17 Aug 10 Fed Bans Lenders from Paying YSP to Mortgage brokers
The Federal Reserve announced that they were banning mortgage lenders from paying bonuses to brokers for higher interest rate sold to the lender. The change is among several announced by the Federal Reserve, which has been criticized for failing to rein in high-risk lending during the housing boom. The Federal Reserve on Monday approved a rule banning mortgage lenders from paying bonuses to mortgage brokers and loan officers who get borrowers to agree to a higher mortgage rate than they need to pay. The Fed also proposed requiring clearer disclosures about how payments on adjustable-rate loans can change over time.
One of the proposed rules is designed to give consumers more time to review lenders’ disclosures for their home loan costs. Lenders would be required to refund any loan fees collected if the prospective borrower withdraws the mortgage application within three days of receiving the disclosures. That proposal is open for public comment. The change in required disclosures for adjustable-rate loans is set to take effect at the end of January as an interim rule. Mortgage lenders must show the maximum interest rate and monthly payment that can occur during the first five years, a “worst case” example showing the maximum rate and payment possible over the life of the loan. The disclosures must also include a statement that consumers might not be able to avoid rate and payment increases by mortgage refinancing.
The ban on mortgage lenders’ paying bonuses to brokers and loan officers for higher-interest loans takes effect in April. The Federal Reserve said that its consumer tests found that borrowers generally were unaware of the payments and how they could affect the total cost of a loan. Critics have called the bonuses little more than kickbacks that encouraged mortgage brokers and lender salespeople to steer borrowers into costlier loans.
Mortgage brokers have argued that they can use the payments, also known as rebates or yield spread premiums, to cover borrowers’ closing costs, so a homeowner wanting to refinance a mortgage with no upfront costs might accept a higher interest rate to accomplish that. In making the rule final, the Fed said a loan originator “may not receive compensation that is based on the interest rate or other loan terms. This will prevent loan originators from increasing their own compensation by raising the consumers’ mortgage costs.” Mortgage loan originators would still be able to receive compensation calculated as a percentage of the loan amount.
Another rule finalized Monday would require borrowers to be notified when their home mortgage has been sold or transferred. The Fed also proposed a rule to make it easier for consumers to learn who owns their loans. Under the provision, once a mortgage servicer is asked by a borrower for that information, the loan servicer would have to provide it within a reasonable time, which generally would be 10 business days
11 Aug 10 Fed to Keep Mortgage Rates Low
The Fed Reserve’s announcement yesterday moved the mortgage markets. Industry insiders continue to brace for the feared double dip recession. Many analysts that aren’t in Obama’s pocket believe the economy will take another dip. The housing sector is pretty flat and there are many regions that are in desperate need of some good news. Consumer bankruptcies in the U.S. continue to rise (in 2006 there were less than 600,000 filed; last year there were 1.4 million, and this year is on pace to top 1.6 million). The private sector does notappear to be ready to hire. These factors should contribute to the Fed keeping mortgage rates low for the near future.
11 Aug 10 Emergency Homeowner Loan Program
Word on the finance street is that the Federal government will soon announce the Emergency Homeowner Loan Program. The latest round mortgage bail-outs from the Obama Administration is said to be focused on aiding homeowners who have under-water mortgages.
According to CNNMoney, the Obama administration pledged another $3 billion in additional funds available to assist distressed homeowners in a foreclosure prevention effort. One part of the mortgage bail-out plan, includes a new $1 billion program that will offer self-employed home loans to unemployed borrowers at risk of losing their homes. The mortgage loan relief, which will be dispersed through non-profit and housing agencies, will carry 0% interest and be good for a maximum of $50,000 for up to two years. In the coming weeks, HUD said it will announce details about the new loan relief program, called the Emergency Homeowner Loan Program.
It was not clear whether or not the Emergency Homeowner Loan Program would be part of the recently discussed bail-out for Freddie Mac and Fannie Mae. HUD announced just last week more government loan relief with the FHA short refinance program that was created to help homeowners refinance their under-water mortgages. It also wasn’t clear whether or not the FHA short refinance program would be part of the Emergency Homeowner Loan Program. HUD was unavailable for comment.
Recent Government Mortgage Relief Programs
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The administration also added $2 billion in home loan aid for its mortgage program that helps struggling homeowners in the states with highest unemployment rates. Today, the Obama administration announced an additional $2 billion that will expand the mortgage relief program to a total of 17 states and the nation’s capital. The regions chosen have suffered significant home value depreciation, high unemployment and high foreclosure rates well above than the national average for a year.
