20 Dec 11 Democrats Want Homeowners to Fund Payroll Tax Extension Via FHA, Fannie and Freddie
The Democrats in the House and Senate proposed a new bill to extend payroll tax cuts for two months and they suggest that an increased fee to FHA home loan to pay for it. I’ve heard some wild ideas reporting new in the mortgage industry for the last decade, but hiking home loan fees is absurd. The House was scheduled to vote on the legislation last night.
For the last few months, Washington politicians have been arguing the merits of extending the payroll tax cuts that supposed to be funding social security. Under the proposed legislation, annual mortgage insurance premiums for FHA loans would increase by 10 basis points. Guarantee fees, or “G fees” for Fannie Mae and Freddie Mac loans would also rise.
Mortgage Bankers Association President and CEO David Stevens, pleaded for the House to vote down the payroll tax extension. “The idea that you should pass a ten year tax increase for two months of payroll tax relief is appalling. Fannie and Freddie’s guarantee fees are supposed to be used to help offset the risk inherent in providing home loans, and any increases should be used for that purpose,” he said. “Siphoning off a portion of those fees into the general government coffers may be politically expedient, but it is far from sound policy.”
13 Dec 11 Increasing Mortgage Fees to Fund the Payroll Tax Cut
Wow, it seems politicians will go to great lengths for Obama’s reelection campaign as they are now moving to fund the payroll tax cuts by taxing future government mortgages. It’s hard to believe that with the social security well running dry that we would slash the payroll taxes that actually fund it, but then to hear that they are going to use mortgages bought by Fannie Mae and Freddie Mac to fund it is even more absurd.
Democrats and Republicans continue to wrangle over how to pay for extending the payroll tax cut, one option floated by both parties on Capitol Hill is to tap into mortgage giants Fannie Mae and Freddie Mac to raise $38 billion in revenue over 10 years. But the proposal, which would require that the two Government Sponsored Enterprises (GSEs) undergirding the housing market raise the fees they collect from lenders, has real estate industry groups in an uproar. And housing experts say the additional fees could be yet another headwind for the shaky housing market.
The idea of boosting the fees Fannie Mae and Freddie Mac collect was first floated by the now defunct congressional Super Committee tasked with finding $1.2 trillion in deficit-reduction measures, and it had garnered bipartisan support at the time. Now, as Congress looks for ways to pay for an extension of the payroll tax cut, the proposal has resurfaced in legislation put forth by both House Republicans and Senate Democrats. If Congress doesn’t act the payroll tax cut is scheduled to increase by two %age points, to 6.2% from a rate of 4.2% – which would effectively increase taxes by $1,000 for the average family next year.
Fannie Mae and Freddie Mac don’t issue mortgages themselves, but they buy them from lenders and repackage them into securities that are then sold to a wide range of investors. The two GSEs now own or guarantee about half of U.S. home mortgages, or nearly 31 million loans. To protect against any defaults, they charge the originating lenders “guarantee” fees. Last year, those fees averaged 0.26 percentage points of a loan’s value. Under the new Republican and Democratic proposals, the fees would rise by at least an eighth of a %age point – and the money raised would go to the Treasury Department, not to Fannie and Freddie.
Business groups are opposed both to the higher fees and to the idea of diverting the money to the Treasury. The National Association of Realtors and the National Home Builders Association on Thursday sent a letter to Sen. Bob Casey, D-Penn., author of the Democratic proposal, arguing that the fees “should not be diverted for purposes unrelated to the safety and soundness of the housing finance system.” The groups said the congressional proposal is “counterproductive” and said the fees should be used “solely for the purpose of minimizing the loss exposure of these government-sponsored enterprises, investors and taxpayers.” The National Association of Realtors will send another letter to the House GOP leadership on Friday stating its fierce opposition to using revenue from a fee increase to fund programs outside of housing.
Some in Congress are also adamantly opposed to the higher fees. “Fannie Mae and Freddie Mac are currently being propped up by taxpayer dollars, so it makes no sense to use them as an ATM to pay for other government spending,” says Rep. Dennis Cardoza, D-California. “Although I support extending the payroll tax cut, it is imperative we find another source of funding instead of playing these shell games. Fannie and Freddie are already floundering under the weight of the ongoing housing crisis and I fear this could only further worsen their ability to help struggling homeowners.” California lenders continue to express concerns over increased mortgage insurance premiums so this could really burden borrowers in the Golden state.
