Refinancing Your Home : Has the time arrived?, by Chris Wagner, American Capital Mortgage Inc.


Chris Wagner, CMPS
American Capital Mortgage Corporation
555 SE 99th Ave., Suite 101
Portland, OR 97216
503-674-5000 Office
503-888-3372 Cell


The mortgage industry has gone through more transitions in the past few years than Lady Gaga has had costume changes!  Since mid-2007, qualifying has gone from just being able to fog a mirror to having to document your high school transcripts before your loan gets funded!

All joking aside, we are seeing some outstanding refinancing opportunities that simply did not exist a short while ago.  Despite the current economic adversity, chances are good that you can significantly improve your current mortgage, simply due to the fact that we are seeing rates that haven’t been around since the 1940’s!

Here are just a few highlights

For those with an existing FHA loan: a streamline refinance will allow you to lower your rate without an appraisal or income qualifications!   VA loans offer a similar program called IRRL (interest rate reduction loan)

For those whose conventional loans are owned by Fannie Mae or Freddie Mac: A “refi-plus” or the Home Affordable Refinance Plan (HARP) allows you to refinance, often without an appraisal, and if an appraisal is required, they provide for lowered values without paying for mortgage insurance while often allowing for limited income documentation as well.

Getting qualified is simple! Within a short 5 to 10 minute phone call, your mortgage professional should be able to learn everything they need to update your file and determine which program is the best fit.  Realistically, most of the information are top of mind items and should be enough to get the ball rolling without the completion of a formal application. This will allowyou to get a good idea if refinancing now is a good idea for you.

Let’s get down to business……

Once you get a feel for what can be done based on your current circumstances and loan type, you will have the information necessary to make a good decision to get the best results you can, but there is more to it than just APR.  Call it cultural training, but we have all been conditioned to pursue an interest rate like a raccoon runs after whatever is shiny.  In both cases, what you end up with is not always good.

There are essentially four categories that when surveyed, the vast majority of clients will describe their satisfaction or dissatisfaction based on how the following transactional components were executed.  You may consider keeping this list in the back of your mind as a scorecard while you are considering the individuals and institutions you will or are working with.

  1. 1. Communication: This is the number one source of concern that clients describe as a source of anxiety and ill ease.  Our imaginations tend to work against us when we are left to our own and there are few things that are crueler than being ignored.  Your broker/banker’s job is to effectively quarterback all of the people involved with your transaction and to report the progress and timelines to you in a pre-described manner.  This is the only way that expectations can be set properly.  Much like a safari guide, every trip is a little different, but there are enough similarities that your professional should know what to look out for, what to do if it is encountered and how it will affect your outcome.  If you have trouble getting your calls or emails returned promptly when you are initially inquiring about a loan, you can only count on it getting worse down the road.

  1. 2. Honesty and Integrity: This should be obvious, but it is not.  We are not talking about premeditated deception here.  The level of disclosure required by all parties is geared towards virtually eliminating that.  What we are talking about is a mortgage provider who quotes rates and terms prior to gathering the details of your transaction, thus paving the way toward disappointment.  What would you think of a doctor who gave you a prescription without asking questions or examining you first?  This kind of malpractice is due to an urgency to get a commitment from you and may indicate a lack of experience on the part of the interviewer.  Internet advertisers often employ phone-room type data input clerks that often work from a script.  Ask your provider for a written closing cost guarantee prior to spending any money besides the charge for a credit report.  This will go a long way to indicate to you if the numbers are real.

  1. 3. Smooth and Complete Process: Perhaps you have already been, or know of someone who was the victim of the “Oh, just one more thing” series of phone calls requesting additional information that never seem to end once started.  Granted, there are circumstances that in fact do generate requests that could not be anticipated initially, however you should receive a list of items required that you need to begin gathering immediately once your application has been taken.  In addition, you should be given a timeline of the various milestones that will occur during your transaction.  Examples would be, when appraisal is ordered, received, underwriting timelines, and ultimately when you will be signing.  You might get a super low rate, but if it feels like you had to crawl over broken glass to get it and you have been working on it for 4 months, much of the shine will have worn off that apple by the time you actually close.
  1. 4. Rates, terms and fees: This also seems fairly straightforward, as it has to make economic sense to proceed.  In reality, you may initially consider this to be the most significant detail when considering a lender.  The fact is, the lenders and individuals who are still in business after the past few years had to be competitive, or they simply would not be around.  It is wise to determine what your real savings is after all costs are considered.  If it costs you $5000 to lower your rate and that saves you $100 per month, you want to be aware that it will take you 50 months before you reach the break even point of expenses versus savings.  That could be an excellent strategy based on other criteria, but each situation needs to be considered individually in order to be genuinely accurate.  In this case, one size does NOT fit all.

Action step: Don’t Wait!

Find out what can be done in your present situation.  Don’t make assumptions regarding employment, home values or credit.  You owe it to yourself to know for sure.  Don’t wait until rates start creeping up, because they most certainly will.  You are under no obligation to act once you do get qualified, and if you do nothing else, you can get an updated credit report from all three major credit bureaus.  You have a historic opportunity to impact you and your family’s financial future, don’t wait!

Fixed rate home loans are history, by Sarbajeet K Sen


The fight may be intense among the top housing finance lenders to woo customers with special offers and teaser rates even as festive season is round the corner. But, if you are someone looking for a home loan that bears a fixed rate of interest for its entire tenure, you may not be as welcome.

While the State Bank of India and LIC Housing Finance do not offer products with interest rate remaining fixed for its entire tenure, HDFC and ICICI Bank are pricing their offering at a level that would discourage consumers to opt for it, prompting housing finance experts to say the offers are virtually not on the shelf.

While HDFC’s fixed rate loan comes at 14 per cent rate of interest, against its teaser rate home loan offering that starts at 8.5 per cent up to March 31, 2011, ICICI Bank has priced its offering a shade higher at 14.5 per cent, while its teaser rate begins at 8.25 per cent for the first year.

“The rate that the lenders are offering on their fixed rate product for the entire tenure essentially means that there is no such product available. The pricing appears to be aimed at discouraging borrowers to opt for the offer,” RV Verma, executive director of National Housing Bank, said.

