The Federal Bureau of Investigation would get funds to boost the ranks of agents investigating mortgage fraud and predatory lending under a budget blueprint unveiled by the Obama administration Thursday. The Department of Housing and Urban Development would also receive increased funding to crack down on fraudsters and mortgage lenders who prey on home buyers and refinancing borrowers.The funding increases come amid evidence of rising incidence of mortgage fraud, perhaps the result of increased scrutiny of illegal or predatory practices amid the housing meltdown.
Suspicious activity reports filed by financial institutions on suspected mortgage fraud increased 44% in the 12 months ending in June 2008 compared with the prior year, the Financial Crimes Enforcement Network, a U.S. Treasury unit, said this week. The White House budget blueprint doesn’t specify the increase spending sought to combat mortgage fraud. Details of its budget will be unveiled in mid-April.The White House has proposed a total budget of $47.5 billion for HUD for fiscal year 2010, a $7.4 billion increase over the level contained in a House budget bill approved on Wednesday. The $47.5 billion doesn’t include $13.6 billion in economic stimulus funds devoted to HUD projects and programs, of which roughly $10 billion have already been allocated by the agency.
Low mortgage interest rates continued this week amid mixed reports about the slowing economy, Freddie Mac’s chief economist said on Thursday.According to Freddie Mac chief economist Frank Nothaft, “Both the core producer price and consumer price indexes ticked up in January, higher than the market consensus, while consumer confidence in February dropped to the lowest reading since records began in January 1967,” said, in a news release. FHA mortgage rates remain low with 5.625% average on thirty year fixed rate home loans.
Thirty-year fixed-rate mortgages averaged 5.07% for the week ending February 26, up from last week’s 5.04% average but still lower than their 6.24% average a year ago, according to Freddie Mac’s weekly survey of conventional rates. Meanwhile, fifteen-year fixed-rate home loans averaged 4.68%, unchanged from last week and down from 5.72% a year ago.
5-year Treasury-indexed hybrid adjustable-rate mortgages averaged 5.06% this week, up from 5.04% last week; the ARMs averaged 5.43% a year ago. 1-year Treasury-indexed ARMs averaged 4.81% this week, up slightly from 4.80% last week; the ARMs averaged 5.11% a year ago.To obtain current mortgage rates, the fixed interest mortgage loans and the 5-year ARM required payment of an average 0.7 point, while the 1-year ARM required an average 0.6 point. A point is 1% of the mortgage amount, charged as prepaid interest.
In the news release Nothaft said “Reductions in home prices and affordable mortgage rates have yet to spur housing demand.” You can see how new sale prices continued to decline home. “For instance, house prices declined by 8.7% for the twelve months ending in December 2008 and were down 10.9% from their highs set in April of 2007, according to the Federal Housing Finance Agency’s purchase-only monthly home price index.
Now that President Barack Obama’s $787 Billion Economic Stimulus Bill has been signed into law and will take effect on March 4, many American homeowners are anxiously wondering how this bill may affect the housing market and possible mortgage relief. Despite primarily focusing on bolstering the economy by creating jobs and reviving spending, the bill includes steps to revitalize this critically important segment of the American economy. But what impact will the stimulus package directly have on your mortgage?
President Obama’s financial resue plan, named the American Recovery and Reinvestment Act, is designed to address two groups of homeowners: those who are current on payments but have high mortgage rates and not enough equity to qualify for a mortgage refinance loan, and those who are at risk of losing their homes to foreclosure.
Watch Obama’s Radio Address 01-31-09
The mortgage rescue plan also intends to provide $200 billion in additional financial backing to Fannie Mae and Freddie Mac to increase money available for home lending.These steps will directly help homeowners and new home buyers seeking a new mortgage, says Michael Isaacs, president and CEO of Residential Finance Corporation a national mortgage lender specializing in FHA refinances. “The stimulus package aims to make money more readily available for lenders to help those who are currently in need,” says Isaacs. “The American Recovery and Reinvestment Act will directly help those seeking to refinance out of bad mortgages as well as those looking to become homeowners for the first time.”
Charlie Lyons elaborates further on the opportunity available for investors to purchase defaulted home mortgages and the roots of the foreclosure crisis.
The housing crisis came as a result of the subprime mortgage meltdown and subsequent banking crisis.FHA mortgage lenders have been trying to help homeowner recover with FHA loan programs like FHASecure and Hope for Homeowners, but they have not been able to slow the loan delinquencies and sliding home values.
The Federal Reserve signaled Wednesday that it stands ready to use new unconventional tools, or expand existing ones, to spur lending and consumer spending that could help lift the economy out of a painful recession.The Fed also agreed to keep the targeted range for the federal funds rate between zero and 0.25% for “some time” to help brace the economy. Economists predict the Fed will keep the funds rate, the interest banks charge each other on overnight loans, at that record low level through the rest of this year.
