New HUD program offers up to 24 months of mortgage assistance to unemployed

A new program run by the Department of Housing and Urban Development allows delinquent borrowers who are unemployed or suffering from a severe medical condition to receive assistance with mortgage payments for up to 24 months.

The Emergency Homeowners Loan Program offers up to $50,000 to eligible borrowers at a 0% interest rate. HUD officials called it a true bridge loan because all deferred payments are forgivable provided the borrower lives in a home and remains current on payments for five consecutive years.

But the program isn't for everyone. Brian Sullivan, public affairs representative for HUD, said borrowers must have a consistent track record of making mortgage payments on time. A household's yearly income also may not exceed 120% of the area median income and must have had its income reduced by at least 15% in two years due to sudden unemployment, underemployment or a medical condition.

The property must be the borrower's primary residence and at risk of foreclosure.

"This is about families who were paying their mortgage, were current, were working, and then something happen," Sullivan told HousingWire. "It's for low- to middle-income, working families."

HUD announced plans for the program in August, after the agency was designated under Dodd-Frank to create an emergency homeowners assistance program with an allocated budget of $1 billion. Funding through the new program is only available in the 32 states and Puerto Rico that were not otherwise funded by the Hardest Hit Fund.

Borrowers must meet with their local NeighborWorks division or state finance agencies with HUD approved standards to receive funding. NeighborWorks is a national nonprofit organization created by Congress to provide financial support, technical assistance and concealing services to homeowners.

HUD hopes to begin accepting applications by the end of the year. HUD announced Tuesday how the $1 billion would be divided by state (chart below, in dollars):

Mortgage rates still breaking record lows

Mortgage rates, nearly across the board, reached record lows again for the week ending Sept. 23.

The Freddie Mac weekly survey showed the average 30-year fixed-rate mortgage reached 4.32% with an average 0.8 point, down to its all-time low from 4.37% last week. Last year, at this time, the 30-year FRM averaged 62 basis points higher.

The 15-year FRM reached a new record low at 3.75% with an average 0.7 point, down from 3.82% last week and 4.36% a year ago.

The 5-year Treasury-indexed hybrid adjustable-rate mortgage averaged 3.52% with an average 0.6 point, down from 3.54% last week. And the 1-year Treasury-indexed ARM averaged 3.48% with an average 0.7 point, the only rate to increase from last week at 3.46%.

"Confidence in the state of the economy fell among consumers and businesses, which led to a decline in long-term bond yields and brought many mortgage rates to record lows this week," said Frank Nothaft, vice president and chief economist at Freddie.

The weekly Bankrate survey of large banks and thrifts showed the average 30-year FRM at 4.5%, unchanged from last week. New record lows came for the 15-year FRM, which fell 2 bps to 3.94%, and the 30-year FRM jumbo loan that dropped to 5.16%.

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.

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Burning Down the House

A North Carolina man facing foreclosure reportedly hired another man to burn down his house, according to a Winston-Salem-based news outlet.

Davidson County Sheriff David Grice said homeowner Gregory Ringley, 48, hired David Hill, 40, of Coeburn, Virginia, to start the fire.

The home was actually burnt down on August 16 – and a subsequent investigation found that a flammable liquid was used to start the fire.

Ringley was not only looking to avoid foreclosure, but also interested in collecting insurance money.

He was charged with conspiracy to commit arson and conspiracy to commit insurance fraud, while his mother, who drove Hill to the home to set the fire, faces charges of conspiracy to commit insurance fraud.

Both were being held on a $100,000 bond, while Hill was charged with second-degree arson and held on a $5,000 bond.

This incident is just one of many odd attempts to avoid foreclosure since the mortgage crisis got underway.

There was the guy who simulated robbery to pay the mortgage, and the other guy who tried to blow up the bank holding his mortgage.

Not to mention the guy who bulldozed his own home after his bank began foreclosure proceedings.

Back in early 2008, the Insurance Information Network of California actually warned homeowners not to resort to arson if facing foreclosure.

Sign of the times…

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.

Zero Down !!!!!!

Just a few years after the mortgage crisis swept in, zero down mortgages seem to be making a comeback, according to a piece in the NY Times.

Mortgages with no money down have performed worse than home loans where borrowers have some skin in the game, but proponents believe the lack of down payment wasn’t/isn’t the core issue.

Instead, the combination of zero down financing, lax underwriting requirements (stated income), and exotic loan programs (option arms) has been seen as the problem.

So will the new breed of zero down mortgages perform better than their earlier counterparts?

Affordable Advantage

Fannie Mae recently launched “Affordable Advantage,” a program that allows borrowers to purchase a home for as little as $1,000 down.

Throw in downpayment assistance (to cover closing costs), and you can get a mortgage for as little as 67 cents.

But in order to qualify, you must fully document your income, have a minimum credit score of 680, and actually live in the home.

The only loan offered is a 30-year fixed-rate mortgage, making it all the more safer for borrowers (and mortgage lenders).

Currently, they’re available in four states, including Idaho, Massachusetts, Minnesota and Wisconsin.

And of the 500 loans originated in Wisconsin since March, none are delinquent after six months (slow clap).

USDA Zero Down Loan Program

One of the other few remaining zero down loan programs comes from the United States Department of Agriculture (USDA).

Though it’s reserved primarily for low-income individuals and households, you can have income up to 115% of the median for the area in which you purchase the home (figure that one out).

The property has to be located in a rural area (or exurb) and be modest in size, cost, and design, and borrowers must have “reasonable credit histories.”

But it’s still an easy way around that pesky down payment.

