Posts Tagged ‘mortgage’

More recent mortgage modifications seem to be sticking

September 8th, 2010 by Katy Dinner

Homeowners whose loan payments were reduced in 2009 are falling back into default less often than those who got modifications in 2008.

BOSTON — Homeowners who had mortgages modified recently are faring better than those who did so earlier in the housing crisis, according to a report released Tuesday, possibly debunking predictions of a huge wave of defaults to come.

The State Foreclosure Prevention Working Group warned of other troubling signs, however, on the same day that a separate industry report showed the most severe July sales drop-off for previously occupied homes in 15 years.

The group of 12 state attorneys general and state banking regulators said Tuesday that foreclosures still easily outpace the number of loan modifications. Modifications lower monthly payments and reduce the odds of losing a home.

Nearly three years into the foreclosure crisis, the group of state officials also found that nearly 63% of homeowners who are at least 60 days behind on their mortgage payments aren’t taking part in a foreclosure prevention program.

Banking officials warned that lenders must aggressively seek out homeowners who are teetering on the edge, even if it means short-term pain for banks…Read more.

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Mortgage Fraud Is Rising, With a Twist

September 8th, 2010 by Katy Dinner

Adapting to Tighter Rules After Collapse, Scammers Turn to More Complex Plots

By ROBBIE WHELAN

New data suggests that mortgage fraud—which got tougher to pull off after the collapse of the U.S. real estate market—is returning in a big way.

Data prepared for The Wall Street Journal by research firm CoreLogic, examining about seven million home loans made by hundreds of lenders, show that losses from mortgage fraud—ranging from falsified credit reports to identity theft—rose 17% last year after declining 57% in the two years after its 2006 peak.

In 2009, $14 billion in loans, or about 0.7% of all mortgage loans made in the U.S., were originated with fraudulent application data.

The figures are a fraction of the mortgage market, but the increase is sharp.

CoreLogic, which tracks fraud only by mortgage value, examines about 7 million loans each year using a proprietary computer program that detects discrepancies in loan documents and predicts the likelihood of fraud. The real losses to banks won’t be known for several years when banks are forced to write off the value of the loans’ value.

Some of CoreLogic’s profits come from selling market research to lenders aiming to cut losses from mortgage fraud.

Investigators and lenders say they are seeing a similar upswing in fraud.

The Federal Bureau of Investigation in June indicted a Phoenix man for mail and wire fraud among other alleged crimes when the agency says he tried to steal a house from his landlord. Also in June, federal prosecutors in New Jersey charged 29 defendants—including 12 real-estate agents, four mortgage consultants, an appraiser, a bank employee and a mortgage broker—with wire fraud in an alleged scheme involving 17 properties in the state and losses of $5.5 million.

“Even though we have certain compliance measures in place, people will adapt whatever scheme,” said Sharon Ormsby, the FBI’s section chief for financial crimes. “It doesn’t matter if the market is going up or down.” Read more.

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WeeklyBasis: Full Tilt Credit Boom, Part 2

August 23rd, 2010 by Julian Hebron

 

Rates are up about .125% following a mortgage bond selloff late last week, but rates are still at unprecedented lows. There was very little economic news last week, and the selloff (which pushes rates higher) came as bond markets traded on two main factors that will continue next week.

Rate Factors Week of August 23

These are all key reports that move bond markets, but they’ll be overshadowed by $109b in new Treasury bond auctions as follows: $7b in reopened 30yr TIPS Monday, $37b in 2yr notes Tuesday, $36b in 5yr notes Wednesday, and $29b in 7yr notes Thursday. This massive Treasury supply will disrupt bond markets and mortgage bonds may sell off, pushing rates higher.

How Long Can Low Rates Last?

Last week I explained (http://ow.ly/2rudZ) how government issues billions in new Treasury debt biweekly, why global markets have had such a big appetite for Treasury and mortgage debt over the past 18 months, and what might happen to rates if this bond rally reversed into a selloff.

A few days after those comments, Wharton finance professor Jeremy Siegel published a Wall Street Journal OpEd entitled The Great American Bond Bubble (http://ow.ly/2ru3P) discussing similar concerns about an overbought Treasury bond market. He thinks a bond market selloff is imminent, and presented estimated investment losses for bondholders.

But you don’t have to be a mortgage or Treasury bondholder to experience investment losses. The rate increase that comes from a bond selloff is, in essence, an investment loss for consumers seeking mortgages.