Tags: Emergency Homeowner Loan Program, FHA short refinance program, self-employed home loans, under-water mortgages
21 Jul 10 California Mortgage Brokers Get Criminal Checks Yet Banks Are Exempt
One would think after the recent mortgage debacle and housing crisis that the government would really want to implement mortgage loan reform that closed the “loop holes” to significantly reduce the foreclosures and loan defaults that have been costing U.S. tax-payers billions of dollars each year. California mortgage brokers face closer scrutiny as the state adopts a federal law aimed at curbing the fraud and abuse that helped decimate the housing market. According to Bloomberg, mortgage brokers in the nation’s most populous state will be required by July 31th to have passed criminal-background and credit checks, as well as licensing exams. California, along with about a third of U.S. states, previously didn’t require mortgage sellers to have individual licenses.
That’s about to change as all states by January 1st must implement the national rules, which Congress developed after record mortgage defaults and foreclosures were triggered by rampant lending to people who couldn’t afford to repay their loans or never intended to. Brokers will be assigned identification numbers to enable regulators and borrowers to track their lending histories. “When someone buys 100 shares of stock, they must go through a licensed securities broker,” said Senator Dianne Feinstein, a California Democrat and co-sponsor of the law, the Secure and Fair Enforcement for Mortgage Licensing Act of 2008. “Until recently, some purchased their home — a far more valuable asset — through an independent mortgage broker or lender who may have had a criminal background or no license at all. This lack of accountability enabled unscrupulous brokers to commit fraud at the expense of unsuspecting homebuyers.”
Why Are Banks Exempt?
The 2008 law, dubbed the SAFE Act, doesn’t require testing for mortgage brokers at federally regulated mortgage lenders. That may help companies such as BofA Home Loans, Citi Mortgage and Wells Fargo Home Mortgage increase market share because they face fewer training requirements and costs, said William Emerson, chief executive officer of Quicken Loans Inc., a closely held nonbank lender in Livonia, Michigan. “For large, independent, nonbank lenders, this is certainly an operational challenge,” Emerson, whose company originated $25 billion in mortgages in 2009, said in a telephone interview. “It certainly adds costs.” Bank of America and Wells Fargo together accounted for 46 % of the residential-lending market in the first quarter, according to data compiled by Inside Mortgage Finance Publications in Bethesda, Maryland. Of $320 billion in new mortgages in the quarter, about $184 billion, or 57 %, was originated by lenders whose employees are exempt from the licensing exams, according to Inside Mortgage Finance data. “You see mortgage brokers take the test and fail it and wind up working for banks,” Emerson said. “If you can’t pass a test and work for an independent, why are you qualified to work for a bank?” According to according to Pete Marks from the Conference of State Bank Supervisors, about 71 % of people who took the national broker exams passed on the first try, which was assigned responsibility under the SAFE Act to maintain the licensing system and national registry. Mortgage originators must also pass separate tests in each state they do business.
Increased Protections from Bank Lenders
Bank of America, based in Charlotte, North Carolina, conducts background investigations and credit checks of all hires and provides training in legal compliance and regulations, Terry Francisco, a spokesman, said in an e-mail. Wells Fargo takes similar precautions, said Jason Menke, a spokesman for the San Francisco-based bank.
Borrowers were victimized last year by brokers engaged in fraudulent loan-modification plans, home appraisals and applications for the first-time homebuyer tax credits, the Federal Bureau of Investigation said June 17 in its annual report on mortgage fraud. The top states for fraud in 2009 were California, Florida, Illinois, Michigan and Arizona, based on law enforcement and industry data, according to the bureau. In a law-enforcement crackdown on mortgage fraud announced by the FBI on June 17, mortgage brokers accounted for 169 of the 1,215 defendants charged in the operation; 56 of the 485 arrests; and 46 of the 336 convictions to date. “From homebuyers to lenders, mortgage fraud has had a resounding impact on the nation’s economy,” FBI Director Robert Mueller said in a statement.
Mortgage Fraud Repercussions
According to RealtyTrac Inc, mortgage companies will take-over more than one million homes this year, forecast July 15th. Mortgage defaults soared to 10.1 % and foreclosures reached 4.63 % in the first quarter, both records, the Mortgage Bankers Association said May 19. Median existing-home prices have fallen 22 % to $179,600 since the July 2006 peak, the National Association of Realtors said June 22.
The number of U.S. mortgage brokers shrank to 246,900 in May, less than half of the February 2006 high of 504,400, according to the U.S. Bureau of Labor Statistics. The decline was driven by tighter compliance standards, said David Olson, president of Access Mortgage Research & Consulting, a firm in Columbia, Maryland, that works with residential lenders.