Then there are FHA loans, which only require 3.5 percent down – and before things went so very wrong, you could get 100 percent financing via seller-paid downpayment assistance.

Of course, those loans didn’t turn out so well…


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.

Mortgage Comparison Shopping

The Federal Reserve has proposed a new rule that may make it easier for prospective homeowners and those looking to refinance shop around before making a commitment.

The proposal, which was part of a 930-page document published mid-month in the Federal Register, would allow consumers to cancel mortgage applications within three days and get refunded for certain costs.

Things like application fees and appraisal fees would be refundable, while credit report fees would not.

Mortgage shoppers would be entitled to refunds if they canceled an application within three business days of receiving key disclosures, including the Good Faith Estimate and Truth in Lending Act statement.

The Fed believes such a rule would help consumers shop for the best deal, instead of being locked in with one mortgage lender for fear of losing any up-front costs.

But many lenders believe the rule will have little effect, as most already wait several days before charging any fees.

Others are concerned it could delay an already backed-up process, as there will be a waiting period before anything is acted upon or ordered.

Although, it’s not uncommon for a loan to be “on hold” until it makes it through underwriting and receives a formal decision.

It’s unclear how the rule would affect mortgage brokers, those who work on behalf of banks directly with consumers.

A recent Bankrate.com study found that mortgage closing costs rose more than 36 percent this year, with loan origination fees rising nearly 25 percent and third-party fees jumping almost 50 percent.


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.

"Highly Affordable"

Housing affordability remained near its highest level on record for the sixth consecutive quarter, according to the latest survey from the National Association of Home Builders.

The National Association of Home Builders/Wells Fargo Housing Opportunity Index (HOI) indicated that 72.3 percent of all new and existing homes sold during the second quarter were affordable to families earning the national median income of $64,400.

That’s up slightly from the first quarter and just shy of the record-high 72.5 percent seen in the first quarter of 2009.

Before 2009, the affordability index rarely topped 67 percent, and had never reached the 70 percent-mark.

But record low mortgage rates and falling home prices have opened the door for more buyers, less the tighter underwriting environment.

Kinda makes you wonder why no one is interested in buying a home these days – maybe affordability isn’t the driver.

After all, a ton of buyers pre-mortgage crisis couldn’t even afford to make their mortgage payments in the conventional sense, so they opted for mortgage programs with teaser rates like the option arm.

Perhaps they were more interested in the thought of home price appreciation, as opposed to simply living in a home.

Syracuse, NY Most Affordable Housing Market

The most affordable major housing market in the country was Syracuse, NY, pushing Indianapolis-Carmel, IN off the top spot, which it held for almost five years.

Nearly all (97.2%) of the homes sold there were affordable to households earning the median family income of $64,300.

Detroit, Youngstown, and Buffalo also made the list of the most affordable metros.

Meanwhile, the New York-White Plains-Wayne, NY-NJ area continued to be the least affordable major housing market during the second quarter, with just 19.9 percent of all homes sold deemed affordable to those earning the median income of $65,600.

Los Angeles, the Bay area, and Honolulu continued to linger at the bottom of the affordability scale during the quarter as well.

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.

Countrywide Customers Eligible for Free Credit Monitoring

If you provided personal information to or made mortgage payments to Countrywide Financial before July 1, 2008, you may be eligible for free credit monitoring for two years.

The ruling is part of a settlement finalized today by U.S. District Judge Thomas B. Russell of Paducah, who oversaw more than 36 lawsuits related to a security breach at the company.

The lawsuits are tied to the arrest of former Countrywide employee Rene Rebollo Jr., who was a senior analyst for the company.

Federal investigators claim Rebollo used a flash drive to download personal data from roughly 20,000 customers a week for two years from 2006 through August 2008.

The data included sensitive information ranging from birth dates and social security numbers, to mortgage and credit card information.

He later sold the seemingly valuable data to another defendant, Wahid Siddiqi, for just $500 and the pair earned a combined a $50,000 through sales to third parties, likely mortgage lead companies and similar entities.

Bank of America, which now owns the defunct mortgage lender, denied any wrongdoing, but said a settlement would help the company avoid additional expenses and litigation.

Former Countrywide customers who are able to prove their identity was “stolen” as a result of the breach are eligible for up to $50,000 in compensation for each offense.

The deadline to subscribe for free credit monitoring (Triple Advantage by Experian) is September 7, 2010 – the earliest deadline to file a claim for monetary compensation is October 18.

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.

Soon but not yet....

Last week, Federal Housing Administration (FHA) commissioner David Stevens announced plans for implementing FHA's new mortgage insurance premium structure. Based on industry feedback to the announcement, the FHA postponed the premium fee changes on all new case numbers for one month, and will now implement them on Oct. 4, 2010.

"Over this past week, the industry responded with support of the new fee structure, but voiced strong concern about having system changes ready in time to meet the original Sept. 7, 2010 deadline," said US Housing and Urban Development (HUD) deputy assistant secretary Vicki Bott. "Since these system changes impact regulatory disclosures, lenders expressed they must have the additional time to implement and test systems. FHA took this feedback seriously and has accommodated the need for additional time."

FHA will lower its upfront premium simultaneously with the increase to the annual premium. FHA's upfront mortgage insurance premium will be adjusted down to 100bps on all amortization terms and the annual mortgage insurance premium will increase to 85-90 bps on amortization terms greater than 15 years.

The Senate last week approved its version of HR 5981, which allows the FHA it to hike its annual premiums for its single-family program. It allows the FHA to raise its annual mortgage insurance, raising the statutory cap rate to 1.55% from 0.55% — a flexibility that the industry and the FHA says could ultimately reduce the cost of credit insured by the FHA.


