13 Apr 10 WAMU Defends Risky Mortgage Lending

Government officials claim they are investigating the roots of the mortgage crisis.  Former executives from mortgage lender Washington Mutual appear before Congress. The testimony follows an 18-month investigation that discovered disturbing incongruities and gross negligence in WAMU’s banking practices.

Washington Mutual who was the biggest bank and mortgage lenders in U.S. history ever to fail; Congress is hoping to uncover some of what happened behind the scenes to cause such a gigantic failure, which eventually led to the crisis in the financial sector and the subsequent economic downturn currently in place. This marks the first time since the bank collapsed that WAMU execs have testified before Congress.  The Seattle-based WAMU continuously practiced poor mortgage lending procedures with the loan officers processing home loans and bad credit mortgages too quickly, the more rewards they would get. The points based system even offered extra bonuses for those loan officers who overcharged borrowers on their mortgage loans.

Former WAMU CEO Kerry Killinger is quick to note that he was not at fault for WAMU’s failure, or for that matter, the financial crisis. Instead, Killinger blames the boom and bust of the housing market. “The severe downturn was caused by declining housing prices which in combination with a freezing of the capital markets fueled a vicious cycle of delinquencies, home foreclosures and further price declines,” said Killinger.

Moreover, WAMU’s former president described WAMU as “the worst managed business I had seen in my career.”   The hearings are live and testimonies from WAMU’s former president, Stephen Rotella, David Schneider, former president of WAMU’s home loan division, and two former chief risk officers are underway. Killinger is also being questioned.  The article was written by Lani Shadduck.

13 Apr 10 B of A Home Loan Modifications Perform Poorly

Bank of America home loan executives delivered bleak mortgage statistics to Congress recently.  According to the Business Journal of the Greater Triad Area, B of A offered less than favorable information with weaker than anticipated mortgage news.

Barbara Desoer, president of Bank of America Home Loans, is testifying on Capitol Hill today about the housing crisis and the steps B of A is taking to modify troubled mortgages. And she’s painting a bleak picture, according to her prepared testimony.

•1.4 million borrowers, or 10% of the entire B of A residential mortgage portfolio, are more than 60 days delinquent.

•More than 16,000 B of A employees are dedicated to helping troubled borrowers work out a solution with a mortgage refinance or loan modification.

•B o A has taken $10.4 billion in write-downs tied to mortgage loans over the past two years.

“We’re now at a critical point,” Desoer says in prepared testimony. “Many customers are still struggling to make ends meet due to prolonged unemployment, depressed home values, and other economic realities.”  Desoer’s testimony in front of the House Financial Services Committee is designed to help lawmakers decipher how to improve loan modification programs.

B of A has implemented trial mortgage loan modification programs for about 297,000 home owners so far. About twice that many are eligible under current standards. And Desoer is asking Congress for some improvements to the program to encourage more participation 

“There has not been adequate success in getting enough customers to accept the offers and complete the documentation and trial period required to obtain a permanent modification,” she says.

As of June 30, Bank of America (NYSE: BAC) had deposits of $1.77 billion in the Triad, placing it fourth in market share with 4.6 %. The company also employs about 2,000 in the region, the majority of which are at a call center in High Point’s Piedmont Centre

03 Feb 10 FHA Credit Improving

The FHA home loans originated last year went towards borrowers with better credit scores than in previous years. These borrowers migrated to FHA when the subprime market disappeared.  The average credit score of an FHA borrower is now 690, up from 630 only two years ago, agency officials said. 

