Mortgage Lenders Nationwide

Much to the surprise of many pundits, the recently signed Financial Reform Bill did not outline guidelines for regulators to begin crafting the future of Fannie Mae, Freddie Mac, and Ginnie Mae.  Although this was viewed as an oversight by most, it was the right move because it will allow our political and financial leadership to focus on repairing the mortgage finance system.  Remember that the government loan programs Fannie, Freddie, VA and FHA loans maintain nearly 96% of the mortgage market-share yet they are exempt from most of the financial reform repercussions.   

In April, Treasury outlined their “Housing Finance Reform” objectives. The administration’s proposals will be designed to achieve four objectives.

1. Mortgage credit should be available and distributed on an efficient basis to a wide range of borrowers.
2. A well-functioning housing market should provide affordable housing options, both ownership and rental, for low and moderate-income households.
3. Consumers should have access to mortgage products that are easily understood.
4. The system should distribute the credit and interest rate risk in an efficient and transparent manner that minimizes risk to the broader economic system an does not generate excess volatility or instability

Demand for home loan financing has hovered near the 13-year low reached earlier this month, showing the lowest mortgage rates on record have yet to spur sales after the expiration of a government tax credit. It will take gains in employment and in consumer confidence to boost housing.   “The housing market is weak,” Paul Anastos, president of Mortgage Master Inc., a Walpole, Massachusetts-based mortgage lender, said in an interview before the report. “There’s good opportunity out there in the housing market, but because consumer confidence is fairly low, people aren’t really shopping. They’re worried about other things, like jobs.”

According Paul Muolo from Origination News online, CitiMortgage ceased closing wholesale jumbo mortgage loans a few months ago.  This devastated many mortgage brokers who counted on Citi for competitive jumbo mortgage loan products. National Mortgage News reported that CitiMortgage has started to slowly bring back their jumbo mortgage products in their retail branches. Muolo cited a former Citi jumbo mortgage loan broker that said Citi’s retail jumbo pricing “is not competitive.” In addition, to he reported that certain mortgage service companies are not approving loan modification plans unless the borrower is at least 30-days delinquent.

For most of the year, loan companies have been searching for refinance leads with better conversion ratios.   U.S mortgage demand increased again last week, led by a rebound in refinancing applications as mortgage rates hit the lowest levels of 2010.   Bryan Dornan, the founder of  the mortgage lead company, the Lead Planet said, “Mortgage marketing has been difficult in 2010 for lenders and brokers that focus solely onhome  refinancing, because lending guidelines have tightened to a very uncomfortable level.” Finding a homeowner who qualifies for a refinance is ten times more difficult than it was just 3 years ago. 

In the article, Lead Planet indicated that refinance lead volumes surged almost 20% last week.  Apparently their lending partners utilized the increased lead volumes and new loans submitted into process increased tenfold.  A spokesman for the Lead Planet said Purchase lead volumes rose 5.75% even though nationally home loan applications had come to a screeching halt.  

Overall, mortgage demand increased 3.9% on a seasonally adjusted basis. Unadjusted, demand increased 3.4% from the week before.  30-year fixed-rate mortgages dropped from 5.02% to 4.96%, while rates of 15-year fixed-rate mortgages fell to 4.32% from 4.34%.  Interest rates on one-year adjustable-rate mortgages decreased from 7.03% to 6.86%.  Read the original article online > Lead Planet Reports Big Jump in Mortgage Refinance Lead Volumes

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.

It is very important that you consider the lending costs and benefits when comparing mortgage refinance loans. Charles and Nancy Henson refinanced their home mortgage last year, and Charles Henson says it was not a difficult decision. “The mortgage rates had dropped, and we wanted to do something a little more secure,’’ he said. “Our previous rate was 5.625%. We ended up locking our home loan at 4.875%.’’ The current mortgage rates have spurred many to consider mortgage refinancing – basically replacing one loan with another. Depending on the new loan’s terms, it can save you tens of thousands of dollars.

