19 May 11 Did First Time Home Buyers Benefit from Tax Credit?

The government’s recent $8,000 cash incentive for first-time home buyers has proved even more costly for recipients than for taxpayers, according to data released Monday. The first time home buyers tax credit was sold by realtors and loan officer as a “no brainer”, but since then some financial advisors are questioning whether or not it helped new home buyers. The average home buyers have lost twice as much to price declines as they received from the program. According to Zillow, the median home value fell to about $170,000 in March from $185,000 a year earlier. That means a buyer who closed on a house just before the tax-credit program expired in April 2010 collected $8,000 but has since lost $15,000 in value. Those who bought earlier in the program have done worse; the median price is down $20,000 from March 2009.”The $8,000 first-time home buyers tax credit . . . has brought many new families into the housing market,” the White House boasted in November 2009 upon announcing an extension and expansion of the program. Judging by sales declines since, that seems beyond doubt. Over the past year, the pace of existing home sales has fallen more than 6% and that of new home sales has fallen 22%. The credit wasn’t great for taxpayers, either. IRS says it paid $26 billion in home buyer credits in 2009 and 2010, enough to cover the maximum $8,000 credit for more than 3 million buyers.

At least rates on purchase loans were extremely low. FHA has been very helpful with affordable first time home buyer loans that do not require a significant down-payment like traditional home loans require. Both conventional and FHA rates were low, so it’s easy to see how consumers were swayed into buying a house.

House prices indeed tracked the rate of inflation during the 1970s, 1980s and 1990s, straying only slightly and briefly and returning each time. In 2000, house prices began to detach from the inflation rate and race ahead of it. Therefore, normalcy might be restored once the house price rise since 2000 matches the rate of inflation since then.  Houses are up 41% since 2000. Inflation has increased other costs by 32%. By this measure, too, prices on a national level seem nearly back to normal but not quite there yet.  Read the original Smart Money article > How the $8,000 Tax Credit Cost Home Buyers $15,000 .

10 Mar 11 Brokers Challenge Loan Officer Compensation Rules

Loan officer compensation rules continue to be challenged as the mortgage industry groups gear up for a battle with the U.S. government.  Two groups representing mortgage brokers and other real estate industry professionals have filed suit against federal regulators over new rules governing loan officer compensation that are scheduled to take effect April 1. The Federal Reserve drafted the rules to implement provisions of the Dodd-Frank mortgage reform and Consumer Protection Act that are intended to prevent loan originators from steering borrowers into higher-interest-rate loans.

httpv://www.youtube.com/watch?v=nqNZbSja8ho

The rules, which stipulate that loan officer compensation cannot be based on a mortgage transaction’s terms, will prevent mortgage brokers from collecting rebates on higher-interest loans known as yield-spread premiums, groups representing mortgage brokers say.  Critics of yield-spread premiums say they can serve as an incentive for mortgage brokers to steer borrowers into high-interest loans, if brokers pocket the rebates themselves rather than applying them to borrower’s closing costs. Supporters say yield-spread premiums allow borrowers to finance their closing costs and home loan origination fees by paying a higher interest rate on their loan. Those costs can be a “major obstacle to homeownership” for those who can’t afford to pay them out of pocket, the National Association of Independent Housing Professionals said in a lawsuit filed Monday.  The Fed’s rule is “arbitrary and capricious,” the NAIHP said in its complaint, because loan officers employed by banks will still be able to provide that same option to borrowers. 

Bank loan officers offer loans with reduced or no upfront settlement costs in exchange for a higher rate on the borrower’s mortgage, and recoup those costs by adding a “service release premium” when they sell mortgages with higher interest rates in the secondary market, NAIHP’s suit said.
In overhauling the Real Estate Settlement Procedures Act (RESPA), the Department of Housing and Urban Development (HUD) “expressly approved (yield-spread premiums) as a way for borrowers … to pay settlement costs, including compensation to their broker for loan origination services,” NAIHP said. The lawsuit seeks a temporary restraining order and preliminary injunction barring the Federal Reserve from enforcing the rule. The public would be better served if the newly formed Consumer Financial Protection Bureau drafted a rule to implement Congress’ intent in the Dodd-Frank bill, the group said.

The National Association of Mortgage Brokers today said it’s filed its own lawsuit with the same goal. The section of the rule NAMB objects to “could cause devastating and irreparable harm to small-business mortgage brokers,” the group said. The Fed’s rule-making authority under the Truth in Lending Act (TILA) is scheduled to be transferred to the Consumer Financial Protection Bureau in July.