Fed Chief Bernanke Endorses Stimulus Package View the Analysis and Discussion with Former Fed Governor Lyle Gramley.
With its key lending rate to banks already near zero, the Fed pledged anew to use “all available tools” to revive the economy.Specifically, the Fed said it is “prepared” to buy longer-term Treasury securities if the circumstances warrant such action. At its previous meeting in December, the Fed said it was merely evaluating that option. Jeffrey Lacker, president of the Federal Reserve Bank of Richmond, was the sole dissenter on this point. He wanted the Fed to move forward on buying the securities.Doing so would help drive down mortgage rates and provide help to the stricken housing market, economists said.Mortgage lenders continue to report interest rates in the 5% range for 30-year fixed home loans.
For example, many thirty-year mortgage loans featuring fixed interest rates are targeted to the 10-year Treasury note. If the Fed were to buy that security, it would push down rates on home mortgages connected to it. The same logic would apply to other Treasury securities.“So many consumer rates are pegged to Treasury rates — homes, cars,” said Joel Naroff, president of Naroff Economic Advisors. “If the economy is to recover, consumers need to borrow and need to borrow at reasonable rates. The Fed made clear that it is prepared to make that happen.”The Fed also said it “stands ready” to expand another program aimed at providing relief to the crippled mortgage market.
Under that program, the Fed is buying up to $500 billion in mortgage-backed securities guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae. It also has agreed to buy up to $100 billion of Fannie and Freddie debt.Mortgage interest rates have fallen since the program’s announcement late last year. The Fed said it could buy more of these bad credit mortgage securities or extend the length of the program.
The Fed on Tuesday took measures to stem home foreclosures as required by a 2008 law. The relief would apply to mortgage assets the Fed is holding because of last year’s bailouts of Bear Stearns and insurer American International Group. Distressed borrowers could see the amount they owe on their home loan lowered or their interest rate reduced, among the options for help.But borrowers have no way of knowing whether their mortgage loans are held by the Fed, because their loan payments are collected by other companies, known as loan servicers.
The central bank also will be launching a program aimed at bolstering the availability of consumer loans. Under the program, which is expected to start in February, up to $200 billion will be made available to spur auto, student and credit card loans as well as loans to small businesses. To do that, the Fed will buy securities backed by those different types of consumer debt. The Fed also hopes that action will lower rates on those loans.
The Fed said Wednesday that it will assess whether the program should be expanded in size or scope. Fed officials previously have mentioned the possibility of expanding the program to provide financing for other types of securities, such as those backed by commercial mortgages.
Fed Chairman Ben Bernanke and his colleagues are battling a three-headed economic monster: crises in housing, credit and financial markets that — taken together_ haven’t been seen since the 1930s. Despite the Fed’s aggressive rate-cutting campaign, a string of radical Fed programs and a $700 billion financial bailout program run by the Treasury Department, credit and financial markets are still stressed and far from normal. “Conditions in some financial markets have improved, in part reflecting government efforts to provide liquidity and strengthen financial institutions; nevertheless, credit conditions for households and firms remain extremely tight,” the Fed said. Homeowners need quick mortgage relief with loan modification programs that guarantee homeowners affordable home loan terms.
Warning that the nation is at a “perilous moment,” President Barack Obama made a fresh plea to Congress Wednesday to enact a $825 billion package of increased government spending and tax cuts to stimulate the economy. The recession, now in its second year, could turn out to be the longest since World War II. The nation’s unemployment rate bolted to a 16-year high of 7.2% in December and could hit 10 % or higher at the end of this year or early next year. A staggering 2.6 million jobs were lost last year, the most since 1945, though the labor force has grown significantly since then. Another 2 million or more jobs will vanish this year, economists predict.
Against that backdrop, the Fed raised the specter of deflation — but didn’t use the word. The Fed saw a risk that “inflation could persist for a time below rates that best foster economic growth and price stability in the longer term.” With jobs disappearing, home values tanking, foreclosures soaring and nest eggs shriveling, consumers have sharply cut spending. That, along with the housing collapse, has played a big role in causing the economy’s backslide. Many economists predict data will show the economy contracted at a pace of 5.4% in the final three months of last year when the government releases the gross domestic product report Friday. If they are correct, that would mark the worst performance since a drop of 6.4% in the first quarter of 1982, when the country was suffering through a severe recession. The economy is still contracting now — at a pace of around 4%, according to some projections.
Greg McBride from BankRate discusses the mortgage meltdown and Suzy Orman give their different points of view on the Federal Reserve’s rate cuts and how it helps the homeowners, consumers and mortgage lenders!Mortgage interest rates remain low for conforming and FHA home loans.
