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19 Feb 14 Companies Returning to Mortgage Servicing in the US

The private mortgage sector is making a come back. After a 5-year hiatus, many mortgage companies are taking some risks with servicing residential mortgage liens. The game is different and the rules have changed but the servicing sector seems to have new life again.

The former senior adviser at the Consumer Financial Protection Bureau, Chris Haspel helped develop new mortgage rules aimed at preventing a rerun of the non-prime boom. Now, he is part of a growing industry seeking to profit from making loans that fall outside the new “qualified mortgage” regulation he helped author.

Many of the largest lending companies in the United States have said they do not intend to originate or securitize high numbers of non-qualified-mortgages, raising fears that home financing credit could soon dry up for millions of Americans. At the same time, a crop of new non-bank lenders are stepping in to fill what they see as a gap left by retreating banks

The new QM standard is expected to be followed next month by the “qualified residential mortgage” rule which aims to better align the incentives of those who slice-and-dice loans into mortgage bonds with the interests of the investors who buy the securities. The rule is expected to follow broadly the same criteria set out by the QM rules and will probably exempt the financial entities that create, or “sponsor,” securitisations of QM loans from having to hold on to a slice of the deal. That means securitizers of non-qualified mortgages will probably have to hold a piece of the resulting bond. For banks, already beset by new capital rules, that is an onerous requirement and one that is likely to deter them from bundling non-QM loans.

Props to the Financial Times 

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19 Feb 14 30 Year Rates Trending Higher

The Zillow Mortgage Marketplace reported home loan interest rates for thirty-year loans with fixed interest rates increased again this week, with the present interest rate being quoted on Zillow at 4.18%, which is higher than the 4.14% at this same time last week. The rates for 30-year home loans bounced around between 4.17 and 4.21% for the week, and peaked at 4.27 % on Wednesday before falling back  to 4.18% on Thursday.

 

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13 Feb 14 Low Mortgage Rates Stablizing

In a recent article, Freddie Mac chief economist, Frank Nothaft said, “Low mortgage rates are helping to stabilize home sales.” “New home sales in August rose to the highest annualized pace since September 2008 and the inventory of unsold houses fell to the lowest level since February 1983.”

The 30-year fixed-rate mortgage averaged 4.94% for the week ending Oct. 1, down from 5.04% last week and 6.10% a year ago. The mortgage hasn’t been below 5% since the week ending May 28, when it averaged 4.91%.

The 15-year fixed-rate mortgage averaged 4.36% this week, down from last week’s 4.46% average. The home loans averaged 5.78% a year ago. It hasn’t been lower since Freddie Mac started tracking it in 1991.

To obtain these low mortgage rates, the 30-year fixed-rate mortgages require a payment with a cost of 0.7 point, the 15-year fixed-rate mortgage and the 5-year ARM required an average 0.6 point and the 1-year ARM required an average 0.5 point. A point is 1% of the mortgage amount, charged as prepaid interest.

Bad credit mortgage rates may be possible with the obama loan relief or the new FHA loan modification that enables borrowers with delinquent loan payments refinance their home if there is a documented hardship.

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09 Sep 13 Top 5 Errors 1st Time House Buyers Should Avoid in the Loan Process

1. Making mistakes when it comes to a borrower’s credit report. Don’t assume that you should automatically pay off all charge cards and unsecured loans to qualify?

2. Don’t assume you are pre-qualified when may not be.

3. Don’t just work with any loan officer. Choose a lender that has a good track-record closing first time home buying loans with competitive pricing.

Buying a house is not like buying a stereo or even an automobile. The financing aspect of first time house buying is very critical and making the goof choices can save you a lot of money over time. Rates are still great and many lenders have announced more home financing products that have created new opportunities. Read the entire Yahoo blog post.

Other Lending Articles

FHA Housing Loans for Bad Credit

FHA Offers First Time Home Buying Loans

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06 May 13 Federal Reserve Survey Reveals Tight Lending Guidelines

A recent Federal Reserve survey revealed that banks and mortgage lenders are not planning on lightening requirements for borrowers seeking home loans and refinancing. According to WSJ, banks remain unwilling to loosen standards on home loans. Cash buyers and investors have been driving the housing recovery so far. If it is going to persist, it will need to include more buyers with home loans, economists say. Last fall, Federal Reserve Chairman Ben Bernanke said that  lending standards appeared to be “overly tight.”