The Government Sponsored Enterprises are still burdened with financial problems of their own. Since the Bush administration seized control of the mortgage giants in September 2008, they have received $151 billion in taxpayer funding – money that they must still repay. Having the guarantee fee go to the Treasury instead of Fannie and Freddie would only make it harder for them to pay down their debts, says Susan Wachter, professor of financial management at the University of Pennsylvania’s Wharton School. “If it is raised and goes to pay for Treasury deficits, it’s not covering the deficit that Fannie and Freddie owe, which ultimately is a tax payer liability as well,” she says. “It’s not accomplishing what it’s supposed to accomplish.”
Read the original Fiscal Times Articles on Paying for the Payroll Tax Cut.
06 Dec 11 GMAC and Other Lenders Fighting the State of Massachusetts Over
Last week, the State of Massachusetts announced they were suing 5 major banks over mortgage fraud and deceptive lending practices that included foreclosure procedures. On Friday, GMAC Mortgage announced they effective immdeately that it will halt their loan origination in Massachusetts. Massachusetts Attorney General Martha Coakley said in a article that GMAC has to follow the law before foreclosing on consumers in order to do business in the state. “With today’s action, it appears GMAC has acknowledged it has a problem following the foreclosure laws and being held accountable for doing so.”
A spokesman for GMAC said they would not be buying new mortgages written by Massachusetts lenders because of the lawsuit. But Coakley wanted to preserve the state’s right to pursue two additional kinds of foreclosure related claims particular to Massachusetts an arrangement that home loan lenders did not appreciate. That breakdown led the attorney general to initiate her own lawsuit last week.
GMAC Mortgage has plenty of company as a defendant in the case. Lending giants Bank of America Corp., Wells Fargo & Co., Citigroup Inc., and JPMorgan Chase & Co. were all named for allegedly committing fraud and failure to reduce mortgage payments for some homeowners. The lenders all said they would fight the allegations in court.
Now GMAC Mortgage says it’s dropping its business with local brokers and smaller lenders. In a statement last week, the company said ‘‘recent developments’’ had ‘‘led mortgage lending in Massachusetts to no longer be viable.’’ That sounds like a dramatic reaction to the attorney general’s lawsuit. GMAC Mortgage certainly suggested legal costs were an economic tipping point that doomed the company’s business in Massachusetts.
But GMAC Mortgage is scaling back it’s so-called correspondent mortgage business all around the country. Ally Financial, reporting quarterly financial news last month, said it was losing hundreds of millions of dollars in the mortgage business. One response: reduce correspondent banking, which accounts for 8 % of Ally’s mortgage business. GMAC Mortgage is a relatively small presence in Massachusetts, too. But I’ve heard from smaller local lenders who depend on GMAC who now wonder how its departure might limit their access to credit. Read the original article > Lenders Should Not Blame Martha Coakley
06 Dec 11 Banks аnd Mortgage Lenders Still Value Credit Scores
Credit scores continue to drive the underwriting for home mortgages in the United States of America. Yes FHA sауs thеу will bе guaranteeing аnу borrower who meets the minimum FICO scores, but thе actual lenders аrе private financial institutes. Тhе government approved, FHA lenders аrе free tо set thеіr оwn minimum qualification requirements аs thеу аrе thе оnеs whо аrе lending thе money, thеу secure thеmsеlvеs bу requesting higher FICO score. The fact that FHA Credit Score Requirements start at 500, but most private lenders are requiring 640 ficos if they want an approval on a FHA insured home mortgage. Today it is more difficult to get bad credit home loans, but if you do the interest rates are substantially lower than they were in the subprime “heydays”.
According to Experian, 58% of Americans hаvе а score аbоvе 700, аnd thе average national FICO score іs 692. Ѕо аs fаr аs thе lenders point оf view low FICO score borrowers аrе nоt оnlу risky but thеу аrе nоt thаt mаnу thus requirements оn thеm саn bе tougher. Good credit scores will ensure you get the best lender rates from conventional lenders, but FHA lenders are not as concerned about how high the credit score are.