Out of the total home loan providers including all banks and housing finance companies, the four largest players — HDFC, SBI, ICICI Bank and LIC Housing Finance, between them accounted for nearly 53 per cent of the market at the end of 2009, according to Icra report on the mortgage loan market in the country.

According to data available on the NHB website for interest rates on housing finance as on September 1, Axis Bank and DFHL Vysya Housing Finance have similar high rates of 14 per cent and 13.75 per cent, respectively on their fixed rate products, while the likes of Punjab National Bank and IDBI Bank have comparatively lower rates. IDBI Bank’s offer comes at 11 per cent, PNB has the lowest rate of 10.50 per cent among the 15 primary lenders.

The remaining eight lenders in the list do not have such fixed rate offers.

A senior official of SBI felt that the fact that providers are actively discouraging fixed rate products is a sign of the market coming of age. “It is a sign of the market maturing. When most housing loan providers were offering fixed rates for the entire tenure some years ago, many of them were new to the whole concept of retail banking and did not know of its intricacies. The competition for drawing in fresh borrowers was making them offer such products,” the official said.

So, what is it that is forcing the major lenders to discourage borrowers from taking a fixed offer or deciding to not offer such a product at all? Lenders say that the sole reason is their inability to raise long-term funds to match such lending.

“Cost of funds keeps varying over the longer term. Hence, it is rather risky to take a long-term call on the lending rate and deciding to keep it fixed for the entire tenure,” the SBI official said.

Srinivas Acharya, managing director of Sundaram BNP Paribas Home Finance, said inability to raise long-term funds makes designing of long-term fixed rate products difficult. “We don’t offer a fixed interest rate product over the entire tenure because it is risky proposition. It is difficult to pattern fixed rate products over a 20-year period, since there is no matching funding available in the market,” he said.

Verma says besides the difficulty of raising long-term funds, such funds often come at a higher cost, if available. “It is difficult for lenders to take a call because of uncertainties. Long-term fund raising has become difficult or comes at a price that is not attractive,” Verma said.

ICICI Bank and HDFC did not want to comment on the issue. “Yes we do offer fixed interest for the entire tenure of the home loan,” was all that an ICICI Bank spokesperson said, without willing to discuss the subject when probed further.

sarbajeetsen

@mydigitalfc.com

Treasury Designs New Federal Program to Help Stimulate Economy, by Mandelman, Mandelman Matters


This week, the federal government is said to be announcing a new federal program designed to keep our economy vacillating between deflationary collapse and contrived recovery.  The program, referred to as the Special TARP Underwriting Program to Impede Development, will first tackle the challenge of bringing the government’s most inane economic stability plans together under one larger, yet infinitely more purposeless program banner.

Initial funding for the Special TARP Underwriting Program to Impede Development will come primarily from contributions made on a voluntary basis by the nation’s largest and most insolvent financial institutions, through the sporadic unannounced printing of twenty and fifty dollar bills, and from change found in the couches left behind in foreclosed homes.

Names floated in the press for program director included initial frontrunner, Carrot Top, followed by Dan Quail and Paris Hilton, although confirmed reports say that Treasury Secretary Tim Geithner and White House economic advisor, Larry Summers, have thrown their considerable combined clout behind Elizabeth Warren.

“I can’t think of anymore more qualified for this job than Liz,” the Treasury Secretary said while attending a Telethon for the Boatless in Miami Beach, sponsored by the magazine, Unbridled Avarice, and through a grant made by Goldman Sachs.  (In the spirit of full disclosure, Goldman did file papers with the SEC stating that the firm does plan to short that grant in an effort to remain vigilant about it’s risk profile.)

The Special TARP Underwriting Program to Impede Development is known by the acronym, STUPID.  The program is projected to provide assistance to responsible American homeowners who have high credit scores, equity of $200,000 in a second home, and surnames that begin with “Gh” or “Pf,” assuming they did not file a tax return in 1992, and reside primarily in a state that ends in the letter “E”. Qualified homeowners can apply for assistance under the program by calling a toll-free number at HUD; area code 212-GET-STUPID.

Secretary Geithner explained the program to reporters while waiting for his dessert soufflé to rise.  Those in attendance said that he told the group that the program would help homeowners and get the economy back on track by removing the key obstacle to the future profitability of financial institutions.  He also mentioned that the soufflé was dry.

“So, now that you understand what STUPID is, let’s talk about what STUPID does,” Geithner told the group.  “I think you can see why Larry and I feel so strongly that Liz Warren be asked to run the new program.  I think that she, more than anyone else I can think of, is representative of what the program is all about.  I’m hoping that within a very short period of time, the entire country will associate the name Elizabeth Warren with STUPID.  I know Larry and I both do already.”

The good news is that almost all of the HAMP participating servicers have already signed on to participate in the new program, so most homeowners are very likely to find that they have a STUPID Servicer handling their loan.

http://mandelman.ml-implode.com/

Is Debt Really The Problem… or is it something else?, By Bill Westrom, Truthinequity.com


Mainstream media, the Government and consumers themselves vilify debt as the root of the consumer’s financial plight and the root of a weakening country. Debt is not the problem; it’s the management of debt and the way debt is structured that is creating the problem not the debt itself. Unless you win the lottery, invent a cure for cancer or get adopted by Bill Gates or Warren Buffett, debt will be something you will have to face somewhere along the course of your adult life; it’s a natural component of our society.

In today’s economic environment hard working American’s are experiencing a level of fear and financial uncertainty they have never been faced with. This is keeping them up at night wondering how they are going to sustain a life they have worked so hard to build. Americans are also wondering why those we have trusted for all these years; the banks, money managers and politicians, are thriving financially, but don’t seem to be contributing anything of real value to the public? Today, the predominant questions being asked by the American public as it relates to their financial future are; what am I going to do, what can I do, how am I going to do it? We all work way too hard to be faced with these questions. The answers to these frightening questions are right in front of us. The answers lie in the use of the financial resources we use every day. You just need to know how to use them to your advantage.

The crux of the problem for consumers and the country alike lie with misaligned, improper or a shear lack of education on the use of the banking tools we use every day. The three banking tools that we use every day; checking accounts, credit cards and loans are simply being used improperly. The solution lies in educating consumers and institutions to use these tools in the proper sequence and function to manage debt properly, regain control of income and possess the authority to control the repayment of debt. It’s as simple as that. By exposing the failed business model of conventional banking and borrowing practices, realigning them into a model that actually helps consumers get more out of what they own and what they earn, we can once again grow individually, as a society and a nation.