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.

Cash-In Refinances Rise in Latest Quarter

During the second quarter, 22 percent of homeowners who refinanced their mortgages lowered their principal balance by bringing in additional money at closing, Freddie Mac reported today.

It was the third highest “cash-in refinance” share since Freddie Mac began keeping records on refinancing trends since 1985.

Cash-in refis (which are basically rate and term refis) increased from 19 percent in the first quarter, but were nowhere near the 36 percent share seen in the final quarter of 2009.

Meanwhile, cash-out refinances, where the original loan amount increased by at least five percent, represented 27 percent of all refinance loans.

Over the past three quarters, cash-out refinancing has been at its lowest since Freddie began tracking in the 80s.

The main cause of decline was harsher underwriting guidelines for loan-to-value ratios, coupled with reduced home prices.

In fact, the median appreciation of the collateral property was a negative five percent over the median prior loan life of four years.

Compare that to 20-30+ percent positive appreciation during the boom years in the mid-2000s, and you’ll know why everyone refinanced their mortgage (with cash-out).

Just $8.3 billion in home equity was pulled out during the second quarter, down from $8.4 billion in the first quarter and the lowest amount since 2000.

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.

Applicationrs Rise....Are you taking advantage?

Home loan application volume increased 7.6 percent on a seasonally adjusted basis for the week ending July 16, the Mortgage Bankers Association said today.

Refinance applications increased 8.6 percent week-to-week to the highest level since the week ending May 15, 2009.

The increase was led by a 10.7 percent rise in conventional refinance applications, offset by a 4.2 percent decline in government refinance apps.

“As rates on 30- and 15-year fixed-rate mortgages declined to the lowest levels recorded in the survey, refinance activity increased last week, said Michael Fratantoni, MBA’s Vice President of Research and Economics, in a release.

“The refinance index is up almost 30 percent over the past 4 weeks, but is still well below the peak seen last spring.”

He noted that those aiming to get the lowest interest rate are getting conventional loans, while those looking for a low down payment requirement are grabbing FHA loans.

Purchase Applications Rise

The seasonally adjusted purchase index increased 3.4 percent from a week earlier, thanks to an eight percent increase in government apps (FHA loans, VA loans).

The unadjusted purchase index was up 15.3 percent compared with the previous week (which included the Independence Day holiday), but off 35.7 percent from year-ago levels.

Interest Rates Hit New Lows

Meanwhile, the popular 30-year fixed fell to 4.59 percent from 4.69 percent, the lowest level ever recorded in the MBA’s survey, while the 15-year fixed slipped to 4.05 percent from 4.12 percent, also a record low.

Finally, the one-year adjustable-rate mortgage dipped to 7.17 percent from 7.20 percent, but clearly remains an unfavorable option.

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 got underway.


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.

Blowing up the Bank?

An Illinois man facing foreclosure reportedly attempted to blow up the bank that held his mortgage.

Last Friday at around 8 p.m., the disgruntled homeowner crashed into a PNC bank branch in his hometown of Lockport in an apparent attempt to destroy it.

The man then set off a four-inch mortar, typically reserved for fireworks shows, which blew off the roof of his car and shattered windows in the front of the bank.

Fortunately the bank was closed at the time and there were no reported injuries.

The homeowner, David Whitesell, has been charged with arson and criminal damage to property with an incendiary device, both felony offenses.

He was being held on a $30,000 bond and expected to appear in court this week.



There have been similar instances of homeowners going to great lengths to get revenge on their banks or attempt to bring their mortgages current using unconventional methods.

In February, a man bulldozed his home after the bank began foreclosure proceedings.

And last summer, another struggling homeowner robbed a bank in San Diego in order to make his mortgage payments.

He made off with $107,000 before eventually being caught.

A month earlier, a Long Island truck driver behind on his mortgage executed an elaborate fake robbery, which included telling police he was held up at gunpoint.

He eventually broke down and told police he was unable to keep up on his mortgage.

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.

No Closing Cost

You may have seen ads for the “no cost refi” loan lately, a mortgage program that promises no fees or out-of-pocket expenses when you refinance your existing mortgage.
While this type of offer is by no means a new concept, it’s definitely a subject worth revisiting to ensure people understand what they’re getting when they choose a no cost refinance option.


A no cost refinance is essentially a loan transaction in which the lender or broker pays settlement costs, including typical fees such as processing and underwriting fees, appraisal fee, title/escrow fees, loan origination points, and so on.
A bank or lender may also bundle your closing costs on top of your loan amount, increasing the size of your loan, making it a “no-cash” loan. Though you may avoid out of pocket expenses and upfront fees, these costs are not lender paid and the loan is not a true no cost loan.
So how do banks and lenders make up for the absence of fees that normally must be paid?

The reality of the situation is that these types of loans will actually bump up your interest rate, sometimes dramatically in order to make up for the missing fees that are usually charged at closing.


Also note that no cost refinances will vary by lender, and some programs may cover all costs, while others may still charge you for certain third-party fees such as per diem interest, insurance, taxes, and even points!
Mortgage brokers can also setup a no cost refinance for you, adjusting their yield-spread premium to the point where they make enough money to offset the fees associated with the loan.

Let’s look at an example to illustrate the program:
Imagine that you’re credit profile allows you to qualify for a mortgage at an interest rate of 6% on a $500,000 loan, paying a point to the lender and another $2,500 in closing costs totaling $7,500. While this may seem like a large upfront cost, the trade off may be a lower interest rate.
With Countrywide’s “No Cost Refi” program you’ll cruise through the transaction without paying a dime, but you may end up with an interest rate of 6.5% or higher on the very same transaction.


