in 2010 because virtually all major mortgage sources including Fannie Mae and Freddie Mac have raised their credit-score cutoffs for the best rate quotes and lowest fees. > Go online  and read the complete credit repair article.

Mortgage professionals will have to get used to a new “Good Faith Estimate” to be disclosed in 2010. The U.S. Department of Housing and Urban Development (HUD) has updated and re-released “Shopping for Your FHA loan: HUD’s Settlement Cost Booklet.”  A large share of content in the 49-page publication, which helps consumers comparison-shop mortgages, addresses the standardized Good Faith Estimate (GFE) and HUD-1 settlement statement forms that lenders must start using on Jan. 1, 2010.

HUD estimates that consumers could save almost $700 in costs and fees per mortgage loan on average as a result of the new requirement, which is one of several changes to the Real Estate Settlement Procedures Act (RESPA).  In addition to the updated literature, the agency has set up a RESPA “FAQ” section and other information on a dedicated RESPA page so that consumers, settlement service providers and lenders can gain a better understanding of the new rules.

Here is the location of the .pdf of the booklet that you can save or print out for your reference. http://portal.hud.gov/portal/page/portal/HUD/documents/Settlement Booklet December 15 REVISED.pdf

Mortgage lenders are now required to provide loan applicants with the following:

- Good Faith Estimate—provided at the time of application to borrowers to outline the home loan terms and Total settlement costs.

- HUD-1/HUD-1A Settlement Statements—to inform borrowers of final costs at settlement.

- Servicing Disclosure Statement—to inform the borrower whether another financial institution may be servicing their loan.

- Settlement Cost Booklet—provided within three days of application to inform the borrower of fees involved in home purchase settlement.

HUD announced they were making changes to the guidelines for with FHA mortgage products.  The Federal Housing Administration still has money, but its loan reserves are depleting to dangerously low levels.  FHA’s capital reserves are supposed to be 2% of outstanding loans. According to the actuarial review for fiscal year 2009, the reserves are a mere 0.5%. By the time you read this, FHA loan reserves might have disappeared entirely, thanks to the increasing number of FHA home foreclosures.  All FHA borrowers pay a mortgage insurance premium. These premiums go into the FHA’s capital reserves fund and are used to pay for home loans that are foreclosed upon. As FHA refinance loans and purchase mortgages have become much more popular, and the unemployment numbers have risen, more of these loans have gone bad, requiring more payments from the capital reserves. 

Unlike the Federal Deposit Insurance Corporation , which recently proposed that banks pay three years of insurance premiums at once in order to replenish the FDIC’s reserves, FHA can’t require current borrowers to pay more. But it can change the rules going forward that will make it more difficult to qualify for an FHA loan.  According to a senior official at the Department of Housing and Urban Development , conversations are ongoing to determine what will make the most sense.  “Nothing will be taken off table,” the official said. “Everything needs to be assessed through the lens of the FHA core mission as well as the broad economic policies of the Administration with regard to stabilizing housing.”

AmTrust Bank of Cleveland, which until recently was the nation’s third largest residential mortgage wholesaler, was seized by the government late Friday with a majority of its assets sold to New York Community Bank, Westbury, N.Y., a top ranked player in multifamily lending.  According to Home Loan Wholesale, the government actually took bids on AmTrust’s operations two weeks ago, saying interested investors included BB&T, EverBank, Fifth Third Bancorp, Key Bank and others. Its failure is expected to cost the government roughly $2 billion. The lender’s demise is yet another blow for loan brokers in search of wholesalers willing to table fund their customers. At press time, it was unclear whether NYCB would keep AmTrust’s wholesale division intact. A thrift, AmTrust had $12 billion in assets and until a few years ago was called Ohio Savings and Loan. The thrift was a national correspondent originator, selling its conventional mortgage loans to Fannie Mae and Freddie Mac. NYCB paid no premium to assume all of AmTrust’s $8 billion in deposits, and also agreed to take over $9 billion of the failed thrift’s assets. New York Community and the FDIC will share losses on $6 billion of those assets. The nation’s largest privately owned thrift, AmTrust had been stung by a string of losing quarters and mounting losses from construction and development home loans. Last Monday its holding company, AmTrust Financial Corp., filed for Chapter 11 bankruptcy protection.