The Truth Is In The Proof.
TruthInEquity.com

How Ruthless Banks Gutted the Black Middle Class and Got Away With It, by Devona Walker, Truth-out.org


The real estate and foreclosure crisis has stripped African-American families of more wealth than any single event in history.

The American middle class has been hammered over the last several decades. The black middle class has suffered to an even greater degree. But the single most crippling blow has been the real estate and foreclosure crisis. It has stripped black families of more wealth than any single event in U.S. history. Due entirely to subprime loans, black borrowers are expected to lose between $71 billion and $92 billion.

To fully understand why the foreclosure crisis has so disproportionately affected working- and middle-class blacks, it is important to provide a little background. Many of these American families watched on the sidelines as everyone and their dog seemed to jump into the real estate game. The communities they lived in were changing, gentrifying, and many blacks unable to purchase homes were forced out as new homeowners moved in. They were fed daily on the benefits of home ownership. Their communities, churches and social networks were inundated by smooth-talking but shady fly-by-night brokers. With a home, they believed, came stability, wealth and good schools for their children. Home ownership, which accounts for upwards of 80 percent of the average American family’s wealth, was the basis of permanent membership into the American middle class. They were primed to fall for the American Dream con job.

Black and Latino minorities have been disproportionately targeted and affected by subprime loans. In California, one-eighth of all residences, or 702,000 homes, are in foreclosure. Black and Latino families make up more than half that number. Latino and African-American borrowers in California, according to figures from the Center for Responsible Lending, have foreclosure rates 2.3 and 1.9 times that of non-Hispanic white families.

There is little indication that things will get much better any time soon.

The Ripple Effect

If anything, the foreclosure crisis is likely to produce a ripple effect that will continue to decimate communities of color. Think about the long-term impact of vacant homes on the value of neighborhoods, and about the corresponding increase in crime, vandalism and shrinking tax bases for municipal budgets.

“The American dream for individuals has now become the nightmare for cities,” said James Mitchell, a councilman in Charlotte, NC who heads the National Black Caucus of Local Elected Officials. In the nearby community of Peachtree Hills, he says roughly 115 out of 123 homes are in foreclosure. In that environment, it’s impossible for the remaining homeowners to sell, as their property values have been severely depressed. Their quality of life, due to increases in vandalism and crime, diminished. The cities then feel the strap of a receding tax base at the same time there is a huge surge in the demand for public services.

Charlotte, N.C. Baltimore, Detroit, Washington D.C. Memphis, Atlanta, New Orleans, Chicago and Philadelphia have historically been bastions for the black middle class. In 2008, roughly 10 percent of the nation’s 40 million blacks made upwards of $75,000 per year. But now, just two years later, many experts say the foreclosure crisis has virtually erased decades of those slow, hard-fought, economic gains.

Memphis, where the majority of residents are black, remains a symbol of black prosperity in the new South. There, the median income for black homeowners rose steadily for two decades. In the last five years, income levels for black households have receded to below what they were in 1990, according to analysis by Queens College.

As of December 2009, median white wealth had dipped 34 percent while median black wealth had dropped 77 percent, according to the Economic Policy Institute’s “State of Working America” report.

“Emerging” Markets Scam v. Black Credit Crunch

While the subprime loans were flowing, communities of color had access to a seemingly endless amount of funding. In 1990, one million refinance loans were issued. It was the same for home improvement and refinance loans. By 2003, 15 million refinance loans were issued. That directly contributed to billions in loss equity, especially among minority and elderly homeowners. Also at the same time, banks developed “emerging markets” divisions that specifically targeted under-served communities of color. In 2003, subprime loans were more prevalent among blacks in 98.5 percent of metropolitan areas, according to the National Community Reinvestment Coalition.

One former Wells Fargo loan officer testifying in a lawsuit filed by the city of Baltimore against the bank says fellow employers routinely referred to subprime loans as “ghetto loans” and black people as “mud people.” He says he was reprimanded for not pushing higher priced loans to black borrowers who qualified for prime or cheaper loans. Another loan officer, Beth Jacobson, says the black community was seen “as fertile ground for subprime mortgages, as working-class blacks were hungry to be a part of the nation’s home-owning mania.”

“We just went right after them,” Jacobson said, according to the New York Times, adding that the black church was frequently targeted as the bank believed church leaders could convince their congregations to take out loans. There are numerous reports throughout the nation of black church leaders being paid incentives for drumming up business.

Due in part to these aggressive marketing techniques and ballooning emerging market divisions, subprime mortgage activity grew an average of 25 percent per year from 1994 to 2003, drastically outpacing the growth for prime mortgages. In 2003, subprime loans made up 9 percent of all U.S. mortgages, about a $330 billion business; up from $35 billion a decade earlier.

Now that the subprime market has imploded, banks have all but abandoned those communities. Prime lending in communities of color has decreased 60 percent while prime lending in white areas has fallen 28.4 percent.

The banks are also denying credit to small-business owners, who account for a huge swath of ethnic minorities. In California ethnic minorities account for 16 percent of all small-business loans. In the mid-2000s roughly 90 percent of businesses reported they received the loans they needed. Only half of small businesses that tried to borrow received all or most of what they needed last year, according to a survey by the National Federation of Independent Business.

In addition, minority business owners often have less capital, smaller payrolls and shorter histories with traditional lending institutions.

Further complicating matters is the fact that minority small-business owners often serve minority communities and base their business decisions on things that traditional lenders don’t fully understand. Think about the black barber shop or boutique owner, who knows there is no other “black” barber shop or boutique specializing in urban fashions within a 30-minute drive. While that lender may understand there is such a niche market as “urban fashions,” they likely won’t understand the significance of being “black-owned” in the market as opposed to corporate-owned. Or think of the Hispanic grocer with significant import ties to Mexico who knows he can bring in produce, spices and inventory specific to that community’s needs, things people cannot get at chain grocery stores. That lender might only understand there is a plethora of Wal-Marts in the community where he wants to grow his business.

Minority business owners are often more dependent upon minority communities for survival, which of course are disproportionately depressed due to subprime lending. Consequently, minority business owners have a lower chance of success. Banks, understanding that, are even less likely to lend. It’s like a self-fulfilling prophecy, and it’s beginning to resemble the traditional “redlining” of the 1980s and 1990s.

