Posts Tagged ‘Borrowers’
Fed: Give borrowers time to change their minds
The Federal Reserve released a proposal Monday to give mortgage applicants three days to change their minds. The proposal was part of a 930-page document that clarifies and finalizes the new financial reform law. The Fed’s document says that for closed-end loans secured by real property or a dwelling, a creditor must: • Refund any appraisal or other fees paid by the consumer (other than a credit report fee) if the consumer decides not to proceed with a closed-end mortgage transaction within three business days of receiving the early disclosures (fees imposed after this three-day period would not be refundable). • Disclose the right to a refund of fees to consumers before they apply for a closed-end mortgage loan. The Fed says this proposal will make it easier and cheaper for consumers to comparison shop. It also acknowledged that borrowers who want to close a transaction in a hurry would be handicapped because most lenders will delay sending out an appraiser for a few days. Other proposals affecting homebuyers included: • A ban on yield-spread premiums, which encourage mortgage brokers to push buyers toward more profitable mortgages. • A requirement for lenders to tell borrowers when their mortgage is sold or transferred. • An explanation of the effects of balloon payments, adjustable loan payment fluctuations and minimum payments on loan balances. Source: Bankrate.com, Holden Lewis
Shorter-term mortgages gain favor
More homeowners are refinancing into shorter-term loans, saving a bundle by taking advantage of the lowest mortgage rates in decades. Nearly a third of borrowers refinancing fixed 30-year loans in April through June picked loans with 15- or 20-year terms, according to mortgage finance giant Freddie Mac. It was the highest share since 2004. The trend has been driven by near-weekly drops in rates all summer. Average rates on fixed 15-year loans fell below 4 percent for the first time last week, dropping to 3.92 percent, according to Freddie Mac. A year ago, the average 15-year rate was 4.68 percent. Meanwhile, the rates on fixed 30-year loans now average 4.44 percent, Freddie Mac found. At today’s rates, a borrower with a 30-year loan at a 6.5 percent interest rate and a $200,000 principal balance could save some $70,000 in interest over the life of a shorter 20-year loan. “It’s borrowers looking to build equity more quickly, and borrowers have generally been paying down their loans more quickly,” says Keith Gumbinger, vice president of HSH Associates, a publisher of mortgage and consumer loan information. Peter Iche, president of Carthage Federal Savings and Loan Association in Carthage, N.Y., says he’s seen an increase in people who are approaching retirement refinancing to shorter-term loans. “They realize that they can afford a heavier payment,” he says. “They’re getting closer to retirement where they are willing to suck it up for a few years.” Most of the customers trying to refinance to shorter-term loans usually qualify, he says. And with rates as low as they are now, “For the group of people that can afford to do it, it’s a good time to wrap things up.” Many can’t, however. With rates at record lows, a higher volume of refinancings would be expected, says Mark Zandi of Moody’s Analytics.com. But high unemployment and lost home equity is preventing many borrowers from doing so, he says. Application volume for both home-purchase mortgages and refinancings has been tepid because many potential borrowers lack high enough credit scores, sufficient income or enough equity in their homes to qualify for new loans. Borrowers’ monthly payments rise when they refinance into a shorter-term loan, so lenders generally require borrowers to have higher monthly incomes to get a 15-year mortgage than a 30-year. In addition, because property values in many areas have fallen sharply the past three years, about a quarter of residential properties with mortgages are worth less than the loan balances. Copyright © 2010 USA TODAY, a division of Gannett Co. Inc., Stephanie Armour. Contributing: Jillian Berman
Banking execs say gov’t needs to back mortgages
The call from business for less government has a notable exception: the mortgage market. The Obama administration invited banking executives Tuesday to offer advice on changing the government’s role in backing the mortgage market. While they disagreed on the exact level of support needed, the group overwhelmingly advocated for the government to maintain a large role in the $11 trillion market. If the government pulled out, millions of Americans wouldn’t be able to convince banks to take the risk of giving them home loans, the executives said. Ending government support could lead to a spike in mortgage rates. That could deter many from buying homes, and banks, mortgage lenders and Realtors would lose money over time. “It will take on a different form, but there is a role for government,” Kevin Chavers, a managing director at Morgan Stanley, said in an interview. Most attendees agreed the time