Assuming you make the interest-only payment each month, you’ll pay an additional $200 a month, or roughly $2,400 annually if you select the “no cost refi” at an interest rate of 6.5%.

This is the point where you need to ask yourself what you plan to do with the property and the mortgage. If you’re planning on upgrading to a more expensive home in just a few years, or if you’re the type that refinances often, paying upfront costs for a lower interest rate may be a losing endeavor. For you, a no cost loan may be a good choice.


But if you plan to stay in the home for five or more years (or whenever the break-even point takes place), it would make sense to pay a little more upfront for future savings. After all, that $200 discount each month might ease your budgeting woes in the future, and amount to some serious savings if you stick with the mortgage for the long term.
Remember, no cost loans aren’t inherently good or bad. Their associated benefit or cost will really depend on your unique financial situation.

If you want to see if Refinancing makes financial sense please reply via email with the following information
1. Current Interest Rate
2. Current Loan Balance
3. Idea of Home Value from Assessment or Recent Appraisal
4. Current Monthly Payment
5. Yearly Taxes
6. Yearly Homeowners Insurance
7. Idea of Credit Score or Rating Fair-550-620 Good 620-680 Excellent 680 and above.
By sending an email back with the above information, I can then forward you an accurate idea of what your new payment would be if you decided to refinance. Not 1 phone call unless you prefer to discuss further.


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.

6 Million to lose Homes.....

Of the eight million homeowners currently not making mortgage payments, six million are expected to lose their homes over the next two years, according to the latest Market Intelligence newsletter from John Burns Real Estate Consulting.

As a result, the national homeownership rate will fall to just 61.7 percent.

Here’s the math:







The numbers might be even worse if you factor in the additional five million homeowners with no equity in their homes, assuming they strategically default.

Fortunately, most borrowers don’t walk away voluntarily until equity falls to -62 percent of their home’s value, at least that’s how the study from the Federal Reserve goes.

You could also argue that homeowners with less than five percent equity in their homes could default as well, as you need an equity cushion to unload a home to pay for associated closing costs (and to buy a new one).

John Burns also noted that “loan modifications have little prayer of helping,” citing the fact that homeowners who received permanent loan modifications use more than 30 percent of their income to pay off debt other than the mortgage.

And we all know consumers prefer to pay their credit cards over their mortgages.

The sliver of good news is that 58 percent of homeowners can afford the median priced home vs. 45 percent historically.

Now if only anybody wanted one…


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.

Economist Reports the Housing Market Double Dip is Beginning

Toronto-based Capital Economics, an independent macroeconomic research firm, said Tuesday that a double dip in the United States housing market is now materializing.

Furthermore, the report finds that for every home currently on the market, there are two homes waiting to be sold.

There are conflicting opinions on whether or not a double dip will occur, and warnings abound, but the research by Paul Dales clearly calls the beginning of a new downturn. However, the Federal Reserve Bank of Cleveland is also reporting numbers that indicate the macroeconomy still shows pockets of strength.

In the Capital Economics report, titled "Double Dip Begins," Dales argues that the rush to take advantage of the tax credit pushed new home sales up by 29% in the two months to April. But in May, new sales plunged by 33% m/m to a new record low. The pending home sales index also fell sharply, by 30% m/m in June.

"The expiration of the homebuyer tax credit at the end of April has triggered a double-dip in the housing market, with new home sales falling particularly sharply in May," he writes. "The only reason why existing home sales did not fall significantly is because they are measured at the contract closing, rather than signing stage."

New legislation signed into law at the start of July dictates that as long as a contract was signed before the end of April, homebuyers can still claim the tax credit if it is closed before the end of September. Existing sales will therefore fall more gradually.

Nonetheless, the number of homes in the foreclosure pipeline increased in the first quarter. The foreclosure inventory rate rose from 4.5% to 4.6% and the delinquency rate, which measures the proportion of all borrowers that have missed at least one mortgage payment, increased from 9.5% to 10.1%.

"That means the potential supply, or "shadow inventory", rose from 7.6m homes to 7.8m," Dales said. "That dwarfs the 3.9m homes already on the market."

Dales sourced his numbers from Bloomberg, CoreLogic, FHFA and Thomson Datastream. He also cites Case-Shiller, MBA, NAR and NAHB stats as well.

According to a report on international trade by the Federal Reserve Bank of Cleveland, the nominal trade deficit unexpectedly widened in May, as an increase in imports outweighed a slightly more modest rise in exports. The $1.9bn widening, which follows a $0.3bn widening in April, brings the deficit to an 18-month high of $43.3bn.

However, the report sees strength in some pockets of the economy.

"While the decrease in net exports will likely lop off a few tenths off of real GDP growth in the second quarter, the sharp increase in nonpetroleum imports suggests that domestic spending is continuing to recover," states the report. "The strengthening of the dollar has not hindered US exports yet, as exports climbed 2.4% in May."

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.

Subprime Lending is Dead; Long Live Subprime Lending?

The lending market needs subprime mortgages. Yes, you read that right: our country, perhaps now more than ever, needs access to loan products for those with poor credit profiles. After all, more of us than ever before are now subprime credit risks.

New data released today by FICO Inc. show that a whopping 25.5 percent of consumers now have a credit score of 599 or below. That’s a market of more than 43 million people, and growing every day, too—thanks to unemployment levels that appear set to remain painfully high for the next five years.

This is the definition of growth market, too: historically, only 15 percent of consumers have found themselves with a credit score below 600. Now, a quarter of consumers fit the profile.