Each refinance mortgage is its own case, due to many factors: your loan, your credit, your home’s equity, the interest rate, the cost of the refinancing, and so on. Some things to consider:

■ Interest rate. “If you can save half a point or more on your interest rate, that can be a good indicator to refinance,’’ said Kay Sandusky of Citizens National Bank of Southwestern Ohio. Sandusky added: “If it is going to cost you $2,000 to do the refinance and you are saving $200 per month, do the math and consider how long you will be in the home and if that is a savings to you.’’ “How long you’re going to be in the home is a big factor,’’ Penner said. “If someone is going to live in the house three to five years, [refinancing] may not be a great idea.’’
■ Total cost benefit. Kim Penner of Union Savings Bank said you have to consider total costs when considering refinancing. “Your lowest interest rate alone is not always your best deal,’’ Penner said. “You have to see if it makes sense to get a lower rate if your costs are high.’’
■ Short term vs. long term. “Think about what term of loan you want,’’ Penner said. “Is cash flow an issue? Are you looking at retiring?’’ He added that the sooner you pay off a loan, the more you save on interest payments. “The difference in interest could be $40,000, $50,000, $60,000,’’ Penner said. Henson is retired and his wife is self-employed, but he said they chose a 30-year rate because it was a more conservative approach, given the economic climate. They “decided we could make a 30-year into a 15 by paying more on the principal each year,’’ Henson said. “With a 30-year rate, you have the flexibility if you want to pay extra.’’
■ Credit score. Borrowers who have at least a 740 get the best terms. If your credit score is lower, you can still get a loan, but at a higher interest rate.
■ Know your home’s equity. “You have to have 20% home equity ask for a conventional home loan without private mortgage insurance,’’ Sandusky said, though there are other options. FHA home loans have mortgage insurance, but if your credit is outside of the conventional box or if you have no equity, talk to a FHA mortgage company, because these government loans may be your best option for refinancing.
■ Talk to a professional. “I ask a lot of questions about the borrower and offer options,’’ Penner said. Be careful shopping for a mortgage online. Don’t let banks obtain your credit report each time. “Multiple inquiries on your credit report in a short period of time can harmful to your credit,’’ Sandusky said. “Know your credit and tell the bank.’’

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.

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 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
*    Loan Modification Companies
*    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.

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.” 

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.

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.

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.

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 2^nd 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.

Wells Fargo & Co. announced Thursday the completion of its merger with Wachovia Corp., resulting in a monstrous distribution system for financial services with 1.4 trillion in assets and 11,000 stores nationwide servicing 48 million banking households and employing 276,000 employees.

The Board of Governors of the Federal Reserve approved the merger in mid-October following a debacle between Citigroup Inc. and Wells Fargo over which suitor would acquire Wachovia’s banking operations — Citi pulled out of talks after four days of discussion on splitting Wachovia’s assets.  Get the Mortgage News as it happens>

As of Thursday, customers of Wells Fargo and Wachovia were granted access to use all the company’s 12,260 combined automated teller machines.  Pat Callahan, an executive vice president and head of the Company’s merger transition, said Wachovia customers will continue to see the Wachovia brand in their banking stores and communities for the near future. “The key to a successful integration will be our ability to provide outstanding customer service throughout the integration,” said Callahan. “So we’re going to take our time and do this right. Wells Fargo and Wachovia customers should continue banking as they do today…”  Wells Fargo continues to be one the most respected mortgage lenders nationwide.

At closing, Wells Fargo acquired all outstanding shares of common stock of Wachovia in a stock-for-stock transaction. Wachovia shareholders received 0.1991 shares of Wells Fargo common stock in exchange for each share of Wachovia common stock they owned. Shares of each outstanding series of Wachovia preferred stock were converted into shares or fractional shares of a corresponding series Wells Fargo preferred stock, having substantially the same rights and preferences, Wells Fargo said in a press statement.  Read the Complete Bank Merger Article >

In a recent article, Aleshia Howe considers the impact of low interest rates and the lack of home financing in recent weeks.  Mortgage lenders and consumers alike have watched home mortgage rates tumble to near mid-4 % range before quickly rising above than 5%. As home mortgage rates continue to flirt with 30-year lows, local mortgage lenders say they’re seeing a noticeable spike in refinancing inquiries, but the historic low rates have done little to convince “looky-lue” homebuyers to re-enter the market.

Is now a good time for New Homebuyers to Jump in Because Home Mortgage Rates are low? 