The Mortgage Bankers Association said Wednesday Mortgage refinancing applications rose last week as home mortgage rates declined.  Refinance loan applications increased 18.2 % last week, the MBA said, following the third straight week where rates on 30-year home loans stayed below 5%. This brings mortgage refinance applications to their highest level since May.   “Such low refinance rates are spurring mortgage loan demand,” said Frank Northaft, Freddie Mac vice president and chief economist. On Thursday, Freddie Mac said the average rate on 30-year home loans stood at 4.87 %, down 4.94 % from last week. This is the lowest rate since the week of May 21, when they averaged 4.82 %. The record low on mortgage rates is 4.78 %, set last spring.   Average rates on 30-year fixed rate mortgages stood at 5.94 % this time last year.   Homeowners who are considering home refinancing their mortgage may want act soon.  Mortgage rates could inch back up as the home purchases diminish.

Applications for home mortgages dropped to a seasonally adjusted 2.8% for the week ending September 25, compared with the week before. The Mortgage Bankers Association announced yesterday that VA mortgage rates were better, as were FHA mortgage rates.  Many borrowers are excited for the low rate refinancing with FHA customers rushing to qualify for FHA streamline refinance loans that are seeing interest rates below 5% for the first time in a while. The average fifteen mortgage rates declined to 4.46% last week which is down significantly from last year when rates were at 5.78%.

The average mortgage rate on a typical 30-year fixed-rate mortgage dropped to 5.07 % in the latest week, McLean, Virginia based Freddie Mac told mortgage lenders last week. That’s down from as high as 5.59% in June, and up from the record low of 4.78% in April. While mortgage refinance applications rose to the highest since late May in the latest week, they remained 64% below the high this year set in January, according to a Mortgage Bankers Association index. Read the complete article at Mortgage Related News > Bonds for Mortgage Loans Yields Decline.

According to Bryan Dornan, “The best time for a streamline loan for refinancing your FHA mortgage is when you are saving a significant amount of money monthly without adding on additional years with the new mortgage terms.  Read the original article “When FHA Streamline Makes Sense for Mortgage Refinancing.”

Three mortgage lenders approved to originate loans insured by the Federal Housing Administration were suspended by the U.S. Department of Housing and Urban Development over “serious” violations.  HUD recently announced their Mortgagee Review Board had suspended Golden First Mortgage Corp. The Great Neck, N.Y., company allegedly neglected to notify HUD of an Office of Thrift Supervision investigation into the activities of its president or his involvement in an OTS civil money penalty.  Suspended FHA lenders are not allowed to sell new FHA-insured loans while HUD investigates their FHA lending practices, the statement said.

FHA mortgage rates remain low and the Federal Reserve has ensured FHA lenders and banks offering HUD loans his commitment to making affordable home financing available to Americans.  When shopping for a FHA lender, Lenders Nationwide recommends that consumers consider FHA mortgage companies that have a clean HUD record.

Mortgage Brokers Network understands net branching, recruitment and lead generation.  As an industry leader in loan officer recruiting for the banks and net branches, Mortgage Brokers Network provides the largest network of loan officers and active net branches in the country.  MBN helps loan professionals find the lender or bank that best suits their needs and financial goals.

*    Mortgage Training and Loan Officer Education
*    Continuing Education for Loan Officers
*    Mortgage Lead Generation
*    Recruiting for Net Branches
*    Virtual Branch Locators
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*    FHA, VA, Reverse, Conventional Lenders

Visit Mortgage Brokers Network online at http://mortgagebrokersnetwork.com  or call them at 815 -230-9867 to get more information.  Read the original MLV Article online > Mortgage Brokers Network for Leads and Recruiting.