The agency banned 268 FHA lenders from making FHA mortgage loans last year, more than double the total terminated in the previous eight years. The FHA suspended six other firms. Among them were some of the largest FHA mortgage lenders –Taylor, Bean & Whitaker and Lend America, both of which shut their doors soon thereafter.   Consumers taking out FHA mortgage loans will have to pay higher upfront fees, perhaps as early as this spring. Those with especially weak credit scores will also have to put down at least 10% instead of the usual 3.5% down-payment.  Read the original article from the FHALoanBlog, > Better Credit FHA Loans Performing Well

08 Jan 10 Will the Fed Let the Mortgage Market Walk?

Many mortgage industry insiders believe the Federal Reserve will take their hands off the housing sector in 2010, when the central bank enables mortgage market to stand on its own two feet.  The Fed is unlikely to step in again after its bad credit mortgage buying program devised at the height of the financial meltdown expires. That would take a renewed crisis, like a sudden and destabilizing hike in mortgage interest rates.

Besides conventional and FHA mortgage rates, there are other impediments to a fresh round of mortgage-backed debt purchases, including the Fed’s desire to keep inflation expectations under control.  One of the reasons the Fed capped its bond-buying program, which included more than $1.4 trillion in mortgage-related securities and $300 billion in Treasury debt, was the perception that the central bank was “monetizing” federal deficits printing money to keep the government solvent.  This latent fear, prevalent in financial markets and reflected in the elevated price of gold, has the potential to turn more than $1 trillion in dormant excess bank reserves into a runaway rise in prices, analysts say.

Barring a double-dip in housing, however, Fed officials are unlikely to meddle.  Their reluctance to intervene anew has many roots. For one thing, it would signal a policy about-face that could adversely affect markets as investors reassess what they believed was an improving economic outlook.  > Read the original article online.

17 Dec 09 Mortgage Rates Up but Stay Below 5 Percent

Mortgage interest rates crept up for the 2nd consecutive week, but borrowers who applied for mortgage refinancing remained strong.  Refinance applications continued to rise, as homeowners are making a last ditch effort to lower their monthly home loan payment before the rates rise.

Freddie Mac reported the average fixed rate on a thirty-year home loan was 4.94% this week, up from 4.81 % last week.  Mortgage rates are closely tied to yields on long-term government debt, which have risen since the average fixed rate on thirty-year mortgages hit a record low of 4.7% the week of Dec. 3.

A Federal Reserve program to buy $1.25 trillion in mortgage-backed securities has kept rates on thirty-year mortgages under 5% this year. The government mortgage programs, like FHA and VA were created to make home buying more affordable, is set to end next spring.

The low rates resulted in a wave of refinancing activity: The Mortgage Bankers Association reported that nearly 3 out of 4 home loan applications were for home refinancing during the first few weeks of December, Freddie Mac collects mortgage rates each week from lenders around the country. Home mortgage rates often fluctuate, even within a given day.

The average rate on a fifteen-year fixed mortgage rose to 4.38% from 4.32% last week. Mortgage rates on five-year, adjustable-rate mortgages averaged 4.37%, up from 4.26% last week. Rates on one-year, adjustable-rate mortgages rose to 4.34% from 4.24%.

16 Dec 09 Lend America Banned from FHA Mortgage Lending

According to a recent article from National Mortgage News, mortgage company, Lend America was banned from FHA mortgage lending on Monday.  Apparently, the company was refinancing certain customers without paying off their prior existing lien.  According to veteran mortgage banking attorney Robert Lotstein, who has clients that did business with Long Island-based Lend America, said this has created a situation where customers received a new loan from the mortgage lender but without their existing lien being paid off.

14 Dec 09 HUD Says FHA Guidelines Changing in 2010

FHA mortgage products have helped support the housing sector for decades, but over the last few years FHA home loans has significantly supported borrowers for home buying and mortgage refinancing.  HUD has plans for revising FHA guidelines.  Below are at least several revisions HUD is making with FHA loan programs.

1. Upping the minimum required down payment. HUD is looking at whether increasing the required minimum down payment from 3.5% to 5% will help stabilize FHA loan defaults. If home buyers have more “money invested,” HUD officials wonder, will they be less likely to default on their mortgages?

