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Mortgage Headlines
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Last Updated Saturday, October
31, 2001 12:34 PM CST
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German Banks To Merge Mortgage Units
Deutsche Bank, Dresdner Bank and Commerzbank have agreed to merge their mortgage units, according to Dow Jones Newswires. The name of the new entity will reportedly be Eurohypo, with ownership percentages at 35% for Deutsche Bank, 35% for Commerzbank and 30% for Dresdner Bank. Dow Jones reported the merger will result in job cuts of around 800 of the merged entity's 2400 employees.
Anthrax Scare To Fuel e-Lending?
As of Sunday evening, CNN reports that there have been 8 cases of inhalation infections causing 3 deaths and 5 cases of cutaneous anthrax. CNN says that there have been 32 total cases of anthrax exposures. The anthrax cases have caused U.S. mail delivery to slow, possibly making some borrowers frustrated with delayed payments or closings. The Department of Housing and Urban Development recently urged lenders to allow more time for late payments. While the Postal Service's moves may eventually alleviate the public's fear of mail, any immediate shift to the use of the Internet to obtain or pay a mortgage will unlikely be reversed. So how will the public's fear of anthrax exposure affect the speed with which the mortgage industry shifts from mail-based origination and servicing to Internet-based? While a Fannie Mae spokesman doesn't see any effect, executives from Ellie Mae and FICS do. Ellie is a provider of mortgage origination software, and FICS provides servicing software to banks and mortgage bankers. Ellie provided data showing increased activity with its electronic services -- especially more recently. The Associated Press quoted one expert professor as saying that while many people have had security and identity theft concerns about Internet bill payments in the past, the anthrax scare shifts the tolerance level.
Are "Conforming" Loans Always Conforming?
Some home mortgage lenders are jumping the gun and actively offering low-cost "conforming" loans in amounts far in excess of the mortgage size limits set annually by the nation's giant housing finance investors, Fannie Mae and Freddie Mac, according to RealtyTimes.com. In mortgage industry parlance, "conforming" means that a loan follows all the guidelines necessary to make it eligible for purchase by Freddie or Fannie. Conforming loans generally carry the best-available rates in the marketplace at a given time. Non-conforming mortgages, by contrast, carry higher rates and less attractive terms. The government sponsored enterprises may increase the conforming loan limits in January based on statistics from the Federal Housing Finance Board's monthly survey of closed home sale prices for the month of October.
D.C. Scams: Little Protection
Long before any of the suits against Capital City Mortgage were filed, the D.C. Department of Consumer and Regulatory Affairs (DCRA) had not only begun investigating related business practices; it had also, by alleging violations of the District's consumer-protection statutes, halted the foreclosure sales of three homes financed by Capital City, according to a story at WashingtonPost.com. Defunding reportedly ended the investigation of Capital City, but DCRA still was able to help consumers by forwarding much of the information it gathered from its investigation to the Federal Trade Commission.
Mortgage broker's no-points offer is really a royal rip-off
SFGate.com advised one couple to take their elsewhere before they are royally ripped off by that mortgage broker. All those fees are 100 percent garbage fees, which line the pockets of mortgage broker, according to the story. The author pointed out that a no-point loan is not the same as a no-cost loan, and that they should shop at least six lenders for a no-cost loan.
Some crafty maneuvering can bring mortgage down
Another story by SFGate.com points out that a home equity line-of-credit (HELOC) can help some borrowers stay within conforming loan limits. The HELOC also offers the benefit of falling payments as the principal balance drops. Rates for closed-end seconds mortgages are reportedly not as attractive as HELOC rates.
Rates Up, Refis Down
As rates edged up, applications for refinance mortgage loans fell almost thirteen percent from the prior week, according to the most recent Weekly Mortgage Applications Survey by the Mortgage Bankers Association of America. Freddie Mac released a report this week that said 63% of single-family borrowers who refinanced during the third quarter pulled cash out, (increased their loan balances by five percent or more) compared to a revised 58% in the previous quarter. In its Primary Mortgage Market Survey for the week ending October 26, Freddie reported that the average thirty-year fixed rate mortgage (FRM) rose three basis points (BPS) from last week to 6.64 percent. The majority of mortgage bankers, mortgage brokers and other industry experts surveyed by BankRate.com this week say rates will remain unchanged (+/-2 BPS) during the next 30-45 days. The survey includes more than 100 participants.