The Fed announced on Feb. 1 that it would not complete pending aspects of four rule-making proceedings, which included changes to TILA mortgage loan disclosures, restrictions on certain advertising practices and sales practices for reverse mortgages, and changes to the disclosure obligations of loan servicers.  The loan officer compensation rules were already finalized when the Fed made that announcement.  The Small Business Administration’s Office of Advocacy has cautioned that mortgage brokers may have difficulty determining if they are in compliance with the rules, despite additional guidance issued by the Fed in January.

21 Dec 10 More Home Mortgage News

The Mortgage Bankers Association continues to report that interest rates are all over the map.  Home mortgage news has been focusing on interest rates rising and foreclosure proceedures being rectified.

Is home financing available?  Yes. Mortgage brokers and mortgage bankers have access to a multitude of lenders and money is available. Also, interest rates are near historic lows and consumers with good credit scores are qualifying.  Meet with an experienced loan officers to explore your options.

Is it possible to qualify for a refinance loan? While there are more challenges than in the past, it is possible to refinance. Even if your house value does not come in where you need it, there may be loan programs available. Make sure the cost of refinancing mortgages is either paid by the lender or rolled into the loan.

In other mortgage news, the state of New Jersey courts are threatening to block six major mortgage lenders from foreclosing on most homeowners unless they can verify and document that the foreclosure process is lawful.  On Monday, judges ordered six lenders to defend their foreclosure practices and 24 others to produce reports on their process.

New Jersey is now requiring banks’ attorneys to certify that they spoke with a bank employee who reviewed the foreclosure documents, a practice similar to one enacted in October by New York. For now, home foreclosures will continue, but Mr. Rabner said he didn’t expect a rush to push cases through in the meantime. The 6 banks—Ally Financial, Bank of America, Citibank, JP Morgan Chase, OneWest Bank FSB and Wells Fargo—were involved in 29,000 of the 65,000 foreclosure filings in New Jersey in 2010, Mr. Rabner said.

28 Jul 10 Is the Financial Reform Bill Flawed?

Much to the surprise of many pundits, the recently signed Financial Reform Bill did not outline guidelines for regulators to begin crafting the future of Fannie Mae, Freddie Mac, and Ginnie Mae.  Although this was viewed as an oversight by most, it was the right move because it will allow our political and financial leadership to focus on repairing the mortgage finance system.  Remember that the government loan programs Fannie, Freddie, VA and FHA loans maintain nearly 96% of the mortgage market-share yet they are exempt from most of the financial reform repercussions.   

Watch Glen Beck Discuss the Pitfalls of Finance Reform Bill on Fox News
 httpv://www.youtube.com/watch?v=IeREpKxIYhY

Read the original mortgage news article > Financial Reform Bill Flawed?

Tags: financial reform bill

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

12 Jul 10 Mortgage Rates Could Rise

As the benchmark mortgage rates were pressured higher by a modest rally in stocks,  consumer borrowing costs held their ground and went into the weekend only a few basis points more expensive versus the previous Friday.  As a result we are seeing the best  30-year fixed conventional mortgage rates in a range between  4.375 and 4.625% . Borrowers must qualify, meeting the lender guidelines for these low rates.  Mortgage rate increases were only obvious via an uptick in “discount points” charged by lenders.

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

05 Jul 10 Mortgage Lead Generation Improving for Brokers and Lending Companies

Representatives from mortgage companies have been complaining for years how the quality of mortgage leads has been detiriorating every time the lenders tighten the requirements and loan program guidelines.  Mortgage Lead Vault (MLV) published a news article that highlighted the rise of refinance lead volumes that could be considered a positive indicator for the mortgage industry.  MLV cited news sources like the Mortgage Bankers Association and the Lead Planet for the loan application statistics and mortgage lead data.  In their Weekly Mortgage Application Survey, MBA reported that the Refinance Index spiked 12.6% from the previous week.  They also noted that this was the most significant increase for the Refinance Index since the report for the week ending May 22, 2009.

Kevin Grant the chief economist for mortgage lead generation company, the Lead Planet said, “The refinance lead activity has been surging since the homebuyer tax credits expired at the end of April.”  Grant also told MLV that “the lead quality should dramatically increase as the banks and lenders loosen up their refinance guidelines.” See the original news article> Mortgage Refinance Lead Volume Rises.  Article was written by Patrick Miller

01 Jul 10 FHA and VA Get Exemptions in Finance Reform Bill

According to a report from the American Banker, the Federal Housing Administration and the Department of Veterans Affairs were awarded exemptions in the finance reform bill that passed last week.  From a loan origination perspective, VA and FHA lenders would be getting an unfair advantage. The reality is that in today’s mortgage market loan companies are offering FHA or VA or both loan products so will this have a dampening effect?  This could pose more of a risk of defaults on FHA and VA home loans. So FHA and VA home loans Former MBA chairman David Kittle thinks FHA is getting a pass from Congress in this bill.

How will the Exemptions Effect the Non Government Mortgage Companies?