All of which underscores a unique irony to the financial mess we’re now in: much of the growth in demand for mortgages in recent history came out of the subprime sector, now thoroughly villianized and vaporized. Subprime mortgages represented between 8 and 15 percent of total origination volume between 1995 and 2003, according to data published by Inside Mortgage Finance.

These days, it’s closer to zero percent if it’s anything at all. Wells Fargo (WFC: 27.69 +2.33%)—the nation’s largest mortgage lender, year to date—said last week that it was shuttering its subprime operations and laying off as many as 3,800 employees. There isn’t a public market for subprime debt; banks surely don’t want to hold subprime credits on their balance sheet and explain such a strategy to shareholders; and the private mortgage securities market is still in what could best be characterized as critical condition. (Any private RMBS issuances seen in mortgages this year are primarily pristine credits, not subprime.)

Are we really prepared as a country to say, then, that a full quarter of all consumers—in a period of flat to declining wage growth, for those lucky enough to have jobs right now—simply don’t exist insofar as mortgages and credit cards are concerned? What if that number reaches 30 percent of consumers (and it will)?

Let me play devil’s advocate for a minute. Maybe we do need to accept the fact that a quarter of consumers shouldn’t really be consuming all that much; that’s an austerian viewpoint if there ever were one, but it is certainly true that consumers ended up way over their heads in debt and are still deleveraging household balance sheets. Much of that deleveraging, by choice or otherwise, tends to affect credit scores adversely.

That said, subprime lending existed as a viable market for years ahead of this mess, albeit with a risk profile akin to what you’d actually expect from subprime borrowers—default rates six times or more beyond what would be seen with prime credits. Only when a number of economic and market forces created an unsustainable housing bubble did we begin to see default behavior of subprime borrowers start to more closely mimic that of prime-credit borrowers—as those with debt management problems were often able to avoid reality by refinancing early and often.

The result was that subprime debt tempted investors with a too-good-to-be-true combination: impossibly high yield, especially in first-loss positions, mixed with default rates that were next to nil. Sure, voluntary prepayments are more of a risk with subprime product (borrowers with lower credit scores are typically more sensitive to interest rate movements)—but voluntary prepayment behavior has long been well understood by investors and frankly was easily hedged, or at least incorporated into trading strategy for subprime securities.

All of which is to say that subprime lending wasn’t always the villain it’s now being made out to be. In fact, back in 1999, when subprime lending was just firing up its engine, most of the consumer lobby was backing research highlighting “unequal access to capital” for those with poor credit; the Congressional lobbying machines were pushing lenders to make more loans to borrowers with weaker credit, and lenders were in turn touting their partnerships to lend to low- and moderate-income families.

I wrote about this issue way back in 2008, in a column called “Mortgage Mess Generates War of Entitlement”—it’s perhaps more apropos today than it was when I first wrote it, so I’d recommend reading it again.

Today, the tables have turned. Consumers are raging against high levels of default, and lenders are touting their successes in preventing foreclosures.

With so many consumers now stuck in the subprime credit bucket, and their numbers growing by the day, it’s really just a matter of time until the pendulum of public opinion swings back again towards wanting consumers to have access to credit. The very same organizations now harpooning lenders for predatory lending practices—rightly or wrongly—will begin calling for the banks and other lenders to make credit available to this group.

Oh, the irony of it all.

Much of our nation’s public policy is determined by the will of the voters, after all, and our Congressional representatives do tend to vote the will of people (short-sighted though the people's will may be). And if 25 percent of our nation’s consumers—ahem, make that voters—are now subprime credits, something tells me it won’t be long until even subprime consumers decide they ought to be able to buy something.

The only question left to answer is: just who will be there to lend to them?

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.

Citi is starting to lend....

Citibank has reportedly increased mortgage lending at its retail branches by 60 percent in the past two months, according to the Wall Street Journal.

The New York City-based bank, which had to reassess its risk appetite after teetering on the brink of failure, also doubled its mortgage application pipeline in a matter of months.

The overall mortgage application pipeline increased to $2 billion in June from less than $1 billion in February, likely spurred on by record low mortgage rates.

Citi’s North American retail banking business head Brad Dinsmore told the paper that home loans had become a “top priority” for the company, and said most of the applications were likely to turn into loans, partially because of a focus on more affluent customers.

He added that mortgage application volume was strong in major cities like Los Angeles, New York, Chicago, and San Francisco, with 30 percent going toward home purchases rather than refinances.

Additionally, applications for jumbo mortgages are up 30 percent, likely because Citi is offering a 30-year fixed-rate mortgage at around five percent, well below competitor rates hovering above 5.6 percent.

Citi has roughly 1,000 retail banking branches in the United States, but recently announced the closure of 376 CitiFinancial branches nationwide and in Canada, along with hundreds of related layoffs.

However, CitiFinancial only offered personal loans and smaller home purchase and refinance loans, which doesn’t seem to be part of their long-term strategy.

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.

How Low can they can go?

Average rates for all but one mortgage product category set new record lows, according to a pair of weekly surveys.

Freddie Mac's (FRE: 0.3951 -4.33%) weekly survey put the average rate for a 30-year fixed-rate mortgage (FRM) at 4.58% with an average 0.7 origination point for the week ending July 1, down from last week's average of 4.69%. A year ago, the average rate was 5.32%.

The Bankrate survey of large banks and thrifts put the average rate for a 30-year FRM at 4.75% with a 0.41 origination point, down from last week's average of 4.81%.

The average rates are both new lows for 30-year FRMs in the two surveys.

