Category Starting A Business

MBA Ups 2009 Mortgage Forecast by $800 Billion

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More good news…for loan originators.  The Mortgage Bankers Association increased its 2009 mortgage lending forecast by $800 billion to $2.78 trillion thanks to the expected refinance bonanza.

The group now expects refinancing to total $1.96 trillion in 2009 and purchase originations to ring in at $821 billion.

The refinance figure is up from an estimated $765 billion in 2008, while purchase money mortgage originations were actually revised downward from $851 billion, below the 2008 estimate of $854 billion.

Total originations could rise to the fourth-highest level on record (behind only 2002, 2003, 2005), thanks to an unprecedented drop in interest rates, spurred by the Fed’s move to scoop up mortgage-backed securities and treasuries.

“While the Fed has not announced that it is targeting specific rates for either 10-year Treasury rates or rates on 30-year fixed-rate mortgages, the effect of having the Fed bid in the market for a sustained period is enough to create a refinance incentive for a tremendous number of homeowners,” said Jay Brinkmann, the MBA’s chief economist.

“The vast majority of mortgages originated before the latter part of 2008 are probably going to have at least a 50 basis point refinance incentive for at least the next several months, with mortgage rates hitting lows not seen since the early 1950s and late 1940s.”

Of course, only borrowers with home equity, solid credit scores, and verifiable income will be be able to take advantage of the low, low mortgage rates.

Underwater borrowers will still be left out in the cold, and jumbo loan-holders will have a more difficult time securing financing, though Bank of America is reportedly rolling out a new program to facilitate such deals.

Another concern is the capacity to deal with the increase in refinance transactions, as staff levels were cut to match soft demand last year, coupled with the fact that many warehouse lenders have pulled out.

Loan originations this year will be “almost entirely” backed by Fannie Mae, Freddie Mac or the FHA, in contrast to previous record origination years dominated by jumbo and subprime loans.

(photo: mattmcgee)

About the Author: Colin Robertson

Before creating this blog, Colin worked as an account executive for a wholesale mortgage lender in Los Angeles. He has been writing passionately about mortgages for 15 years.

Source: thetruthaboutmortgage.com

Senator McCain Unveils Mortgage Refinance Plan

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U.S. Senator and presidential hopeful John McCain delivered a speech today at a small business roundtable in Brooklyn, unveiling his so-called “HOME” plan to tackle the ongoing housing crisis.

McCain applauded recent bipartisan efforts aimed at easing the mortgage crisis, but offered up his own solution that seems to be an amalgam of suggestions conjured up by the likes of the Senators Frank and Dodd and the Treasury.

It essentially allows good borrowers who fell behind on their mortgage payments to refinance into more affordable, federally guaranteed 30-year fixed mortgages while restructuring any debts if they’re upside down.

So mortgage lenders would need to voluntarily write down principal if borrowers were underwater, and any profit from a subsequent sale would be split amongst the lender, the borrower, and the government.

McCain also called on financial institutions to follow suit and get their balance sheets in order while shoring up capital, and said the DOJ must crack down on alleged abusers and bring justice to those who contributed to the housing mess.

That said, it’s likely the HOME loan program will only be available for those borrowers who filled out loan applications honestly, without fudging income and asset numbers (debt-to-income ratio) to get more house than they could afford.

It’s not really a new concept, but McCain’s version could be less of a “bailout” if he chooses to focus solely on those who were led astray by mortgage brokers, loan officers, banks, and lenders.

In related news, the Senate voted 84-12 in approval of the controversial bipartisan housing bill.

About the Author: Colin Robertson

Before creating this blog, Colin worked as an account executive for a wholesale mortgage lender in Los Angeles. He has been writing passionately about mortgages for 15 years.

Source: thetruthaboutmortgage.com

FHA Short Refinance Option Coming Soon

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A new option that should be available by fall of this year will allow borrowers current on their mortgages to execute short refinances into FHA loans, assuming the original loan is not FHA-insured.

In fact, the new loan must NOT be owned or guaranteed by the FHA, VA, or the USDA. So essentially only those with conventional loans need apply.

Loans eligible for refinancing via the FHA short refinance program include Alt-A loans, subprime loans, fixed-rate loans, ARMs, and loans of all documentation types.

