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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 2nd 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 >

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23 Jun 09 Thirty Year Mortgage Rates Continue to Rise

Mortgage interest rates on U.S. 30-year fixed-rate mortgages rose to 5.57 % a few days after hovering around 5.47% earlier in the week.  According to Zillow Mortgage the rate are down sharply from the previous week when mortgage rates were reported nationally with an average of 5.76% on home loans that were fixed for thirty years.

Conventional and FHA mortgage rates have remained historically low in 2009 and most industry insiders believe that interest rates will maintain low levels for the remainder of the year and into 2010 before climbing with the forecasted inflation. The higher mortgage rates reflect a rise in yields on U.S. government bonds, which are linked to the mortgage market.  The mortgage rate, however, is sharply higher than the roughly 5.00% level seen at the end of May and at the beginning of this year, Zillow said. 

Home loan refinancing activity has dropped precipitously in recent weeks. A move higher in FHA mortgage rates should further dampen demand.  According to Lawrence J. White, professor of economics at New York University’s Stern School of Business, “Higher mortgage rates are certainly an impediment to a U.S. housing market recovery, but other factors are also suppressing demand.  “People are worried about the overall economy, how secure their jobs are as well as their overall financial status,” he said.  “So, while higher mortgage rates matter, they are not the sole driver of housing demand,” he said. 

The applications for mortgage refinance loans dropped as expected, but loan modification requests rose significantly as bad credit mortgages are beginning to reset to the higher adjustable interest rates that have homeowners around the nation fighting to keep their home from foreclosure.  The battered U.S. housing market, which is in the midst of its worst downturn since the Great Depression, is both the source of and a major casualty of the credit crisis.  A setback for the market could hamper a turnaround of the U.S. economy.

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03 Mar 09 Mortgage Loan Rescued

U.S. President Barack Obama’s $75 billion plan to help families avoid foreclosure should be bolder. While it is a meaningful rescue attempt that may help 9 million Americans, it could be doomed unless mortgage issuers have to write down principal to reflect current market values. The odious (to lenders) concept of a “mark-to-market” mortgage might be one way to put a floor on home-price declines. Why not give those in or facing foreclosure a haircut on principal? About 20 % would be fair, reflecting the national decrease in house prices.

And what about the diligent souls who have been paying their mortgage loans all along? Lower mortgage rates reflecting the Federal Reserve’s cost of funds — about 1 %, plus 2 %age points of profit for the lenders — would be beneficial. That may boost new-home sales, re-sales and refinance loans. A strong new mortgage law could limit writedowns before a foreclosure hits the overcrowded court system. To avoid abuse, mark-to-market would be used only as a last resort, after all other options are exhausted.

In its current form, though, the Obama mortgage bailout relies mostly on voluntary interest-rate modifications for relief through Fannie Mae and Freddie Mac, the government-seized mortgage companies. Designed to keep people in their homes, the plan calls for reducing mortgage interest rates so that monthly payments are eventually no more than 31% of household income.

Plan’s Shortfalls

If Congress sanctions mortgage write-downs or “cram-downs” in bankruptcy court — the essential next step in the bailout program that Obama supports — that will indirectly undermine home values. Each judge may be allowed to forgive as much principal as deemed appropriate.  Even if a homeowner avoids bankruptcy and heads straight to foreclosure, a bank that repossesses the home can lose 40% or more in fees, commissions and discounting when the lender finally resells it. Marking down 20 % in principal would be a relative bargain.

How do we avoid the moral hazard of people spuriously filing for bankruptcy to dump their mortgages? An estimated 350,000 households might take this route, according to the Congressional Budget Office. That’s where a write-down cap would come in. Index it to local real-estate prices. When there’s a recession, you are more likely to get a break. If you have positive equity, it’s unlikely you will write it down.

Mandatory Counseling

Combine the write-down and bankruptcy provisions with mandatory counseling and screening. That might stem future defaults, which have been occurring in 57% of Fannie’s and Freddie’s loan modifications.  Everyone has a stake in a sensible solution to the crisis. If your neighbor’s home goes into foreclosure, it will depress your property value and often lead to an increase in crime. The whirlpool of defaults also contributes to lower consumer spending, constricted bank lending and even lower home prices, which dipped almost 19% in December.  Curiously, there was no mention in the White House’s plan of the many loan-easing techniques that Fannie and Freddie are already using. They include:

– Short sales: Also called “pre-foreclosure” sales, these transactions involve selling a house for less than its mortgaged value. The servicer and borrower then negotiate the payment on the difference between the net sales price and what’s due on the mortgage.