Bernanke said the surveys showed that home loan lenders began tightening credit standards in 2007 and have not eased guidelines significantly since. In the latest senior loan survey, released on Monday, only a few American banks reported that they eased standards on fixed home refinance loans over the past three months. A large majority of the loan officers said that the “risk-adjusted profitability of the residential mortgage business relative to other possible uses of funds” was an important factor restraining residential real estate loans. Fear of “putback risk,” the risk that the insurers and mortgage buyers would force them to buy back bad loans, was another important factor.

A number of smaller banks indicated that they were even less likely now to approve a home loan with a FICO score of 620, depending on the down payment. Some more banks were likely to approve a loan application with excellent credit — a FICO score of 720 — and a 20% down payment. About a third of bank loan officers indicated that they were less likely to approve loans insured by the Federal Housing Administration with FICO scores of 580 or 620.

Read the original Market Watch article online.

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05 Dec 12 Mortgage Lending in 2013 with FHA Loan Programs

Margaret Chadbourn wrote an article for Reuters in which she considered the state of lending with the Federal Housing  Administration. The U.S. Federal Housing Administration, facing a $16.3 billion deficit, will increase home loan fees next year and take other steps in an effort to avoid a taxpayer bailout, the Obama administration said on Friday.

  • Obama administration to raise fees for FHA loans in 2013
  • FHA asking Congress for new tools to bolter insurance fund
  • FHA to sell more distressed loans and expand short sales
  • Agency won’t speculate on whether bailout can be averted

The agency, a primary source of funding for first-time home buyers and those with modest incomes, said it would raise the premiums it charges on loans it guarantees by 10 basis points, adding, on average, about $13 per month to a borrower’s cost. A basis point is one-hundredth of a percentage point.

Housing officials would not say whether the steps would be enough to keep the mortgage insurer from turning to the Treasury Department for a cash infusion for the first time in its 78-year history. “I’m not going to place bets,” FHA Acting Commissioner Carol Galante told reporters. The FHA’s role in the mortgage market has expanded rapidly since the U.S. housing bubble burst. It now insures about 1.2 million mortgages, supporting about 15% of all U.S. home loans, up from 5% in 2006. Combined with government-controlled Fannie Mae and Freddie Mac (FMCC.OB), which buy loans and repackage them as securities for investors, Washington’s footprint in the market has grown to account for nearly nine of every 10 mortgages. FHA still approves cash out loans with bad credit with only 15% equity as long as the borrowers has other strong credentials.

The three firms have helped prevent a deeper housing bust, but heavy losses have sparked debate over how to strike the best balance between protecting taxpayers and keeping credit flowing. An independent audit delivered to Congress on Friday showed the FHA had depleted the capital it would need to cover expected losses on the $1.1 trillion in mortgages it backs. It said the losses would leave the agency $16.3 billion in the red. “FHA is in dire need of restructuring,” said Cliff Rossi of the University of Maryland’s business school, who has worked at Fannie Mae, Freddie Mac and Citigroup. “The latest report highlights the broader issue surrounding housing finance and how much of a guarantee the government should provide and to whom.”

The FHA’s troubles stem from rising defaults on mortgages it guaranteed from 2007-2009 as the housing bubble was deflating. The audit projected those losses would amount to $70 billion. Galante emphasized that the White House’s annual budget proposal in February would be instrumental in determining whether the agency would need taxpayer funds by the time its fiscal year expires on Sept. 30. Any final determination would not be made until September. While officials stressed that a bailout is not a foregone conclusion, critics of the agency — including some lawmakers — are concerned it could turn out to be a burden on taxpayers along the lines of mortgage finance companies Fannie Mae and Freddie Mac, which have been propped up by more than $135 billion in funds from the U.S. Treasury. Senate Banking Committee Chairman Tim Johnson said he was “deeply concerned” by the state of the FHA’s finances and urged officials to “do everything in their power to protect taxpayers and restore its capital reserve” to the level required by law. The FHA is mandated to maintain a 2% capital ratio, which is a gauge of its ability to withstand losses, but it has not met that target for four years. The audit found the ratio had dropped to negative 1.44%.  Read the original Reuters update on FHA lending.

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03 Dec 12 1 in 3 Say They Would Use Wal Mart for Home Loan Services

With all the low rates being offered by banks and mortgage lenders, you would think that consumers would be more content with the current lending environment. A recent survey indicates that people may not be as happy with their lender as you would think.

One in three U.S. consumers would consider a mortgage from retailer Wal-Mart and almost half would consider one from online payment provider PayPal, according to a financial services study to be released on Monday. The results should be especially disconcerting for banks because the two companies do not even offer home financing or second mortgages.

