Mortgage Lenders Nationwide

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.

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.

According to Primary Mortgage Market survey released by Freddie Mac, 30-year mortgage loans with fixed rate amortizations schedules dropped to their lowest level on record, Thursday.  FHA mortgage rates declined again, along with conforming interest rates to nearly 5% for fixed 30-year loan terms.

The nationwide average interest rate for 30-year mortgage loans featuring fixed rate on a thirty year term was 5.19% for the week ending December 18, the lowest level since Freddie Mac began the survey in 1971.  First mortgage rates were down from last week when it averaged 5.47 %.  A year ago, the average for mortgage loans was 6.14%.  Second mortgage rates still remain a few points higher than interest rates for 1^st trust deeds.  Amid the foreclosure crisis, second mortgages remain a high risk for mortgage lenders and investors.

The fifteen-year fixed-rate mortgage averaged 4.92 %, down from 5.2 % last week and 5.79 % a year ago. The fifteen-year mortgage rates have not been lower since April 1, 2004, when they averaged 4.84 %.  According to a statement by Freddie Mac chief economist, Frank Nothaft “The rate drop was driven by the Federal Reserve announcement on December 16th, when it cut the federal funds target to a record low and stated it stood ready to expand the buying of mortgage loan assets as conditions warrant.”

Five-year Treasury-indexed hybrid adjustable-rate home loans averaged 5.60% this week, which is lower than the previous week that averaged 5.82%. A year ago, the five-year ARM averaged 5.90%.  One-year Treasury-indexed ARMs averaged 4.94% this week, down from last week when it averaged 5.09%. At this time last year, the one-year ARM averaged 5.51%.

Another shocking day of financial drama in remains unsettled with increased confusion regarding the $700 billion bailout to save the nation’s financial system has any chance of making it through Congress. Meanwhile, lawmakers received another sign of the volatility of the U.S. financial system last night as federal regulators seized Washington Mutual and immediately sold the bulk of its operations to JP Morgan Chase in what amounted to the largest bank failure in U.S. history.  WAMU is one of the nations’ largest mortgage lenders, but with foreclosure crisis worsening, the home loan defaults clearly took their toll on this financial giant.  How it affects the WAMU customers and borrowers no one knows yet.  Lending guidelines continue to get stricter so bad credit mortgage refinancing becomes even more difficult.

Today no one knows whether the breakdown in negotiations means the plan is doomed or if it just represents a brief stumbling block. The Los Angeles Times reports that, far away from the limelight, Republican and Democratic lawmakers were moving toward a compromise, “but it remained to be seen whether there would be enough votes to pass legislation.” If that sounds familiar it’s because that’s how things looked yesterday in the early afternoon when key lawmakers said they were well on their way to agreeing on the “fundamentals” of a deal. But then in the White House, a “verbal brawl” broke out in the Cabinet Room, according to the New York Times, and things quickly fell apart, which led to an eloquent declaration from President Bush: “If money isn’t loosened up, this sucker could go down.” 

Apparently George Bush’s well delivered speech warning of financial pitfalls were not enough to save the plan after more quarreling heated up over “financial concerns, presidential politics and partisan rancor” resulted in “an unexpected Washington drama with the nation’s economic future hanging in the balance,” says USA Today. Who’s to blame for the breakdown? The Washington Post declared yesterday that a “renegade bloc of Republicans” managed to both surprise and anger administration officials as well as congressional leaders when they “moved to reshape” the bailout. The Wall Street Journal reports that talks are set to resume this morning “without House Republicans.” For the latest up to the minute home financing news, check out Mortgage News.

Bloomberg’s Edward Evans just reported that IndyMac Bancorp  the second- largest independent home mortgage lender in the U.S. filed for bankruptcy after a run by depositors left the California mortgage lender short on cash. Before IndyMac was forced to halt lending, was one of the rare lending giants who offered, “A-paper”, sub-prime, construction and FHA mortgage loans to people with a vraiety of credit profiles.  IndyMac filed for bankruptcy today in a California court.  They are seeking relief under Chapter 7 of Title 11 of the U.S. code, the Pasadena, California-based company said in a Securities and Exchange Commission filing.

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.