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Mortgage Headlines
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Last Updated Monday, March 25, 2002 01:22 AM CST
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Applications, Rates Worsen
Rates climbed for the third straight week, with the average 30-year fixed rate mortgage (FRM) rising 0.06%, or six basis points (BPS) from last week to 7.14%, according to Freddie Mac's latest primary mortgage market survey. The average 1-year adjustable rate mortgage (ARM) edged up just 3 BPS to 5.11%. In its survey mortgage bankers, commercial banks and thrifts, MBA said that refinance applications tumbled more than 21% from last week and were down more than 31% from last year. Refinances represented nearly 41% of total applications, down from more than 46% last week. MBA said overall applications were down 11% from last week. Fifty-four percent of the mortgage bankers, mortgage brokers and other industry experts surveyed by Bankrate.com expect rates to stay within 2 BPS of their current level during the next five weeks, while the remaining forty-six percent expect rates to rise.
Bankrupt Subprime Lender Settles With FTC
The Federal Trade Commission (FTC) announced that it has reached a settlement in a predatory lending case with First Alliance Mortgage Company and its chief executive officer, Brian Chisick. First Alliance is accused of using a sophisticated sales presentation, known as the "Track," to gain the trust of customers and hit them with 10%-25% in fees. The company also allegedly misled customers about increases in the interest rate and the amount of monthly payments on adjustable rate mortgage (ARM) loans, and failed to provide the ARM booklet required by the Truth-in-Lending Act.
Fanghella Faces Trial In May
Former PinnFund USA, Inc. chief Michael J. Fanghella is scheduled for criminal trial in May, according to U.S. Attorney spokeswoman Deborah Hartman. Fanghella is accused in a civil case by the Securities and Exchange Commission (SEC) of misappropriating nearly $110 million -- which was raised for the purpose of funding subprime mortgages -- to pay for extravagant personal living expenses, including at least $10 million spent on his former adult film actress girlfriend. The SEC alleges that since 1993, Fanghella and Hillman raised at least $330 million from at least 166 investors through the funding companies purportedly for funding subprime residential home mortgages. However, instead of using those funds as intended, the defendants allegedly used the proceeds to pay for Fanghella's lavish lifestyle, to fund PinnFund's operational losses, and to make repayments to investors as part of a Ponzi scheme.
30-Year Climbs Past 7%
Mortgage applications tumbled this week as rates jumped -- with applications for refinance mortgages falling more than 24% from last week -- according to the Mortgage Bankers Association of America (MBA). In its most recent weekly survey of mortgage bankers, commercial banks and thrifts, MBA reported that overall applications were down 16%. Freddie Mac said that according to this week's rate survey, the average 30-year fixed rate mortgage (FRM) was 21 basis points (BPS) higher than last week and 12 BPS higher than the same week last year. The average 1-year adjustable rate mortgage (ARM) edged up 1 BPS from last week to 5.08%. Only 10% of the mortgage bankers, mortgage brokers and other industry experts surveyed by Bankrate.com this week believe rates will decrease more than 2 BPS over the next five weeks. Half of Bankrate's respondents think rates won't change while 40% think rates will increase.
Freddie Fights Fraud With Technology
Freddie Mac announced this week that it will offer a new quality control technology tool which can identify inflated property values in connection with fraud or misrepresentation. Among other features, Freddie says its "Home Value Calibrator" can identify potential predatory loans, evaluate a batch of mortgages originated by third parties and review large pools of mortgages. Using a scoring system, Freddie's technology examines home values generated by an automated valuation model (AVM), borrower data and loan data to predict whether a loan is at high risk, moderate risk, or low risk of a faulty assessment.
Seven indicted in Internet mortgage fraud scheme
The U.S. Attorney has filed two indictments against seven defendants in 2 cases related to a bankrupt online mortgage lender. One indictment accuses the defendants of deceiving investors and warehouse lenders, manipulating the publicly traded shares of bankrupt AppOnline.com, Inc. and using warehouse funds -- intended for loan fundings -- for daily operations. A second indictment accuses AppOnline.com of directing warehouse lenders to wire mortgage funding proceeds to escrow accounts secretly controlled by AppOnline.com and its principals. That indictment went on to say that accounting improprieties enabled AppOnline.com to provide financial statements to the Securities and Exchange Commmisiion and to its warehouse lenders that allowed it to remain in business far longer than it would have with legitimate financial statements.
