Summary of the Mortgage Reform and Anti-Predatory Lending Act

Below is a summary of the “Mortgage Reform and Anti-Predatory Lending Act,” which is a part of the wider Dodd-Frank Wall Street Reform And Consumer Protection Act:

- Require Lenders Ensure a Borrower’s Ability to Repay: Establishes a simple federal standard for all home loans: institutions must ensure that borrowers can repay the loans they are sold (I think this bans stated income loans and no-doc loans).

- Prohibit Unfair Lending Practices: Prohibits the financial incentives for subprime loans that encourage lenders to steer borrowers into more costly loans, including the bonuses known as “yield spread premiums” that lenders pay to brokers to inflate the cost of loans. Prohibits pre-payment penalties that trapped so many borrowers into unaffordable loans.

- Establishes Penalties for Irresponsible Lending: Lenders and mortgage brokers who don’t comply with new standards will be held accountable by consumers for as high as three-years of interest payments and damages plus attorney’s fees (if any). Protects borrowers against foreclosure for violations of these standards.

- Expands Consumer Protections for High-Cost Mortgages: Expands the protections available under federal rules on high-cost loans — lowering the interest rate and the points and fee triggers that define high cost loans.

- Requires Additional Disclosures for Consumers on Mortgages: Lenders must disclose the maximum a consumer could pay on a variable rate mortgage, with a warning that payments will vary based on interest rate changes.

- Housing Counseling: Establishes an Office of Housing Counseling within HUD to boost homeownership and rental housing counseling.

Keep in mind that the mortgage section alone is 206 pages, so I didn’t get a chance to read it all, nor do I want to read it all, and I’m not sure anyone else did/does either…

Much of the language is vague, so only time will tell if the changes are meaningful, assuming the bill passes in a vote before Congress this week.

Of course, most regulation, especially that in the mortgage industry, is circumvented within days of being enacted, so don’t expect anything groundbreaking.

I am an actual person so if you are interested in refinancing you can receive real time quotes and payment options by calling me directly. You can reach me, Gene Neal at 877-276-6400 Ext 101.

Most Borrowers Would Benefit from Mortgage Refinance, But Can't Qualify: Credit Suisse

Mortgage rates hit all-time lows this week, amid a weak demand for new mortgages.

But even so, according to fixed income researchers at Credit Suisse (CS: 38.89 +1.30%), the majority of borrowers remain unable to take advantage of the exceptionally low rates that would reduce monthly payments. They find that only 38% of borrowers that could benefit from a refinance can actually do so due to a variety of barriers.

In commentary released this week, the analysts wrote that 73% of 30-year fixed-rate mortgages (FRM) are "refinanceable," meaning the new rate would be at least 50 basis points (bps) less than the old rate.

But the cost to refinance is higher in the current market and only 61% of 30-year FRM borrowers could see their mortgage rate reduced by at least 75 bps, the discount needed to make it cost effective for a borrower to refinance.

The pool of potential refinancers decreases even further because of stricter underwriting standards that will keep many refinancers on the sideline, keeping mortgage prepayment levels muted unless rates drop even further, the analysts wrote.

But if rates continue to decline, an increasing number of borrowers that would qualify for a refinance mortgage would find it cost effective to do so, increasing prepayments. Given current averages rates of 4.75% on 30-year FRMs, Credit Suisse estimates total prepayments of Agency mortgage would total $85bn, compared to average prepayments of $71bn during the previous three months. If mortgage rates decreased further, averaging 4.25% to 4.5%, prepayments would increase to $100bn to $110bn.

I am an actual person so if you are interested in refinancing you can receive real time quotes and payment options by calling me directly. You can reach me, Gene Neal at 877-276-6400 Ext 101.

D to the Anger...

Mortgage delinquencies fell for the first time since 2008, but foreclosures are on the rise and loan modifications are re-defaulting at a seriously high rate, according to the OTS Mortgage Metrics Report released today.

Mortgages in all stages of pre-foreclosure (such as 30+ day lates, 60+ day lates, and so on) on all types of loans (prime, Alt-A, subprime) improved during the first quarter of 2010 as newly initiated foreclosures increased roughly 19 percent from the fourth quarter.

Meanwhile, foreclosures in process increased nine percent and completed foreclosures jumped nearly 19 percent as loan servicers ran out of options to keep borrowers in their homes.

After all, there aren’t solutions for everyone, namely those who had no business buying a home, especially a severely overpriced one.

