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.