The volatility in the market is expected to hang around. However, with mortgage rates approaching record lows, applications for the week ended Dec. 26, 2008, ran 155% ahead of the mortgage activity seen during the same week in 2007, according to the Mortgage Bankers Association’s weekly survey.    Many mortgage lenders say the rise in applications coincided with another drop in mortgage rates, as the federal government’s efforts to throw a lifeline to the residential mortgage market begin to manifest.  FHA home loan rates remain low and most of the new home loan applications reflect some type of FHA loan product.

According to the MBA’s survey, rates on thirty-year fixed-rate mortgage loans averaged 5.03% last week, down from 5.04 % the previous week.  Mortgage refinancing applications for refinancing made up 82.9% of all applications filed for the week ending Dec. 26, 2008, while the share of applications for adjustable rate mortgages, or ARMs, averaged 0.8%.  Not unlike the refinance boom that occurred during the last economic downturn in 2003, local lenders say their phones are continuously ringing and home refinancing is on most borrower’ minds. The difference between 2003 and now, however, rests in the guidelines.  “Mortgage rates have gone down; they’re not the lowest they’ve ever been, but they are definitely the lowest they’ve been in a while. Of course, these days are tougher than in the old days because of what’s gone on in the past year or so,” said Bob Neville, lender at Franklin Financial Mortgage in Southlake and board member with the Dallas-Fort Worth Association of Mortgage Brokers, or DFWMBA. “Things have tightened up considerably and it’s a whole new ball game, but people with good credit and a little equity are able to get some very nice rates.”

Scott Burdette, managing director of the Dallas-Fort Worth offices of IRR–Residential Valuation Consultants, said his firm also has seen a drastic uptick in refinancing applications for local properties.  “You’ve got willing people, but not all are capable because of new rules,” he said. “But there’s a definite spike and that means at least people are trying to be smart and make sure they’re in the best situation they can be in.”  Read the complete home financing article >

The U.S. Department of Housing and Urban Development released its first revision to the Real Estate Settlement Procedures Act in 30 years. The new form requires disclosure of yield spread premiums paid to mortgage brokers.  HUD claims the new loan disclosure revisions for a new standardized Good Faith Estimate that HUD estimates will save borrowers about $700.  “For the first time ever, HUD is requiring mortgage lenders and brokers to provide borrowers with an easy-to-read standard Good Faith Estimate that will clearly answer the key questions they have when applying for a mortgage loan,” HUD said.

The current financial crisis began with the collapse of Fannie Mae and Freddie Mac in July. The dominant institutions in the American mortgage market, and among the most powerful institutions politically, became wards of the government in a matter of weeks. What was their fatal flaw?

One popular explanation, often advanced by the GSEs themselves, is their “affordable-housing goals.” In 1992, as part of the Federal Housing Enterprises Financial Safety and Soundness Act, Congress required the GSEs to devote some of their home loan purchases to housing for families in the lower half of the income distribution, and also to families living in areas considered to be “underserved.” Housing for both homeowners and renters is included. Specific %age targets were set on a transition basis; the U.S. Department of Housing and Urban Development was required to revise the targets periodically, by regulation, which it has done 3 times (1996, 2001, and 2005).

The law requires HUD to set goals on the basis of the kinds of mortgage loans the GSEs actually buy — their market — and the importance of lower-income borrowers and underserved areas in that market. Research in the late 1990s showed that the GSEs were already buying the better-quality bad credit mortgages and also low-documentation loans (“Alt-A”), so the goals in 2001 and 2005 included these loans as part of their market.

The home financing goals will then be factored in as %ages of the mortgages the GSEs actually bought between 2001 and 2004, for example, out of every 100 loans they bought, 50 were supposed to be for homeowners and renters in the lower half of the income distribution. This may sound high, but in those years other mortgage lenders, making loans to similar types borrowers as the GSEs, made more than 57% of their loans to lower-income families. Effective in 2005, the goal was raised to 52%, with a further increase to 53% for 2006.

RESPA continues to promote affordable-housing goals, but is that realistic? They let the GSEs off the hook and shift the blame to the Bush administration, at the same time diverting attention from the refusal of congressional Democrats to allow stronger regulation of Fannie and Freddie after their accounting scandals surfaced in 2003. The goals are even blamed by some conservatives, who see them as credit allocation, and overlook the special privileges conferred on the GSEs by their federal charters which create something close to a federally sponsored duopoly in the mortgage financing market.