Loan modifications also rose during the quarter, with “actions to prevent avoidable foreclosures” increasing five percent from the previous quarter and more than 61 percent from a year earlier.

But the performance of loan modifications is still dubious at best, with just 27.2 percent of mods performed in 2008 and 51.8 percent performed in 2009 current.

Yes, the numbers have improved over the past year, but with still more than half failing to do their job, you have to wonder if we’re just delaying the inevitable.

Of the mods performed in 2009, 26.2 percent are already seriously delinquent and 7.9 percent are in the process of foreclosure.

Early data has suggested that HAMP modifications are outperforming other modifications, which the OTS attributed to an emphasis on lower mortgage payments based on affordability and new requirements for documented and verified income.

After three months, 7.7 percent of HAMP modifications were 60 days or more delinquent, compared with 11.3 percent of all loan modifications.

Do the Funky Dry Wall

Government mortgage financiers Fannie Mae and Freddie Mac announced today that they would provide mortgage payment relief to homeowners with problem drywall.

Fannie Mae, which said the funky drywall is covered under the company’s “Unusual Hardships” policy, will forebear payments for up to six months and has instructed loan servicers to minimize the derogatory credit scoring impact associated.

Meanwhile, Freddie Mac said loan servicers may grant forbearances on a case-by-case basis for up to three months or reduce payments for up to six months.

Servicers may also recommend forbearance for up to a full year, based on the borrower’s unique situation.

“Freddie Mac’s goal is to help borrowers cope with these unusual drywall problems by instructing our servicers to give them the full measure of relief available under our policies,” said Freddie Mac Vice President of Loss Mitigation Yvette Gilmore, in a release.

“This will help more borrowers shoulder the unexpected cost of remediation and continue to succeed as long-term homeowners.”

The defective drywall, which was imported in large quantities from China, was used by a number of homebuilders and contractors during the boom and after the Gulf Coast hurricanes in 2005.

It has been linked to a number of health-related problems and has reportedly caused corrosion of electrical wiring, appliances, heating and A/C systems.

Earlier this week, the pair also announced mortgage payment relief to homeowners living in areas affected by the Gulf of Mexico oil spill.

I am an actual person so if you are interested in refinancing you can receive real time quotes and payment options by calling me directly. You can reach me, Gene Neal at 877-276-6400 Ext 101.

F A I L.....

While both HAMP and loan servicer-specific loan modifications are on the rise, most are expected to re-default, according to a new report from Fitch Ratings.

Roughly 15 percent of all residential mortgage-backed securities (RMBS) have received either a HAMP or non-HAMP loan modification through May, up from 10 percent in September 2009.

And nearly 35 percent of RMBS subprime loans have received at least one loan modification, up from 25 percent during the same period.

But the seemingly large numbers continue to fall short of expectations, and could slow thanks to new requirements like verifying income before issuing trial loan modifications.

Of course, the quality of loan modifications may improve as a result, as loans mods that relied upon stated income were much less likely to convert to permanent modifications under HAMP.

Fitch maintains that 65 percent to 75 percent of modified subprime and Alt-A loans will default again within a year.

For prime loans, the re-default rate is slightly lower at 55 to 65 percent, but it still makes you wonder if loan modifications even work?

And roughly 15 percent of all modified loans have received at least one additional modification after the first one failed.

So what’s the solution?

Well, Fitch thinks the expanded use of short sales will “help the loan resolution landscape over time.”

Just a shame they result in a borrower losing their home, but it seems that’s the only real answer to this pesky foreclosure problem.

Top 10 tips for loan refinancing

Top 10 tips for loan refinancing

Housing Info Update

After years of hearing how home prices are plummeting and foreclosures are mounting, consumers want to feel hopeful about the housing market -- but maybe they're being too optimistic.

In a presentation to the National Association of Real Estate Editors in Austin, Texas, last week, Stan Humphries, Zillow.com's chief economist, pointed to four myths he said consumers are latching on to as they try to make sense of recent housing statistics.

The four myths:

1.

The housing recession is over. It's not, Humphries said. He estimates the bottom in home prices won't come until the third quarter, at least from a national perspective. Doug Duncan, chief economist at Fannie Mae and also a speaker at the conference, agreed with that estimation.
2.

After markets hit bottom, prices will rebound to boom levels. Not going to happen, at least for a while, Humphries said. "Once we hit bottom, the bottom is going to be a long and flat affair across the markets," he said. "What we're going to see once we hit bottom is the second phase of the housing recession... that second phase is one of being flat."
3.

