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