Illinois Rep's Bill Would Expand Sect 32 To Purchases
U.S. Rep. Jan Schakowsky (D- Ill.) has introduced legislation that would extend coverage of the Home Ownership and Equity Protection Act (HOEPA) from only home equity loans to home purchase loans, according to a story in The Commercial Appeal (GoMemphis.com). HOEPA is administered by the Federal Reserve and sets conditions for making "high-cost" or "Section 32" loans. HOEPA requires additional disclosures and restricts some loan agreement provisions that can cause unique hardships to high cost loan borrowers. According to GoMemphis.com, the Senate Banking Committee held hearings on the matter in July, but no legislation has emerged yet from the efforts. Congress is reportedly dealing with its own crisis issue - terrorism - that may delay action on predatory lending legislation.
The Case For Yield Spread Premiums
Last week the HUD Secretary announced new disclosure rules designed to prevent unexpected loan fees at settlement. Among the details of the new policy, HUD sought to clarify its position on "yield spread premiums". HUD has stated that YSPs are not "illegal kickbacks" as some interest groups have charged, but serve "an important purpose" by allowing low-income borrowers to pay lower fees at settlement in return for a higher interest rate. The plain fact is that in the vast majority of loans where YSPs are paid, these fees are used to offset the borrower's typical closing costs. The only way the mortgage industry can offer no point or no cost loans is by offering a higher interest rate with a YSP. Without YSPs, the American consumer would not be given the choice to take a higher rate with lower fees.
No Need to License Colorado Mortgage Brokers, Review Finds
The Colorado Department of Regulatory Agencies (Department) recently released a report that said stricter enforcement of existing laws and more consumer education would better serve the public, according to DenverPost.com. The report -- which is the result of a request for licensure by the Colorado Association of Mortgage Brokers' (CAMB) -- reportedly indicated that licensing would not prevent unscrupulous lending practices and would reduce the level of competition in the mortgage industry. The CAMB president-elect was quoted as saying that he was very disappointed. Another association -- the Colorado Mortgage Lenders Association -- reportedly said it applauded the Department's decision.
"Upcharging" On The Outs, Says HUD
The message from the federal government to mortgage lenders, brokers, title companies and other real estate settlement service firms could not be clearer: No matter what you may have heard to the contrary, marking-up the costs of consumer credit reports, appraisals, title recordations and other routine mortgage closing fees is illegal. In a wide-ranging policy statement last week on mortgage fees, HUD addressed a controversy that's been simmering since this summer: the belief by some real estate and mortgage industry professionals that there is no federal prohibition against "upcharging" clients on routine services. Now HUD has explicitly put upchargers on notice: Mark up consumers at your peril. It's a violation of federal law, and it could lead to fines of thousands of dollars per borrower, or a class action suit involving all your illegally upcharged customers.
Mortgage Market Reshaped by Terrorist Attacks But Proving Resilient
More than a month after the terrorist attacks on New York and Washington, D.C., they still have an appropriately enormous impact on our lives and mortgage market trade. But, according to TheBankingChannel.com, despite this, there were signs last week that both of the latter are getting back on track. Moody's Investors Service managing director Tad Philipp was quoted as saying in a report last week, "the years of upgrades exceeding downgrades by wide margins are likely over." The story went on to say that by and large, even though the mortgage market remains less than entirely immune to the intensified economic downtown, it is still being thought of as one of the sectors better positioned for the challenge than others - or than it has been in the past.
Questions to ask before starting a re-fi
The first factor borrowers should consider, according to a recent SFGate.com story, is how much money they will save. Because the decision to refinance depends on individual circumstances, they would have to decide if the monthly savings is worth the costs of refinancing -- which include application fee, credit check, points, appraisal, title search, title insurance and others. The next factor is whether to pull cash out, and how much. The term is important; while the fifteen-year mortgage costs more each month, the loan will be paid in full at 15 years. On a 30-year loan, the borrower will only be beginning a fifteen-year loan (again).
Getting your name off a mortgage is almost impossible
There is nothing a cosigner can do to force the lender to remove their name from a mortgage the cosigned on, according to a story at SFGate.com. The situation shows the pitfalls of co-signing on a mortgage to help a relative or friend qualify. Even after six years, what incentive does the lender have to let the cosigner off the mortgage? None. Lenders know that the cosigner would probably come to the rescue if principal borrower falls behind in his payments.