2. Changing mortgage insurance premiums. HUD officials are considering whether changing the way FHA mortgage insurance premiums are structured will keep more buyers from becoming delinquent. Should there be an extra fee up front? Should the amount paid over time change for maximum stabilization?

3. Raising the minimum credit score required for an FHA loan. While credit scores have been lousy at predicting what happens to people with good credit who lose their jobs, they have been more accurate in identifying risky behavior. At the height of the housing boom, FHA approved loans to borrowers with credit scores below 500. Discussions underway wonder whether the minimum acceptable credit score should be 620 or higher.

4. Dialing back how much money sellers can give FHA home buyers. Right now, sellers can give buyers up to 6% to help cover closing costs and fees. Experts recommend reducing that to 3%.

5. Requiring FHA lenders to have more cash on hand. Like borrowers, lenders need to have more “skin in the game.” Right now, lenders need only have $250,000 in cash to cover fraud-related loan originations, but HUD officials want to see that amount rise to $2.5 million. That will reduce the number of lenders that can offer FHA loans, and hopefully cut down on mortgage fraud.

6. Eliminating abusive lenders. HUD is asking Congress for more power to prevent abusive lenders from making FHA loans. According to HUD Secretary Shaun Donovan’s testimony before the House Financial Services Subcommittee on Oversight and Investigations, lenders will be required to “indemnify the FHA fund for their own failures to meet FHA requirements” and will be held accountable nationally for any improper activities. Donovan said that HUD “will also develop a Lender Scorecard that will summarize the performance of lenders who do business with the FHA. This scorecard will be posted on (the department’s) Web site to ensure transparency and accountability for lenders, borrowers and the market.”

HUD officials say the quality of the FHA loan portfolio has improved over the course of 2009. The typical borrower’s debt-to-income ratio has declined, meaning the mortgage payment is a smaller portion of the borrower’s monthly income.  While HUD officials are pleased to see borrowers with a stronger personal finance balance sheet, there are two big concerns. First, the number of borrowers who are delinquent in paying their mortgages is growing. If those borrowers don’t figure out a way to make up their missing payments and start paying their mortgage on time, more homes will fall into foreclosure, further depressing housing prices.

The second concern is rising unemployment. “If unemployment continues to track at high levels and goes to 11 or 12%, that’s a real struggle,” the senior HUD official said. “The big risk is a stagnant, slow recovery that keeps unemployment rates high because there is no loss mitigation technique for that.  In other words, if homeowners lose their jobs and can’t find replacements that pay enough to cover their monthly expenses, the FHA’s capital reserves fund sinking into the red will be the least of the government’s problems.

08 Dec 09 FHA Mortgage Insurance Premiums Rising

FHA unexpectedly delayed the release of a much-anticipated audit of its capital reserves in November.  Of course, the mortgage lending industry feared the worst that the government’s FHA mortgage insurance fund was negative.  After the audit was released showing a thin $3.6 billion cash cushion with promises from FHA to keep the fund solvent, a new worry emerged revealing the government could move to raise the FHA mortgage insurance premium it charges borrowers, increasing closing costs for millions of potential customers.  At a press conference unveiling the audit, housing secretary Shaun Donovan confirmed that FHA is weighing its options, including a possible hike in the upfront MIP. Mr. Donovan would not rule it out entirely but also said that it was not imminent.

Currently, FHA mortgage lenders charge a borrower roughly 165 basis points at the closing table plus 50 basis points monthly. The points are often financed and the borrower cannot recoup the premium. The 50 bps are part of the monthly payment and can be adjusted up or down, depending on the FHA’s needs and concerns.  Today, FHA mortgage loans account for between 25% and 30% of all new originations and have become the program of last resort for homebuyers with both poor credit and low or no down-payments.  “If they (FHA) need to raise cash I would rather see them raise the monthly rather than the upfront MIP,” said one mortgage executive following the issue.  But Jim Pair, president of the National Association of Mortgage Brokers, wasn’t thrilled with the idea of raising the MIP unless FHA really needs to.  “An increase at this time would be detrimental to the housing market,” Mr. Pair told Origination News.  The audit found that the Mutual Mortgage Insurance fund actually has $30.7 billion in cash on a total book-of-business approaching $700 billion but $27.1 billion of that amount has been set aside to cover anticipated losses on FHA mortgages, leaving it with a cash cushion of just $3.6 billion.