The fragile global economic climate still justifies investors seeking the safety of mortgage and Treasury bonds, but Siegel is not alone in his sentiment, and markets can shift violently. If the U.S. had a debt crisis like they’re having in Europe, it would cause huge mortgage and Treasury selloffs and sharp rate spikes.

But the more likely scenario is a correction off current price levels for mortgages and Treasuries, and even this would push mortgage rates up .25% to .5%.

For now though, it’s still a full tilt U.S. credit boom, so consumer rates are stunningly low. The rest is whether a homebuyer can negotiate the right deal on a home in an area with price stability.

Which brings us to the second rate factor for next week: bond markets realizing that their boom era can’t go on forever.

First is market calendar for the week beginning Monday, August 23. We have July’s Existing Home Sales (from the NAR) and New Home Sales (from the U.S. Census Bureau) Tuesday and Wednesday, then the second reading of 2Q2010 GDP and Consumer Sentiment on Friday.

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5 New Barriers To Getting A Mortgage

August 18th, 2010 by Katy Dinner

Are you having trouble getting approved for a mortgage? Ever since the housing bubble burst, lenders have been subjecting mortgage and refinance applicants to stricter and stricter criteria. Here are five reasons why people are finding it more difficult to get approved these days.

IN PICTURES: 5 Steps To Attaining A Mortgage

1. Lender Paranoia
Mortgage lenders naturally want to avoid their past mistakes, so it’s not surprising that they would look more closely at applicants’ financial situations. But changes in the secondary mortgage market have made them extra cautious.

Greg Cook, a licensed California real estate broker and mortgage banker, says that it used to be easy for lenders to get their loans insured by the FHA or guaranteed by Fannie Mae. Only in the case of fraud would these organizations require lenders to repurchase a mortgage.

“Now, if FHA feels the lender didn’t follow guidelines, they can refuse to insure and the lender has to pony up the cash to replace the funds on their warehouse line,” Cook says. “Multiple buybacks can bankrupt a small lender.”

With lenders facing greater responsibility for the loans they originate, they have no choice but to be extremely cautious in approving borrowers.

Read more

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Doubling Down on Housing

August 2nd, 2010 by Katy Dinner

97By M.P. Mcqueen

The housing crash has left at least 11 million people in the unenviable position of owing more on their homes than they are worth—and many more millions with properties worth far less than they paid for them.

But some might not be as trapped as they think.

Record-low mortgage rates and a new slump in home prices are presenting unusual opportunities in the housing market these days—even for so-called underwater borrowers.

Some intrepid homeowners are intentionally taking a loss on their current house—and writing a big check to retire their old mortgage—in order to buy twice the home for not much more money. Others, eschewing conventional personal-finance advice, are even opting for “cash-in” refinancings, paying thousands of dollars out of pocket to settle old loans—and then taking out new mortgages with lower payments, shorter durations or both.

Katie Everett, a real-estate broker in Denver, says none of her clients kicked in cash when selling their homes last year. This year, “about half are willing to bring money to closing, anywhere from $5,000 to $45,000,” she says.

Are these people crazy to be tying up even more of their cash in their homes, in effect doubling down on what has been a losing bet thus far? After all, any number of variables, from the employment picture to the credit markets, could weigh on housing for years to come.

Yet economists say trading up to new homes or refinancing existing ones can be smart—even if it means plunking down more cash to get out of old mortgages. People living in less-desirable neighborhoods might be able to find better homes in tonier ones that offer better appreciation potential. And with mortgage rates so low, such buyers can keep their monthly payments manageable, even though the new homes are more expensive…Read more.

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Fannie Mae Gets Tough on Homeowners Who Walk Away

July 16th, 2010 by Katy Dinner

fanniemae2The mortgage giant plans to go to court against those who can afford to make their payments but decide it’s not worth it. It also will limit their access to future loans.

Taking aim at homeowners who are able to pay their mortgage but decide it’s not worth it, Fannie Mae plans to go after them in court and to limit their access to home loans for seven years.

The government-controlled mortgage giant said Wednesday that it would instruct the companies servicing its loans to recommend when it should pursue a so-called deficiency judgment — a court order requiring a defaulting borrower to pay any remaining unpaid portion of the loan after a seized home is sold.