had come to do away with Fannie Mae and Freddie Mac. Rescuing the two mortgage giants has cost the government nearly $150 billion so far. Bill Gross, the managing director for bond giant Pimco, suggested Fannie and Freddie should be formally merged into the government. He also called on the administration to allow millions of homeowners to automatically refinance their loans to help stimulate the economy. A more widely held view at the conference is for the government to do away with Fannie and Freddie, and instead provide a guarantee that mortgage investors get paid even if borrowers default in droves. Figuring out a plan for Fannie and Freddie is also a political challenge for President Barack Obama and his party. Republicans have seized on the administration’s management of Fannie and Freddie to illustrate Democrats’ push for growing the reach of the federal government. While the banking industry has joined Republicans in criticizing the administration for instituting stronger regulations of Wall Street, they support the government playing a large role in the mortgage market. “There would be a lot of homeowners who wouldn’t be able to afford homes because we’d be dealing with higher interest rates,” said S.A. Ibrahim, chief executive of mortgage insurer Radian Group Inc. Treasury Secretary Timothy Geithner pledged on Tuesday “fundamental change” to the structure of Fannie and Freddie. The mortgage giants profited tremendously during good times but burdened taxpayers with losses when the housing market went bust. He said the two companies weren’t the only cause of the financial crisis, but made it worse. Fannie and Freddie buy mortgages and package them into securities with a guarantee against default. They have ensured that millions of Americans can get home loans – even after the housing market collapsed. The two companies, the Federal Housing Administration and the Veterans Administration together backed about 90 percent of loans made in the first half of the year, according to trade publication Inside Mortgage Finance. Geithner did not offer a specific exit strategy for Fannie and Freddie. But he said, “It is our responsibility to make sure that we create a system that is not vulnerable to these same failures happening again.” The administration is expected to offer a plan next year. One option that dominated the discussion Tuesday is for the government to collect money from the mortgage industry and set up an insurance fund that could be used to cover losses during a severe downturn. This would prevent taxpayers from having to foot the bill for the industry. Some want the administration to take more dramatic actions. Gross said Fannie and Freddie’s function should be consolidated into one government agency that would issue mortgage-backed securities. Without such a solid guarantee, mortgage rates would soar, he warned. He also told the administration that the economic recovery required more government stimulus, particularly in the housing market. He suggested the administration push for the automatic refinancing of millions of home loans backed by Fannie and Freddie. Refinancing those loans at the lowest mortgage rates in decades would give Americans more money each month. That would boost consumer spending by $50 billion to $60 billion and lift housing prices by as much as 10 percent, he said. Without such stimulus in the next six months, Gross said, the economy will move at a “snail’s pace.” Obama officials say they do not plan to enact such a program, which has been the subject of intense rumors on Wall Street in recent weeks. Copyright © 2010 The Associated Press, Alan Zibel, AP real estate writer. All rights reserved. This material may not be published, broadca
Facing foreclosure? New Fannie Mae website helps consumers find options
Fannie Mae launched a new website to help consumers understand their options when facing foreclosure and the possible loss of their home. Called KnowYourOptions.com, it outlines the choices available to homeowners struggling to make mortgage payments, and provides guidance on how they can contact and work with their mortgage company to find a back-up plan. KnowYourOptions.com provides information in both English and Spanish. Features include: • Interactive Options Finder helps homeowners identify options. • Calculators help borrowers understand how many of the options would work in their situation, including calculations about refinance, repayment, forbearance, and modification. • Videos feature real homeowners discussing how they received help; others feature housing counselors giving advice. • Forms – including a financial checklist and contact log – to help borrowers prepare for a meeting with their mortgage company or housing counselor. • Information on refinancing, repayment plans, forbearance, modifications and Deed-for-Lease. • Out-of-the-box alternatives, including short sales and deeds-in-lieu for homeowners who recognize that they can no longer afford their mortgages, but want to avoid a foreclosure on their credit history More info: www.KnowYourOptions.com.
