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Mortgage Headlines
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Last Updated Saturday, November
09, 2001 12:34 PM CST
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Rates Slide To 30-Year Low
Fixed mortgage rates slipped to their lowest levels in thirty years, as Freddie Mac reported the average thirty-year fixed rate at 6.45%, down eleven basis points (BPS) from last week. The fifteen-year fixed rate was reported at 5.94 percent, down 10 BPS. Two-thirds of the mortgage experts surveyed by Bankrate.com expect for rates to decline further over the next 30-45 days. Applications for refinance mortgages shot up almost twenty-five percent from the prior week, according to the Mortgage Bankers Association of America (MBA). Total loan applications -- including applications for purchase-money mortgages -- rose twenty-three percent.
Originators Lack Adequate Education
Mortgage lenders and brokers nationwide do not feel that their originators and processors have the knowledge they need to be totally effective in their respective positions, according to a survey conducted by Mortgage-Education.com. The survey of 1,200 mortgage brokers and mortgage lenders was completed in August of this year.
Carolina Title Agency President Pleads Guilty
The owner and president of a North Carolina title insurance agency pled guilty to insurance fraud in federal court, according to an announcement from the U.S. Attorney. Robert B. Herbert, Jr. of Raleigh allegedly "embezzled and misappropriated moneys from Stewart Title from March 2, 2000 to May 31, 2000," according to documents referenced by the U.S. Attorney. The announcement went on to say that an audit of the company that Herbert owned and operated -- Carolina Title Insurance Agency -- revealed that more than $700,000 was missing from various escrow accounts.
Can 'A' Loans Be Predatory?
While subprime lenders have received most of the press associated with predatory lending practices, abuses can also occur on 'A' loans to 'prime' borrowers. Joe Falk, president of the National Association of Mortgage Brokers (NAMB), says that predatory lending does occur with 'A' paper borrowers. The higher rates charged by originators seeking more income from yield spread premiums (YSP) \ have fueled disputes over the use of YSP's. With the current refinance wave reaching record levels, many of the best originators may be too busy to handle more business. Unfortunately, unscrupulous originators that are aware of this may be better positioned to take advantage of uneducated borrowers.
Pro Athletes Among Investment Advisor's Victims
Federal securities regulators have sued Donald Lukens, an investment adviser catering to professional athletes and other wealthy clients, for allegedly defrauding more than 100 investors of at least $12.5 million in a series of schemes in the late 1990s, according to a story by the Associated Press (AP). The SEC also reportedly sued James Carter Allison, who, at Lukens' direction, made transactions through two shell companies that aided Lukens' diversion of clients' money, the SEC alleged. Lukens allegedly cheated investors in four schemes involving mortgage-backed securities in California and Nevada. Lukens secretly enriched himself with undisclosed commissions and fees, and diverted millions that his clients entrusted to him to invest in the securities, the SEC reportedly said in its complaint.
REO Disposition, Outsourcing and Related Exposure
The first opportunity to prevent unnecessary losses down the road is in the selection of the REO Outsourcer. A true REO Outsourcer should act as an extension of the client's REO Department providing all of the functions for which the typical REO Department would be responsible. There are many other specific areas of the disposition process that represent fertile ground for potential exposure problems. For example, closing delays frequently result from the inability to transfer clear title at closing thereby forcing the client to incur additional unnecessary carrying costs. If the outsourcer is simply referring title issues back to the client for resolution, a necessary and critical function of the outsourcer's job is not being fulfilled. An effective, knowledgeable and competent outsourcer should be able to identify many, if not all, of these potential problem areas as they arise. Doing so will enable the client to take immediate preventative measures to avoid incurring further losses and to effectively move the property through closing.
FBI Investigation Leads To Indictment
A federal indictment was unsealed last week charging two men in a 15-count indictment with mail and wire fraud in the operation of an advance fee scheme in Massachusetts and elsewhere, according to the U.S. Attorney. The two men were allegedly operators of a mortgage assistance company that defrauded consumers of over $1 million. The U.S. Attorney said that from September 1996 through August 1997, the men promised "guaranteed home ownership'' to hundreds of low income individuals who would not qualify for loans from traditional lenders. They allegedly collected in excess of one month's gross income in return for promises of financing, when they had no ability to obtain financing and had no experience in doing so.
$2.55 Billion CMBS To Hit Market
General Growth Properties is bringing a $2.55 billion commercial mortgage backed securities (CMBS) deal to the market, according to a story in Barron's. The issue, which is reportedly the largest securitization to hit the market since 1998, is composed of 27 regional shopping malls divided into three pools.
Falling Fixed Rates Nearing All-time Low
The average 30-year fixed rate mortgage (FRM) fell eight basis points (BPS) from last week to 6.56%, according to Freddie Mac's Primary Mortgage Market Survey for the week ending November 2. Since Freddie began tracking the 30-year FRM thirty years ago, the average has only been lower one time; October 9, 1998, when it averaged 6.49%. A year ago, the thirty-year average stood at 7.73 percent. BankRate.com reported that the majority of experts it surveyed for the period November 1st to November 11th expect rates to fall more than two BPS over the next 30-45 days. The Mortgage Bankers Association of America reported that according to its weekly survey of mortgage bankers, commercial banks and thrifts for the week ending October 26th, mortgage applications fell six percent from the prior week, with applications for refinances falling more than eight percent.
Mortgage Rates Falling Faster Than Cost Of Funds At Thrifts
Shares of Washington Mutual (NYSE: WM) fell more than five percent Thursday as investors worried that the Treasury Department's decision to suspend issuance of 30-year bonds might cause mortgage rates to decline faster than the borrowing costs of thrifts, according to Dow Jones Newswires (DJ). Shares of Golden West Financial Corp. (NYSE: GDW), parent of World Savings, were down 2.76 percent. However, DJ reported that during the day UBS Warburg upgraded the thrift sector to "strong buy" during the day, and said the recent selloff puts these stocks at "historic low valuations," and "the bond rally and ensuing refinancing boom are only modest and temporary negatives."
Mortgage Documents Drifted From WTC To Backyard
Nearly a month after the attacks on the U.S., the Los Angeles Times (Times) reported that attorneys at a Brooklyn law firm got a call from a woman in Sheepshead Bay, nearly 15 miles from the WTC. The Times said that on the tail of an eastward breeze, pieces of paper had come wafting down from the sky and into her backyard. Reportedly among the soggy and torn papers were mortgage agreements about to be signed. According to the Times, the lawyers hung up the phone and called a messenger service.
Threat of Loan Fraud Requires Lenders To Show Caution
Technology has helped make the it a lot easier for sophisticated, yet unscrupulous borrowers to commit fraud, according to a recent story from Mortgage Servicing News. Mortgage fraud has reportedly increased nationally approximately 10% to 15% from last year, according to the story, and this year's increase in foreclosure rates can be attributed, in part, to the increase of mortgage fraud schemes. Fraud is involved in 'flips', builder bailouts and straw borrowers.
COFI Falls Further
The Federal Home Loan Bank of San Francisco announced that the Monthly Weighted Average Cost of Funds Index (COFI) fell to 3.974%, down 13 basis points (BPS) from August. This is the eighth consecutive month that the COFI has declined. This is the lowest that the COFI has been since August, 1994.
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.
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