The worst of the foreclosure mess is behind us. More wishful thinking, according to Humphries. He estimates foreclosures will peak later this year, then remain elevated for a while. Rick Sharga, senior vice president of RealtyTrac, an online marketplace for foreclosure properties, said he doesn't envision foreclosure activity stabilizing until late 2011.
4.

The tax credits saved the housing market. With or without a tax credit, those who bought would have done so anyway, Humphries said. "The biggest impact [in home sales] we believe were low prices... low interest rates and the unsung factor here is the ramped up lending by the Federal Housing Administration."

Still, it's easy to understand why many homeowners want look on the bright side.

"They went from what everyone thought was a lucrative asset to something worth a lot less than they owed on it," said Douglas Culkin, president of the National Apartment Association, in a phone interview. "We all want it to get better," he said.

Some want to finally sell their homes and move on with their plans. And homeowners are tired of thinking their houses are bleeding equity, losing value like a new car driving off the dealership lot.

As for prospective home buyers, even if consumers are feeling confident enough to take an extra trip to Wal-Mart these days, many are not going to jump in and spend on a large-ticket item like a house, said Gail Cunningham, spokeswoman for the National Foundation for Credit Counseling.

"The reality of the situation in which we find ourselves today has sunk in with people," she said in a phone interview. "If a foreclosure hasn't been a part of their life, it has been a part of someone else's life... and they've seen the pain that inflicts on the family."

That perception isn't going to fade quickly.

Rates are D to the own

Mortgage rates improved again this week as economic uncertainties remained, according to mortgage financier Freddie Mac.

The always fashionable 30-year fixed-rate mortgage averaged 4.72 percent during the week ending June 10, down from 4.79 percent last week and 5.59 percent a year ago.

The 15-year fixed fell to 4.17 percent from 4.20 percent, a new record-low, and the fourth such record low in four weeks.

It’s nearly a point lower than the 5.06 percent average seen this time last year.

“Following a relatively weak employment report, bond yields fell this week and mortgage rates followed,” Freddie Mac chief economist Frank Nothaft said in a release.

“Overall, the economy does show signs of improvement. The Federal Reserve reported in its June 9th regional economic review that the economy strengthened in all 12 of its Districts over April and May” (how mortgage rates work).

Adjustable-rate mortgages also improved, with the five-year ARM slipping to 3.92 percent from 3.94 percent and the one-year ARM falling to 3.91 percent from 3.95 percent.

A year ago, the five-year averaged 5.17 percent and the one-year stood at 5.04 percent – the one-year is at its lowest point since the week ending May 27, 2004.

The interest rates above are good for conforming loan amounts at 80 percent loan-to-value at par; pricing adjustments may increase or decrease the rate you actually receive.

Jumbo loans continue to price a half percentage point or more higher than conforming mortgages.

Purchase Activity Down

Purchase activity fell for a fifth straight week, but this time refinance applications also took a dive, according to the latest survey from the Mortgage Bankers Association.

The group’s seasonally adjusted purchase index slipped 5.7 percent from one week earlier, while the unadjusted purchase index was off 16.3 percent from the previous week and 30.4 percent lower than the Memorial Day week last year.

The refinance index, which had increased for a month straight, finally pulled back, slipping 14.3 percent from the previous week.

“Purchase and refinance applications dropped this week, even after an adjustment for the Memorial Day holiday,” said Michael Fratantoni, MBA’s Vice President of Research and Economics, in a release.

“Purchase applications are now 35 percent below their level of four weeks ago, as homebuyers have not yet returned to the market following the expiration of the homebuyer tax credit at the end of April.”

He noted that refinance applications were also off despite record low rates, partially because many borrowers either already refinanced, or cannot qualify due to uncertain job situations and/or underwater mortgages.

Meanwhile, the 30-year fixed slipped to 4.81 percent from 4.83 percent, while the 15-year fixed increased to 4.26 percent from 4.24 percent.

The out-of-favor one-year adjustable-rate mortgage fell to 6.94 percent from 6.96 percent.

Please note that the interest rates above are good for mortgages at 80 percent loan-to-value.

The MBA’s weekly survey covers more than half of all retail, residential loan applications, but does not factor out duplicate or rejected apps, which have surely risen since the mortgage crisis began.

If you are interested in refinancing you can receive real time quotes and payment options by calling me directly. You can reach me, Gene Neal at 877-276-6400 Ext 101.