The study shows consumers are willing to try alternative loan companies as borrowers focus on price, customer service and trust in their provider when selecting a mortgage, said Doug Hautop, lending practice lead at the Carlisle & Gallagher Consulting Group, which conducted the survey. “There is a real threat from new entrants,” Hautop said.  The study’s results were based on online responses from 618 U.S. consumers in September. Non-bank mortgage companies such as Quicken Loans and Nationstar Mortgage Holdings Inc have gaining market share as some large banks such as Bank of America Corp pull back in a business that burned them during the financial crisis. Carlisle & Gallagher, based in Charlotte, North Carolina, provides consulting services to five of the top eight U.S. mortgage originators, Hautop said. It’s no secret that bank lenders are maintaining high standards on mortgages and they less likely to approve home loans with bad credit.

A Wal-Mart Stores Inc spokeswoman declined to comment on the survey. The retailer provides small business loans at its Sam’s Club stores, but doesn’t offer mortgages. A spokesman for PayPal Inc, a subsidiary of online auction site eBay Inc, said it offers credit lines for customer purchases, but hasn’t announced any plans to move into the mortgage business. Read Original NBC News Article.

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03 Dec 12 Sales on Mortgage Bonds Spike 45 Percent

The short-term future for home loan interest rates may lie in the sales of mortgage securities. Issuance of U.S. government-backed mortgage securities soared 45%last month to the highest since at least 2009 as lenders rushed to create bonds before guarantors Fannie Mae and Freddie Mac increase their fees.
About $207 billion of securities backed by the taxpayer- supported firms or U.S.-owned Ginnie Mae were issued, according to data compiled by Bloomberg. Home loan lenders moved up issuance to precede a 10-basis-point increase in Fannie Mae and Freddie Mac guarantee fees that took effect Dec. 1. Sales of the securities will slow, according to Barclays Plc analysts, after the deluge contributed to a widening of yields on the bonds the Federal Reserve is buying that almost erased the effect of its latest purchase program.
“This dynamic should begin to reverse now since only the timing of issuance is affected and not the overall amount,” the New York-based analysts led by Nicholas Strand wrote in a Nov. 30 report. December “issuance should be significantly less in comparison. This is a significant positive.” The difference in yields between 30-year Fannie Mae securities trading closest to face value and the average of those for five- and 10-year Treasuries reached 110 basis points on Nov. 14. That was 4 basis points narrower than the gap on Sept. 12, a day before the Fed said it would buy $40 billion more mortgage bonds a month to bolster the economy. A basis point is 0.01 percentage point. Read the original article on Business Week.

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03 Dec 12 Home Equity Line of Credit Tips for the New Year

Some people are unaware that home equity lines of credit are considered a “2nd mortgage” and thus you must already own a house to be eligible for this type of financing. These home equity lines are considered a second mortgage because the home is used as collateral for lending purposes. Using a credit line to borrow against the equity in your property has been a popular in the United States for the last few decades. Today, 2nd mortgage lenders are extending these HELOCs through several types of loan programs.

Tax Deductibility on Home Equity Interest

Smart Home Equity published a good article about tax deductibility on the topic of home equity-credit lines. The issue of deducting interest on loans up to $100,000 has become a concern as many borrowers are not clear about limitations. We strongly suggest discussing this with a CPA who is well versed on the mortgage interest deductions for 2013.

You will find most loans come with variable interest rates, some come with attractive low introductory rates, and a few come with fixed rates. You also may find most loans have large one-time upfront fees, others have closing costs, and some have continuing costs, such as annual fees. You can find liens with significant balloon payments at the end of the term and others with no balloons but with higher monthly payments. The bottom-line is that there are home equity products that make sense for your situation and loans that do not make sense for you financially as well.

The FTC reminds us to review the home equity contract carefully before you sign it.  Read the FTC warning about home equity lines of credit.

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16 Nov 12 Underwater Home Mortgages Decreases Nationally

The White House submitted a budget plan to Congress this year that would have provided the FHA as much as $688 million from the U.S. Treasury, the first bailout in the agency’s 78- year history. The money was not needed because the FHA will get almost $1 billion from the government’s $26 billion settlement with the five biggest U.S. mortgage servicers over alleged foreclosure abuses, according to Shaun Donovan, secretary of the U.S. Department of Housing and Urban Development, which oversees the FHA. Mortgage servicers collect monthly payments and manage the foreclosure process.

