The Federal Reserve issued the final mortgage rules are effective April 1, 2011, to provide mortgage lenders and loan originators time to develop new originating models and implement necessary changes to their loan originating systems. The final rules, which apply to closed-end mortgage loans secured by a consumer’s dwelling, will:
Prohibit payments to the loan originator that are based on the loan’s interest rate or other terms. Compensation that is based on a fixed percentage of the loan amount is permitted.
Prohibit a broker or loan officer from receiving payments directly from a consumer while also receiving compensation from the creditor or another person.
Prohibit a broker or loan officer from “steering” a consumer to a mortgage lender offering less favorable terms in order to increase the broker’s or loan officer’s compensation.
Provide a safe harbor to facilitate compliance with the anti-steering rule.
Among other provisions, Section 1403 of the Reform Act creates new TILA Section 129B(c). The Board intends to implement Section 129B(c) in a future rulemaking after notice and opportunity for further public comment. Here are a few discrepancies…
The Reform Bill gets a bit more specific with the definition of “steering, but the final rules issued today already impose restrictions preventing the originator from steering borrower into loans that are not in their best interest.
The final rule issued today does not include a provision in the Reform Bill (TILA Section 129B(c)(2)) that says the borrower may not make any upfront payment to the lender for points or fees on the loan other than certain bona fide third-party charges. Make sure you read that closely, it says UPFRONT. Some mortgage lenders charge an appraisal fee disguised an “application fee” and will not refund it if the borrower goes with another lender before the home inspection is completed. This regulation eliminates the borrower paying an “application fee” right after they are issued the GFE.
It is unclear whether or not the Reform Bill’s revisions will affect a home equity credit line as well because they are not considered “Closed End Credit”.
There are several factors that contribute to lack luster home loan activity in the summer of 2010. Yes the tax credit for first time homebuyers expired on April 30th. Sure that was a good incentive to drive first time homebuyers, but this is not the primary reason that home loan application volumes have been faltering the last few months. If Forrest Gump was hear, he might say, “It’ the loan guidelines stupid.” Read the original Nationwide Lender article > First Time Homebuyers Beyond Low Mortgage Rates.
A recent survey from the Mortgage Bankers Association indicated that the cost of mortgage loan origination was soaring. In their report MBA stated that independent mortgage bankers and their subsidiaries reported a significant decline in their profits in the 1st quarter of 2010. The average profit made on each loan was $606, a decrease of 32% from the $890 that was earned in the 4th quarter of 2009 and a 44% decline from the $1,088 that was reported in the 1st quarter of 2009. 75% of the firms in the study posted pre-tax net financial profits in the 1st quarter 2010, compared to 76% in the 4th quarter of 2009.
Survey respondents reported a drop in the average production volume to $157.8 million from $216.5 million in the previous quarter. MBA reported that the home loan volume decline was the main driver behind the decline in profitability. As home loan volume fell, operating expenses increased to $5,147 per home loan compared to $4,402 in the 4th quarter, an increase of 17%. The “net cost to originate” rose to $2,945 per loan in the 1st quarter of 2010, from $2,345 per loan in the 4th quarter of 2009. This figure includes all production operating expenses and commissions minus all fee income, but excludes secondary marketing gains, capitalized servicing, servicing released premiums and warehouse interest spread.
Despite this challenge as originations declined in the first quarter, the independents and bank subsidiaries still produced an average of thirty two basis points of production profit, primarily resulting from higher secondary marketing gains.” MBA’s 1st Quarter 2010 Mortgage Bankers Production Survey covers 295 companies, 70 % of which are independent mortgage companies.
Bloomberg reported that profits by independent mortgage bankers shrank to an average of $606 per home loan in the first quarter, down from $1,088 a year earlier, the Washington-based mortgage bankers group reported yesterday.
An index of home loan applications in the U.S. rose to the highest level in nine months last week as record-low borrowing costs boosted refinancing, the Mortgage Bankers Association said today. Originations probably will decline to $1.48 trillion this year from $2.1 trillion in 2009, according to a July 14 forecast by the group.
Mortgage Giant, Wells Fargo & Co. announced the lender would no longer make subprime mortgage loans and they were closing their consumer finance division that originated bad credit home mortgages. The closing of this Wells Fargo division will result in 3,800 layoffs and the eliminated future subprime mortgage lending. The mortgage giant said the consumer finance division originated less than 2% of its home loan volume in the first quarter of 2010.