Lenders rarely employ court proceedings to pursue foreclosures in California, nearly always opting instead for a streamlined procedure involving a trustee’s sale of the home. Under state law, however, lenders who opt for court proceedings can obtain a deficiency judgment if the mortgage was used to refinance a home, but not if it was used to finance a purchase.

“It’s not a hollow threat,” said Alex Creel, chief Sacramento lobbyist for the California Assn. of Realtors, which has called for legislation that would ban deficiency judgments in many cases of refinanced mortgages.

Fannie Mae also said it would make new mortgages harder to obtain for borrowers if it can be proved that they engaged in a “strategic default” — abandoning a home to foreclosure not because the required payments are unaffordable but because the mortgage is larger than the value of the residence. For such a borrower, Fannie said it would not buy or guarantee another home loan for seven years…Read more.

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Posted in For Owners & Sellers, National Housing News | No Comments »

How Far Underwater Do Borrowers Sink Before Walking Away?

July 15th, 2010 by Katy Dinner

388px-1254-1256_Montgomery_St_(San_Francisco)By Nick Timiraos

At what point do borrowers who owe more than their homes are worth decide to stop paying the mortgage?

A new study from economists at the Federal Reserve Board aims to answer that question. The research found that the median borrower who “strategically” defaults doesn’t walk away from the mortgage until the amount owed exceeds the value of the home by 62%.

The study is bad news for the mortgage industry in that it backs up the idea that a growing share of borrowers are walking away from loans. Concerns are mounting among lenders and investors that some borrowers who owe far more than their homes are worth are now choosing not to pay mortgages that they can afford.

But the silver lining here is that it suggests a rather high threshold for borrowers to walk away.

“The fact that many borrowers continue paying a substantial premium over market rents to keep their homes challenges traditional models of hyper-informed borrowers” choosing to simply walk away, the authors write. The results suggest “that borrowers face high default and transaction costs” that make strategic defaults less widespread than they might otherwise be.

The study examined borrowers in Arizona, California, Florida and Nevada who bought homes in 2006 with no money down. Nearly 80% of those borrowers had defaulted by September 2009. The authors then attempt to estimate and separate out defaults caused by job loss and other income shocks from those that had been spurred simply by negative equity.

Nearly 80% of all defaults in the sample resulted from the traditional combination of income shocks and negative equity. But for borrowers that had a loan-to-value ratio of 150%, half of all defaults were strategic defaults, driven purely by negative equity.

Most defaults are typically driven by a combination of income shock and negative equity, or what’s known as the “double-trigger” hypothesis. While borrowers who lose their jobs but have equity in their homes can sell and avoid default, those without any equity are left with fewer options…Read more.

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California to Offer Program to Trim Underwater Mortgages

July 12th, 2010 by Katy Dinner

4W24FANNIE.xlgraphic.prod_affiliate.4By Jim Wasserman

Lots of people will want to get in on this one: California is going to use federal money to pay down the mortgages of struggling homeowners.

The California Housing Finance Agency announced Wednesday that it will spend $420 million to trim individual mortgages by up to $50,000. Lenders will be asked to match the amount, a deal that could make thousands of mortgages newly affordable across the Sacramento area.

The program, launching Nov. 1, will be run on a first-come, first-served basis, said Evan Gerberding, marketing manager for the CalHFA’s “Keep Your Home” initiative.

“Unfortunately, there will likely be more demand than funding,” she said.

Specifics on the selection process are still in the works. But CalHFA will exclusively fund applicants from low- to moderate-income households. In Sacramento, that’s expected to mean people earning less than $68,000 a year. Borrowers will have to be delinquent or in imminent danger of defaulting, but have adequate income to continue paying after getting the help.

Gerberding advised people to keep checking the Keep Your Home website for applicant criteria to be posted later. She said people struggling to make payments shouldn’t wait for the program to start, but should contact lenders and loan counselors now…Read more.

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WeeklyBasis: How Bond Markets Affect Mortgage Rates

July 12th, 2010 by Julian Hebron

logo_greenRRATE SNAPSHOT
Conforming, Jumbo, and FHA rates ended last week at record lows again (see rates below), which makes a two-month streak of record lows. A significant rate spike is not expected in the near future, but it’s also not likely rates will stay this low. Here’s why rates could tick up next week.