“After inflicting harm on neighborhoods of color through years of problematic subprime and option ARM loans, banks are now pulling back at a time when communities are most in need of responsible loans and investment,” said Geoff Smith, senior vice president of the Woodstock Institute.

Believe it or not, no one in a position of power to stop all this from unfolding was blindsided. Ben Bernanke was warned years ago about the long-term implications of the real estate bubble and subprime lending. Still, he set idly by. He told the advocates who warned him that the market would work it all out. Perhaps they thought the fallout would be limited to minority communities, or perhaps they just didn’t care.

Devona Walker has worked for the Associated Press and the New York Times company. Currently she is the senior political and finance reporter for theloop21.com. 

 

New Program for Buyers, With No Money Down, John Leland, Nytimes.com


MILWAUKEE — When the housing bubble burst, one of the culprits, economists agreed, was exotic mortgages, including those that required little or no money down.

But on a recent evening, Matthew and Hannah Middlebrooke stood in their new $115,000 three-bedroom ranch house here, which Mr. Middlebrooke bought in June with just $1,000 down.

Because he also received a grant to cover closing costs and insurance, the check he wrote at the closing was for 67 cents.

“I thought I’d be stuck renting for years,” said Mr. Middlebrooke, 26, who earns $32,000 a year as a producer for a Christian television ministry.

Although home foreclosures are again expected to top two million this year, Fannie Mae, the lending giant that required a government takeover, is creeping back into the market for mortgages with no down payment.

Mr. Middlebrooke’s mortgage came from a new program called Affordable Advantage, available to first-time home buyers in four states and created in conjunction with the states’ housing finance agencies. The program is expected to stay small, said Janis Smith, a spokeswoman for Fannie Mae.

Some experts are concerned about the revival of such mortgages.

“Loans that have zero down payment perform worse than loans with down payments,” said Mathew Scire, a director of the Government Accountability Office’s financial markets and community investment team. “And loans with down payment assistance” — like Mr. Middlebrooke’s — “perform worse than those that do not.”

But the surprise is the support these loans have received, even from critics of exotic mortgages, who say low down payments themselves were not the problem, except when combined with other risk factors like adjustable rates or lax underwriting.

Moreover, they say, the housing market needs such nontraditional lending, as long as it is done prudently.

“This is subprime lending done right,” said John Taylor, president of the National Community Reinvestment Coalition, an umbrella group for 600 community organizations, and a staunch critic of the lending industry. “If they had done subprime this way in the first place, we wouldn’t have these problems.”

At Harvard’s Joint Center for Housing Studies, Eric Belsky, the director, said the loans might be the type of step necessary to restart the housing market, because down payment requirements are keeping first-time home buyers out.

“If you look at where the market may get strength from, it may very well be from first-time buyers,” he said. “And a very significant constraint to first-time buyers is the wealth constraint.”

The loans are the idea of state housing finance agencies, or H.F.A.’s, quasi-government entities created to help moderate-income people buy their first homes.

Throughout the foreclosure crisis, the state agencies continued to make loans with low down payments, often to borrowers with tarnished credit, with much lower default rates than comparable mortgages from commercial lenders or the Federal Housing Administration. The reason: the agencies did not offer adjustable rates, and they continued to document buyers’ income and assets, which many commercial lenders did not do. In 2009, the agencies’ sources of revenue dried up, and they had to curtail most lending.

Then they created Affordable Advantage. The loans are 30-year fixed mortgages, with mandatory homeownership counseling, available to people with credit scores of 680 and above (720 in Massachusetts). The buyers have to put in $1,000 and must live in the homes.

All of these requirements ease the risk, said William Fitzpatrick, vice president and senior credit officer of Moody’s Investors Service. “These aren’t the loans that led us into the mortgage crisis,” he said.

So far Idaho, Massachusetts, Minnesota and Wisconsin are offering the loans. The Wisconsin Housing and Economic Development Authority has issued 500 loans since March, making it the first state to act. After six months, there are no delinquencies so far, said Kate Venne, a spokeswoman for the agency.

The agencies buy the loans from lenders, then sell them as securities to Fannie Mae. Because the government now owns 80 percent of Fannie Mae, taxpayers are on the hook if the loans go bad.

The state agencies oversee the servicing of the loans and work with buyers if they fall behind — a mitigating factor, said Mr. Fitzpatrick of Moody’s.

“They have a mission to put people in homes and keep them in homes,” not to foreclose unless other options are exhausted, he said. The loans have interest rates about one-half of a percentage point above comparable loans that require down payments.

Ms. Smith, the spokeswoman for Fannie Mae, distinguished the program from loans of the boom years that “layered risk on top of risk.”

With the new loans, she said, “income is fully documented, monthly payments are fixed, credit score requirements are generally higher, and borrowers must be thoroughly counseled on the home-buying process and managing their mortgage debt.”

For Porfiria Gonzalez and her son, Eric, the loan allowed them to move out of a rental house in a neighborhood with a high crime rate to a quiet street where her neighbors are retirees and police officers.

Ms. Gonzalez, 30, processes claims in the foreclosure unit at Wells Fargo Home Mortgage; she has seen the many ways a mortgage holder can fail.

On a recent afternoon in her three-bedroom ranch house here, Ms. Gonzalez said she did not see herself as repeating the risks of the homeowners whose claims she processed.

“I learned to stay away from ARM loans,” or adjustable rate mortgages, she said. “That’s the No. 1 thing. And always have some emergency money.”

When she first started shopping, she looked at houses priced around $140,000. But the homeownership counselor said she should keep the purchase price closer to $100,000.

“They explained to me that I don’t need a $1,200-a-month payment,” she said.

The counselor worked with her real estate agent and attended her closing. On May 28, Ms. Gonzalez bought her home for $90,500, with monthly payments of $834. After moving expenses, she has kept her savings close to $5,000 to shield her from emergencies.

“If I had to make a down payment, it would have wiped out my savings,” she said. “I would have started with nothing.”

Now, she said, she is in a home she can afford in a neighborhood where her son can play in the yard. A neighbor brought her a metal pink flamingo with a welcome sign to place by her side door.

“My favorite part is the big backyard,” said Eric, 10. “And that’s pretty much it.”