Home loan lenders will check mоrе parameters ехсерt thе credit score factor, bеfоrе deciding whеthеr tо perform thе transaction wіth thе borrower. Тhеу will wаnt tо sее employments salary, wages, debt-to-income ratio ( bоth front ratio аnd bасk ratio) со signers аnd drill dоwn tо thе credit report tо analyze уоur pay bасk abilities. So іf уоur FICO credit score іs close tо thе 620-640 range уоu саn stіll gеt а loan, but thе process mіght bе а lіttlе longer.
So thе FHA credit score requirements аrе set аt vеrу low еnd аt 500 аnd 580 (fоr thе low dоwn payment loans). Вut thе lenders hаd thеіr FICO credit score requirements raised frоm 620, tо 640. Аnd thіs іs confusing mаnу customers whо fall bеtwееn thеsе twо requirements. Тhеу qualify fоr аn FHA hоmе loan wіth credit оvеr 580, but nо lender will lend thеm money wіth credit score lower thаn 640.
The mоst simple thing tо dо, іs tо gеt hold оf thаt credit score, analyze іt, аnd wіth а simple help raise thе FICO score uр. Іt takes twо parameters, time аnd guidance.
The process оf rebuilding thе FICO credit score will include sending letters tо аll three bureaus Equifax, Experian аnd TransUnion, finding inaccurate data іn thе reports, requesting negative remarks tо bе erased, dоіng sоmе tweaks tо adjust credit cards balance… аnd bеfоrе уоu knоw іt, уоur score mау raise bу 30-50 points оr more!
Most people dо nоt knоw but thеу dо ΝОТ nееd tо hire expensive credit attorneys’ fоr аll оf thіs, thеу саn tаkе advantage оf simple аnd nоn expensive services аnd softwares tо dо mоst оf thе work fоr thеm. Ѕее thеsе twо credit repair solutions аnd pick whісh оnе іs best fоr уоu.
28 Nov 11 Will the Federal Reserve Keep Buying Mortgages?
The buying of mortgage backed securities is an example of the US government subsidizing our housing sector. Federal Reserve Chairman Ben S. Bernanke and his fellow policy makers, who bought $2.3 trillion of Treasury and mortgage-backed bonds between 2008 and June, will start another program next quarter, 16 of the 21 primary dealers of U.S. government securities that trade with the central bank said in a Bloomberg News survey last week. The Fed may buy about $545 billion in home-loan debt, based on the median of the firms that provided estimates.
While mortgage rates are already at about record lows, housing continues to constrain the economy, with the National Association of Realtors saying in Washington last week that the median price of U.S. existing homes dropped 4.7 percent in October from a year ago. Borrowers with a 30-year conventional mortgage would save $40 billion to $50 billion annually in aggregate if they could all refinance into a new loan with a 3.75 percent rate, according to JPMorgan Chase & Co. Read more of this SF Gate Story.
14 Nov 11 The Lead Planet Connecting More Loan Applicants with Lenders
In a recent press release, the LeadsOutlet announced a new partnership with the Lead Planet, an internet mortgage marketing company that operates their headquarters in San Diego, California. In a recent phone interview, the LeadsOutlet spokesman said, “We compared lead generation technologies from several major players in the mortgage marketing space, but walked away choosing the Lead Planet because of their commitment to mortgage optimization online. The Lead Planet has been generating leads that convert well on the mortgage websites since 1999.
Many loan companies have been very successful with their mortgage advertising strategies so the LeadsOutlet choice was no surprise to industry insiders. According to LP economist, Kevin Grant, “This deal will have no effect on the existing companies that purchase leads from the Lead Planet.” Read the original article online, > LeadsOutlet Chooses the Lead Planet for Mortgage Marketing.
30 Sep 11 Record Low Home Loan Rates But Who Qualifies?
It’s no secret that the Federal Reserve has made significant efforts to keep home loan interest rates artificially low in an effort to help the housing industry and U.S. economy rebound. Today the fixed 30-year mortgage rates have dipped below 4% for the first time ever. Unfortunately, most borrowers do not qualify for home mortgage loans with these record low rates. For the few consumers that meet the lender requirements this means the opportunity to qualify for the best refinance rates of all-time.