Risks abound if too many refinance
Lots of homeowners are frustrated these days that they can’t seem to get a mortgage refinance even though interest rates are at historical lows. It turns out they’re not alone. Plenty of people on Wall Street would also love to see a boom in refinancing activity, saying it would be a near-painless way to inject more money into the economy. If more people can refinance, the thinking goes, the more cash they’ll have to spend. Those economists and analysts calling for a mass mortgage reset say it could be engineered by the government, which controls the giant mortgage lenders Fannie Mae and Freddie Mac. Have them loosen underwriting standards and give breaks on fees, and more people will qualify to refinance. Here’s what the Obama administration says about that idea: Don’t get your hopes up. And that’s a good thing, since ushering in a refinancing boom would only be a short-term fix for the housing market and the economy that would have long-term consequences. A widespread refinancing of loans would mean reverting to looser lending standards, one of the things that got us into this mess. It could also boost mortgage rates for new borrowers and force U.S. taxpayers to shoulder more risk, since they technically own Fannie and Freddie. “At some point, we have to ask ourselves how much more can we ask taxpayers to do to support people staying in their homes,” says Dean Baker, co-director of the left-leaning Center for Economic and Policy Research in Washington. Wall Street has been abuzz in recent weeks over the possibility of the government engineering a broad refinancing of loans. Mortgage rates for a 30-year fixed home loan are now 4.49 percent, the lowest it has been since Freddie Mac began tracking rates in 1971. But millions of borrowers haven’t been able to benefit from those low rates. A big reason has to do with the fact that falling housing prices have left many borrowers with little or no home equity, which is also known as being “underwater.” As a result, they can’t qualify for refinancing. Others are deterred from refinancing by strict lending standards and the high fees that come with it. To get more mortgage resets done, some well-known economists and analysts at firms like Morgan Stanley and Goldman Sachs say the government should encourage a refinancing wave by adjusting lending policies at Fannie and Freddie. The mortgage lenders were taken over by the government two years ago. They own or guarantee about half of all U.S. mortgages, or nearly 31 million home loans worth more than $5 trillion. They buy home loans from lenders, package them into bonds with a guarantee against default and sell them to investors. The savings from a major mortgage reset could be significant. Allow someone with a $200,000 mortgage at 6 percent to refinance down to 4.5 percent, and suddenly there is $3,000 a year available to be plunged back into the economy. Add that up across millions of people, and you have what Morgan Stanley economist David Greenlaw calls a “slam dunk stimulus.” The government is already trying to help borrowers refinance, but its existing program has been a bust. The Home Affordable Refinance Program, or HARP, is directed at homeowners whose loans nearly or completely outsize the value of their homes. The government had hoped HARP would lead to millions of mortgage resets, but only a few hundred thousand have been done. The problem is that there are too many restrictions when trying to refinance under HARP. That’s why some people on Wall Street want the government to roll out a less restrictive program to get more mortgages resets done. Regardless of the pressure coming from homeowners and some on Wall Street for the government to ease refinancing rules, Treasury Department spokesman Andrew Williams tells The Associated Press that “the administration is not considering a change in policy in this area.” The government sees where the pitfalls are. Taxpayers have already pumped $145 billion into Fannie and Freddie over this last two years, and widespread refinancing now could raise that burden. Fannie and Freddie would very likely see their earnings decline and writedowns on their mortgage securities go up. In total, a mass mortgage reset could cost the mortgage lenders $75 billion, according to research from investment firm Keefe, Bruyette & Woods. Let’s also consider that a refinancing boom could have unintended consequences. The pace of foreclosures might not slow. A lower interest rate still might not be attractive enough for deeply underwater borrowers to stay in their homes. To some, it is not worth paying any money toward a depreciating asset, regardless of the interest rate. New borrowers could also face higher interest rates. A large refinancing wave would depress the value of mortgage-backed securities, making them less attractive to investors such as pension funds and foreign governments. Weak demand for those securities could lead to higher mortgage rates because lenders could have a harder time selling off their loans to investors. A short-term refinancing wave could help stabilize the housing market now, but it could also hurt home sales later. Homeowners who are able to lock in a once-in-a-lifetime interest rate could be deterred from moving in the future. Hitting the mortgage reset button could put more money into homeowners’ pockets today, and would also give the economy a quick jolt. But the ultimate costs may be too high. Copyright © 2010 The Associated Press, Rachel Beck, AP business writer.