A recent article from the Mortgage Bankers Association reported that home loan applications declined this week in response to the increase of mortgage rates last week.  The volume of home loan applications declined 3.5% compared with the previous week.  Loan applications filed were still up an unadjusted 16.1% for the week ended Aug. 7 from the same week in 2008, according to the MBA’s weekly survey.  FHA mortgage applications filed last week to purchase homes rose 1.1% from the week before. Volumes for conforming, VA and FHA home loan applications were all lower than expected.

Mortgage refinancing applications to refinance existing mortgages decreased 7.2%, on a week-to-week basis, reversing the 7.2% increase during the week ended July 31, according to the Washington-based MBA. The four-week moving average for all mortgages was down 0.7%. Home refinancing applications made up 52.3% of all applications last week, down from 54.2% the previous week. ARM mortgage loans accounted for 5.8%, up from 5.4%.

According to the MBA survey, thirty-year fixed-rate mortgage loans carried an average interest rate last week of 5.38%, up from 5.17% the week before. As for 15-year fixed-rate mortgages, the average rose to 4.71% last week, up from 4.60% the week before. And 1-year ARMs averaged 6.71% last week, up from 6.67% the week before. Read the complete article online> Mortgage Loan Application Activity Slowing

The impact on Taylor Bean and Whitaker shutting down wholesale will be significant for mortgage brokers across the country.  Many mortgage companies used TBW for all their FHA home loans and this will hurt them.  The loss of Taylor, Bean and Whitaker as a wholesale lender is a major blow to U.S. mortgage brokers who say it means home loan applicants who were in process at the wholesaler will need to purchase new appraisals and potentially sit through new waiting periods.

Taylor Bean disclosed Tuesday that it lost its FHA approval and that its Ginnie Mae servicing portfolio was seized. Then it surprised its customers Wednesday with a notice indicating it stopped originating, closing or funding any home loans. In a news release today, the National Association of Mortgage Brokers called the Ocala, Fla.-based lender “a major channel for wholesale mortgage funding.” 

Recent government initiatives to stem the nation’s looming home foreclosures are hampered because banks and other mortgage lenders in many cases have more financial incentive to let homeowners lose their property in  aforeclosure than to work out a loan modification agreement, some economists have concluded.   Policymakers often say it’s a good deal for home loan lenders to cut borrowers a break on mortgage payments to keep them in their homes. But, according to researchers and industry experts, foreclosing can be more profitable.   The problem is that loan modifications is profitable to banks for only one set of distressed borrowers, while home loan lenders are actually dealing with three very different types. Loan modification plans make economic sense for a bank or other lender only if the borrower can’t sustain payments without it yet will be able to keep up with new, more modest terms. A second set are those who are likely to fall behind on their home loan payments again even after receiving a loan workout and are likely to lose their homes one way or another. Mortgage lenders don’t want to help these borrowers because waiting to foreclose can be costly. 

Finally, there are those delinquent borrowers who can somehow, even at great sacrifice, catch up without a modification. Lenders have little financial incentive to help them.   These financial calculations on the part of lenders pose a difficult challenge for President Obama’s ambitious efforts to address the mortgage crisis, which remains at the heart of the country’s economic troubles and continues to upend millions of lives. Senior officials at the Treasury Department and the Department of Housing and Urban Development have summoned industry executives to a meeting Tuesday to discuss how to step up the pace of loan relief. FHA has already added a new mortgage loan modification alternative to the traditional FHA refinance loans, for borrowers whose mortgages are greater than the value of their property.  The administration is seeking to influence lenders’ calculus in part by offering them billions of dollars in incentives to restructure mortgages and home loans. Still, foreclosed homes continue to flood the market, forcing down home prices. That contributed to the unexpectedly large jump in new-home sales in June, reported yesterday by the Commerce Department.   “There has been this policy push to use modifications as the tool of choice,” said Michael Fratantoni, vice president of single-family-home research at the Mortgage Bankers Association. But “there is going to be this narrow slice of borrowers for which modifications is the right answer.” The size of that slice is tough to discern, he said. “The industry and policymakers have been grappling with that.”   The effort to understand the dynamics of the mortgage business comes as the administration is begging lending companies to extend additional mortgage refinancing to help borrowers under its Making Home Affordable plan, which gives lenders subsidies to lower the payments for distressed borrowers. According to RealtyTrac about 200,000 homeowners have received modified loans since the program launched in March, while more than 1.5 million borrowers were subject during the first half of the year to some form of foreclosure filings, from default notices to completed foreclosure sales.