Refi's Jump
Applications for refinance mortgage loans jumped 22% from last week, according to the Mortgage Bankers Association of America (MBA). In its weekly survey of mortgage bankers, commercial banks and thrifts, MBA said that overall applications were up nearly 15%. Freddie Mac reported in this week's survey of 125 lenders that the average 30-year fixed rate mortgage (FRM) rose seven basis points (BPS) to 6.87 percent. While the southwest saw the biggest increase -- 13 BPS -- the 30-year FRM was still lowest in that region, at 6.83 percent. The average 1-year adjustable rate mortgage (ARM) jumped 13 BPS to 5.07 percent. The spread between the one-year ARM and the thirty-year FRM fell to 1.80% from 1.86% last week. A year ago, the spread was only 0.68%. Most of Bankrate.com's mortgage experts surveyed think rates will not fall during the next 30-45 days.
IRS To Use AVM To Determine Home Equity
The U.S. Internal Revenue Service (IRS) will utilize an Automated Valuation Model (AVM) to determine the home equity of certain taxpayers, according to an announcement from Basis100 Inc. The IRS has signed a one-year contract with Basis100 to deliver the technology that assesses an individual's ability to pay taxes through home equity, primarily with requests for "Offers in Compromise." Basis100 says that the IRS has been using its AVM technology since March 2000 in a pilot program.
Rates May Rise
Fixed rates edged down last week, with the average 30-year fixed rate mortgage (FRM) improving one basis point (BPS) from last week to 6.80%, according to Freddie Mac. Freddie said the average one-year adjustable rate mortgage (ARM) fell 2 BPS to 4.94%. The majority of mortgage bankers, mortgage brokers and other residential mortgage industry experts surveyed by Bankrate.com expect for rates to increase more than 2 BPS during the next 30-45 days. Applications saw little change in activity as the Mortgage Bankers Association of America (MBA) reported that overall applications were nearly 4% higher than last week. MBA reported in its survey of mortgage bankers, commercial banks and thrifts that refinance applications fell about a third of a percent while purchase applications were up almost nine percent. Refinance applications continue to represent a smaller portion of overall applications.
And This Week's Winner Is:
COFI For 'Falling'
The Federal Home Loan Bank of San Francisco announced that the monthly weighted average cost of funds index (COFI) for the 11th District savings institutions fell again in January to 2.823%, down from 3.074% last month. The COFI, which reflects the interest paid by savings institutions in Arizona, California, and Nevada on their various sources of mortgage money, is announced about 30 days after the end of the month being reported.
Fugitive Awaiting Extradition From India
After two years on the run, Indian authorities have apprehended one of two brothers that allegedly sold loans with fraudulent documentation to three U.S. lenders. According to Assistant U.S. attorney Steven M. Biskupic, Rajiv C. Shah, president and part-owner of Midwest Mortgage Company, was arrested in New Delhi, India last month. Shah's brother, Sanjiv C. Shah, who was vice-president and part-owner of Midwest, remains a fugitive. The brothers allegedly falsified loan payment histories, falsified credit histories and forged borrowers' signatures on more than 300 loans to subprime borrowers. Both face 1 count of 'Bank Fraud Conspiracy', 4 counts of 'Bank Fraud' and 1 count of 'Money Laundering Conspiracy'.
Falling rates may hold steady
In its weekly survey of thrifts, commercial banks and mortgage lending companies, Freddie Mac said that the average 30-year fixed rate mortgage (FRM) fell five basis points (BPS) from last week to 6.81 percent. The one-year adjustable rate mortgage (ARM) continued improving, with the average falling two BPS from last week to 4.96%. According to the majority of mortgage bankers, mortgage brokers and other industry experts surveyed by Bankrate.com, rates won't move more than 2 BPS in either direction during the next 30-45 days.Applications for refis fell nearly ten percent from the prior week, according to the Mortgage Bankers Association of America's (MBA) weekly survey of mortgage bankers, commercial banks and thrifts. Purchase applications were down almost eight percent from last week, and overall applications were down almost nine percent. Government applications were down nearly 12%.
Bankruptcies Jump 19% In 2001
Speaking at a Mortgage Bankers Association of America conference this week, bankruptcy attorney Penni A. Alper said that during 2001 there were 1,492,129 bankruptcy filings, "the biggest banner year yet." While this was nineteen percent more than 2000, filings are expected to increase to 1.6 million during 2002. Ms. Alper, who is responsible for national bankruptcy representation for 300 lenders and investors nationwide, spoke at a session entitled 'Bankruptcy' during this year's national mortgage servicing conference being held in Dallas.
