01 May 12 Mortgage Insurance Case Gets Settled by MGIC
Carly Neals applied in May 2010 with PNC Mortgage to get a home loan refinance on the house she owns jointly with her husband in Wexford, PA. Neals is the mother of three children, the youngest was born on June 21, 2010, and PNC determined, based on Fannie Mae’s underwriting guidelines, that her request to borrow 90% of the value of her home required private mortgage insurance. Mortgage lenders typically require applicants seeking to borrow more than 80 percent of their home’s value to obtain mortgage insurance. Neals’s loan application documented her wage and bonus income from her full-time job for the previous two years. This documentation included pay stubs from April 29, 2010, and May 13, 2010, showing net pay of $2,148.98 in each two-week pay period. After giving birth to her youngest son on June 21, 2010, Neals began a period of fully paid maternity leave from her job.
Read the original Forbes article.
01 May 12 New Systems for Lenders Working with Fannie and Freddie
Chicago began charging lending companies the one-time registration fee in November, when it introduced some changes to the city’s vacant housing ordinance. These new rules will go for 1st and 2nd home loans. Previously, abandoned homes were the legal responsibility of only the homeowner. But the Chicago City Council expanded the ordinance to require lenders to register, secure and maintain properties when homeowners fail to do so. Read the original WBEZ article.
10 Jan 12 Fannie Mae CEO Quits
According to Bloomberg, Fannie Mae mortgage bonds gained after the government-supported companies detailed changes to their refinancing rules. Fannie Mae’s 6.5%, 30-year fixed-rate mortgage securities rose about 0.20 cent on the dollar to 110.55 cents, the highest since Oct. 14, as of 12:05 p.m. in New York, according to data compiled by Bloomberg. With the mortgage refinance rate hovering at 4%, the demand for homeowners to swap loans for savings remains strong.
The bonds outperformed similar-duration U.S. government notes by about 0.25 cent. Fannie Mae and Freddie Mac offered additional information yesterday on adjustments to refinancing rules for loans to borrowers with little or no home equity under a Program called the “Home Affordable Refinance”. The government-controlled companies’ letters to lenders suggested less relief for so- called representations and warranties that can be used to forced mortgage repurchases than some investors anticipated. “The rep and warranty relief newly offered by Fannie Mae through yesterday’s announcement is not all that significant and, at the very least, somewhat lower than what has been already been priced in,” Nomura Securities International Inc. analysts led by Ohmsatya Ravi in New York wrote in a note to clients.
Most loan companies have shelved their bad credit mortgage loans until the default rate drops dramatically. The mortgage companies also revealed the maximum upfront fees they plan to charge on high- risk mortgages will fall to 0.75%, from 2 %, unless homeowners refinance into debt with terms of 20 years or less. On October 24th, their regulator said they would eliminate the fees for short-term debt and reduce them for other loans without providing details.
04 Jan 12 Mortgage Application Activity Slows in the Final Week of 2011
MBA said that the average 30-year mortgage rates on conforming home loans fell to the year’s low of 4.07% from 4.10% the prior week, and well below 4.82% at the end of 2010. According to NAR, home loans with no money down were not as available and it was having an impact on the homeownership rate which has faltered the last few years.
Bob Moulton, president of Americana Mortgage Group in Manhasset, New York, said the company’s loan volume is off to a better start in 2012 than the same time a year ago, because homeowners are interested in refinancing.
The slide to near-record-low borrowing rates has spurred more homeowners to seek refinancing, propelling that index up more than 60% in 2011.
But demand for home mortgages fell in the year, as borrowers struggled to come up with enough cash for down payments or stayed on the sidelines due to worries about unemployment. Read the complete Reuters article.
20 Dec 11 Democrats Want Homeowners to Fund Payroll Tax Extension Via FHA, Fannie and Freddie
For the last few months, Washington politicians have been arguing the merits of extending the payroll tax cuts that supposed to be funding social security. Under the proposed legislation, annual mortgage insurance premiums for purchase mortgage transactions with the FHA would increase by 10 basis points. Guarantee fees, or “G fees” for Fannie Mae and Freddie Mac loans would also rise.
Mortgage Bankers Association President and CEO David Stevens, pleaded for the House to vote down the payroll tax extension. “The idea that you should pass a ten year tax increase for two months of payroll tax relief is appalling. Fannie and Freddie’s guarantee fees are supposed to be used to help offset the risk inherent in providing home loans, and any increases should be used for that purpose,” he said. “Siphoning off a portion of those fees into the general government coffers may be politically expedient, but it is far from sound policy.”