No doubt part of the explanation is that lenders are overwhelmed by the volume of borrowers seeking to modify their mortgages. Rising unemployment and falling home prices have added to the problem.   But a study released last month by the Federal Reserve Bank of Boston was downbeat on the prospects for widespread modifications. The analysis, which looked at the performance of loans in 2007 and 2008, found that lenders lowered the monthly payments of only 3 % of delinquent borrowers, those who had missed at least two payments. Lenders tried to avoid modifying the loans of borrowers who could “self-cure,” or catch up on their payments without help, and those who would fall behind again even after receiving help, the study found.   “If the presence of self-cure risk and re-default risk do make renegotiation less appealing to investors, the number of easily ‘preventable’ foreclosures may be far less than many commentators believe,” the report said.

Nearly a third of the borrowers who miss 2 payments are able to self-cure without help from their home loan lender, according to the Boston Fed study. Separately, Moody’s Economy.com, a research firm, estimated that about a fifth of those who miss three payments will self-cure.

When Adrian Jones fell behind on the mortgage payments for her Dallas home earlier this year, her lender asked her to cut other expenses. Jones said she eliminated movies and coffee breaks. She turned to family members for loans. When that failed to raise enough, she sold her second car.   “It hurt, but it also made sense. The debt was my responsibility,” Jones said.   But six months later, after catching up on the mortgage, Jones is again feeling pinched after her hours as an office assistant at an architecture firm were cut. This time, she’s not sure she can fix the problem herself.   “I am going to try, obviously,” she said. “But it is getting harder and harder.”   Like Jones, those who are most determined to meet their obligations are often unlikely candidates for loan modifications.   “These are the people who will get a second job, borrow from their family to keep up,”

Mortgage lenders also worry that borrowers may re-default even after receiving a home loan modification. This only delays foreclosure, which can be costly to the lender because housing prices are falling throughout the country and the home’s condition may deteriorate if the owner isn’t maintaining it. In some cases, lenders lose twice as much foreclosing on a home as they did two years ago, said Laurie Goodman, senior managing director at Amherst Securities.  

American Home Mortgage Services, based in Texas, was willing to modify Edward Partain’s mortgage on his Tennessee home last April after business at his beauty salon slowed and a divorce stretched his budget. But after months of negotiating with his lender, Partain said he was surprised to learn that it would only lower his payments by $90 a month, instead of the $250 decrease he expected.   “At $250, I would have had a chance, but after they added in late fees and payments, I couldn’t do it,” he said.   Partain soon fell behind on his payments again and went back to American Home Mortgage Services seeking a more affordable payment. Partain said he was told that he was ineligible for another modification because it had been less than a year since his last. A foreclosure sale was scheduled for late July. After American Home Mortgage Services was contacted by The Washington Post about the case, the company said Partain would be considered for the federal foreclosure-prevention program and it delayed the sale by three months. Partain is relieved but anxious about the details. “You want to wait and see what figures they come up with,” he said.   Administration officials have not said publicly how many borrowers they expect to re-default under Obama’s program.   But the experience of a separate program run by the Federal Deposit Insurance Corp. could be instructive. After taking over the failed bank IndyMac last year, the FDIC began modifying troubled mortgages held or serviced by the company. Richard Brown, the FDIC’s chief economist, said the agency expects up to 40 % of those borrowers to re-default.   Even at that rate, he said, the modification program is more profitable than doing nothing. “The idea that 30 to 40 % re-default is a failure to a program is false,” Brown said.

According to a recent Inman News article, Closing.com, an online portal that enables consumers, mortgage consultants and real estate professionals to comparison-shop for settlement services online, says it will display cost estimates in the format required on the standardized Good Faith Estimate before mortgage lenders were required to use that form back on January 1st.