The personal identification number will help weed out brokers with histories of writing home loans that quickly go bad, said Ann Fulmer, vice president of Interthinx Inc., an Agoura Hills, California-based company that sells mortgage-fraud detection software. “One of the things we saw over and over during the boom was that a bad actor would work at a shop for several months, frequently ending up as the ‘top producer,’ and then leave for presumably greener pastures,” Fulmer said in an e-mail. “In actuality, they usually left because their bad loans were about to start blowing up and, if they stayed, they’d be discovered.”
Mortgage Modification Implications
The U.S. Department of Housing and Urban Development, which oversees compliance with the SAFE Act, has proposed that employees handling loan modifications for struggling homeowners also meet the licensing requirements, a policy opposed by banks. Mandating licenses for loan modification advisors would slow hiring and stall efforts to reduce foreclosures, said John Courson, CEO of the Mortgage Bankers Association. “We say this is not originating a new loan, it’s reducing the terms of their loan to get them to affordability,” he said in a telephone interview.
The housing department hasn’t set a deadline for a decision, said Lemar Wooley, a spokesman. It costs $3,000 to $6,000 to train and pay the fees for each new employee to comply with the mortgage-licensing system, said Anthony Hsieh, CEO of LoanDepot.com, an online mortgage originator based in Irvine, California. “The law is supposed to make sure we kick the bad ones out,” said Hsieh. “It could be the opposite — keep the good ones out.”
States with the highest fraud and foreclosure rates are among the last to put the national mortgage-licensing system in place. Nevada, which had the highest foreclosure rate in the first half of this year, goes live Oct. 1. Behind the delay was the state’s multilevel approval process, said Elisabeth Daniels, a spokeswoman for Nevada’s Department of Business and Finance. Florida, where a 2008 Miami Herald investigation found state regulators allowed 10,529 people with criminal backgrounds to work in the mortgage industry, also is scheduled to begin issuing licenses Oct. 1. States including Georgia, Illinois, New Jersey, Ohio and Virginia have already adopted the SAFE Act. Article written by John Gittelsohn for Bloomberg
Tags: California mortgage brokers
16 Jul 10 Home Loan Applications Decline
The number of home loan applications in the U.S. for home purchases fell to a 13 1/2-year low last week, the Mortgage Bankers Association reported yesterday, in a further sign of the slump in home buying since a federal tax credit concluded at the end of April. There have been fears for months that the incentive was stealing future sales and would result in a new leg down for the housing market once the support ended. New-home sales sunk to a record in May while pending total sales tumbled 30% from April.
Home loan applications for new homes were down 43% from the Independence Day week last year, said the MBA. The bad news comes even as home mortgage rates sink to new record lows. Those rate declines have been giving some lift to applications for home refinancing, which hit a 14-month high two weeks ago. But even the MBA refinance mortgage report fell 2.9% last week from a week earlier as its gauge for purchases dropped 3.1%. The share of applications for refinance loans was flat at 78.7%.
Tags: Home Loan Applications
14 Jul 10 Prime-Rated Mortgage Loan Security Delinquencies Increase
According to Fitch Ratings serious delinquencies of U.S. prime-rated residential mortgages rose in June from May, the 37th-straight month of sequential gains, though Alt-A and subprime mortgages extended a recent trend of declines. While noting the continued drops are “noteworthy,” the portion of borrowers who had been current in the prior month but fell behind–or roll rate–remains elevated. “The persistently high roll rates indicate that the delinquency declines are more a reflection of increased property liquidation and ongoing loan-modification activity than of widespread improvement in home loan payment performance,” said Fitch’s Vincent Barberio.
Home loan delinquencies have shown signs of plateau in recent months, with a number of measures showing their first declines since 2007, when the housing bubble began to lose air. Delinquencies of 60 days or more on prime-rated jumbo mortgages, or those of at least $417,000, rose to 10.4% in June from 6.4% a year earlier and 10.3% in May. Such loans saw the biggest increase in delinquencies last year among home borrowings, though the overall rate remains far below those of other mortgage types. Roll rates remained above 1% after dipping below that level in April, but were lower than their 1.4% peak in March.