“Interest rates on fixed-rate mortgages and the 5-year hybrid ARM fell once again to all-time record lows this week in a period where the economy struggles to gain momentum and inflation remains very low,” said Frank Nothaft, Freddie Mac vice president and chief economist. “Growth estimates for first quarter GDP were revised down by a half percentage point over the past two months to 2.7%, according to the Bureau of Economic Analysis. Annual inflation, as measured by the 12-month change in the core CPI, held at 0.9% in April and May, which is the slowest pace in over 44 years, as reported by the Bureau of Labor Statistics.

Rates on 15-year FRMs were also down. Freddie Mac put the average rate for a 15-year FRM at 4.04% with an average 0.7 point, down from last week's average of 4.13% and a year ago, when the average was 4.77%. Bankrate said 15-year FRMs averaged 4.2% with a 0.41 point, down from 4.26% last week. Both averages are new lows in the survey.

Rates are being driven down by an increased investor appetite for American bonds compared to those of other countries, particularly volatile Europe. But Brian Koss, executive vice president of Mortgage Network, in Danvers, Mass., believes psychological factors may come into play before rates drop any further.

"As you get near the 4.5 (percent) handle, it really acts as the new Rubicon that does not want to be crossed," Koss told Bankrate, adding that it's in the best interest of the largest mortgage servicers not to stimulate another refinancing boom because they likely would lose many of the loans they're currently profitably servicing.

Freddie said the average rate for a five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) was 3.79% with an average 0.7 point, down from last week's average of 3.84% and a year ago, when it averaged 4.88%. Bankrate put the average rate for a five-year Arm at 4.07% with a 0.41 point, down from last week's average of 4.13%.

The only mortgage product tracked in the surveys that did not set a new low was Freddie's average for one-year Treasury-indexed ARMs, which averaged 3.8% with a 0.7 point, up from last week's average of 3.77%. A year ago, the one-year ARM averaged 4.94%.

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.

Senate Passes Homebuyer Tax Credit Extension

Yesterday, the House pushed through a three month closing extension of the homebuyer tax credit.

Tonight, the Senate unanimously approved the bill — leaving the President to ratify the provision by signing it into law, as early as tomorrow morning.

"I thank my colleagues for joining me to pass this important extension and giving homebuyers in Nevada and around the country the opportunity to purchase their first home," said Sen Harry Reid (D-NV), in a statement following the bill's passage.

"In addition to helping thousands of families experience the American dream, this successful and popular program provides a much needed boost to Nevada's housing market and economy."

The deadline for the tax credit was midnight tonight but only if the mortgage went through, so with Obama's signature, it would have been possible that no contracts currently under offer — but unable to close — would fall through the cracks with the extended deadline.

The Senate approved provision will give buyers until Sept. 30 to complete their purchases and qualify for tax credits of up to $8,000.

If the President signs the bill into law tomorrow, it is unclear if the provision will apply retroactively to deals that close on Thursday, July 1.

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.

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.

Stated vs Actual

Just prior to the mortgage crisis, stated income loans ran rampant, and once home prices took a turn for the worse, many of these loans defaulted at a fast clip.

Over time, it became clear that stated income was not the best way to measure a borrower’s ability to repay their obligations, especially when guaranteed home price appreciation was no longer around to pick up the slack.

The same seems to be true of loan modification performance, as evidenced by the conversion rate of mods under the Making Home Affordable program.

Loan servicers who have required income documentation prior to starting trial loan modifications have seen much greater success than those who haven’t asked for income documents upfront.

For example, subprime servicer Ocwen Financial Corp. (who required verified documentation) has seen an 83 percent success rate in converting trial loan modifications to permanent ones, while others accepting stated income have seen success rates as low as six percent.

In fact, juggernauts like Bank of America, Wells Fargo, and Chase are seeing conversion rates at the low-end of the spectrum, at or around 25 percent, thanks in part to accepting stated income to get things going.

This seemingly haphazard approach (similar to the ways things were run prior to the crisis) may explain why 277,640 of the 1,214,085 trial loan modifications have already been canceled.

Fortunately, all loan servicers will be required to use verified income prior to starting a trial loan modification with an effective date on or after June 1.

That should result in a much better conversion rate for all loan servicers going forward, especially the big guys that don’t seem to be getting the job done.

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.

Home Purchase Applications Drop.....

Home loan applications fell 1.5 percent on a seasonally adjusted basis for the week ending May 14, the Mortgage Bankers Association said today.

The refinance index actually jumped 14.5 percent from one week earlier thanks to the low interest rates on offer, but home purchase applications plummeted 27.1 percent to their lowest point since May 1997.

It’s pretty clear the expiration of the homebuyer tax credit in late April led to this extreme drop-off, and it makes you wonder if home prices will be able to sustain, even with the near record-low mortgage rates on offer.

The decline in purchase apps pushed the refinance share of mortgage activity from 57.7 percent to 68.1 percent of total applications.

Meanwhile, the popular 30-year fixed-rate mortgage slipped further to 4.83 percent from 4.96 percent, and the 15-year fixed averaged 4.19 percent, down from 4.32 percent.

The one-year adjustable-rate mortgage dipped to 6.81 percent from 6.86 percent.

Mortgage points increased on all loan types, somewhat eliminating any benefit tied to the interest rate improvement.

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.

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.

The Street Vs The Home

With all the recent stock market volatility, you may be wondering what effect such events have on mortgage rates.

Well, when economic fears rise, as they did last week, investors flee the stock market and head toward safer U.S. Treasury bonds, like the benchmark 10-year bond.

As a result, yields for those bonds plummet because demand is strong and a higher yield isn’t necessary to lure investors.

And because the 30-year fixed tends to follow the direction of the 10-year bond yield, mortgage rates fell.