By the 4th quarter of this year, borrowers using Closing.com will be able to submit a “pre-GFE” to home loan originators, allowing for more reliable estimates of closing costs, the mortgage technology company said in announcing the launch of a 2.0 version of its Web site in beta testing.

The Mortgage Bankers Association announced that the mortgage refinance gauge decreased to 1,482.2, the lowest reading since November, from 2,116.3 the previous week. The home purchase index fell to 267.7 last week from a two-month high of 280.3.  Unemployment, which touched a 26-year high in May, and rising borrowing costs discouraged homeowners from refinancing, while a growing number of home foreclosures sidelined potential buyers waiting for house prices to stop declining.

The share of home loan applicants seeking to refinance loans plunged to 46.4% of total applications last week from 54%.  The average interest rate on a 30-year fixed-rate mortgage loan fell to 5.34% from 5.44% the prior week. The rate reached 4.61% at the end of March, the lowest level since the group’s records began in 1990.  At the current thirty-year mortgage rate, monthly borrowing costs for each $100,000 of a loan would be $558, or about $62 less than the same week a year earlier, when the rate was 6.33%.  Many loan officers have voiced their concern that market needs to keep conforming and FHA mortgage rates low until the housing sector can recover.

Do You Qualify for the hottest mortgage loan, HARP?

FHA refinance loans aren’t always attainable for self-employed borrowers looking for fixed rate refinancing, because HUD requires full income documentation.  Loan modification plans can be nearly impossible for borrowers in high cost regions like California, New York and Florida who have jumbo mortgage loans.  Mortgage relief is often easier said than done.

When the stimulus package passed, millions of homeowners felt they were dissed. While the new mortgage relief program focuses on homeowners in foreclosure, it offers nothing for the homeowner who is responsible and current with their home loan payment. To compensate for this oversight, the U.S. Department of Treasury recently launched the Home Affordable Refinance Program (HARP). “HARP was created specifically to provide access to reduced-cost home refinancing for responsible homeowners with no equity in their home. Millions of Americans have lost their home equity due to the decline in home prices,” said Joe Engle, president of Loan Smart, Inc. in Thousand Oaks, California.

Presently, millions of homeowners find themselves in the unsettling predicament of having to sit on high mortgage interest rates that are not affordable or about to rest to a higher payment that will tip the budget negatively.  Most good borrowers are unable to refinance their homes and take advantage of historically low interest rates, because of the declining home values.  

Through the Home Affordable Refinance Program 4 to 5 million responsible homeowners will have the opportunity to refinance their homes, even if they owe more than 80% of their property’s value. “With low fixed rate mortgage refinancing, many families could see a reduction in their mortgage payments by thousands of dollars per year,” said Engle. Unfortunately, not everyone qualifies for Home Affordable Refinance Programs. This refinance program only benefits homeowners with home mortgages owned or guaranteed by Freddie Mac and Fannie Mae, which are Government Sponsored Enterprises. “At Loan Smart, we can assist homeowners with determining if they qualify for HARP by researching to find out if their loan is owned by either Freddie Mac or Fannie Mae,” commented Engle.   Engle points out that HARP will offer a huge advantage to homeowners with first and second mortgages. HARP will allow for refinancing of the first mortgage up to 105% of the current home value, with the second mortgage remaining in place.

Most mortgage industry insiders believe there is still a 12 to 18 month window of opportunity left for foreclosure prevention services like loan modification and loan workouts.  Loan modification leads are still hot in the mortgage marketing circles.  Foreclosure scams continue to run rampant and that makes consumers very weary. 

New measures are being implemented to take aim at what consumer groups say is a surge in fraud by entities offering to help struggling homeowners modify their home mortgage loans or avoid foreclosure.  “There are a lot of different scams going on right now,” said Martha Lucey, president of ByDesign Financial Solutions, a nonprofit credit-counseling agency. “Homeowners are struggling with affordability and many are desperate. When consumers are desperate, they’re willing to pay for unrealistic financial solutions.”