HOW BOND MARKETS AFFECT MORTGAGE RATES
We will see June Retail Sales figures Wednesday, June business inflation figures Thursday, and June consumer inflation Friday. These reports are important, but will likely show continued tame inflation and tentative consumers, which won’t surprise rate markets.

So the biggest rate factor will be $69b in Treasury auctions as follows: $35b in 3yr notes Monday, $21b in 10yr notes Tuesday, $13b in 30yr bonds Wednesday. The Treasury Department auctions debt to raise money for ongoing government spending, mostly for stimulus plans implemented during the heat of the financial crisis of the past few years.

In the current unstable global investing landscape, Treasury securities are considered a safe, albeit low yielding, bet. Specifically the new issuance of 10yr and 30yr debt competes with 30yr mortgage bonds for investor dollars, and these long-dated mortgage bonds are what most rates are tied to. So if investors sell mortgage bonds to buy Treasuries, mortgage bond prices drop and rates rise.

Also, if the Treasury auctions aren’t well received, it can cause selloffs across all bond markets, including mortgages. Justifiably, the flood of Treasury debt into markets has caused oversupply concerns at different times in the past couple years, and rates rise as all bonds sell off. But while Europe has been in crisis much of this year (especially since early Q2), U.S. mortgage and Treasury securities are in favor.

This is the biggest reason rates are as low as they are.

But market favoritism can change quickly, especially given the run mortgages and Treasuries have already had.

Homebuyers and refinancers are well served to lock existing low rates as soon as they are ready to transact.

DAILY CONSUMER-FRIENDLY COMMENTARY
In addition to this WeeklyBasis report, you can get daily updates in simple terms by visiting www.TheBasisPoint.com. You can follow using Twitter feed at www.twitter.com/thebasispoint and/or you can ‘Like’ www.facebook.com/thebasispoint and headlines will flow into your Facebook stream.

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WeeklyBasis: Rates Can’t Possibly Go Lower, Right?

July 7th, 2010 by Julian Hebron

logo_greenR

RATE SNAPSHOT

Rates have dropped steadily since May 6 and hit two new record lows in each of the last two weeks. Rates for Conforming loans up to $417k, Super Conforming loans $417k-729k by county, FHA loans, and jumbo loans above $729k are below. Also below is a chart showing Conventional (non FHA) 30yr Fixed mortgage rates from 1971 to Present. The all-time record low of 4.58% with .7% in points was set the week ending July 1. The fine print on rates used in the chart is here: 

WHY RATES ARE SO LOW

In an unprecedented rate stimulus exercise from January 2009 through March 31, the Federal Reserve bought $1.25 trillion in mortgage bonds. Rates are tied directly to mortgage bonds, so when those bond prices rise on buying rallies, yields (or rates) drop. Rates were already near all-time lows as of March 31 when the Fed ended its program.

Then a week later on May 6, Greek parliament voted on austerity measures to increase taxes and cut spending (including wage cuts for about 20% of their workforce), and rioting ensued. That caused a brief 1000 point drop in the U.S.’s Dow stock index, and despite recovering from lows that day, stocks (again using the Dow as a benchmark) have lost 1240 points, or 11.35%. European bonds have taken big losses as the debt crisis spread beyond Greece. And here in the U.S., weaker new and existing homes data in the past 2 months, and June’s weak employment report has also caused market participants to question the strength of the economic recovery. 

The end result is heavy buying of Treasury bonds and mortgage bonds since they’re both considered the safest investments relative to other options globally. Mortgage bonds have steadily risen from Fed-induced March 31 highs to staggering new heights, which is why rates are down.

RATE LOCK BIAS CONTINUES

This report has maintained a rate lock bias since mid-May for current homebuyers and for homeowners who have borrower AND property profiles that qualify for refinancing. It seems improbable that current levels of mortgage bonds can hold, and if they break lower, rates will rise. There are no economic reports of particular note for the holiday shortened week beginning Tuesday, July 6. 

DAILY CONSUMER-FRIENDLY COMMENTARY

In addition to this WeeklyBasis report, you can get daily updates in simple terms by visiting

http://bit.ly/9jL8nI. The fine print on the rates in this WeeklyBasis report is at the bottom of the report. www.TheBasisPoint.com. You can follow using Twitter feed at www.twitter.com/thebasispoint and/or you can ‘Like’ www.facebook.com/thebasispoint and headlines will flow into your Facebook stream.

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