“You don’t like it that it’s a quiet, safe neighborhood?” his mother asked.

“Yeah, I do.”

“He didn’t go out much with kids in the old neighborhood,” she said.

“Because they were bad kids,” he said.

Ms. Gonzalez said that owning a house was much more work than renting, and that when the basement flooded during a heavy rain, her heart sank.

“But I look at it as an investment,” she said, adding that a similar house in the neighborhood was on the market for $120,000.

Prentiss Cox, a professor at the University of Minnesota Law School who has been deeply critical of the mortgage industry, said the program met an important need and highlighted the track record of state housing agencies, which never engaged in exotic loans.

“It’s not a story people want to hear, because it won’t bring back the big profits,” Mr. Cox said. “The H.F.A.’s have shown how the problems of the last 10 years were about having sound and prudent regulation of lending, not just whether the loans were prime or subprime.”

He added, “One of the great and unsung tragedies of the whole crisis was the end of the subprime market.”

When to refinance a mortgage? , Thetruthaboutmortgage.com


Mortgage Q&A: “When to refinance a mortgage?”

With mortgage rates at record lows, you may be wondering if now is a good time to refinance.

The popular 30-year fixed-rate mortgage slipped to 4.32 percent this week, well below the 5.08 percent seen a year ago, and much better than the six-percent range seen years earlier.

So should you refinance now?

Well, that answers depends on a number of factors.

First, what is the current interest rate on your mortgage(s)? And what will the closing costs be on the new mortgage?  They’ve been rising lately…

Let’s look at a quick example:

Loan amount: $200,000
Current mortgage rate: 5.5% 30-year fixed
Refinance rate: 4.25% 30-year fixed
Closing costs: $2,500

The monthly mortgage payment on your current mortgage (including just principal and interest) would be roughly $1,136, while the refinanced rate of 4.25 percent would carry a monthly payment of about $984.

That equates to savings of $152 a month.

Now assuming your closing costs were $2,500 to complete the refinance, you’d be looking at about 17 months of payments before you broke even and started saving yourself some money.

So if you refinanced again or sold your home during that time, refinancing wouldn’t make a lot of sense.

But if you plan to stay in the home (and with the mortgage) for many years to come, the savings could be substantial.

Other Considerations

If you’re currently in an adjustable-rate mortgage, or worse, an option arm, the decision to refinance into a fixed-rate loan could make even more sense.

Or if you have two loans, consolidating the balance into a single loan (and ridding yourself of that pesky second mortgage) could result in some serious savings.

Additionally, you might be able to snag a no cost refinance, which would allow you to refinance without any out-of-pocket costs (the rate would be higher to compensate).

cash-out refinance could also contribute to your decision to refinance if you were in need of money and had the necessary equity.

Finally, if you’re already in a 30-year fixed and want to build equity, you might consider taking a look at the 15-year fixed, which is pricing at a record low 3.83 percent, assuming you could handle a higher monthly payment.

Tax Credit Uncertainty Not Benefiting Housing Market, by CJ Moore, Technorati.com


Could the home buyer tax credit be returning?

That’s the hot topic right now in housing, as secretary of Housing and Urban Development Shaun Donovan wouldn’t squash the idea when he was asked about it Sunday on CNN’s “State of the Union.”

“I think it’s too early to say after one month of numbers whether the tax credit will be revived or not,” Donovan said. “All I can tell you is that we are watching very carefully. … We are going to be focused like a laser on where the housing market is moving going forward, and we are going to go everywhere we can to make sure this market stabilizes and recovers.”
If Donovan were to follow his own advice – making sure the market stabilizes – he would be smart to provide some certainty to housing. By leaving the possibility open, Donovan could be postponing any chance of a recovery.

The housing market certainly needs a boost after the news last week that new home sales and existing home sales in July dropped to record low levels.

The tax credit certainly influenced these numbers. Many prospective homebuyers rushed to meet the April 31 deadline so they could receive the tax credit, and that undoubtedly interrupted the month-to-month flow of housing. By leaving the possibility open for another tax credit, it could have the opposite effect. Prospective buyers might hold out and wait to see if the credit returns.

With Donovan’s wishy-washy response on Sunday, the Obama administration had a chance to give a clearer answer on Monday, and White Press Secretary Robert Gibbs failed to do so, saying that bringing back the tax credit “is not as high on the list as many other things are,” but still leaving the possibility open.
Another tax credit could provide a boost, but it’s debatable whether that boost would really be beneficial in the long term. It could be best to sit back for a while and see what happens and focus on other areas that could benefit housing, such as unemployment.

Read more: http://technorati.com/business/finance/article/tax-credit-uncertainty-not-benefiting-housing/#ixzz0yIHYvbvn

Mortgage Comparison Shopping May Get Easier, thetruthaboutmortgage.com


The Federal Reserve has proposed a new rule that may make it easier for prospective homeowners and those looking to refinance shop around before making a commitment.

The proposal, which was part of a 930-page document published mid-month in the Federal Register, would allow consumers to cancel mortgage applications within three days and get refunded for certain costs.

Things like application fees and appraisal fees would be refundable, while credit report fees would not.

Mortgage shoppers would be entitled to refunds if they canceled an application within three business days of receiving key disclosures, including the Good Faith Estimate and Truth in Lending Act statement.

The Fed believes such a rule would help consumers shop for the best deal, instead of being locked in with one mortgage lender for fear of losing any up-front costs.

But many lenders believe the rule will have little effect, as most already wait several days before charging any fees.

Others are concerned it could delay an already backed-up process, as there will be a waiting period before anything is acted upon or ordered.

Although, it’s not uncommon for a loan to be “on hold” until it makes it through underwriting and receives a formal decision.

It’s unclear how the rule would affect mortgage brokers, those who work on behalf of banks directly with consumers.

A recent Bankrate.com study found that mortgage closing costs rose more than 36 percent this year, with loan origination fees rising nearly 25 percent and third-party fees jumping almost 50 percent.

Them Be Fightin’ Words: The Fight Over Foreclosure Fees, by PAUL JACKSON, Stopforeclosurefraud.com


For the law firms that manage and process foreclosures on behalf of investors and banking institutions, what’s a fair legal fee? What’s a fair filing fee? Should fees to outsourcers be prohibited? And just how much money should it really cost to process a foreclosure?