According to Wells Fargo chief executive Dave Kvamme “Credit losses in the Wells portfolio that rose in the current economic environment could not continue.” The bank indicated in their quarterly filing, that overall loss rates were at 4.62%. However Wells’ portfolio’s performance was very similar to prime loan portfolios across the board for the mortgage industry. Wells Fargo has been one of the largest home mortgage lenders in the United States for decades and some times the company is forced to make tough decisions that impact the entire industry. A spokesman for Wells Fargo & Co. said they would record charges of about $185 million in total related to the closings. The unit reportedly originated less than 2% of Wells Fargo & Co.’s $76 billion in residential production during the first quarter. A company spokesman for Wells said the company was poised to originate more FHA home loans going forward.
Homeowners residing in the Gulf Coast finally got some good news. Bank of America, Freddie Mac and Wells Fargo announced they were extending mortgage relief to distressed borrowers in the region. Freddie Mac forbearance policies allow its servicers to suspend a borrower’s loan payments for up to three months or reduce payments for up to six months. BofA and Wells Fargo company policies also call for an initial 90-day forbearance of payments in a disaster situation. Read the original article > Gulf Coast Borrowers Offered Mortgage Relief From BofA, Freddie Mac, Wells Fargo
After several mortgage bailouts a no end to loan defaults insight, it is not unreasonable to ask the question —- Why do we need both Fannie Mae and Freddie Mac? In a recent article in the Huffington Post, a strong recommendation from the editor arose for Fannie Mae and Freddie Mac to clean up their act and merge the two government mortgage giants. The Huffington blog called for a new strategic plan for Fannie and Freddie to find a common goal and merge. The federal government has gotten tangled too deep in this mortgage mess and many believe if they continue it will significantly prolong the recession. The FHA mortgage loan programs have been able to recover so why can’t Fannie and Freddie follow suit?
The Post points out that merging Fannie Mae and Freddie Mac to form “Fannie Mac” is a logical step to shift responsibility to new stockholders. The plan will also return the taxpayers’ subsidies to the Treasury. Both GSEs have similar missions. Most of their loan programs are comparable and the merger is logical. The new Fannie Mac will trim its staff and get rid of highly paid senior and middle management who perform the same functions. The GSEs have one-to-four family, home-lending divisions that buy home loans from banking institutions. They have separate divisions to purchase multifamily loans for rental properties with five units or more. Some of the programs within each division are similar enough to be combined and further reduce the company’s size. These government mortgage companies need to dispose of the dispose of their toxic assets like the loan defaults, and bad credit home loans.
Several reverse home mortgage lenders eliminated the origination and servicing fees on their senior home loan products, in an effort to re-brand the mortgage industry. Changes in the Federal Housing Administration Home Equity Conversion Mortgage program, combined with lower home values, resulted in cuts in the amount of proceeds borrowers were eligible for, experts said. Financial Freedom, now part of OneWest Bank, has created the Financial Freedom Senior Saver product, a fixed-rate home equity conversion mortgage which charges no origination and servicing fees.
The new program, the company said, will give seniors a savings of between $3,500 and $10,000 in loan costs. Borrowers still are responsible for the FHA mortgage insurance premium and third-party costs.
According to the Mortgage Bankers Association, the mortgage loan application volume filed in the U.S. last week decreased by 8.5%, compared with the previous week. Mortgage interest rates increased during the week ended Friday compared with the week before, according to the MBA weekly survey. The survey covers about half of all U.S. retail residential home loan applications.
The share of applications filed for a mortgage refinance dropped again last week. Mortgage marketing executive, Bryan Dornan believes, “the decrease in refinance applications can be directly attributed to homeowners becoming more educated on what is need to qualify for a refinance loan in today’s credit crunch.” Dornan continued, “Borrowers have either been denied recently or they understand that have late payments on their mortgage payment will prevent them from qualifying with traditional lenders. Borrowers continue to seek help refinancing existing mortgages dropped to 68.1% of total loan applications from 69.3% the previous week. The four-week moving average for all home mortgages was up 1.6%.
Adjustable-rate home loans made up 4.7% of total applications, up from 4.4% the previous week. Rates on 30-year fixed-rate mortgages averaged 5.03%, up from 4.94% the previous week, while 15-year fixed-rate mortgages averaged 4.35%, up from 4.33%. The one-year ARMs interest rate grew to 6.8% from 6.67%.
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.
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.
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.
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.