16 Dec 11 Home Mortgage Bonds Surge with Support from Federal Reserve
According to a Bloomberg report, The Federal Reserve is already bolstering the market, adding “dollar roll” trades this month that lower home financing costs for investors, after starting in October to recycle proceeds from past investments in housing-related debt to help real estate escape its worst slump since the 1930s. While a smaller share of economists predict the central bank will add to its $1 trillion of holdings as the U.S. grows, bond buyers may benefit regardless, said Dwight Asset Management Co.’s Paul Norris.
About 49% surveyed by Bloomberg News see the Fed announcing next year additional debt buying, down from more than two-thirds before the central bank’s November meeting. The Federal Open Market Committee said today the “economy has been expanding moderately,” at the conclusion of its meeting in Washington, and refrained from taking new actions to reduce home loan costs.
The Standard & Poor’s/LSTA U.S. Leveraged Home Loan 100 index fell 0.3 cent to 90.39 cents on the dollar, the lowest level since November 29th. The measure, which tracks the 100 largest dollar- denominated first-lien leveraged loans, has declined from 90.83 on Dec. 6. Leveraged mortgage loans and high-yield bonds are rated below Baa3 by Moody’s and lower than BBB- by S&P.
The Federal Reserve, which under QE1 bought $1.25 trillion of home mortgage securities and $172 billion of other agency debt through March 2010, has purchased a net $56.1 billion since October to offset prepayments and maturities, Bloomberg data show. The acquisitions are focused on the $5.3 trillion market of home loan bonds guaranteed by government supported Fannie Mae and Freddie Mac or U.S.-owned Ginnie Mae.
With dollar rolls, an investor seeking to borrow money enters into contracts to sell mortgage securities in any month and then buy similar bonds the following month; a lender would undertake the opposite trades. Investors entering into transactions for other reasons may be on either side of the contracts.
13 Dec 11 Increasing Mortgage Fees to Fund the Payroll Tax Cut
Democrats and Republicans continue to wrangle over how to pay for extending the payroll tax cut, one option floated by both parties on Capitol Hill is to tap into mortgage giants Fannie Mae and Freddie Mac to raise $38 billion in revenue over 10 years. But the proposal, which would require that the two Government Sponsored Enterprises (GSEs) undergirding the housing market raise the fees they collect from lenders, has real estate industry groups in an uproar. And housing experts say the additional fees could be yet another headwind for the shaky housing market.
The idea of boosting the fees Fannie Mae and Freddie Mac collect was first floated by the now defunct congressional Super Committee tasked with finding $1.2 trillion in deficit-reduction measures, and it had garnered bipartisan support at the time. Now, as Congress looks for ways to pay for an extension of the payroll tax cut, the proposal has resurfaced in legislation put forth by both House Republicans and Senate Democrats. If Congress doesn’t act the payroll tax cut is scheduled to increase by two %age points, to 6.2% from a rate of 4.2% – which would effectively increase taxes by $1,000 for the average family next year.
Fannie Mae and Freddie Mac don’t issue mortgages themselves, but they buy them from lenders and repackage them into securities that are then sold to a wide range of investors. The two GSEs now own or guarantee about half of U.S. home mortgages, or nearly 31 million loans. To protect against any defaults, they charge the originating lenders “guarantee” fees. Last year, those fees averaged 0.26 percentage points of a loan’s value. Under the new Republican and Democratic proposals, the fees would rise by at least an eighth of a %age point – and the money raised would go to the Treasury Department, not to Fannie and Freddie.
Business groups are opposed both to the higher fees and to the idea of diverting the money to the Treasury. The National Association of Realtors and the National Home Builders Association on Thursday sent a letter to Sen. Bob Casey, D-Penn., author of the Democratic proposal, arguing that the fees “should not be diverted for purposes unrelated to the safety and soundness of the housing finance system.” The groups said the congressional proposal is “counterproductive” and said the fees should be used “solely for the purpose of minimizing the loss exposure of these government-sponsored enterprises, investors and taxpayers.” The National Association of Realtors will send another letter to the House GOP leadership on Friday stating its fierce opposition to using revenue from a fee increase to fund programs outside of housing.