The most common allegations involve struggling homeowners who make up-front payments, often in the thousands of dollars, to firms that promise to work with their mortgage lender to renegotiate their mortgage and lower their monthly home loan payments. The mortgage loans are never changed and the money is gone.

A bill by state Sen. Ron Calderon, D-Montebello, would prohibit firms from charging advance fees for mortgage loan modification services. Supporters say the bill would prevent people in bad financial straits from becoming even worse off.

In addition, the legislation would require for-profit firms to tell potential customers that they could get free assistance from various nonprofit counseling agencies.   “The federal fix is going to take care of a lot of the problems we’re experiencing on the foreclosure side of things,” Calderon said. But people looking for help need to be protected, he said.

The California Association of Realtors opposes the bill. The organization objects to the measure’s blanket prohibition on advance fees.  Assemblyman Kevin Jeffries, R-Lake Elsinore, said he is open to more foreclosure-related safeguards, up to a point.”  My view is that the federal government is getting pretty pro-active in cleaning up the lending industry,” he said. “There’s no reason to duplicate what’s happening at the federal level.”

Several other bills build on parts of SB 1137 dealing with rental tenants in foreclosed properties.  One measure would make the buyer of a rental property at a foreclosure sale responsible for returning the tenants’ security deposit.

According to Jim Miller, another bill would give renters up to a year to leave properties that revert to the lender after foreclosure. The renters would have to move if new owners want to move in.  “We think having a family there is much better for all parties involved,” said Ronald Coleman, legislative director of the low-income advocacy group Association of Community Organizations for Reform Now, known as ACORN. Vacant homes get run down and attract vandals, he said.

2009 has clearly been a good year for mortgage rates and homeowner, mortgage lenders and brokers have all benefitted from the Federal Reserve’s commitment to lower interest rates.  Which direction will the mortgage rates go from here is anyone’s guess.

Home mortgage rates remain low as the Federal Reserve continues to make moves to keep them that way. Freddie Mac’s weekly rate report says thirty-year fixed-rate mortgages fell to an average 4.82%, down from 4.86 % last week. A year ago, thirty-year mortgages were averaging about 6%. 

Long-term fixed rate mortgage loans are now on par with many adjustable rate mortgages. A one year ARM also averaged 4.82% this week. “Long-term fixed-rate mortgage rates have remained below 5% for the past ten weeks as the U.S. Treasury and Federal Reserve act to keep interest rates low through security purchases,” says Freddie Mac chief economist Frank Nothaft. “The treasury purchased $136 billion in mortgage-backed securities through April and the Fed bought $740 billion through mid-May.”

The Federal Reserve has also purchased $115 billion in Treasury bonds since March. Homebuilder confidence rose this month, according to the National Home Builders Association, despite a drop in housing starts. The decline in construction was led primarily by a continued drop in condo and apartment construction.

The Mortgage Bankers Association also reported this week a continued rise in home loan applications, led by refinancing activity.   Mortgage refinancing now accounts for 74 % of all mortgage applications.

In a recent NAR survey of Realtors, the report indicated that 85% home buyers appeared to be disinterested in the higher-end real estate market because they can’t get jumbo mortgages or didn’t want to pay higher mortgage interest rates.  Although NAR’s re Regulators said the stress tests showed 10 of the nation’s 19 largest banks needed to raise $74.6 billion in capital between them. The banks regulators said must raise the largest sums — Bank of America ($33.9 billion), Wells Fargo ($13.7 billion) and GMAC ($11.5 billion) — are big players in mortgage lending.

In general, the need to raise capital can constrict new home mortgage lending, because new home loans create additional capital requirements. Regulators base mortgage lenders’ capital requirements, in part, on the dollar amount of mortgage loans outstanding, and projected losses on those home loans and other investments. The results of the stress tests shouldn’t have any impact on conforming mortgages, because lenders can sell the loans they originate to Fannie and Freddie, said Tom Kelly, a spokesman for Chase, the consumer and commercial lending business of JPMorgan Chase & Co. Kelly said conforming home loans have made up more than 90 % of Chase’s originations in recent months.   “In terms of whether to do more jumbos or not, it’s a decision about pricing, risk and whether holding jumbo mortgages on your balance sheet is the best use of your capital,” Kelly said. “The secondary market for jumbo mortgage loans has not returned at all, so each individual bank has to decide, one, do they have the capital, and two, do you want to use that capital?”