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06 Nov 12 Mortgage Lenders Poised for Housing Market Recovery

Once a year, the Mortgage Bankers Association holds their annual convention and they reported their largest turn-out since 2007 as over 3,500 mortgage lenders reportedly attended the event. The common beliefs from this MBA event were that home loan origination will increase in 2013, but mortgage refinancing volumes will likely decrease towards the end of next year. 2012 has been an incredible year for record low rates on FHA, VA, conventional and jumbo mortgage products. The housing sector is beginning to see signs of a recovery in many areas across the country and this gives Realtors and home loan lenders hope that 2013 will be a profitable year.

The biggest problem remains qualifying criteria for home loan programs as many of the applicants have issue with credit or equity requirements. There may not be enough subprime mortgage lenders offering programs that meet the needs of distressed homeowners. The Home Affordable Refinance Program has helped many homeowners that have upside down mortgages, but you have to have a mortgage owned by Fannie Mae or Freddie Mac. Not all underwater home loans are owned by these government entities so there is still a need to find an underwater refinance programs for people that do not have a mortgage owned by Fannie or Freddie. The biggest criticism of the FHA streamline refinance is that borrowers must pay for closing costs out of their pocket. FHA will not allow people to finance closing costs under the streamline program. They will also not permit no-cost loans in which the lender fees are paid by the loan company. Not everyone has $4,000 or $5,000 to pay for the streamline refinance.

Economists for the trade group estimated that modest economic growth, more sales to owner-occupants and a small boost in average home prices will drive a 16% increase in home purchase mortgages, to $585 billion. Meanwhile, home refinance transactions are forecasted to decrease $785 billion, down from an estimated $1.2 trillion this year. The American Action Forum, a public policy group, recently estimated that combined all the new regulations would result in 20% fewer mortgages than otherwise would be made, up to 1 million fewer housing starts over a three-year period and 3.9 million fewer jobs. Renting is roaring. Investors are scooping up distressed suburban homes to turn them into rentals, and the majority of multifamily construction now going on is apartments, not condominiums.

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31 Oct 12 Rates Creep Higher and Loan Activity Stalling

Recent reports suggest that home financing activity is slowing down. Interest rates on home mortgages remains extremely affordable but rates have been inching higher in recent weeks. The Mortgage Bankers Association said its seasonally adjusted index of real estate loan application activity, which includes both home refinance and purchase demand, dipped 4.8% in the week ended October 26. The MBA’s seasonally adjusted index of house refinance applications dropped 6%, while the gauge of loan requests for house buying, a leading indicator of home sales, edged up 0.5%. According to the website, FHAHLR.com, “Refinancing with bad credit scores has been more strenuous for borrowers with today’s increased loan standards.”

Will Interest Rates Come Back to Record Levels?

The refinance share of total residential lending activity slipped to 80% of applications from 81%. Fixed rates on 30-year loans averaged 3.65% in the week. This indicated a rise of 2 basis points from 3.63% the week before. According to MBA the weekly survey covers over 75% of mortgage applications in all 50 states.

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31 Oct 12 Disaster Relief Plans for East Coast Residents Hit by Sandy

According to Reuters yesterday, Fannie Mae and Freddie Mac announced support for disaster-relief policies to borrowers whose homes were damaged by Hurricane Sandy. This financial aid applies to home owners residing in towns and cities along the eastern United States that have been declared disaster areas by President Barack Obama.

Freddie Mac said it “strongly encourages” servicers to help affected borrowers with Freddie Mac-owned loans by suspending foreclosure and eviction proceedings for up to 12 months, waiving assessments of penalties or late fees against borrowers with disaster-damaged homes and not reporting forbearance or delinquencies caused by the disaster to credit bureaus. Fannie Mae said its policy with mortgage servicers, updated in 2009, allows borrowers to enter forbearance for up to 90-days. Fannie Mae said servicers were reminded of the existing guidelines on disaster relief in light of the recent storm.

  • Mortgage Aid for Hurricane Sandy Victims Extended from Fannie and Freddie (see http://www.bdnationwidemortgage.com/blog/index.php/2012/10/mortgage-aid-for-hurricane-sandy-victims-extended-from-fannie-and-freddie/)

To reach Fannie Mae, visit their website in regards to loan relief, call 1-800-732-6643. Call Freddie Mac at 1-800-373-3343.