Let’s read and evaluate the info on which borrowers get mortgage relief and which homeowners are being hung out for foreclosure. Learn more about what mortgage lenders will be encouraged to participate.Clearly the Obama administration has incentives to mortgage lenders who cooperate with the Government initiative that request lending companies extend loan modification plans to struggling homeowners.
Watch Obama Home Mortgage Relief Video
One of the early surprises was the scope of the mortgage refinancing plan. In case you haven’t been paying attention, this part of the program is aimed at responsible homeowners who would like to refinance to today’s low interest rates but are prevented from doing so due to falling home values.
We had originally been told that only “conforming” loans would qualify for this departure from conventional “loan to value” guidelines. In other words, the benefit would only be available to borrowers whose loan balance was less than the Fannie Mae maximum loan amount of $417,000.
See that the details of the plan enabling FHA home refinancing up to a current balance of $729,750. This part of the plan makes good sense, and here’s why:
> The foreclosure prevention plan is only available to borrowers submitting owner-occupied properties who are not late on their existing mortgage payments. Statistically speaking, this group of homeowners is less likely to default on their home loans.
> The refinance and modification program is only available for home loans which are owned or guaranteed by Fannie Mae or Freddie Mac. Since the government is already on the hook for these loans, it makes sense to make them affordable, in an effort to stem the foreclosure crisis.
> Borrowers must be able to qualify for the terms of the new, lower rate home mortgages and prove enough income so that the new loan is affordable and sustainable. Unlike the modification plan, this refinancing is not temporary.
> Under a typical refinancing, the maximum loan is 80% of the home’s current appraised value. That has been the sticking point for many of these borrowers. But under this program, the loan can go as high as 105% of the appraised value of the home. This change is critical to the mortgage relief program. It reflects the realization that dropping home values in a neighborhood don’t make a borrower less likely to pay on time.Read the complete article >
The Federal Reserve has positioned as a buyer in secondary mortgage markets that had seized up but are vital to enabling lenders to make new home loans.Mortgage lenders sell many of their loans to institutional investors, and higher rates charged by these investors to hold pooled bad credit mortgages make it more difficult for loan officers and mortgage brokers to offer lower rates on new mortgage loans. Conventional and FHA mortgage rates were both slightly lower than the previous week.
The gap has narrowed in just a few months between Treasuries and the mortgage rates that the agencies and mortgage lenders have to carry to make them attractive.Read the original article > Mortgage Interest Rates Drop.
Was it predatory lending or was Wall Street and mortgage lenders simply rolling the dice too much?
Watch 60 Minutes/CBS News Interview on Predatory Mortgage Lending
Paul Bishop’s post “60 Minutes” interview on CBS Morning Show.World Savings’ Paul Bishop spoke with Harry Smith about when he first noticed the company was taking on high risk home loans.
For the mortgage refinance program, only homeowners whose loans are held by Fannie Mae or Freddie Mac are eligible; they have until June 2010 to apply.Consumers should contact their loan servicing company that sends out their monthly bill to find out if their mortgage liens are held by Fannie or Freddie. The two mortgage finance companies own or guarantee almost 31 million home mortgages more than half of all U.S. home mortgage loans.
Mortgage lenders can reduce a borrower’s interest rate to as low as 1% for 3 years, 2% for five years. Mortgage interest rates would then rise to about 5% until the mortgage is paid back.If the loan workout plan works as proposed, it could be a big plus for borrowers like Nick Kavalary, a network cable installer who lives outside Milwaukee.Kavalary, 42, has been struggling with JPMorgan Chase & Co. to get a loan modification. He was finally approved for one this year, but it only lowers his mortgage rate from 10.75%. to 9.8%.Even at the lower mortgage rate, he said, making the loan payment is nearly impossible.“If I can’t pick up a 2nd job, I’m going to lose this home,” he said. “With the job market being the way it is, nobody’s hiring anybody.”
Meanwhile, action to put in place another part of Obama’s housing plan is expected soon on Capitol Hill.A few days ago, the House Democrats agreed to narrow proposed legislation that gives bankruptcy judges the power to change the terms of mortgage loans for borrowers distressed with debt.The latest version of the mortgage relief bill would have the court’s judges considering whether a homeowner had been offered a reasonable loan by the bank to restructure his or her home loan before seeking help in bankruptcy court. Borrowers also would have a responsibility to document that they had previously attempted to renegotiate their home mortgage.
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.