By now most people understand that we have a significant foreclosure crisis evolving. Hundreds of thousands of people each month are receiving a notice of default that is the first step of the foreclosure process.  The latest numbers from HUD are stunning: For the first 15 days of October only 49 homeowners with delinquent conventional loans were able to refinance with FHA home loans. That’s less than one per state.

Consider that the highly-anticipated new FHA loan program, Hope for Homeowners was going to cure the mortgage refinancing problems? HUD announced on October 2^nd, “The Bush Administration today unveiled additional mortgage loan assistance for homeowners who may be at risk of foreclosure. The HOPE for Homeowners Program will refinance mortgages for borrowers who are having difficulty making their payments, but can afford a new FHA loan insured by HUD’s Federal Housing Administration.”

In fact, the Bush Administration was vehemently opposed to the legislation and just days before it passed was threatening to veto the FHA Loan Reform bill which included the Hope for Homeowners package.  But now FHA mortgage reform has become law. The mortgage law has been effective since July but very few borrowers were able to qualify FHA mortgage applicants. But this refinance program just doesn’t work well for delinquent borrowers because they typically have too many late payments.

HUD recently reports that for the first 15 days of October it had 42 home loan applications and they were unable to approve any of these applicants. Even though the FHA home loan program has a history of helping homeowners with bad credit, the Hope for Homeowner loan is providing very little hope for homeowners who are trying to prevent a foreclosure.

Senator John McCain introduced a new plan during the second presidential candidates’ debate on Tuesday night that he believes will rescue the housing market and bolster the economy.  The McCain plan, dubbed the American Homeownership Resurgence Plan, would allow the Secretary of Treasury to buy up bad home mortgage loans, convert them into low-interest FHA-insured loans, and reset the loan principal (therefore decreasing monthly payments) based on a decrease in the value of the home.  The McCain camp thinks his plan will save homeowners from foreclosure.

The plan is aimed at helping those 1 in 6 Americans that are now upside down in their mortgages due, in part, to sinking home values.  McCain’s home financing plan would give these people a chance to refinance based on the current value of their home.  McCain’s plan would be paid for by U.S. taxpayers under funding that’s already been approved in the $700 billion bailout.  According to Scott Hess, former WMC executive, “Americans need a new alternative to refinancing, because sadly, most homeowners do not qualify to refinance their home because of tightened lending guidelines nobody anticipated.”  Hess continued, “At least with a loan modification, homeowners can restructure their mortgage with a fixed rate and a payment that they can afford.”

Opponents, say his proposal are unfair to homeowners who are paying their mortgage loans every month, and that it’s a bad financing decision.  Scott Messina, believes McCain’s plan is a place to begin, but it’s likely won’t solve the mortgage crisis. “It’s a step in the right direction because it attempts to address the issue of rising foreclosures,” said Messina.  “However, it’s important for market stability that those people who are paying their mortgages on time and don’t need a bailout are not penalized.”

“Where’s the incentive for homeowners on the brink to do the right thing?  If everyone else is getting a bail out with no repercussions, then why should you continue to struggle?” questioned Messina. Under Messina’s plan, the Congress would pass legislation that provides for a new FHA mortgage loan program, the 203S, or the 203 Save program that would be sold as Ginnie Mae securities just like many FHA loans are now and would carry the current guarantee by the U.S. Government.  All 203S mortgages would only offer fixed mortgage rates only available to homeowners currently facing foreclosure.

I heard an awful report about Citi Mortgage freezing home equity credit lines.  A mortgage lender recently reported that one of his clients heloc was frozen without notice.  Here are the facts according to mortgage banker Bryan Dornan, “The borrower was a 781, full doc borrower under 40% DTI and under 75% CLTV.  The borrower lives in San Diego county and reported that they had always made their mortgage payment on time and they have even made a principal paydown on the credit line that paid off over $100,000 of the outstanding balance.” 

One day they received a letter in the mail that CITI was freezing their credit line effective immdiately.  The borrower had the option to appeal the decision and when they followed that path, they had to pay for a new URAR appraisal from an appraiser that Citi Mortgage selected.  I don’t know about you, but when a 780 fico, full doc borrower under 75% CLTV gets their credit line frozen, I start to wonder…  Is this the state of mortgage brokering and lending in 2008?   With banks freezing 2nd mortgages on borrowers like this I start to believe that the mortgage crisis has just begun.  Please share your recent lending stories.