The new study believes the MMI will stay in the black unless the housing recession deepens significantly. If that happens, the fund would have a negative capital ratio of 0.46%. But if the mortgage market suffers what FHA calls a “downward interest rate shock” the fund could go negative by as much as 2.33%.  The actuarial study (audit) of FHA was done by IFE Group of Rockville, Md. Mr. Donovan said the release of its findings were delayed because HUD wanted the firm to conduct “more extreme” stress modeling on the reserve fund. “We felt some of the loss scenarios were not as bad as we expected,” said the HUD secretary.

Commenting on IFE’s findings, Howard Glaser, a former HUD attorney who is now a lobbyist, said FHA is not immune from the laws of economics. “Facing the equivalent of a 500-year flood in the housing market, and having stepped into the void left by reckless lenders who pillaged the mortgage system, FHA now finds itself tight on capital.”  To many mortgage bankers, the FHA loan program is the only game in town, and without it originations to cash strapped and low-income borrowers would seize up.

03 Nov 09 Home Mortgage Rates Climb 3 Weeks in a Row

Home mortgage rates for 30-year home loans rose to 5.03 % this week, the third consecutive weekly increase. The average home loan rates rose from 5% a week earlier, mortgage giant Freddie Mac said last week. The last time the average was higher was the week of September 24th, when rates averaged 5.04%.   The average rate on a 15-year, fixed-rate mortgage loans rose to 4.46% from 4.4 % last week, Freddie Mac said.   Home mortgage rates on five-year, adjustable-rate home loans averaged 4.42%, up from last week’s 4.4%. Mortgage rates on one-year, adjustable-rate mortgages rose to 4.57% from 4.54%.

Home buyers can reduce their payments and mortgage rates by buying points, which amount to 1 % of the loan total. The average for home loans in Freddie Mac’s survey was 0.7 points for 30-year home mortgages and 0.6 points for 15-year, five-year and one-year loans.  “It’s still a very low rate by longer-term historical standards,” said George Mokrzan, senior economist at Huntington National Bank in Columbus, Ohio. “It’s still very supportive of the housing market and recovery.”

The Federal Reserve last year pledged to buy bonds backed by home loans in order to encourage lower mortgage rates. It increased the size of that program to $1.25 trillion in March.   The bond purchases from Fannie Mae, Freddie Mac and Ginnie Mae brought down yields on mortgage-backed securities and allowed lenders to reduce rates on new loans while still selling the securities backed by them at a profit. The plan helped drive mortgage rates to a record low of 4.78 % twice in April.   The central bank’s purchasing program is scheduled to end in the first quarter next year, the Federal Open Market Committee said in a statement September 23rd.

Rising borrowing costs and uncertainty over whether Congress will extend a government tax credit for first-time home buyers may have contributed to a drop in mortgage applications last week. The Mortgage Bankers Association’s index of applications to purchase a home or refinance fell 12%, and sales of new homes declined in September, the Commerce Department said Wednesday.

According to the Mortgage Bankers Association, home loan applications dipped 5.2% in the week ended October 23rd and mortgage refinancing volumes declined 16%.  New-home purchases in September dropped 3% to a 402,000 annual pace, lower than even the most pessimistic economist’s forecast. It was the first month-to-month decline in sales since March.