Refis Jump 22.5%; Set New Record
Applications for mortgage refinances jumped more than twenty-two percent from the prior week, according to the Mortgage Bankers Association of America's (MBA) survey for the week ending October 12th. The composite index, which includes all loan application types, increased more than eighteen percent from last week. Freddie Mac reported that the average 30-year fixed rate mortgage (FRM) rose slightly to 6.61% from 6.58 percent the prior week. The fifteen-year FRM also climbed 3 basis points (BPS) to 6.09%. BankRate.com reported that the majority of the 100 mortgage experts it surveyed for the week ending October 24th expect rates to remained unchanged.
Is Now The Time To Lock-In?
Federal Reserve Chairman Greenspan served up an impromptu rate intervention to help stave an Asian financial collapse in October 1998. Rates had already been heading downward because of financial instability, but the Fed cuts helped spur a sharp drop in mortgage rates. For about five days. After that, rates took off and never looked back, reaching a peak almost 18 months later, when rates moved above the 8.50 percent mark. No one, knows where rates are headed. If you're now thinking about locking in, think about it this way...assume you'll decide but make the wrong decision. In other words, if you decide to lock today yet rates go down another 1/4 percent in 60 days you still really won, didn't you? No, you may not have hit the absolute bottom, but at least you got a record-setter. On the other hand, let's say you didn't lock and made a mistake...rates shot up and never went back down. Which way would you rather be wrong?
$59 Billion Real Estate Package Proposed For Washington
For the first time in years, real estate has a shot at substantially changing the federal policies governing the sector and its sister industries. As Congress continues to wade through budget proposals for the year, pros on both sides of the political spectrum are desperately seeking ways to stimulate the sputtering U.S. economy. And any measure that does not cause a significant impact on tax revenue is getting close scrutiny. By some estimates, real estate contributes more than 12 percent to the nation's gross domestic product, which means that energizing real estate can lead to broader economic growth. Since January, 2001, says MBA the industry added 25,300 jobs, bringing the total real estate industry employment level to a record 1.56 million. This week the MBA launched its lobbying effort to enact a pro-real estate economic agenda. The organization claims that its suggestions would pump $11.8 billion into the American economy and create 55,000 jobs in the first year. Over five years, agenda items would generate $59.2 billion and create 275,000 jobs, according to the association.
Refinance is not wash or roll-over transaction in bond market
When a loan is refinanced, the payoff extinguishes a part of an existing mortgage-backed security (MBS), and a new buyer must be found for the MBS into which the new loan must go, according to a recent story at Inman.com. The flood of new, refinancing mortgages constitutes selling pressure in the bond market, and equally upward pressure on rates. Many investors drop out of the MBS market during a period of rapidly falling rates for fear that they will be "prepaid out" -- just as many have been by re-refinancing this year. Most existing 30-year mortgages bear a seven-point-something rate. It takes about a one percent drop in rates to justify a refinance. Since Labor Day, borrowers with rates 7.75-7.875 percent have had their first good, economic opportunity to refinance... ever.
Mortgage Fraud Case May Upset Balance Of Power In NY County
In a case that could affect the balance of power in New York's Nassau County, Patrick Williams was indicted by a federal grand jury in Brooklyn on one count of conspiracy, one count of making false statements to a federally insured bank and three counts of defrauding HUD, according to a story by Newsday.com (Newsday). Williams, 51, was reportedly charged with illegally obtaining $1.28 million in mortgage loans for five home buyers. Newsday said that if he is convicted of the charge of making false statements to a federally insured bank, Williams -- who was a former bank regulator for the Federal Deposit Insurance Corp. and a former vice president of the Freedom National Bank of New York -- could reportedly face up to 30 years in prison but will likely face much less, under federal sentencing guidelines.
Mortgage Broker Sentenced
Raymond T. Jackman, JR. appeared in federal court recently and was sentenced to two years' probation, according to an announcement from the U.S. Attorney's office. Jackman also received a $1,000 fine for his participation in the scheme to commit bank fraud. The sentence is significantly less than the maximum penalty of 5 years' incarceration and a $250,000 fine. Jackman, who worked as a mortgage broker & originator, pleaded guilty to conspiracy to commit bank fraud in July.
