Mortgage Lenders Nationwide

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.

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.”

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.

Will 2010 be remembered for the year of the best mortgage ever?  Nationwide published an article today that considers the realty of  this new era of record low rates. Many people are baffled that the record low mortgage rates have not sparked a refinance or housing boom.  In the past when the Federal Reserve took measures like discounting key interest rates it usually spurred a housing boom that led to a sharp rise in homeownership.  In 2010 there is a decrease in homeownership mostly because even though money is cheap it is still not financially feasible for struggling consumers who are experiencing a loss of income and the threat for job loss is the most real it has been since the Great Depression in the 1930’s.

Popular loan programs like cash out second mortgage loans and interest only mortgages have almost completely disappeared.  Bad credit mortgage options are few and far between with FHA and VA home loans occasionally taking a risk on a borrower with a poor credit score.  Home equity loans were once offered at 125%, but now you can consider yourself truly blessed if you qualify for a 90% equity loan.  Even the FHA streamline refinance loan requires borrowers to pay for the closing costs “out of pocket.”  Most borrowers are using a FHA loan for cash out refinancing because they do not require a 700 credit score like most home equity lenders demand today.

Undoubtedly the pool of borrowers that qualify for mortgage refinancing or home buying has shrunk, but maybe there is a silver lining.  In the near future interest rates will likely rise.  If you are one of the chosen few who meet today’s home lending requirements you just might qualify for the mortgage loan of a lifetime.  If you do qualify – - – Seize the opportunity and lock into the lowest fixed rate ever!  Read the original Nationwide article > Mortgage Loan of a Lifetime

Smart Home Financing posted a helpful article that compares the pre-approval to the pre-qualification.  Many first time homebuyers find themselves confused when discussing their needs mortgage needs with a lender or broker.  The mortgage pre-approval is a written letter that includes a loan decision from the underwriting department after a borrower completes the residential loan application.  A pre-approval letter is a great negotiating tool for home buyers because it lends them credibility and helps the seller make a decision on their perspective offer.

Many first time home buyers prefer FHA mortgage loan options because these loans only require a 3.5% down-payment.  For homebuyers with a military background we recommend VA mortgage programs because they require no down-payment.  VA home financing is available up to 100% even for first time homebuyers.  Read the original article online at the Smart Home Financing Blog > Pre-Qualification Versus Pre Approval Letter

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.

Several reports published last week signaled that refinancing is supporting the mortgage business with over 75% of all loans being submitted into process are considered a refinance transaction.  According to a recent Mortgage Lead Vault post, the refinance lead activity spiked last week.  MBA also released similar statistics in their Weekly Mortgage Application Survey indicating there was 12.6% in home refinancing applications from the previous week.  Chief economist for the Lead Planet, Kevin Grant said, “the mortgage lead quality should dramatically increase as the banks and lenders loosen up their refinance guidelines.” See the original news article> Mortgage Refinance Lead Volume Rises.

Mortgage Refinancing Buzz posted another article offering home refinance advice to consumers shopping for a refinance loan online.  The article looks back a few years to the mortgage crisis and chronologically leads up to 2010 and the lowest refinance rates that our country has seen in 50-years.  They reminded us how we got here with thousands of lending companies and banks going out of business and the federal government deciding to take on a larger role in home loans.  Yes mortgage lenders continue to tightened refinance guidelines because foreclosures and loan defaults continue to mount across the country.  Mortgage Refinancing Buzz noted that a few of the with government loan programs continue to take risks.   Mortgage refinancing tips are available online so go to the MRB blog to get the insight.  Read the original article > Mortgage Refinancing Advice for 2010

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.

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

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.

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

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.

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.

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.

Mortgage rates are beginning to show some positive results for rebuilding the mortgage industry.  Record low mortgage rates have spurred a surge in homeowners wanting to refinance. According to a report from Mortgage Bankers Association, over 85% of new home loan activity involved refinancing applications.

Mortgage lenders are swamped by the giant wave of mortgage refinancing requests.  Many have shed staff the past couple of years as the housing market slumped. Now they lack the manpower to quickly process refinancing requests.  “Lenders aren’t prepared for the surge,” says Mark Zandi of Moody’s Economy.com.   Some mortgage lenders are even hiring more people to accommodate the growing demand for refinancing.  Read the complete article online. Mortgage Refinancing Activity Skyrockets.

Option ARMs Banking Backdrop of 2009After the subprime mortgage debacle continues as the asset securitization crisis unfolds, another chapter up its sleeves with added melancholy, called the Option ARMs. With billions of Option ARMs due for recast in 2009 and 2010 another crisis is on the making. But this time problems are expected to be more pronounced than the subprime crisis since the economy is already nearing its trough, the consumer confidence has slumped to an all time recent history low and financial markets are in a gridlock. Making the matters worse is the unrelenting fall in the US housing market which is showing no signs of stabilization.  Get the Mortgage News as it happens>

Lenders made Option ARMs with ‘teaser’ features to borrowers, which included making lower minimum payments for initial years and then loan being reset to higher payment schedule thereafter. If that was not enough, these loans had another feature called “negative amortization”.  With US housing prices declining and the burgeoning loan-to-value skyrocketing, Option ARMs delinquencies are set to increase dramatically.  Article was written by Reggie Middleton.  Read the complete home financing article>

In a recent article, Wallace Witkowski reported that the Federal Reserve said that they will begin buying mortgage loan securities backed by Fannie Mae, and Ginnie Mae in early January. The Fed said it “has selected private investment managers to act as its agents in implementing the program,” which is “separate and distinct from the U.S. Treasury’s program.”

The loan security buying will be financed through the creation of additional bank reserves, the Fed said.  Interest rates for home equity loans, credit lines and FHA loans remain at record low levels. 

In a recent article, Obama’s website suggests that they have been examining the sub-prime mortgage lending issues for years.   This is good because it is imperative that the next president thoroughly understand the housing sector and mortgage financing.  Apparently, Obama introduced legislation to fight the war on mortgage fraud and predatory lending.   He vows to protect consumers against abusive mortgage lending practices. The STOP FRAUD Act offers a federal definition of mortgage loan fraud and increases the funding for federal and state law enforcement programs. 

Watch this Mortgage Crisis Video Discussing Predatory Lending 

Obama says he will eliminate laws that prevent bankruptcy courts from introducing loan modifications. This is a good thing if banks are going to offer loan modifications why not do it at this level as well.  Obama says he will introduce a HOME score which enables borrowers to compare several home loan products while better understanding the total cost of the mortgage.  The truth in Lending Law is pretty darn clear.  We all should take some responsibility with this mortgage meltdown.  Whether you are a homeowner, loan officer, lender, bank or politician, we all played a role that led to this foreclosure epidemic.  Read the Complete Mortgage Loan Article