Of course, these days many people are in no position to buy or refinance a home. Many can’t meet the stringent lending standards that have prevailed since the housing bust and bank bailout, or they owe so much more than their house is worth that they can’t get a new loan at a better rate. According to loan officer Darin Hardin of Premier Mortgage Group in Ladera Ranch, California, “The phone is ringing off the hook with people who want to refinance, but the property values are not high enough for homeowners to qualify.”
The record low interest rates are driven by the Fed’s announcement last week that it would load up on purchases of long-term government bonds and mortgage securities. The extra demand was intended to drive down long-term interest rates, including those for home loans – and it worked. According to Freddie Mac for a fixed 30-year mortgage, the typical rate for solid borrowers was 4% last week and early this week. That’s below the record low of 4.08% set in 1950 and 1951.
According to the Mortgage Bankers Association, more than three-quarters of all home loan applications are now for refinances, although the volume is more of a boomlet than a boom. As rates sank toward 4% recently, borrowers were refinancing their loans at about half the pace seen in early 2009, when rates cracked the 5% barrier for the first time since 1956. Read more: Kansas Ciity.com.
16 Sep 11 New Record Low Rates Spur Refinancing Activity
Rates for home buying and refinancing have broken al-time record lows as the Federal Reserve and the poor economic conditions have cause interest rates to fall once again. Record low Treasury bond yields have driven mortgage rates to new record lows in rate offers set by banks and other mortgage lenders early Tuesday, according to a review of rates. Treasury prices fell in early morning trading in New York as investors focused on today’s 10-year note sale. The drop in the 30-year fixed rate found the benchmark mortgage at a low of 3.93% on Money Rates, which is well off a new record low average set last Thursday at 4.12% tracked by Freddie Mac. The mortgage refinance rate on shorter term fixed terms and adjustable rate loans were also significantly lower.
The 15-year fixed rate loan reached a low of 3.23% in early morning offers made to home purchasers and those looking for mortgage refinance loan options available through Housing Predictor mortgage vendors. The 5-year hybrid mortgage rates fell to 2.69%, the lowest rate ever on record.
High unemployment, averaging 9.1% across the U.S. with much higher levels in many areas especially hard hit by the housing bust and economic uncertainty are troubling financial markets, including bankers who are trying to stir-up more business. The deteriorating debt crisis in Europe is also troubling financial markets. Stock markets have been on a roller coaster ride for more than a month with wide swings on the New York Stock Exchange industrial average, making 200 point gains one day and then 200 Read the Housing Predictor Article.
17 Aug 11 Obama Warming to Idea of Helping Mortgage Giants Fannie and Freddie
President Obama announced yesterday that he is leaning towards funding a reorganization of the two failing government mortgage agencies Fannie Mae and Freddie Mac. The White House and Treasury Department also acknowledged that the Obama administration is working on a plan to continue the U.S. government’s role as an insurer of home mortgages for most homebuyers, keeping the struggling Fannie Mae and Freddie Mac under government management.
Fox News reported that one of the options would be to restructure Freddie Mac and Fannie Mae as public utilities managed by a government regulator. The second option being considered would be to eliminate the mortgage lenders role in the loan origination process and replace them with “successors that would have their mortgage securities guaranteed by the government in exchange for a fee.” A third option is to wind down the home financing giants and limit government’s role in insuring loans to other agencies.
Not surprisingly, the White House would not commit to any specific plan as Obama continued his bus tour. According to White House spokesman Jay Carney, “It is simply untrue that the administration has settled on a single proposal for the longer-term structure of the home financing market.” Carney stated, “The article in question mischaracterizes a lot of the core housing and finance principles that the administration laid out in its February report to Congress.”
Deputy Treasury Secretary Neil Wolin also issued a statement saying that the three options outlined in the report to Congress allow for the government’s “footprint in the housing finance market” to “shrink substantially.” Wolin continued, “For now, Fannie Mae and Freddie Mac are playing a critical role in providing support to a still-fragile housing market and making mortgage credit available. However, in each of the three options, Fannie Mae and Freddie Mac will be wound down on a responsible timeline.”
17 Aug 11 Mortgage and Home Loan News
Why Mortgage Leads in Less Popular States Convert Better – The Lead Planet, a mortgage marketing company from San Diego, California discusses why sometimes buying leads in random states makes sense financially.