08 Oct 09 Low Rates Driving Refinance Boom

More than 16 million homeowners owe more on their mortgage than their properties would be valued at.  To many distresses homeowners, mortgage refinancing represents lower loan payments and more money in their pockets. Many phone calls mortgage brokers received last week came from borrowers who couldn’t qualify for a refinance loan because of lower incomes, stricter credit standards or declining home values.  Les Berman of EB Financial said the new guidelines were designed to reduce the conflicts of interest for home appraisals but the stricter guidelines have hindered refinance loan approvals applications because appraisals are coming in too low.  The FHA streamline refinance requires at least six months of payments before a borrower can take advantage of the program, and verification of assets, job and income.

Mortgage brokers say a refinancing is worthwhile if you can shave off at least $100 from your monthly payment or get a full percentage point rate reduction.  That’s why mortgage rates below 5% are so appealing. Refinance rates hit a record low of 4.75% in the spring.    Read the rest of the article online> Mortgage Refinance Boom

15 Sep 09 Mortgage Backed Securities

The Fed’s next key decision is how to wind down its program to buy home mortgage securities and to assess its effect on mortgage rates as that occurs. The central bank now accounts for all but a sliver of the market for mortgage-backed securities, crowding out private activity and raising doubts about how the market would function without government involvement.  At their August gathering, some Fed policy makers believed that a “tapering” of those purchases beyond their scheduled conclusion in December “could be helpful in the future as those programs approach completion,” according to minutes of the meeting.  Two weeks later, Richmond Fed President Jeffrey Lacker said in a speech that he “will be evaluating carefully whether we need or want the additional stimulus” that purchasing the full announced amount would provide.  But another policy maker, Chicago Fed President Charles Evans, said he expects the Fed to carry out the entire amount of purchases. Other Fed officials share that view, worrying about the Fed breaking from a commitment the market is counting on. The central bank’s program has pushed mortgage rates down substantially over the past year, helping to spur the housing market and support the overall economic recovery.  How much mortgage loan yields rise when the central bank ends its purchases will depend in part on how the Fed communicates its plans and how private investors respond.  Policy makers are considering two main views of how the central bank’s involvement influences mortgage rates: by its total stock of mortgage-backed securities, or by the flow of its purchases.

10 Sep 09 Bonds for Mortgage Loans Yields Decline

Bloomberg reported that yields on Fannie Mae and Freddie Mac mortgage securities declined to the lowest in more than three months, signaling that mortgage rates on home loans will drop more and bolster the U.S. housing market.   Yields on Washington-based Fannie Mae’s current-coupon 30- year fixed-rate mortgage bonds fell 0.1of a percentage point to 4.29% as of 3 p.m. in New York, the lowest since May 26, according to data compiled by Bloomberg. The drop followed benchmark Treasury yields lower after stronger-than-forecast demand at the last of three government debt auctions this week.   “If Treasury auctions are oversubscribed day after day, it is only natural that mortgages shouldn’t be far behind,” Tae Park, a portfolio manager in New York who oversees mortgage-bond investments at Societe Generale, said.

Lower mortgage rates may help the housing market offset a forecasted further flood of foreclosure sales to build on recent signs of strength, including the first month-over-month increases in property prices since 2006 registered in an S&P/Case-Shiller index in May and June.   The drop in mortgage-bond yields also suggests home-loan rates may reach the levels below 5% that analysts including Credit Suisse Group AG’s Mahesh Swaminathan say are needed to send refinancing to elevated levels, bolstering consumer finances and spending.   The average rate on a typical thirty-year fixed-rate mortgage dropped to 5.07 % in the latest week, McLean, Virginia based Freddie Mac said today in a statement. That’s down from as high as 5.59% in June, and up from the record low of 4.78% in April. While mortgage refinance applications rose to the highest since late May in the latest week, they remained 64% below the high this year set in January, according to a Mortgage Bankers Association index.