Last week, the stock market plummeted thanks to fears of major default in Europe, but after a bailout package was announced today, stocks surged higher.

Mortgage rates will also climb higher on the news, though they may stay lower longer thanks to the general uncertainty in the air.

This is good news for prospective homeowners, as mortgage rates were expected to keep climbing throughout the year while the economy improved.

As a rule of thumb, bad economic news pushes mortgage rates lower, while good economic news pushes mortgage rates higher.

Stocks move in much the same way, except of course higher stock prices are seen as a positive and higher mortgage rates are viewed quite unfavorably.

Keep in mind, however, that this is just one of many factors that determine mortgage rates, and a change in stock prices may not always indicate a similar change in rates.

Any questions or concerns don’t hesitate to contact me, Gene Neal your Mortgage Expert.





Tel (631) 687-3510 Ext. 101



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Way to Lock Up

For California Mortgage Delinquencies, Location Matters
12May10

location

In sunny California, mortgage delinquencies vary widely by county, as evidenced by a Fitch Ratings study.

Fitch took a look at all securitized, non-agency mortgage loans in the state and discovered that “delinquencies are highly correlated with the level of negative equity.”

And while mortgage performance in California is not substantially different than that of the remainder of the country, certain parts of the state are underperforming or outperforming the rest of the nation.

In the hard-hit Riverside-San Bernardino-Ontario MSA, 23 percent of prime loans are 60+ days delinquent, making it the worst performing region in the nation.

Meanwhile, the San Francisco-San Mateo-Redwood City MSA is the best performing region in the country, with just four percent of prime loans 60+ days delinquent.

Additionally, high-risk option arms and subprime loans in San Francisco outperform less risky Alt-A mortgages in Riverside.

“From 2000-2006, nominal home prices in San Francisco increased by 81% and have since declined 22% from their peak. Over the same period, prices in Riverside have declined 55% from their peak after jumping 193%,” Fitch said in a release.

As a result, 90 percent of Riverside mortgages are now underwater, with nearly 60 percent of mortgage holders owing more than 150 percent of the value of their home.

“Fitch estimates the weighed average current loan-to-value ratio (LTV) in Riverside to be 164%. By comparison, less than 1% of San Francisco mortgages are more than 50% underwater, with a weighted average current LTV of 81%.”

Over the past year, San Francisco home prices have increased by 12 percent, while residences in Riverside have appreciated by just one percent.

Senate Bill Bans Mortgage Kickbacks, Liar Loans
12May10

no hassle

An amendment introduced by Oregon Senator Jeff Merkley and Minnesota Senator Amy Klobuchar aimed at protecting homeowners from deceptive lending practices passed the Senate by a vote of 63-36 today.

As a result, mortgage lenders and loan originators will be banned from accepting payments based on the interest rate and other terms of the loan, which effectively wipes out loan steering.

The legislation also seemingly kills off yield spread premium, which was one of the main ways mortgage brokers were compensated (how mortgage brokers make money).

“Deceptive mortgage practices like hidden steering payments directly led to the Wall Street meltdown and resulted in millions of families losing their homes,” said Senator Merkley in a release.

“We took a huge stride forward today in the fight to restore fairness for homeowners and strengthen the financial foundations of our families. I look forward to seeing this amendment become law so that never again will hidden steering payments put millions of homeowners on the fast track to foreclosure.”

Current rules allow loan originators and mortgage lenders to place borrowers into higher-cost and riskier loans, even when they qualify for more affordable loans.

Merkley cited a WSJ study, which found that 61 percent of subprime loans originated in 2006 went to borrowers who qualified for prime loans.

The bill will also require lenders to document income and “other underwriting standards” to ensure borrowers can actually repay their loans, putting an end to no doc loans and so-called “liar loans,” otherwise known as stated income loans.

These are huge changes and the implications may be great for the mortgage industry.

The amendment was also co-sponsored by Senators Chuck Schumer (D-NY), Olympia Snowe (R-ME), Scott Brown (R-MA), Mark Begich (D-AK), Barbara Boxer (D-CA), Chris Dodd (D-CT), Carl Levin (D-MI), Al Franken (D-MN) and John Kerry (D-MA).

Refis Jump as Rates Slide, Purchases Slow as Tax Credit Ends
12May10

hot cold

Refinance demand surged last week as mortgage rates benefited from economic uncertainty, but purchase activity cooled following the expiration of the homebuyer tax credit, according to data from the Mortgage Bankers Association.

“The recent plunge in rates on US Treasury securities, due to a flight to quality as investors worldwide sought shelter from the Greek debt crisis, benefitted US mortgage borrowers last week,” said Michael Fratantoni, MBA Vice President of Research and Economics.

“Rates on 30-year mortgages dropped to their lowest level since mid-March. As a result, refinance applications for conventional loans jumped, hitting their highest level in six weeks.”

The refinance index increased 14.8 percent during the week ending May 7, pushing its share of mortgage activity to 57.7 percent of total applications from 51.9 percent the previous week.

“In contrast, purchase applications fell almost 10 percent in the first week following the expiration of the homebuyer tax credit, as the tax credit likely pulled some sales into April that would otherwise have occurred in May or later.”

The seasonally adjusted purchase index fell 9.5 percent week-to-week; the unadjusted purchase index was off 8.9 percent from the previous week and 0.6 percent lower than the same week a year ago.

Meanwhile, the average contract rate for a 30-year fixed-rate mortgage fell to 4.96 percent from 5.02 percent, and the 15-year fixed slipped to 4.32 percent from 4.34 percent.

The one-year adjustable-rate mortgage averaged 6.86 percent, down from 7.03 percent – the ARM share of activity remained unchanged at 6.3 percent of total applications.