Freddie Mac and Fannie Mae Default Ratings – Taxpayers have spent about $150 billion to rescue them, the most expensive bailout of the crisis.
How to Qualify for a FHA Loan – First time home buyers continue to go to the government for purchase mortgages for many reasons. Mortgage rates are low and the credit guidelines are flexible.
Home Loan Applications Increased with Interest Rates Declining – With the Federal Reserve’s commitment last week, interest rates fell once again and mortgage applications soared across the country.
Will Homeownership Rates Revive? – With low mortgage rates and talk of the housing market improving many people anticipate that the rate of consumers becoming homeowners will soar again. The New York Times says — Not so Fast.
05 Jul 11 Mortgage Rates Hold Steady
ABC news reported that fixed home mortgage rates remained at 2011 lows. Freddie Mac said the average interest on the 30-year mortgage rates inched up slightly to 4.51%. It hit its lowest level of the year three weeks ago, at 4.49%.
The average rate on fixed 15-year mortgage rates, a popular refinancing option, stayed at 3.69%. It reached its low point of the year two weeks ago, at 3.67%. Rates typically track the yield on the 10-year Treasury note, which has been rising in the past week.
That could change this week when the Federal Reserve’s $600 billion bond buying program ends. The Federal Reserve has purchased around $75 billion worth of bonds each month since November. That drove the yield on 10-year mortgage rates lower than 3% this spring. As a result, rates on loans and other home mortgages also fell.
05 Jul 11 Home Refinancing Interest Fading?
In a recent article, Jann Swanson discussed the decrease in margins for mortgage lenders and brokers for processing home loans in 2011. Loan companies have been forced to reduce their fees significantly in an effort to compete for homeowners home refinancing business.
Swanson reported that Independent mortgage banks and subsidiaries saw a huge dip in profitability as the average they made on each loan originated dropped from $1,082 per loan in the fourth quarter of 2010 to $346 in the first quarter of this year. According to the Mortgage Bankers Association’s Performance Report, lenders increased their overall revenues but profits suffered because of higher production costs. Only 63 % of the firms in the study posted pre-tax net financial profits in the first quarter of 2011, compared to 84 % in the fourth quarter of 2010.
Marina Walsh, MBA’s Associate Vice President of Industry Analysis said that a significant drop in volume during the first quarter was due largely to a fall-off in refinancing. This made it difficult for mortgage companies to manage staff levels which in turn caused higher production costs. Walsh continued, “In the first quarter of 2011, changes in compensation plans and investor expectations are additional factors that likely drove up loan production expenses per loan to the highest levels ever reported for this study.”
14 Jun 11 BofA Struggle with Countrywide Mortgages
Bank of America continues to have struggle with the bad credit loans and legal woes associated with Countrywide. The worst acquisition ever made by Bank of America continues to hurt the bank’s chances of a full recovery. The remnants of the Countrywide deal are still being felt as Sanford C. Bernstein analysts noted that BofA could face another $27 billion of housing losses between now and 2013. That’s on top of the $46 billion the bank has put up so far.
U.S. regulators and state attorneys general have been probing banks’ mortgage business one just about every front. Some are looking at the way banks packaged and sold securities that were backed by home mortgage loans, others are looking at how defaulting homeowners were denied loan modifications while others look at the way homeowners were forced out of the their homes improperly by so-called robo-signers. The attorneys general of New York and California have both announced investigations into banks mortgage issues even though the 50 state’s attorneys general were already in the midst of a group investigation. Read the rest of the article at the Forbes Blog.
09 Jun 11 FHA Finance for First Time Home Buyers
FHA is a government insured loan program that was originally designed for first time home buyers. FHA was established to ensure that all Americans could get access to affordable home financing. The current FHA interest rates are lower than most other mortgage products as well. FHA financing enables home buyers to get low payments because FHA rates are more affordable than most people realize.
Whether you are a first time buyer with good or bad credit, you can finance a new home with an FHA mortgage with ease. Simply talk to a FHA approved lender about qualifying for a government loan that meets your needs. HUD recently tightened credit guidelines with FHA loans, but they are still easier to qualify for than most other 1st time loan programs. If you have been looking for a new home and a new lending solution, however, this might be exactly what you have been searching for. Read the original article > Financing a Home with FHA
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 .