Under the final mortgage reform bill, federal banking agencies, the Securities and Exchange Commission, and Federal Housing Finance Agency will draft rules establishing underwriting standards and allowable product features for these fully documented loans. Qualified home loans also have to meet a new and tougher “ability to repay” standard in the bill along with a 3% limit on points and fees and a separate 2% limit on bona fide discount points. Regulators have the flexibility to set risk-retention requirements lower than 5% for residential loans that don’t meet the qualified mortgage test. 

Balloon, negative amortization, and most interest-only notes will be excluded from the definition but debt-to-income ratios and verification practices must be defined by regulators and could change. The bill, as expected, gives little boost to a revival of the private-label securitization market.  “Time and time again we keep hearing that we need the private sector to jump in, yet all the regulations that are being passed are keeping them out of the game, on the bench, on the sidelines,” said Sylvia Alayon, senior vice president of national operations at due diligence firm Capital Markets Assessment Corp. “We do need the private sector because many loans, like jumbo loans, can never be absorbed by the government agencies, and they represent a significant part of the market.” 

Still, mortgage insiders were relieved that the mortgage reform bill will not force them to retain risk on all securitizations, regardless of loan characteristics, as in the initial language they had lobbied against.  “It’s nice to win one,” said Lewis Ranieri, co-inventor of the mortgage-backed security.  Read the original mortgage reform article online. > FHA Loan Program is Exempt from Risk in Mortgage Reform Bill

28 Jun 10 New Bill Could Boost FHA Loan Volume

FHA mortgage volume could get a boost from regulatory reform, because loans insured by government agencies are fully exempt from the bill’s risk-retention requirement.  The legislation finalized by the conference committee late last week would require loan originators to retain at least 5% of the credit risk in loans they securitize unless the assets meet a “qualified home mortgage” test. All FHA loans and loans from the Department of Veterans Affairs or the Rural Housing Service will automatically meet that test.  “FHA gets a pass,” said David Kittle, senior director of industry relations for IMARC, a mortgage fraud investigation company, and a former chairman of the Mortgage Bankers Association. “Does it give them an advantage? Well, sure. Anytime you are carved out of something that can be onerous for everybody else, then certainly you benefit.”

Certain — and possibly most — loans securitized through Fannie Mae and Freddie Mac will also be eligible for securitization without risk retention.  “I believe chances are very good that in the future almost every mortgage that Fannie and Freddie either buy or securitize will be qualified mortgages under the risk-retention provision,” said Glen Corso, managing director of the Community Mortgage Banking Project, a trade group.  But without an automatic exemption, lenders will have more hoops to jump through when they make home loans headed to Fannie or Freddie, giving FHA an edge.

How many hoops will ultimately depend on how a “qualified” mortgage is defined. Under the final bill, federal banking agencies, the Securities and Exchange Commission, and Federal Housing Finance Agency will draft rules establishing underwriting standards and allowable product features for these fully documented loans. Qualified mortgage loans also have to meet a new and tougher “ability to repay” standard in the bill along with a 3% limit on points and fees and a separate 2% limit on bona fide discount points. Regulators have the flexibility to set risk-retention requirements lower than 5% for residential loans that don’t meet the qualified mortgage test. Balloon, negative amortization, and most interest-only notes will be excluded from the definition but debt-to-income ratios and verification practices must be defined by regulators and could change.

The bill, as expected, gives little boost to a revival of the private-label securitization market. “Time and time again we keep hearing that we need the private sector to jump in, yet all the regulations that are being passed are keeping them out of the game, on the bench, on the sidelines,” said Sylvia Alayon, senior vice president of national operations at due diligence firm Capital Markets Assessment Corp. “We do need the private sector because many loans, like jumbo loans, can never be absorbed by the government agencies, and they represent a significant part of the market.” Still, mortgage veterans were relieved on Friday that the bill will not force them to retain risk on all securitizations, regardless of loan characteristics, as in the initial language they had lobbied against.  “It’s nice to win one,” said Lewis Ranieri, co-inventor of the mortgage-backed security.  Article was written by Paul Muolo and Sara Lepro.

Tags: FHA

24 Jun 10 Federal Reserve Keeps Mortgage Rates at Record Lows

Certainly the Federal Reserve deserves some of the credit for our historic low mortgage rates.  The low interest rates have been the driving force behind the increase in home loan applications for home buying and mortgage refinancing. Today the Fed struck a more cautious tone about the strength of the U.S. economic recovery, indicating Europe’s debt crisis poses a risk to it. Wrapping up a two-day meeting Wednesday, the Fed in a 9-1 decision retained its pledge to hold rates at record-low levels for an “extended period.” Doing so is intended to energize the rebound.  The Fed expressed confidence that the recovery will stay intact despite threats from abroad and at home. But Fed Chairman Ben Bernanke and his colleagues offered a slightly more reserved outlook than the last time they convened.   The Fed said the economic recovery is “proceeding.” That was a bit less upbeat than the view at the April meeting, when the Fed said economic activity continued to “strengthen.” The Fed also said the labor market is “improving gradually.”  While not mentioning Europe by name, the Fed said “financial conditions have become less supportive of economic growth “.largely reflecting developments abroad.”  The fragile economic picture increases pressure on President Barack Obama and lawmakers in Washington. The Federal Reserve indicated that Europe”s debt crisis poses a risk to the U.S. economy and pledged to hold rates at record lows to make sure the recovery stays on track.