Yields on so-called agency mortgage bonds, the type of debt being bought by the Federal Reserve under a $1.25 trillion program as well as by the Treasury Department, are now guiding rates on almost all new U.S. home lending, following the collapse of the non-agency market in 2007 and retreats by banks. The almost $5 trillion market includes securities guaranteed by government- controlled Fannie Mae and Freddie Mac and bonds of U.S.-insured, low-down-payment loans backed by federal agency Ginnie Mae.   While “after four years of decline, the housing market is showing signs of turning,” sizable challenges remain, including more than 2 million foreclosures over the year ahead, Deutsche Bank AG analysts Peter Hooper and Torsten Slok in New York wrote in a report yesterday.  “The question is how strong the bounce,” they said. “Recent movements in sales, prices and builder expectations looked quite promising, but there are good reasons to expect that home building and prices will remain relatively depressed well into next year despite the recent bounce.”  Article was written by Jody Shenn.

01 Sep 09 Mortech Responding to LendingTree with Legal Challenge

Mortgage technology software provider Mortech, Lincoln, Nebraska, said it has plans to address a legal challenge by Lending Tree, Charlotte, N.C. Mortech said in an e-mailed statement that it would deal with the issue in a “timely fashion,” and noted it has a good track record and reputation when it comes to its dealings with industry partners and customers.

According to a New York Times press report, the suit alleges that Lending Tree feels that Mortech, as its business partner, is in violation of its contract because it is planning to make its pricing engine services available for another online provider’s use Google and those services would compete with Lending Tree’s lead generation system that promotes mortgage loan shopping for consumers online.  

01 Sep 09 Freddie Mac Compliant for NYSE Listing

Mortgage rates are low and the home financing industry looks like it’s getting back on track.  Is Freddie Mac poised to gain their NYSE listing back on the stock market?  Mortgage giant, Freddie Mac soon may be receiving a notice from the New York Stock Exchange, saying it is back in compliance with the NYSE’s listing requirements. As of yesterday, Freddie Mac’s common stock was trading at $2.22, which means that its average share price will have been north of $1 for the past 30 days – that is, as long as its stock price doesn’t collapse by close of business Monday. Under NYSE rules, the exchange can initiate delisting proceedings for companies whose 30-day average price falls below $1. “We’re waiting for official notification from the NYSE,” a company spokeswoman said Monday. In a week it will mark the one-year anniversary since Freddie Mac and its sister company, Fannie Mae, were taken over the government and placed into conservatorship. The share price of both GSEs has been rising over the past month. Some stock analysts attribute the price increase to bottom fishing and speculation by short sellers. Freddie’s 52-week low is 25 cents, its high $5.52. In the second quarter Freddie actually posted a profit while Fannie lost money. 

17 Aug 09 Mortgage Delinquency Rate Climbs to All Time High

The delinquency rate on U.S. home loans reached an all-time high in the second quarter.  However the pace of growth for the mortgage delinquency rate slowed and some industry analysts see this as a possible sign the mortgage crisis may be beginning to turn the corner.  Data provided by credit reporting agency Trans Union shows the ratio of mortgage holders who are 60 days or more behind on their payments increased for the 10th straight quarter, to 5.81% nationwide for the three months ended June 30.  That’s up 65%, from 3.53%, in the 2008 second quarter.  Delinquency of 60 days is considered a forecasting sign to foreclosure, because of the difficulty homeowners would have coming up with two back payments to bring themselves current.

While the delinquency rate hit a new high, however, the increase from the 1st quarter to the 2^nd was 11.3%. In the two prior quarters, the delinquency rate spiked almost 16%.  That slowdown may be a good sign, said FJ Guarrera, vice president of Trans Union’s financial services division. “We have reason to be cautiously optimistic,” he said.  While there’s no way to know exactly why the pace of growth is slowing, Guarrera said, it appears that loan modification programs aimed at helping distressed homeowners from both the FHA mortgage and conventional lenders are beginning to help. In addition, he said, consumers are being more careful with their spending.  Read the original article written by EILEEN AJ CONNELLY >

Tags: FHA mortgage, foreclosure, home loans, loan modification programs, mortgage crisis, Mortgage Delinquency, Trans Union