The prime-rated jumbo loans make up the vast majority of the prime-rated mortgage loans in Fitch’s readings. Serious delinquencies for Alt-A loans–typically given to prime-rated borrowers who did not document assets and/or income, declined to 33.7% in June from 33.9% in May, but were up from 29.1% a year earlier. Roll rates rose on month to 3.4% from 3.1%. Prior to a sharp April drop, roll rates haven’t fallen below 3% since June 2008. Subprime delinquencies dropped to 43.7% from 44.8% in May but were above the prior year’s 41.2% The June roll rate fell to 4.2% from 4.3% sequentially but was well below the 12-month average of 5.3%. Article was written by Tess Stynes, Dow Jones Newswires
Tags: Fitch Ratings, subprime mortgages
08 Jul 10 FHA Mortgage Volume Drops
The FHA Loan Guide published an article indicating that FHA originations decreased slightly in May. The government report showed that FHA loan closings dropped 3% in May from April’s volume. FHA loan companies originated $22.3 billion of FHA loans for single-family homes in May. Almost 72% of the 124,750 FHA loan approvals went to borrowers buying a home. Of the 30,900 FHA refinance loans in May, 68% were conventional loan transactions with borrowers putting only 3.5% down-payments which are the minimum FHA requirements for home purchase transactions. The Federal Housing Administration indicated that 8.42% of its insured FHA loans are 90 days or more past due which almost the same as the 8.49% reported in April. Read the original article online > FHA Loan Production Dips Slightly.
08 Jul 10 Wells Fargo Announces Nearly 4000 Layoffs in Consumer Finance Unit
Wells Fargo Announced Thursday that it would no longer originate subprime home loans and were closing their finance division that specialized in those higher risked loans. According to Reuters Wells Fargo was poised to close their consumer finance division that was established a hundred years ago. Even though Wells Fargo has a reputation as a prime mortgage lender that had conservative lending guidelines they had been struggling with delinquencies and loan defaults from their own bad credit home mortgages in addition to mortgage portfolios it acquired from Wachovia Corporation when they recently took them over.
Wells Fargo announced they were closing 638 Wells Fargo Financial offices, which increased its number of retail branches to 6,600 after the Wachovia merger. The bank also has 2,200 Wells Fargo Home Mortgage offices and will eliminate about 2,800 employees from its Wells Fargo Financial unit and will most likely slash another 1,000 jobs in the next year.
According to Dave Kvamme, chief executive of Wells Fargo Financial in Des Moines, “The nonprime real estate business had really declined dramatically over the last 12 to 18 months.” He believed that that Wells waited too long to convert their loan officers from originating subprime loans to FHA mortgage loans too late. As the non-prime home loans contributed to the increased loan defaults that put the company in a position of risk they no longer were comfortable with. Kvamme continued, “The bank has switched from offering subprime mortgages to offering FHA home loans guaranteed by the government.”
Tags: bad credit home mortgages subprime home loans, Consumer Finance Unit, Wachovia Corporation, Wells Fargo, Wells Fargo Home Mortgage
06 Jul 10 Mortgage Activity Slowing Despite Record Low Home Loan Rates
2010 has been a roller coaster ride for mortgage professionals because interest rates have been low but consumers are slower to do anything because of our sluggish economy. Record low home mortgage rates have done nothing to stop a renewed housing slide, as new home sales fell to record lows in May and both mortgage refinancing and home buying volumes fell throughout June.
According to Bob Dorsa, president of the American Credit Union Mortgage Association, “There’s a bit of a fear in the marketplace and people don’t want to do anything.” A strong market in the first quarter of the year had buoyed hopes of a housing recovery, but it appears the first-time homebuyer’s tax credit was a primary driver; since its expiration new home sales were down 32.7% in May to an annualized rate of 300,000. That’s the lowest home mortgage rates reported since record keeping for interest rates began in 1963.
The thirty-year fixed rate mortgage dipped to an average of 4.69%. That is the lowest rates recorded since Freddie Mac between tracking mortgage rates in 1971. The previous record of 4.71% was set in December. The 15-year average fell from 4.20% to 4.13%, also a record low. ARM rates have also moved near record territory, with the average for the five-year ARM falling from 3.89% to 3.85% and the average for the one-year ARM dipping from 3.82% to 3.77%.
Mortgage refinance rates have declined even more over the last two months. Home loan rates tend to track the yields on long-term Treasury debt. Refinance loan volumes have also slowed even as interest rates are falling below levels seen during the “mini-boom” of 2009. Unfortunately most homeowners who are failing to produce enough income to keep their loan payments current usually do not have the required income need to qualify for mortgage refinancing.
In Alabama, Anita Domondon, VP with Meriwest Mortgage noted, “With the Home Affordable Refinance Program enables home refinancing to 125% and for many homeowners that is not good enough because their mortgage is so far underwater.” The notion of a housing double-dip is starting to take hold in some circles, including credit unions. And while CUs across the country have gamely offered loan modifications and debt settlement programs, the rock-bottom rates have left many inflexible on mortgages. The original article was written by Matt Blumenfeld.