For months, thousands of homeowners have been awaiting Barrack Obama’s new administration because of the promised “Hope” and lengthy discussions regarding foreclosure prevention and mortgage relief.  Of course their have been distressed homeowners who have reported better loan payments, but most are growing frustrated in a long line of borrowers awaiting a loan modification or a foreclosure.  Foreclosure scams and fraudulent loan modification programs have been reported in an alarming fashion.

The new federal program to let people refinance or renegotiate their home loans is expected to help millions of Americans lower monthly payments and avoid foreclosure. So what strings are attached?  Some homeowners have expressed concerns about the impact to their credit report or the tax implications from a short sale or loan modification. Other struggling borrowers who are still paying low teaser mortgage rates might fear their monthly mortgage payment skyrocketing.  Here are some questions and answers on concerns homeowners might have about the Making Home Affordable program.

QUESTION- How will my credit report and score be affected?

ANSWER- According to Norm Magnuson of the Consumer Data Industry Association, a trade group based in Washington.  In most cases, mortgage refinancing does not affect your score since it’s simply a rewritten mortgage, this is especially true of home refinance under a federal program like FHA since one of the terms of eligibility is that homeowners can’t have missed a payment in the past year.  It is still unclear what impact a federal mortgage modification an adjustment to terms of an existing home loan, rather than a new one — will have on credit profiles, however, Magnuson said. Regulators haven’t yet determined how the loan modifications will be reported, if at all.

If you are considering submitting a new application for a loan workout or modification under Making Home Affordable, it means you’ve already missed payments and hurt your credit profile. A loan modification should improve your credit profile in the long-run since the idea is to get you on track for meeting payments.  It might also free up money to pay off other debts.  Credit repair has been increasing in popularity and this may be one of the factors.

QUESTION- Is it possible my payments will be higher?

ANSWER- If you’re still paying a low, introductory rate, it’s possible your monthly mortgage payment will increase slightly under the federal refinancing program. But the idea is to avoid the big interest rate spikes that typically come with variable rate mortgage loan.  After submitting a request for the Making Home Affordable program, your current mortgage lender should give you a “good faith estimate” that includes your new interest rate, mortgage payment and the total cost of the loan. Compare the numbers with your current loan; you might decide that refinancing isn’t an improvement.  You can also check out the payment reduction estimator on the government’s Web site at http://www.makinghomeaffordable.gov.

QUESTION- Should I wait to see if mortgage interest rates come down in a couple of months before applying?

ANSWER- Probably not, since mortgage rates are at historic lows.  Last week, rates on thirty-year mortgage loans inched upward to nearly 4.9%, but that’s still close to the lowest level since the Great Depression.  Ken Inadomi, director of the New York Mortgage Coalition said, “Waiting for mortgage rates to drop further would be irresponsible and could backfire.” Even low intro mortgage rates should not be that much lower than fixed interest rates these days and in some cases, they may even be higher. So it’s probably in your best interest to lock in now to a low rate refinance loan that you can afford.  Remember, the Making Home Affordable program expires on June 10, 2010.

QUESTION- What are the tax implications?

ANSWER- Charges for refinancing a mortgage are tax deductible. The total cost should be evenly divided to be deducted over the life of the mortgage, Inadomi said. Other costs, such as attorney or appraisal fees, are not deductible.You will also have to adjust your mortgage interest deduction if you get a lower interest rate.

QUESTION- Can I try to refinance or renegotiate my mortgage on my own, without going through the program?

ANSWER- Working directly with a lender shouldn’t be a problem if you think you’re not eligible for the federal program. Just beware of getting a third party involved, especially if they ask for an upfront fee.