As I write this, the answer to these and other questions are being fought out in the trenches, in an out-of-sight but increasingly heated battle involving Fannie Mae and Freddie Mac, the law firms that specialize in creditor’s rights, default industry service providers, and various private equity interests.

It’s a complex fight that many say will ultimately shape the way U.S. mortgages are serviced over the course of the next decade — and perhaps beyond. It’s also a debate that promises to spill over into how loans are originated and priced.

“No aspect of the U.S. mortgage business will go untouched by the outcome of this current debate,” said one attorney I spoke with, on condition of anonymity. “This is the single most important issue facing mortgage markets today, and will even determine how securities are structured in the future.”

How foreclosures are managed

Typically, a foreclosure involves legal and court filing fees — it is, after all, a legal process involving the forced transfer of a property from a non-paying borrower to secured lender. But the foreclosure process also typically involves a host of other associated fees, including necessary title searches, potential property insurance, homeowner’s association dues, property maintenance and repair, and much more.

Many of these fees are ultimately tacked onto the “past due” amounts tied to a delinquent borrower — and done so legally. Much like when a credit card becomes past due and the interest rate kicks into high oblivion, consumers looking to catch up on their delinquent mortgage payments must also make up the difference in additional fees in order to successfully do so.

Legal fees in the foreclosure business, however, aren’t what you might think. Instead of billing hourly for most work, as most attorneys in other fields would do, attorneys that specialize in processing foreclosures are paid on a flat-fee basis, using pre-determined fee schedules.

Thanks to the market-making power of the GSEs, Fannie Mae and Freddie Mac — both of whom publish allowable fee schedules for every imaginable legal filing and process in the foreclosure repertoire — the entire foreclosure process has been reduced to a set of flat fees.

And not even negotiated fees, at that. For firms that operate in the field of foreclosure management, the GSE allowable fees amount to a take-it-or-leave-it menu of prices.

“For us, it doesn’t matter who the client is, even if it isn’t Fannie or Freddie,” said one attorney I spoke with, under condition of anonymity. “We know we’re only going to be able to claim whatever that flat fee schedule they set says we can claim, since other investors tend to employ whatever the GSE fee caps are.”

Fannie and Freddie as housing HMOs? In the foreclosure business, that’s pretty much what it amounts to.

But beyond determining the legal fee schedule for much of the multi-billion dollar default services market, the GSEs also largely determine who gets their own foreclosure work. Both Fannie and Freddie maintain networks of law firms called “designated counsel” or “approved counsel” in key states marked with significant foreclosure volume — and they either strongly suggest or require that any servicers managing a Fannie or Freddie loan in foreclosure refer any needed legal work to their approved legal counsel.

Each state will have numerous designated counsel — sometimes as many as five law firms — but in practice, attorneys say, two to three firms end up with the lion’s share of each state’s foreclosure work. In states hit hard by the housing downturn and foreclosure surge, like Florida, the amount of work can be substantial.

“The GSEs can force a servicer to use their designated counsel, especially if timeline performance in foreclosure management is out of some set boundary,” said one servicing executive at a large bank, who asked to remain anonymous. “It’s usually easiest to simply use their counsel on their loans, even if we don’t see that firm as best-in-class.”

With the vast majority of the mortgage market now running through the GSEs, and much of what’s left of the private market following the guidelines Fannie and Freddie establish, it should come as no surprise to find that a few law firms in each state end up with the majority of the foreclosure work, sources say.

The rise of the ‘foreclosure mills’

Being designated as approved counsel by Fannie Mae and/or Freddie Mac does carry risk. Just ask Florida’s David Stern, who has seen his burgeoning operation pejoratively branded a ‘foreclosure mill’ by consumer groups, dragged through the press for both alleged and real consumer misdeeds, and facing numerous investor lawsuits surrounding the operation of DJSP Enterprises, Inc. (DJSP: 3.22 -1.23%) — the publicly-traded processing company tied to the law firm.

While Stern’s operation may win the award for ‘most susceptible to negative publicity,’ how the law firm operates is far from unique in the foreclosure industry.

Obama Plans Refinancing Aid, Loans for Jobless Homeowners, HUD Chief Says, by Holly Rosenkrantz, Bloomberg


The Obama administration plans to set up an emergency loan program for the unemployed and a government mortgage refinancing effort in the next few weeks to help homeowners after home sales dropped in July, Housing and Urban Development Secretary Shaun Donovan said.

“The July numbers were worse than we expected, worse than the general market expected, and we are concerned,” Donovan said on CNN’s “State of the Union” program yesterday. “That’s why we are taking additional steps to move forward.”

The administration will begin a Federal Housing Authority refinancing effort to help borrowers who are struggling to pay their mortgages, and will start an emergency homeowners’ loan program for unemployed borrowers so they can stay in their homes, Donovan said.

“We’re going to continue to make sure folks have access to home ownership,” he said.

Sales of U.S. new homes unexpectedly dropped in July to the lowest level on record, signaling that even with cheaper prices and reduced borrowing costs the housing market is retreating. Purchases fell 12 percent from June to an annual pace of 276,000, the weakest since the data began in 1963.

Sales of existing houses plunged by a record 27 percent in July as the effects of a government tax credit waned, showing a lack of jobs threatens to undermine the U.S. economic recovery.

House Sales Plummet

Purchases plummeted to a 3.83 million annual pace, the lowest in a decade of record keeping and worse than the most pessimistic forecast of economists surveyed by Bloomberg News, figures from the National Association of Realtors showed last week. Demand for single-family houses dropped to a 15-year low and the number of homes on the market swelled.

U.S. home prices fell 1.6 percent in the second quarter from a year earlier as record foreclosures added to the inventory of properties for sale. The annual drop followed a 3.2 percent decline in the first quarter, the Federal Housing Finance Agency said last week in a report.

Donovan said on CNN yesterday that it is too soon to say whether the administration’s $8,000 first-time homebuyer credit tax credit, which expired April 30, will be revived.

“All I can tell you is that we are watching very carefully,” Donovan said. “We’re going to be focused like a laser on where the housing market is moving going forward, and we are going to go everywhere we can to make sure this market stabilizes and recovers.”

Reviving the tax credit would “help enormously” in the effort to fight foreclosures and revive the economy, Florida Governor Charlie Crist said on the same CNN program. Florida has the third-highest home foreclosure rate in the country, with one in every 171 housing units receiving a foreclosure filing this year.