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30 Oct 12 No Cost Refinancing Can Save You Big Time

BankRate published a recent article, claiming that there is “no such thing as no-cost mortgages.” The article asserts that lender fees and closing costs are covered by a higher mortgage rate. According to Jake Emmons who works as a loan manager at V.I.P. Mortgage in Aliso Viejo, “the no cost mortgage, typically costs less than .25 of a point.” Financially speaking if a borrower keeps the new mortgage for thirty years,(that means that the borrower never refinances this loan) that is doesn’t pencil out to choose the refinance with no closing costs, but how often does that happen? According to a recent survey at the Mortgage Bankers Association, more than 35% of homeowners that refinanced in 2011 or 2012 have done multiple times. Following this logic, it would be difficult to argue that the “average borrower” will pay off their existing mortgage with 360 payments prior to refinancing. Of course with refinance rates at record lows, there will be a point in time when rates start rising substantially and homeowners that have record low rates actually stop refinancing. In most cases, a no cost mortgage is paid by the lender in what is called “yield spread premium.”

The Most Significant Benefits of a No Cost Refinance

  • New mortgage balance does not increase
  • Borrowers that refinance frequently would save thousands by avoiding lender fees
  • Preservation of savings because people would not have to come “out of pocket” to pay closing costs
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24 Oct 12 Bank of America Being Sued by the Federal Government for a Billion Dollars

The WSJ run website, “Market Watch”, published some breaking news in regards to a lawsuit filed by the U.S government in an effort to sure Bank of America Home Loans over bad mortgages that were originated a few years ago. The United States government filed a civil lawsuit against Bank of America Corp., alleging the U.S. bank strapped American tax-payers with losses by misrepresenting the quality of mortgage liens it sold to government sponsored entities like Fannie Mae and Freddie Mac.

According to Market Watch, the government alleges Countrywide Home Loans., a company that B of A acquired in 2008, dismembered checks on loan quality in 2007 through 2009, adopting a process called “the Hustle” that aimed to boost the speed at which it originated and sold loans to the companies. The mortgage unit falsely continued to claim the loans qualified for insurance from Fannie Mae. Preet Bharara, the U.S. attorney for the Southern District of New York, called Countrywide’s alleged behavior “spectacularly brazen in scope.” The bank approved high risk  liens, like the “no-income mortgage” and stuck taxpayers with the bill,” he said in a statement. “Countrywide and Bank of America systematically removed every check in favor of its own balance — they cast aside underwriters, eliminated quality controls, extended incentives to unqualified personnel to cut corners, and concealed the resulting defects.” The high risk mortgage programs had a high default rate that ultimately led to the foreclosure crisis.

Fannie and Freddie, while backed by taxpayers since the 2008 bailout, are not part of the government. Previous suits have been brought on behalf of government agencies such as Medicare and the FHA. Fannie and Freddie were publicly traded entities before their market funding evaporated in the early stages of the financial crisis, forcing their effective nationalization. Taxpayers have since poured $142 billion into the companies, which along with other government agencies financed nine out of 10 home loans written last year. Fannie and Freddie don’t make loans but guarantee regular principal and interest payments to mortgage-bond investors.

Other actions to speed up loan processing included eliminating underwriter review of high risk loans, eliminating mandatory checklists on underwriting instructions, getting rid of compliance specialists inside the company and revamping the compensation structure based solely on loan volume, according to the complaint.

Instead of underwriter reviews, the company gave those tasks to loan processors “who were previously considered unqualified even to answer questions,” the complaint stated. The complaint also alleges Countrywide instituted the Hustle program while it was assuring Fannie and Freddie that they had tightened requirements and underwriting guidelines. Some $1 billion in loans defaulted as a result of the program, according to the complaint.

Fannie Mae stopped buying or guaranteeing new loans delivered by Bank of America this past February amid an impasse over billions in defaulted mortgages that Fannie said Bank of America was obligated to repurchase. Negotiations over resolving the dispute are ongoing, according to both parties.

Bank of America briefly became Fannie’s top client following its acquisition of Countrywide. It accounted for 20% of all loans Fannie bought or backed in 2009, but that share had fallen below 10% by the third quarter of 2011, and below 3% in the fourth quarter, according to Inside Mortgage Finance.

The suit follows in a long line of legal headaches for Bank of America. Last month, the bank agreed to pay $2.43 billion to settle claims it misled investors about the acquisition of brokerage firm Merrill Lynch & Co., the largest settlement of a shareholder claim by a financial-services firm since the upheaval of 2008 and 2009. Read the complete Market Watch article on the Government and B of A lawsuit. 

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