Federal Reserve Comments:

HOUSING
April: “Housing starts have edged up but remain at a depressed level.”
June: “Housing starts remain at a depressed level.”

INFLATION
April: “Inflation is likely to be subdued for some time.”
June: “Prices of energy and other commodities have declined somewhat in recent months and underlying inflation has trended lower. … Inflation is likely to be subdued for some time.”

INTEREST RATES
April: Leaves federal funds rate unchanged at a record low of zero to 0.25 percent, where it has been since December 2008, and repeats pledge to keep rates “exceptionally low” for “an extended period.”
June: Leaves federal funds rate unchanged and once again repeats pledge to keep rates “exceptionally low” for “an extended period.”

Tags: Fed Chairman Ben Bernanke, low interest rates

16 Jun 10 Borrowers Should Shop Refinancing Quotes

According to Zillow the survey indicated that consumers spend about 5 hours shopping for a mortgage online, yet they spend 10 hours shopping for a car.  31% of borrowers spent less than 2 hours researching their refinance loan. About 50% of all borrowers “only got 1 or 2 loan quotes.”  A spokesman for the Mortgage Lead Vault, a mortgage lead company recommended “making sure that you are comparing apples to apples.  Verify the mortgage rate, term and of course the closing costs when comparing lender quotes.”  The indexes that ARM interest rates reset against are, helpfully, very low now. When comparing home refinance loans, borrowers should consider this against “locking into a low rate for the long term,” said Ephraim Schwartz, a mortgage broker and partner with O’Dette Mortgage Group, in San Francisco.  Read the original article > Compare Lenders for the Best Mortgage Refinance Rates Online

Tags: Mortgage Lead Vault

08 Jun 10 FHA Changing Seller Concession Rules for FHA Loans

2010 FHA mortgage rates have reached record lows for purchase and refinance loans. For the first time home buyers who qualify for a FHA home loan, 2010 will be a year to remember.  FHA lending guidelines have seen significant changes this year.

One of the key attractions of a FHA mortgage loan is going, going, but not quite gone. Sellers and buyers who move fast can still make the most of it.  According to a source at HUD, the Federal Housing Administration plans to reduce maximum “seller concessions” from 6% of the home price to 3%. Seller concession rules allow buyers to look to the property seller to pay for a variety of services and taxes connected with the transaction loan origination and local transfer fees, appraisals, inspections, closing and escrow costs among others though not the down payment.

Compare FHA loan concessions with Fannie Mae or Freddie Mac conventional mortgages, where seller concessions are restricted to 3%. For most home buyers, the FHA mortgage program provides additional flexibility that can be very useful when negotiating.  ZipRealty broker, Abbie Higashi, said the new FHA guidelines made sense and she supports the move by FHA. She believes that real estate agents should “do the deals now” if more than 3% concessions would help the sale go through.

Tags: qualify for a FHA home loan

06 Jun 10 Fifteen-Year Home Loan Rates Hit Record Low

Mortgage interest rates did not change much last week as they held with recent lows.   Freddie Mac did report a record for the fifteen-year fixed-rate mortgage loans.   The thirty-year fixed-rate mortgage average rose slightly to 4.79% for the week ended Thursday, according to Freddie’s weekly survey.

Last week, the average mortgage rate was 4.78%, the lowest since December. Just a year-ago the average for the thirty-year mortgage was at 5.29%.   Freddie Mac chief economist Frank Nothaft said “The economy grew at a slower rate than originally reported in the first three months of the year … which suggests inflation will remain tame in the near term.”  Nothaft continued, “As a result,” he said, “home loan rates held at historic levels this week.”

Mortgage rates on fifteen-year fixed-rate home loans averaged 4.2%, the lowest level since Freddie Mac began tracking the mortgage in 1991, down from 4.21% in the prior week.   1-year Treasury-indexed adjustable-rate mortgages averaged 3.95%, unchanged from the prior week and the lowest level since May 2004. The 1-year ARM averaged 4.81% a year ago.   The 5-year Treasury-indexed ARM averaged 3.94%, down from 3.97% in the prior week and 4.85% a year ago.  Read more at FreddieMac.com.