FHA is in Better Shape than Expected
Mortgages backed by the Federal Housing Administration have performed better than expected so far this fiscal year, though the improvements could be overturned if home prices sink, according to a report the agency submitted to Congress this week. The report analyzed the FHA’s loan portfolio from October through June and compared the results to the projections in an independent audit released late last year. That audit found that as the FHA’s loan volume expanded, its default rate rose and the excess cash it set aside to deal with unexpected losses eroded to dangerously low levels as of Sept. 30. The auditors concluded taxpayers would be on the hook for losses if worst-case scenarios played out – a first for the agency, which has always used fees it charges borrowers to pay lenders for losses. In its report to Congress this week, the FHA updated lawmakers on the performance of its loans since the audit’s release. The agency said it collected more money than it disbursed in the nine months ended June 30, for a net increase of $446 million. It concluded that FHA loans are holding up better than the audit had predicted on many fronts, in part because the agency has attracted more creditworthy borrowers and rooted out fraudulent lenders. But the report did not update the excess cash reserves calculated in last year’s audit. Those were about $3.6 billion as of Sept. 30. That represented about 0.53 percent of all outstanding single-family home loans insured by the agency – well below the 2 percent required by law. A new audit is due later this year. The FHA’s report to Congress said that from October through June, the FHA had 19,310 fewer insurance claims on loans gone bad and paid $3.7 billion less than projected by the audit. Some states are experiencing a backlog in processing foreclosures, which may help explain the lower-than-expected claims, the report said. But aggressive foreclosure prevention efforts and stabilizing home prices also contributed to the better results. When home values drop and borrowers end up owing more than their homes are worth, they are vulnerable to foreclosure because they can’t sell their properties or refinance if they face a financial setback. But just as better-than-predicted home prices have helped the FHA so far this fiscal year, a sustained drop in prices could severely damage its finances going forward. “That’s the overarching caution,” said Bob Ryan, the agency’s chief risk officer. “We have to think about what loan performance will look like based on what houses’ prices will be doing going forward.” The most at-risk loans are the ones made in 2007 and 2008, the report said. FHA Commissioner David H. Stevens has told Congress that “rogue players” migrated to FHA lending in those years and used aggressive tactics to attract poor-quality borrowers to the FHA. Those loans are now maturing into their worst years because failures most often occur two to three years after a mortgage is made. As the loans go bad and clear off the FHA’s books, the agency expects its losses to taper off. The 2009 and 2010 loans – which now make up 60 percent of its outstanding dollar balances – are of better quality, which is why the delinquency rates on those loans are low, the report said. In the quarter ended June 30, only 0.42 percent of the FHA purchase loans were at least 90 days late within their first six months. By contrast, 2.6 percent of the mortgages in the comparable quarter of 2007 and 1.5 percent of the loans in the same portion of 2008 were seriously late. The report also said that the FHA has endorsed more than 1.3 million single-family loans in the first three quarters of the fiscal year as of June, and it’s on pace to ensure 1.7 million by the end of the fiscal year on Sept. 30. Home purchase mortgages alone may surpass the one million mark for the first time since 1987. But refinance activity has slowed dramatically since its peak in late 2009. Copyright © 2010 washingtonpost.com.
Foreclosure Crisis Up Close and In Person
Bruce Marks, who presides over these events claims they will see 60,000 borrowers over the next 8 days, and he also claims 80 percent of those borrowers will get modifications. Roughly 10 percent will get principal reductions, while most will get new interest rates as low as 2 and 3 percent fixed for the life of the loan.
Yes, You Can Still Afford To Get Your Dream Home!
In February 2009, President Obama introduced to the nation his comprehensive Financial Stability Plan, addressing the key problems that are at the heart of our country's current housing crisis. A core and critical component of that plan is his Making Home Affordable program, a plan with the goals of stabilizing the housing market and providing immediate and necessary relief to struggling homeowners so that they may avoid foreclosure and get back on their feet again. The Home Affordable Modification Program provides all eligible homeowners with the wonderful opportunity to modify and restructure their existing mortgages in order to make them affordable and maintainable. To date, over a million homeowners received assistance and the program is well on its way to helping 3 to 4 million homeowners by the year 2012. If your family can no longer afford your current monthly loan payments, then you may be able to qualify for a loan modification that would make your monthly mortgage payment affordable. Default and late payments aside, if you are one of the millions of borrowers who happen to be current, but are having difficulties with making their payments, as well as, borrowers who have missed payments may be eligible. Don't worry about whether or not you are already in foreclosure. The program was designed especially for you. Foreclosure proceedings cease at the moment the modification process starts. The first thing you will want to do if you find yourself in this predicament is contact your loan servicer, provided they have not already contacted you. Your loan servicer is the whichevever financial institution collecting your mortgage payments and is responsible for all accounting and management of the loan. The loan servicer will provide you with all the necessary paperwork and instructions for creating your loan modification package. There is free foreclosure help available to you on the Obama Administrations "Making Home Affordable" website and you may find additional support at the HUD (Housing and Urban Development) website. If you are having problems making your mortgage payment or need assistance with a loan modification, please contact us today at http://www.unitedloanmods.com and we can help save your home! United Mortgage Solutions is a Texas Based Loan Modification company!
Fannie Mae: Walk Away and You Will Pay
An announcement from government-owned mortgage giant Fannie Mae warns: "Defaulting borrowers who walk-away and had the capacity to pay or did not complete a workout alternative in good faith will be ineligible for a new Fannie Mae-backed mortgage loan for a period of seven years from the date of foreclosure."
Is Mortgage Mediation the Answer?
Obviously, given the sheer number of troubled borrowers (approximately 6 million currently delinquent nationwide) there are ample opportunities for mistakes to be made.