Tags: ARM rates, lowest home mortgage rates, thirty-year fixed rate mortgage
02 Jun 10 Home Refinancing Volumes Rise
In a recent article on the Mortgage Refinancing Buzz, they revealed some positive data for lenders across the country. Refinance applications are flooding in as interest rates once again dropped. Home refinancing isn’t right for everyone who qualifies. The blog points out that usually there is a cost with refinancing and most lenders will charge $2,000 to $3,000 for refinancing. No cost refinancing may be a viable option but typically the mortgage rate is higher than the rate would be if you paid the closing costs yourself. Read the original article online at the Mortgage Refinancing Buzz > Rates Drop and Mortgage Refinancing Applications Soar Again
Tags: Mortgage Refinancing Buzz
20 May 10 Home Purchase Loan Applications Drop to 13 Year Low
Yesterday, the Mortgage Bankers Association released its Weekly Mortgage Applications Survey for the week ending May 14, 2010. The MBA’s Vice President of Research and Economics, Michael Fratantoni said: “Home loan applications fell 27% last week and have declined almost 20% over the past month, despite relatively low mortgage rates. The data suggests that the tax credit pulled sales into April at the expense of the remainder of the spring buying season. In fact, this decline occurred even as interest rates on thirty-year fixed-rate mortgage loans dropped to 4.83% which is the lowest level in the six months….However, homeowners seeking mortgage refinancing did respond to these lower interest rates, with refinance applications up almost 15%, hitting their highest level in nine weeks.”
The Mortgage Banker’s application survey covers over 50% of all US mortgage loan applications taken by mortgage bankers, commercial banks, and thrifts. The data gives economists a look into consumer demand for mortgage loans. In a low mortgage rate environment, a trend of increasing home refinance loan applications implies consumers are shopping for lower mortgage payments which can result in increased disposable income and consumer spending. Home purchase applications have widely been considered a strong indication of home buying interest nationally. Breaking it down further — Conforming loan applications declined 9% and FHA home loan applications rose nearly 5%.
The Market Composite Index, a measure of home loan application volume, decreased 1.5% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 3.1% compared with the previous week. The four week moving average for the seasonally adjusted Market Index is up 0.8%. The Refinance Index increased 14.5 % from the previous week. The four week moving average is up 4.5 % for the Refinance Index. The refinance percentage of home loan activity rose to 68.1% of total loan applications from 57.7% the previous week.
The seasonally adjusted Purchase Index decreased 27.1% from one week earlier. The unadjusted Purchase Index decreased 27.0 % compared with the previous week and was 24.1% lower than the same week one year ago. The four week moving average is down 4.6 % for the seasonally adjusted Purchase Index.
This is the lowest Home Purchase Index observed in the survey since May of 1997….The average contract interest rate for thirty-year fixed-rate home loans dropped to 4.83% from 4.96%, with points increasing to 1.08 from 0.91 (including the origination fee) for 80% loan-to-value (LTV) ratio loans. The effective rate declined from the previous week.
The average contract interest rate for fifteen-year fixed-rate home loans decreased to 4.19% from 4.32%, with points increasing to 1.36 from 0.81 (including the origination fee) for 80% LTV loans. This is the lowest 15-year contract interest rate ever recorded in the survey. However, due to the increase in points, the effective rate was essentially unchanged from last week.
The average contract interest rate for one-year ARMs decreased to 6.81% from 6.86%, with points increasing to 0.37 from 0.35 (including points) for 80 % LTV loans. The adjustable-rate mortgage share of activity remained constant at 6.3% of total applications from the previous week.
14 May 10 Lowest Mortgage Rates of 2010 for Refinancing and Home Buying
Reuters reported that mortgage interest rates fell this week to the lowest level of 2010. Mortgage rates dropped to 4.93 % for 30-year fixed rate mortgage loans. Fears about Greece’s precarious financial situation have benefited American consumers and the mortgage loan industry in general. The home mortgage rates in the United States are closely tied to interest rates paid for long-term Treasury bonds. Investors have shifted money from risky European debt to safer U.S. securities. The Federal Reserve ended a program to push down mortgage rates this spring, but rates for home refinance transactions and home buying have continued to be available at ridiculously low rates. Talk to your loan officer about no cost refinance options that have been advertised with many mortgage lenders on the radio. Many lenders are offering the no fee mortgages in an effort to increase business and lure borrowers with good credit scores to consider refinancing.
Tags: no cost refinance