Inflated Pocono Loans, Appraisals May Cost Chase $10-20 mil
Chase Manhattan Mortgage Corp. is considering reducing the value of more than 200 Pocono-area mortgages after appraisal reviews performed by Lenders Service Inc. (LSI) on about 25 loans indicated the homes were sold at inflated prices, according to the Pocono Record. The "Write Downs," which could reportedly cost Chase between $10 and $20 million, would be on loans originated by Chapel Creek Mortgage Banker, Inc. based in Mount Pocono, Pennsylvania. If enacted, victims would see the balances of their mortgages reduced. The law firm of Seeger Weiss LLP is currently seeking class action certification for a complaint filed last June against Chapel Creek and other defendants, including Chase Vice President William Spaner and Chase itself. All the defendants say they have not been involved with inflating appraisals or defrauding customers, according to the Pocono Record.
ARM Below 5%
According to Freddie Mac's survey, the one-year ARM was 4.98%, six basis points (BPS) lower than the previous week. The Mortgage Bankers Association of America (MBA) reported that ARM applications represented 15.6% of overall applications, compared to 15.5% last week and 7.7% a year ago. MBA said that overall applications were 2.5% higher than last week but seven percent less than the same week last year. Freddie reported that the average 30-year fixed rate was 6.86%, down from 6.88% last week. The 15-year average edged down 1 BPS to 6.35 percen. Forty-two percent of the industry experts surveyed by Bankrate.com this week expect rates to increase more than 2 BPS during the next 30-45 days.
Employee Dies At Cendant Mortgage's Annual Sales Meeting
A Cendant Mortgage employee attending the company's national sales meeting in Cherry Hill, NJ died early Sunday, according an announcement from Kennedy Health System. Seven other employees have been admitted to the hospital after exhibiting symptoms of a respiratory illness. All are reported to be in stable condition. Joanne Hemstreet, 45, of Kingston, Mass., had begun complaining of flu-like symptoms Wednesday afternoon while on her way to the Hilton Hotel, where the meeting was being held. She was taken to the hospital on Saturday night, after periodically complaining of feeling ill during the sales meeting. While the hospital said Ms. Hemstreet received comprehensive medical care for her condition, she died at 3:14 am as a result of Fulminent Bacterial Pneumonia, an aggressive bacterial infection.
ARM At 8 Year Low
The average 1-year adjustable rate mortgage (ARM) fell eight basis points (BPS) from last week to 5.04%, according Freddie Mac's weekly survey of thrifts, commercial banks and mortgage lending companies. A look at Freddie's historical tables indicates that the 1-year ARM has not been this low since early 1994 -- at a time when the industry was at the end of a previous wave of refinances. Freddie reported that the average 30-year fixed rate mortgage (FRM) fell 14 BPS from the prior week to 6.88%. MBA reported that overall loan applications rose 5.3% from last week. Refinance applications, which were reported by MBA this week to have increased about 7 percent, are at about only one-third their November levels. Freddie Mac's chief economist, Frank Nothaft, said "as long as inflation is not an issue in the economy, lending rates should remain around 7 percent."
Cendant 4th Quarter Production $10 Billion
In its announcement of fourth quarter results, Cendant Corporation reported that its mortgage loan production was $10 billion, a 71% increase over the prior year's 4th quarter production level of $5.9 billion. The company said that a 41% increase in revenues from 2000 for the real estate services segment "was primarily driven by a significant increase in mortgage loan production and profitability from higher levels of refinancings."
COFI Continues Tumble
The monthly weighted average cost of funds index (COFI) for the 11th District savings institutions fell in December to 3.074%, according to the Federal Home Loan Bank of San Francisco. In November, the COFI was 3.368%. The COFI, which reflects the interest paid by savings institutions in Arizona, California, and Nevada on their various sources of mortgage money, is at its lowest point in decades.
ARM's Are In, Refi's Are Out
Applications for mortgage refinances tumbled more than 36% from last week, according to the Mortgage Bankers Association of America's (MBA) weekly application survey. The drop in refi's helped push overall loan applications down by 25.5%. MBA said that adjustable rate mortgages (ARM) made up more than sixteen percent of total applications, up from 14.6% last week. Freddie Mac reported that the average 1-year ARM was 5.12%, slightly higher than last week's 5.10%. The spread between the 30-year fixed rate mortgage (FRM), which Freddie reported averaged 7.02%, and the 1-year ARM rose to 1.90 percent from 1.86 percent the prior week. Bankrate.com's survey of mortgage bankers, mortgage brokers and other industry experts gave no clear indication this week of which way rates are headed, with close to 1/3 each either expecting rates to fall, rise or remain unchanged.
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