Has Your Credit Changed?
Lenders typically qualify borrowers on the basis of two measures: front ratios and back ratios. In general terms, these standards work like this: The "front ratio" is the percent of gross monthly income used for mortgage principal, mortgage interest, property taxes, and property insurance. Depending on the loan program, lenders might allow 28 to 41 percent of a borrower's income for "PITI." The "back ratio" includes PITI plus car payments, student loan payments, credit card payments, auto loan payments, etc. Back ratios typically range from 36 to 41 percent, but can be greater. The ratios can be lowered to acceptable levels by defering major expenses until after the close, avoiding new credit, paying down debt and cosolidating bills.
How To Assure Loan Rates
Unless the loan officer issues a written lock-in agreement, borrowers are subject to market fluctuations in interest rates. A lock-in agreement is a written commitment by the lender that guarantees the interest rate and terms for a specified period of time. This time period should be long enough to get the loan processed and closed. "Bait and switch" is a generic term to describe the unethical practice of quoting below-market rates to secure the loan application appointment. When the formal loan application is made, the loan officer jacks up the rate. Loan officers are very busy right now because of so many refinancings. Loan officer gives out several rate quotes a day and and quote the current rate at the time.The loan officer should make it very clear that quoted rates are subject to change unless locked. The responsibility of ensuring that the customer understands this rests upon the loan officer.
Freddie Sees 30-yr At 6.6% For Remainder Of 2001
Freddie Mac's chief economist said that 30-year fixed rates should average 6.6% for the rest of the year. He also said that the recovery next year may place upward pressure on mortgage rates, but mortgage rates should still remain below seven percent through 2002.
HUD Clarifies YSP's
The Department of Housing and Urban Development (HUD issued an opinion on yield spread premiums (YSP). HUD clarified its policy by restating that excessive and unreasonable fees are illegal under RESPA because they are unreasonable and not a payment for a bona fide service.
Mortgage Bankers Seek Real Estate Stimulus Package
The Mortgage Bankers Association of America is expected to unveil a far-reaching, $58 billion real estate "economic stimulus" package at its annual convention in Toronto. The package of proposals, an advance copy of which was obtained by RealtyTimes, involves no new federal spending, but is chock-full of recommendations for tax cuts and improvements to federal housing programs. Among the proposals are capital gains tax reductions, and improvements to a variety of other housing-related areas of the federal tax code. One of the most intriguing concepts is a call for an expansion of mortgage interest tax deductions to all taxpaying homeowners, including those who don't itemize. Under current law, only households who itemize on their federal returns can write off mortgage interest payments.Under the MBA's plan, non-itemizing homeowners who take the standard deduction would get a new write-off -- the mortgage interest they paid their lender during the tax year.
What Happens When Surprise Liens Are Found?
The "promissory" note is a legal document which spells out the loan terms. An original loan amount of $160,000, amortized over 30 years, at an interest rate of 7% would have a principal and interest payment of $1,064.48. The promissory note simply states that the borrower acknowledges borrowing $160,000, and agrees to repay this loan at 7 percent, on a monthly basis. The note also spells out the penalty (late charge) should the payment be late. The promissory note also permits the lender to accelerate the remaining balance due on the note should a default occur. The "deed of trust" is the mortgage document. In order to assure the lender that their loan is secured, the borrower signs a deed of trust, which has the effect of giving certain rights to a trustee (or trustees) selected by the lender. In some states, a deed of trust actually conveys legal title in the property to these trustees, giving them the right to immediately foreclose on the property should the borrower be in default. In the majority of states, however, the deed of trust only gives the lender a lien on the property; title remains with the borrower. Trustees under a deed of trust have two basic functions. If the borrower pays off the loan, the trustees are required to release the deed of trust from the land records. Different states have different procedures for accomplishing this release; regardless of what form is used, a paid off mortgage must be released from land records.The trustees also have the right to foreclose on the property. In some states, the trustees have to go to Court and obtain a Judge's approval to proceed with the foreclosure. This is known as a "judicial foreclosure". In other states, the trustees have the right to advertise the property with a local auctioneer and sell the property under a trustees deed to a successful bidder. This is known as a "non-judicial" foreclosure.
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