Some in Congress are also adamantly opposed to the higher fees. “Fannie Mae and Freddie Mac are currently being propped up by taxpayer dollars, so it makes no sense to use them as an ATM to pay for other government spending,” says Rep. Dennis Cardoza, D-California. “Although I support extending the payroll tax cut, it is imperative we find another source of funding instead of playing these shell games. Fannie and Freddie are already floundering under the weight of the ongoing housing crisis and I fear this could only further worsen their ability to help struggling homeowners.” California lenders continue to express concerns over increased mortgage insurance premiums so this could really burden borrowers in the Golden state.
The Government Sponsored Enterprises are still burdened with financial problems of their own. Since the Bush administration seized control of the mortgage giants in September 2008, they have received $151 billion in taxpayer funding – money that they must still repay. Having the guarantee fee go to the Treasury instead of Fannie and Freddie would only make it harder for them to pay down their debts, says Susan Wachter, professor of financial management at the University of Pennsylvania’s Wharton School. “If it is raised and goes to pay for Treasury deficits, it’s not covering the deficit that Fannie and Freddie owe, which ultimately is a tax payer liability as well,” she says. “It’s not accomplishing what it’s supposed to accomplish.”
Read the original Fiscal Times Articles on Paying for the Payroll Tax Cut.
06 Dec 11 GMAC and Other Lenders Fighting the State of Massachusetts Over
A spokesman for GMAC said they would not be buying new mortgages written by Massachusetts lenders because of the lawsuit. But Coakley wanted to preserve the state’s right to pursue two additional kinds of foreclosure related claims particular to Massachusetts an arrangement that home loan lenders did not appreciate. That breakdown led the attorney general to initiate her own lawsuit last week.
GMAC Mortgage has plenty of company as a defendant in the case. Lending giants Bank of America Corp., Wells Fargo & Co., Citigroup Inc., and JPMorgan Chase & Co. were all named for allegedly committing fraud and failure to reduce mortgage payments for some homeowners. The lenders all said they would fight the allegations in court.
Now GMAC Mortgage says it’s dropping its business with local brokers and smaller lenders. In a statement last week, the company said ‘‘recent developments’’ had ‘‘led mortgage lending in Massachusetts to no longer be viable.’’ That sounds like a dramatic reaction to the attorney general’s lawsuit. GMAC Mortgage certainly suggested legal costs were an economic tipping point that doomed the company’s business in Massachusetts.
But GMAC Mortgage is scaling back its so-called correspondent mortgage business all around the country. Ally Financial, reporting quarterly financial news last month, said it was losing hundreds of millions of dollars in the mortgage business. One response: reduce correspondent banking, which accounts for 8 % of Ally’s mortgage business. GMAC Mortgage is a relatively small presence in Massachusetts, too. But I’ve heard from smaller local lenders who depend on GMAC who now wonder how its departure might limit their access to credit. Read the original article > Lenders Should Not Blame Martha Coakley
06 Dec 11 Banks аnd Mortgage Lenders Still Value Credit Scores
According to Experian, 58% of Americans hаvе а score аbоvе 700, аnd thе average national FICO score іs 692. Ѕо аs fаr аs thе lenders point оf view low FICO score borrowers аrе nоt оnlу risky but thеу аrе nоt thаt mаnу thus requirements оn thеm саn bе tougher. Good credit scores will ensure you get the best lender rates from conventional lenders, but FHA lenders are not as concerned about how high the credit score are. The Federal Housing Administration does offer poor credit home loan programs to applicants that have some upside in other areas besides credit.
Home loan lenders will check mоrе parameters ехсерt thе credit score factor, bеfоrе deciding whеthеr tо perform thе transaction wіth thе borrower. Тhеу will wаnt tо sее employments salary, wages, debt-to-income ratio ( bоth front ratio аnd bасk ratio) со signers аnd drill dоwn tо thе credit report tо analyze уоur pay bасk abilities. So іf уоur FICO credit score іs close tо thе 620-640 range уоu саn stіll gеt а loan, but thе process mіght bе а lіttlе longer.
So thе FHA credit score requirements аrе set аt vеrу low еnd аt 500 аnd 580 (fоr thе low dоwn payment loans). Вut thе lenders hаd thеіr FICO credit score requirements raised frоm 620, tо 640. Аnd thіs іs confusing mаnу customers whо fall bеtwееn thеsе twо requirements. Тhеу qualify fоr аn FHA hоmе loan wіth credit оvеr 580, but nо lender will lend thеm money wіth credit score lower thаn 640.
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28 Nov 11 Will the Federal Reserve Keep Buying Mortgages?