The new FHA loan must have a balance no greater than 97.75 percent of the value of the home, and the total loan-to-value (including any second mortgages) cannot exceed 115 percent after the refinancing.

At the same time, the minimum write-down by the mortgage lender must be 10 percent of the unpaid balance of the original loan.

For manually underwritten loans, the total monthly payment, including any second mortgages, must not be greater than 31/50 or 35/48 debt-to-income, though the borrower should benefit from both a reduced balance and a reduced interest rate thanks to the current low-rate environment.

Borrowers who choose the FHA short refinance option can go with a fixed-rate mortgage or an ARM.

Homeowner eligibility for the FHA short refinance program is as follows:

– Homeowners must be current on existing mortgage payment (unless the borrower successfully completes a 3-month trial payment plan)
– Homeowner must occupy the home as a primary residence
– Homeowner must be underwater on existing mortgage(s)
– Homeowner must have a FICO score of at least 500
– Homeowner must meet standard FHA underwriting requirements
– Existing lenders/investors must agree to a principal write-down
– Condos and 1-4 unit properties are eligible
– Not eligible if convicted of felony larceny, theft, fraud, forgery, money laundering or tax evasion in connection with a mortgage/real estate transaction within last 10 years

Borrowers who execute an FHA short refinance should expect to see their credit score negatively impacted as with any other loan forgiveness.

And the standard FHA mortgage insurance premium structure will apply to the new FHA loans.

To increase lender participation, incentives for immediate write-downs of underwater second mortgages will be offered, based on the loan-to-value.

To fund the program, up to $14 billion in TARP funds will be used – FHA will publish data on the number of short refinance loans, the average percentage written down, and the quantity of principal reduced quarterly.

If interested, contact your existing lender/servicer or any FHA-approved lender for more information. The program is expected to be offered until December 31, 2014.

Tip: If you already have an FHA loan, you can refinance an underwater mortgage via the FHA streamline refinance program.

About the Author: Colin Robertson

Before creating this blog, Colin worked as an account executive for a wholesale mortgage lender in Los Angeles. He has been writing passionately about mortgages for 15 years.

Source: thetruthaboutmortgage.com

Rate and Term Refis Reduce Mortgage Payments by Billions

Last updated on November 30th, 2011

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Cash out refinancing hit its lowest point since late 2003 last quarter, but that’s not necessarily bad news.

During the second quarter, just 38 percent of refinances resulted in loan sizes five percent or higher than the previous balance, while 16 percent resulted in a lower loan amount, according to Freddie Mac.

That compares to 43 percent and 13 percent, respectively, a quarter earlier, meaning more borrowers are obtaining lower mortgage rates without sucking out home equity (that’s a good thing).

“A big part of the benefit of refinancing is the lower monthly payment that borrowers enjoy – the payment savings from ‘rate-and-term’ refinancing done during the quarter is about $160 a month on a $200,000 loan,” said Freddie Mac chief economist Frank Nothaft, in a statement.

“But these borrowers also accumulate principal faster than they would have with a higher-rate loan even after taking into account the longer terms of the new loans. In aggregate, second-quarter refinancers will have about $200 million additional principal paydown after a year than they would have under their old loans.”

In total, refinances carried out during the second quarter will reduce mortgage payments by $3.4 billion over the coming year, providing relief for many on the brink.

Half of the borrowers who refinanced their loan over the past three months lowered their mortgage rate by at least 20 percent, with the new rate about 1.25 percentage points below the old rate.

The lack of cash out refinancing was attributed to both stricter guidelines for such lending and a lack of available equity to draw from.

Rates are still historically low, but not at the record low levels seen back in April.

About the Author: Colin Robertson

Before creating this blog, Colin worked as an account executive for a wholesale mortgage lender in Los Angeles. He has been writing passionately about mortgages for 15 years.

Source: thetruthaboutmortgage.com

FHA Short Refinance Program Has Resulted in Only 15 Refis

Last updated on January 25th, 2018

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The FHA Short Refinance program, made available to loan servicers in June but formally launched in October, has resulted in just 15 refinances as of December 31, according to Congressional testimony from the Special Inspector General, Neil M. Barofsky.