The 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.

(photo: qmnonic)

Black Eyed Pea Takes Foreclosure Crisis into Own Hands
11May10

will.i.am

Black Eyed Peas frontman will.i.am has taken on the foreclosure crisis, creating the i.am home fund to help those in jeopardy of losing their homes as a result of the economic downturn.

Yesterday, he unveiled the program on Oprah, surprising two struggling families facing foreclosure by paying off their mortgages.

Sure beats the other freebies Oprah has been known to throw out to guests on the show…

One family with eight children owed $250,000 on their mortgage and had already exhausted their 401k and savings account after the breadwinner lost his job.

The other lucky victim was a single mom who had been laid off after her company downsized, leaving her eight months behind on the mortgage and owing about $100,000.

Both families are now free-and-clear, let’s just hope they don’t try to pull cash-out anytime soon.

“Growing up I dreamt that one day I’d be able to buy my mom a house and take care of my family,” said will.i.am on his website. “I realized that dream and experienced the positive effect giving back had on my family.”

“Now I am compelled to help others who are in jeopardy of losing their homes and inspire others to join the movement.”

The i.am home fund is collecting donations to help other families in similar situations, though it’s unclear how the money will be allocated.

A number of struggling homeowners have already written in on the website in hopes of receiving assistance.

(photo: nicogenin)

Mortgage Rates vs Stock Market
10May10

wall street

With all the recent stock market volatility, you may be wondering what effect such events have on mortgage rates.

Well, when economic fears rise, as they did last week, investors flee the stock market and head toward safer U.S. Treasury bonds, like the benchmark 10-year bond.

As a result, yields for those bonds plummet because demand is strong and a higher yield isn’t necessary to lure investors.

And because the 30-year fixed tends to follow the direction of the 10-year bond yield, mortgage rates fell.

Last week, the stock market plummeted thanks to fears of major default in Europe, but after a bailout package was announced today, stocks surged higher.

Mortgage rates will also climb higher on the news, though they may stay lower longer thanks to the general uncertainty in the air.

This is good news for prospective homeowners, as mortgage rates were expected to keep climbing throughout the year while the economy improved.

As a rule of thumb, bad economic news pushes mortgage rates lower, while good economic news pushes mortgage rates higher.

Stocks move in much the same way, except of course higher stock prices are seen as a positive and higher mortgage rates are viewed quite unfavorably.

Keep in mind, however, that this is just one of many factors that determine mortgage rates, and a change in stock prices may not always indicate a similar change in rates.

Foreclosure Protest Ends with Seven Arrests
07May10

hand cuffs

A man who holed up inside his home to avoid a foreclosure-driven eviction was removed today after a week-long protest.

The homeowner, Keith Sadler, along with several protesters from the “Toledo Foreclosure Defense League,” had bound themselves together using chains.

State Bank and Trust Co. foreclosed on the Stony Ridge, Ohio home last year and later purchased it at a sheriff’s sale in March for $33,333.

Court records reveal that Sadler was supposed to vacate the property by midnight Monday, but it was clear he had no intentions of leaving voluntarily.

The disgruntled homeowner said he had made mortgage payments for 12 years since buying the property from his father, and only fell behind after being laid off from his job (and for medical reasons).

He lived in the home for some 20 years before police knocked down the front door at 6:30 AM local time and carried him out by his arms and legs.

Sadler, along with six others, Connie Smithengale, 20; Bryer Baumgartner, 19; Nicholas Botek, 23; Jessica Angelov, 20; Daniel Orange, 25; and Johnathan Kutsch, 22, were arrested and charged with misdemeanor obstructing justice and trespassing.

The Toledo Foreclosure Defense League has called for a moratorium on both foreclosures and evictions, arguing that banks have been bailed out while homeowners get kicked to the curb.

Back in February, there was word of a so-called “foreclosure ban,” which essentially would prohibit foreclosure action until a borrower was evaluated and found to ineligible for HAMP (or a reasonable attempt to contact the borrower was made).

This isn’t the first dramatic tale of foreclosure and probably won’t be the last…back in September, a San Diego man robbed a bank in order to make his mortgage payments.

A month earlier, a family lost their home to foreclosure thanks to a 7-cent underpayment.

What’s next?

Any questions or concerns don’t hesitate to contact me, Gene Neal your Mortgage Expert.


Tel (631) 687-3510 Ext. 101



eFax Attn Gene Neal

631-389-2556



Fax (631) 687-3513

eneal@athccorp.com

1.6 Millie

Barclays Capital expects 1.6 million distressed sales of homes this year, according to a report in the WSJ.

These “distressed sales” will mainly be in the form of foreclosures and short sales, and will make up roughly 30 percent of all home sales this year and next.

In 2011, the same number of distressed sales is expected, followed by a slight decline to 1.5 million in 2012.

Last year, the bank said such sales totaled 1.5 million.

Barclays currently estimates that banks and mortgage investors such as Fannie Mae and Freddie Mac own 480,000 homes – that number is expected to rise over the next 20 months and peak at 536,000 in January 2012.

However, there’s also the so-called shadow inventory, which they measure by tallying homeowners 90 days or more overdue on mortgage payments or already in the process of foreclosure.

As of the end of February, a startling 4.6 million households were in that category, though not all of them will lose their homes thanks to loan modifications and other loss mitigation efforts.

At the same time, you need to factor in strategic default, which includes borrowers that may be current but thinking about walking away.

Barclays estimates that home prices will fall another three to five percent on average over the next couple years.

You can reach me, Gene Neal at 877-276-6400 Ext 101.