Ownership Handover

– Deeds in lieu of action: The borrower hands ownership over to the servicer to repay the debt and avoid foreclosure. This doesn’t work where there are second mortgages, though.

– Forbearance plans: Employing short-term cuts in monthly payments, the borrower promises to make his account current in the future. This is worthwhile in the case of job loss or illness.

– Charge-off in lieu of foreclosure: Instead of foreclosing and taking the property title, the servicer charges off the debt, which becomes a lien against your property? The balance due must be paid when the property is sold.

All these options are available even if your mortgage loan isn’t owned or insured by Fannie or Freddie. But you need to contact your mortgage-servicing company before missing payments. The Obama team also needs to address the question of how to prevent future defaults on “80-20” home loans or second mortgages, jumbo mortgage loans for more than $417,000 and specific remedies for the more than 2 million homeowners in foreclosure proceedings now.

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03 Feb 09 Dodd Home Loans Refinanced with Countrywide Questioned

The mortgage refinancing of Senator Christopher Dodd’s Washington townhouse and Connecticut house will end the Senate Banking Committee chairman’s transactions with Countrywide.  Dodd, a Connecticut Democrat, said he regretted doing business with Countrywide, which was once the nation’s largest residential lenders and that he was publicly releasing all loan documentation and records in his possession related to the home loans.”I regret I did not do this sooner and I apologize to the people of Connecticut for the delay,” he said in a statement.  As chairman of the Senate’s banking panel, Dodd plays an influential role in overseeing mortgage finance laws that affect U.S. lenders, investment firms, international trade finance and housing.

Why hasn’t Senator Chris Dodd provided his controversial home loan papers?

Watch Dodd & Countrywide Video

B of A acquired Countrywide last year, which many blame for helping to inflate the massive housing bubble that burst last year and sent the global financial system and the U.S. economy into a tailspin.  Dodd said he and his wife “acted properly in our mortgage refinancing negotiations. We did not seek or expect any special rates or terms on our loans and we never received any.”

Mortgage leads continue to rise with low rate demands as loan application volumes continue to rise.  Many mortgage industry executives suggest that very few applicants qualify for home refinancing, because guidelines have tightened and home values have sunk.  Read the original article> Senator Dodd Refinance Mortgages with 2 Countrywide. For the record, Mortgage Related News believes that Dodd did nothing wrong.

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30 Oct 08 No More Home Loans Without Down Payment

Former treasury secretary, Paul O’Neill says Congress should scrap plans for a new economic stimulus package and instead require that no future home mortgage loan be awarded without a twenty percent down payment.  Paul O’Neill said Tuesday it doesn’t surprise him that neither presidential candidate has endorsed his position, but he insisted it is the best way to quickly improve the nation’s economic footing.

“Unfortunately we’ve gotten to a point where people that want to run for president don’t think they can tell the truth and still get elected,” O’Neill told reporters before speaking at a conference. “I’m hopeful whichever person gets elected, they’ll be better than what they’ve said. An awful lot of presidential campaigns now are pandering to the lowest common denominator. They promise people everything.”  O’Neill said he is disappointed that the political response from both parties includes wide support for another economic stimulus package rather than curbing additional bad mortgages.

O’Neill, who hasn’t endorsed a candidate in the race and says he wouldn’t be interested in serving in either administration, made a personal pitch last month to Democratic nominee Barack Obama concerning his idea to mandate down payments. He declined to characterize Obama’s response.  O’Neill, a former CEO of aluminum giant Alcoa Inc., served as treasury secretary for the first two years of Bush’s presidency, including leading the financial response to the Sept. 11, 2001, terrorist attacks.

While he praised aspects of the recent $700 billion financial bailout, which he says has allowed world markets to take a “deep breath,” O’Neill said there should have been government action to combat predatory mortgage loans far earlier. In 2006, he said, “Thirty percent of mortgage loans had no down payment and a large number of those 1st time home buyers defaulted on their first payment.”That was a strong enough signal we should have shut down this flagrant abuse of the principles of home finance,” O’Neill said. “It was bound to crater. It was absolutely bound to come down around our ears, which it has.”  If every home loan was backed by a twenty percent down-payment, O’Neill said, the financial system would be protected long-term, even if some individual investments or businesses failed. “If you can’t afford a home mortgage, we shouldn’t give you one,” he said.

Read Complete Mortgage Article written by JEFFREY McMURRAY

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