To contact the reporter on this story: Holly Rosenkrantz in Washington athrosenkrantz@bloomberg.net.

Jumbo Mortgage Rates Continue to Fall, by Rosemary Rugnetta, Freerateupdate.com


Just as conforming mortgage rates continue to be unpredictable, the same can be said for the jumbo mortgage rate market. As the housing market continues to correct itself, mortgage rates across the board continue to get lower. Purchasing and refinancing higher priced homes just got a little easier as jumbo mortgage ratescontinue to fall to record lows at 5%.

Jumbo loans are those mortgages that are above the conforming loan limit of $417,000 and are not backed by Freddie Mac and Fannie Mae. This conforming lending limit is higher in some high cost areas around the country. With jumbo loans popular in locations such as New York and California, the current low jumbo rates are making it an opportune time for many borrowers to refinance. In some areas where regular sized homes cost above $750,000, the low jumbo mortgage rate is spurring up home sales and refinances, thus bringing life to a stalled market.

Just a little over a year ago, jumbo mortgage rates were approximately 1.5% higher than today. With record low jumbo mortgage rates, many borrowers throughout the country are finding that this is the opportunity they have been waiting for to refinance from a higher interest jumbo loan. By refinancing a jumbo loan to the current lower rate, borrowers are saving hundreds of dollars each month. Most of these people will often reinvest these savings back into the economy which will help the economic recovery get off the ground. At this time, lenders are finding that the availability of money has improved while, at the same time, the price of that money has also improved. If banks continue to gain confidence with their lending in the jumbo mortgage market and do well with their returns, they may begin to ease up their lending in the remaining tighter markets.

Although jumbo mortgage rates continue to fall opening up new life to this niche housing market, qualifying still remains stricter than in the past. These large loans carry more risk to the banks than conforming loans. August 26, 2010 (FreeRateUpdate.com) – Those who wish to qualify for a jumbo loan will need excellent credit scores with the minimum score being at least 720. and sufficient income, relevant to the loan, that needs to be documented for at least 2 years. New purchases require a minimum of 20% down payment while refinances require a minimum of 20% equity in the existing home. After all of the calculations have been done, most jumbo loans require that the monthly mortgage payment not exceed more than 38% of income.

For anyone who can meet these qualifications, now is a good time to trade up to a bigger home that requires a jumbo mortgage or to refinance an existing one. By doing so, these borrowers will appreciate the savings by attaining a jumbo mortgage at such low rates for many years to come. Since no one can predict when the trend will stop and rates will start to rise, it’s time to get the process in motion as jumbo mortgage rates continue to fall and the jumbo loan business heats up.

http://www.freerateupdate.com/jumbo-mortgages/jumbo-mortgage-rates-continue-to-fall-6087

Procrastination on Foreclosures, Now ‘Blatant,’ May Backfire, by Jeff Horwitz and Kate Berry, American Banker


Ever since the housing collapse began, market seers have warned of a coming wave of foreclosures that would make the already heightened activity look like a trickle.

The dam would break when moratoriums ended, teaser rates expired, modifications failed and banks finally trained the army of specialists needed to process the volume.

But the flood hasn’t happened. The simple reason is that servicers are not initiating or processing foreclosures at the pace they could be.

By postponing the date at which they lock in losses, banks and other investors positioned themselves to benefit from the slow mending of the real estate market. But now industry executives are questioning whether delaying foreclosures — a strategy contrary to the industry adage that “the first loss is the best loss” — is about to backfire. With home prices expected to fall as much as 10% further, the refusal to foreclose quickly on and sell distressed homes at inventory-clearing prices may be contributing to the stall of the overall market seen in July sales data. It also may increase the likelihood of more strategic defaults.

It is becoming harder to blame legal or logistical bottlenecks, foreclosure analysts said.

“All the excuses have been used up. This is blatant,” said Sean O’Toole, CEO of ForeclosureRadar.com, a Discovery Bay, Calif., company that has been documenting the slowdown in Western markets.

Banks have filed fewer notices of default so far this year in California, the nation’s biggest real estate market, than they did 2009 or 2008, according to data gathered by the company. Foreclosure default notices are now at their lowest level since the second quarter of 2007, when the percentage of seriously delinquent loans in the state was one-sixth what it is now.

New data from LPS Applied Analytics in Jacksonville, Fla., suggests that the backlog is no longer worsening nationally — but foreclosures are not at the levels needed to clear existing inventory.

The simple explanation is that banks are averse to realizing losses on foreclosures, experts said.

“We can’t have 11% of Californians delinquent and so few foreclosures if regulators are actually forcing banks to clean assets off their books,” O’Toole said.

Officially, of course, this problem shouldn’t exist. Accounting rules mandate that banks set aside reserves covering the full amount of their anticipated losses on nonperforming loans, so sales should do no additional harm to balance sheets.

Within the last two quarters, many companies have even begun taking reserve releases based on more bullish assumptions about the value of distressed properties.

Now there is widespread reluctance to test those valuations, an indication that banks either fear they have insufficient or are gambling for a broad housing recovery that experts increasingly say is not coming.

Banks did not choose the strategy on their own.

With the exception of a spike in foreclosure activity that peaked in early-to-mid 2009, after various industry and government moratoriums ended and the Treasury Department released guidelines for the Home Affordable Modification Program, no stage of the process has returned to pre-September 2008 levels. That is when the Treasury unveiled the Troubled Asset Relief Program and promised to help financial institutions avoid liquidating assets at panic-driven prices. The Financial Accounting Standards Board and other authorities followed suit with fair-value dispensations.

These changes made it easier to avoid fire-sale marks — and less attractive to foreclose on bad assets and unload them at market clearing prices. In California, ForeclosureRadar data shows, the volume of foreclosure filings has never returned to the levels they had reached before government intervention gave servicers breathing room.

Some servicing executives acknowledged that stalling on foreclosures will cause worse pain in the future — and that the reckoning may be almost here.

“The industry as a whole got into a panic mode and was worried about all these loans going into foreclosure and driving prices down, so they got all these programs, started Hamp and internal mods and short sales,” said John Marecki, vice president of East Coast foreclosure operations for Prommis Solutions, an Atlanta company that provides foreclosure processing services. Until recently, he was senior vice president of default administration at Flagstar Bank in Troy, Mich. “Now they’re looking at this, how they held off and they’re getting to the point where maybe they made a mistake in that realm.”