A short refinance is a transaction in which a mortgage lender agrees to pay off a borrower’s existing mortgage and replace it with new a loan with a reduced balance in order to prevent foreclosure.

In a quarterly report to Congress, Barofsky slammed efforts made by the Treasury to halt foreclosures and improve the housing outlook.

He noted that just 522,000 permanent loan modifications were active under the Making Home Affordable program as of year-end, with approximately 238,000 funded via TARP and the rest by the GSEs, Fannie Mae and Freddie Mac.

But a combined 792,000 permanent and trial loan mods have also been cancelled, and more than 152,000 trial mods are still “in limbo.”

“These permanent modification numbers pale in comparison not only to foreclosure filings, but also to Treasury’s initial prediction that HAMP would “help up to 3 to 4 million at-risk homeowners avoid foreclosure” “by reducing monthly payments to sustainable levels,”” said Barofsky.

Last month, the Congressional Oversight Panel said only about 700,000 foreclosures would be prevented via HAMP, but Barofsky expects that total to be even lower, given the soft number as of late.

Meanwhile, RealtyTrac expects foreclosure filings to surpass the three million mark in 2011, increasing 20 percent from the 2.9 million seen last year.

The Treasury also wasn’t able to produce any numbers tied to HAMP’s Principal Reduction Alternative program, which was also formally launched in October to help underwater homeowners.

In other words, expect more foreclosures and lower home prices.

Does the Hope for Homeowners program helping just one borrower back in 2009 ring a bell?

About the Author: Colin Robertson

Before creating this blog, Colin worked as an account executive for a wholesale mortgage lender in Los Angeles. He has been writing passionately about mortgages for 15 years.

Source: thetruthaboutmortgage.com

Is the Refinance Boom Finally Over?

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Refinance demand fell for the sixth straight week, indicating an end to the boom that began in early 2009, according to the latest survey from the Mortgage Bankers Association.

Overall, mortgage application volume was off 18.6 percent on a seasonally adjusted basis during the week ending December 17.

On an unadjusted basis, it was 20.0 percent lower than one week earlier.

The refinance index plummeted 24.6 percent to its lowest level since April 30, while the seasonally adjusted purchase mortgage index decreased 2.5 percent.

The unadjusted purchase index was off 4.9 percent compared with the previous week and 8.4 percent lower than the same week a year ago.

“Refinance application volume dropped sharply this week as mortgage rates held near six month highs,” said Michael Fratantoni, MBA’s Vice President of Research and Economics, in a release.

“Purchase applications fell for a second week, with the level of applications little changed over the past month, indicating that home sales are likely to remain relatively weak over the next few months.”

Meanwhile, mortgage rates were little changed, with the popular 30-year fixed-rate mortgage averaging 4.85 percent, up from 4.84 percent a week earlier.

The 15-year fixed climbed to 4.22 percent from 4.21 percent, and the MBA no longer tracks the one-year adjustable-rate mortgage, which fell out of favor with borrowers long ago.

The mortgage rates above are good for mortgages at 80 percent loan-to-value – but pricing adjustments can lower or raise your actual interest rate.

Keep in mind 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 a few years back.

About the Author: Colin Robertson

Before creating this blog, Colin worked as an account executive for a wholesale mortgage lender in Los Angeles. He has been writing passionately about mortgages for 15 years.

Source: thetruthaboutmortgage.com

Four Percent Mortgage Proposed to Solve Crisis

Last updated on February 2nd, 2018

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As expected, the recent spike in mortgage rates has led to wild new proposals to solve the ongoing mortgage crisis.

The latest proposal comes from Arizona businessman Kenneth Wm. Parker, owner of Parker Properties/Parker Development, who has introduced the so-called “4/40 for Freedom Loan.”

It’s essentially a government-backed mortgage set at a four percent interest rate with a 40-year amortization.

“Americans are begging for relief,” said Parker, founder of 4/40 for Freedom, in a statement. “The program benefits are immediate; lower mortgages means increased disposable income, which translates to available cash to stimulate the economy through investments and product and service purchases.”

“We have received enthusiastic support from the financial and business community regarding the program,” he added.

Expected savings from the program are 33-38 percent per month per household, which would certainly ease pressure on struggling homeowners and move much needed money back into the economy.