While mortgage rates are already at about record lows, housing continues to constrain the economy, with the National Association of Realtors saying in Washington last week that the median price of U.S. existing homes dropped 4.7 percent in October from a year ago. Borrowers with a 30-year conventional mortgage would save $40 billion to $50 billion annually in aggregate if they could all refinance into a new loan with a 3.75 percent rate, according to JPMorgan Chase & Co. Read more of this SF Gate Story.
25 Nov 11 Daily Mortgage News
Higher Loan Limits as FHA extends support with a new role in Government financing. The Daily Herald examines FHA’s elevated loan limits.
14 Nov 11 New Mortgage Lender Liability Rule for HARP Coming Soon
The Chicago Tribune published an article that underscores how important the new changes for the Home Affordable Refinance Act really are. It’s no secret that many mortgage lenders have been concerned that they could be forced to buy back refinanced loans if defects with the initial mortgage are found, a concern that has undercut the program’s effectiveness. FHFA made it clear that they would be loosening the guidelines including the representations and warranties participating home loan lenders have to abide by as part of its revamp of the program.
Lenders will learn on Tuesday to what extent those contracts, which determine their liability for mortgages with bad credit, will be waived. “For those originating the new loans, they will look at how these waivers are going to structured,” said Bose George, an analyst with Keefe, Bruyette & Woods Inc in New York. “If they provide enough of a comfort zone, these changes to the representations and warranties could bring meaningful participation.”
Analysts at Barclays Capital estimate up to 3.1 million mortgage liens are eligible for the program. The Home Affordable Refinance is open to borrowers who have little or no equity in the homes as long as they are making timely payments and their loans are guaranteed by Fannie Mae and Freddie Mac, which back about half of all residential mortgages in the United States. As part of the HARP expansion announced in October, FHFA said it would eliminate the LTV restrictions that prevented borrowers whose home loan exceed 125% of the property’s value from participating in the program. Read the original Chicago Tribune Article.
14 Nov 11 The Lead Planet Connecting More Loan Applicants with Lenders
Many loan companies have been very successful with their mortgage advertising strategies so the LeadsOutlet choice was no surprise to industry insiders. According to LP economist, Kevin Grant, “This deal will have no effect on the existing companies that purchase leads from the Lead Planet.” Read the original article online, > LeadsOutlet Chooses the Lead Planet for Mortgage Marketing.
10 Nov 11 Freddie Mac Indicates Mortgage Rates Falling Further
The home mortgage interest rate track the yield on 10-year Treasury note, which fell this week as investors shifted money into safer Treasury’s amid fears Europe’s debt crisis could worsen. Low mortgage rates have down little to boost home sales. Rates have been below 5% for all but two weeks this year. Yet home sales are on pace to be the lowest in 14 years.
The low interest rates have caused a modest boom for fixed mortgage refinance loans, but that benefit might be wearing off. Most people who can afford to refinance have already locked in rates below 5 %. Just five years ago they were closer to 6.5%. Ten years ago, they were above 8%.
The average home loan rates don’t include extra fees, known as points, which most borrowers must pay to get the lowest rates. One point equals 1% of the loan amount. The average fee for the fixed thirty-year home loan was unchanged. The average cost in lending fees on the fifteen-year fixed mortgage increased from 0.7 to 0.8.
The average mortgage interest rate on the five-year ARM fell to 2.98% from 2.96%, which had been a record low. The average mortgage rate on the one-year adjustable loan increased to 2.95% from 2.88%. According to Freddie Mac, It fell last month to 2.81%, the lowest on records dating to 1984. The average lending fees on the five-year and one-year ARMs were both unchanged at 0.6.
09 Nov 11 Refinance Activity Rises for Homeowners in the US
The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity, which includes both refinancing and home purchase demand, climbed 10.3 % in the week ended Nov 4. “Treasury rates dropped last week, as renewed turmoil in Europe once again led to a flight to quality, and thirty-year interest rates dropped to their second lowest level of the year,” Mike Fratantoni, MBA’s vice president of research and economics, said in a statement.
The MBA’s seasonally adjusted index of refinancing applications rose 12.1% to its highest level in a month. Fratantoni said some lenders saw even bigger increases. Fixed 30-year mortgage rates dropped 9 basis points to average 4.22%. The refinance share of total mortgage activity rose, after declining for three weeks, to 78.6% of home loan applications from 77.1 % the week before. The gauge of loan requests for home purchases gained 4.8 %.