Moreover, Fannie Mae and Freddie Mac have increased foreclosures in the past two months on borrowers that failed to get permanent loan modifications from the government, according to data from LPS. If the government-sponsored enterprises’ share of foreclosures is increasing, that implies foreclosure activity by other market participants is even less robust than the aggregate.

“The math doesn’t bode well for what is ultimately going to occur on the real estate market,” said Herb Blecher, a vice president at LPS. “You start asking yourself the question when you look at these numbers whether we are fixing the problem or delaying the inevitable.”

Blecher said the increase in foreclosure starts by the GSEs “is nowhere near” what is needed to clear through the shadow inventory of 4.5 million loans that were 90 days delinquent or in foreclosure as of July 31.

LPS nationwide data on foreclosure starts reflects the holdup: Though the GSEs have gotten faster since the first quarter, portfolio and private investors have actually slowed.

“What we’re seeing is things are starting to move through the system but the inflows and outflows are not clearing the inventory yet,” he said.

Delayed foreclosures might be good news for delinquent borrowers, but it comes at a high price.

Stagnant foreclosures likely contributed to the abysmal July home sales, since banks are putting fewer homes for sale at market-clearing prices.

Moreover, Freddie says a good 14% of homes that are seriously delinquent are vacant. In such circumstances, eventual recovery values rapidly deteriorate.

Defaulted borrowers were spending an average of 469 days in their home after ceasing to make payments as of July 31, so the financial attraction of strategic defaults increases.

One possible way banks are dealing with that last threat is through what O’Toole calls “foreclosure roulette,” in which banks maintain a large pool of borrowers in foreclosure but foreclose on a small number at random.

O’Toole said the resulting confusion would make it harder for borrowers to evaluate the costs and benefits of defaulting and fan fears that foreclosure was imminent.

http://www.americanbanker.com/issues/175_165/foreclosures-modifications-california-1024663-1.html

FHA Loan Gravy Train Derailing?


After a week of travel to Motown on business, and seeing the housing bust at ground zero, I have to ask you all some questions regarding housing and our government’s role in the quagmire.

Fannie and Freddie dominated the easy loan space to back all borrowers with a pulse from 2000-2007, and now they occupy a toxic waste dumping ground for many a bank’s bad mortgages while trading as penny stocks with all but explicit taxpayer backing.

The new game in town when it comes to financing mortgages circa 2008-2010 is the truly explicit government backed FHA. That federal agency is THE mortgage market, without which no private bank/investor in their right mind would loan money to anyone to buy real estate at today’s prices. Private loan origination to purchase real estate has all but disappeared.

Is the FHA spigot beginning to twist toward the “off” position?

“The Federal Housing Administration’s Mortgagee Review Board (MRB) published a notice today to announce dozens of administrative actions against FHA-approved lenders who failed to meet its requirements. The total amount of originators that used to write FHA-backed mortgages, the report shows, but are restricted from doing so today, has surpassed the 900 mark.”

“The rate of seriously delinquent mortgages backed by the Federal Housing Administration (FHA) declined slightly from May to June, but the gross number of mortgages that are either 90 or more days past due or in foreclosure increased 35% year-over-year.”

“The total value of unpaid FHA mortgages was $865.5bn in June, up 30.3% from $663.8bn one year ago and up 3.3% from $837.8bn in May.”

So we’re on the hook as taxpayers for Fannie and Freddie, and now the FHA is approaching the $1Tillion mark. Delinquencies are skyrocketing, yet the federal government keeps propping up housing prices despite the reality of stagnant wages. Why? How long can this last? When does cold hard cash flow via wages show up in the equation? Perhaps sooner than we all think…

“A total of 168,915 FHA loan applications were received last month, down 6.9 percent from May and 29.4 percent lower than levels seen a year ago, according to the FHA Outlook report.”

How much of an income and/or VAT-sales tax increase is Portland and Oregon willing to pay in order to prop up housing prices via government intervention and real estate bailouts? What business does the government have in financing our privately owned assets?

The sooner the government gets out of housing finance, the sooner most Americans will be able to truly afford a home based upon local wages. Why do we vote for and pay our elected officials to artificially prop up housing and real estate prices?

This post is just a few thoughts from the road, after seeing real estate up close in the Detriot and Southern Michigan area at truly rock bottom prices. Based upon what I saw during my travels, wage based reality bites…

Portland Housing Blog
http://portlandhousing.blogspot.com/2010/07/fha-loan-gravy-train-derailing.html

Oregon ended 2009 11th in nation for foreclosure, Portland Business Journal


Lenders foreclosed on 34,121 Oregon homes in 2009, three times more than in 2007 and well ahead of national trends.

According to year-end figures released late Wednesday by Irvine, Calif.-based RealtyTrac Inc., there were 90 percent more foreclosure actions involving Oregon residences in 2009 than in 2008 and a whopping 303 percent more than in 2007, when the meltdown began.

The picture wasn’t any better nationwide, with nearly 4 million foreclosure filings against 2.8 million U.S. properties, 21 percent more than 2008 and 120 percent more than 2007.

The report showed that 2.2 percent of all U.S. homes or one in every 45 residences received at lease one foreclosure filing during the year.

“As bad as the 2009 numbers are, they probably would have been worse if not for legislative and industry-related delays in processing delinquent loans,” said James Saccacio CEO of RealtyTrac. “After peaking in July with over 3621,000 homes receiving a foreclosure notice, we saw four straight monthly decreases driven primarily by short-term factors: trial loan modifications, state legislation extending the foreclosure process and an overwhelming volume of inventory clogging the foreclosure pipeline.”

Nevada, Arizona and Florida had the nation’s highest foreclosure rates while California, Florida, Arizona and Illinois together accounted for half of all activity.

Oregon ranked 11th, with 2 percent of all homes affected, or one in 47.

Clackamas, Columbia, Deschutes, Jackson, Jefferson, Josephine and Yamhill counties had Oregon’s highest foreclosure ratings.

Washington state ranked 24th, with 35,268 foreclosure actions, 132 percent more than in 2007.

http://portland.bizjournals.com/portland/stories/2010/01/11/daily33.html