“If each homeowner saves an estimated $250 a month on their mortgage, all of a sudden they can make additional purchases and the effect on the economy will be tremendous,” Parker said.

Once passed by Congress, the program would be available for one year to both new and existing homeowners; those with a mortgage would receive loan modifications without a credit check or any other qualification (sounds great).

Jumbo loans would also be offered up to loan amounts of $3.5 million.

“As the economy improves and home values go up, homeowners will refinance with conventional mortgage programs and the U.S. backed real estate interest loan debt will be repaid, resulting in additional economic capital,” the release said.

You can read more about the program over at their site. It’s clearly a bit over the top, but I wouldn’t be surprised if we see subsidized mortgage rates soon if the government isn’t able to rein them in.

About the Author: Colin Robertson

Before creating this blog, Colin worked as an account executive for a wholesale mortgage lender in Los Angeles. He has been writing passionately about mortgages for 15 years.

Source: thetruthaboutmortgage.com

FHA Refinance Applications Plummet in November

Last updated on November 30th, 2011

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FHA refinance loan volume fell 29.9 percent from October to November, according to a FHA Single-Family Outlook released recently by HUD.

A total of 69,062 FHA loan applications were received for refinance purposes, down from 98,544 a month prior, and well below the 112,095 seen the same time last year.

It looks to be another sign that the refinance boom is quickly running out of steam, despite mortgage rates remaining relatively close to historic lows.

The popular 30-year fixed mortgage actually hit its lowest point during the week ending November 11, at a staggering 4.17 percent, but many homeowners probably already took advantage of the low rates beforehand.

Meanwhile, purchase money mortgage applications totaled 63,920, down 6.9 percent from October and 26.6 percent from the 87,142 seen a year earlier.

Reverse mortgages were down just 0.4 percent month-to-month to 8,217, but up a whopping 25 percent from the 6,571 applications seen in November 2009.

Perhaps the recent warning from Consumer Reports will, ahem, reverse that trend.

FHA endorsed a total of 131,258 mortgages for $26.1 billion in November, and as of the end of the month, had 6,745,827 cases in-force with an unpaid balance of $921 billion.

During the month, there were 588,947 FHA loans in serious default (90 days + delinquent).

The default rate jumped to 8.7 percent from 8.0 percent a month earlier, though it was attributed to a reporting problem with some smaller mortgage lenders.

And it’s still 0.6 percent lower than the 9.3 percent default rate seen a year ago.

About the Author: Colin Robertson

Before creating this blog, Colin worked as an account executive for a wholesale mortgage lender in Los Angeles. He has been writing passionately about mortgages for 15 years.

Source: thetruthaboutmortgage.com

Home Affordable Refinance Program Extended

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Despite ongoing criticism and a number of recent bills aimed at ending several government mortgage assistance programs, the Home Affordable Refinance Program (HARP) has been extended by one year, per the Federal Housing Finance Agency.

The FHFA announced Friday that HARP’s original expiration date of June 30 of this year would be pushed back to June 30, 2012.

Additionally, Freddie Mac will exempt HARP mortgages from their recently announced pricing adjustments and Fannie Mae will conform their eligibility date to May 2009.

Through 2010, government mortgage financiers Fannie Mae and Freddie Mac purchased or guaranteed more than 6.8 million refinanced mortgages.

Of these, 621,803 were HARP refinances with loan-to-value ratios between 80 percent and 125 percent.

This total is up from 190,180 in 2009, when HARP first began.

HARP allows those with underwater mortgages (up to 125% loan-to-value) owned or guaranteed by Fannie Mae and Freddie Mac to refinance to take advantage of the historically low mortgage rates on offer.

The loan program actually seems pretty worthwhile, given the fact homeowners must be current on their mortgage payments and demonstrate the ability to repay their mortgages.

The Home Affordable Modification Program, which makes up the other half of the Making Home Affordable Program, is expected to be on the chopping block later this week, mainly because of poor performance (HAMP will only prevent 700,000 foreclosures) and high costs.

Of course, such bills to halt the program are likely just political, as President Obama has already noted that bills to end similar programs would be vetoed if they happened to make it to his desk.

The only possibility could be some fine-tuning to the existing programs, but even that is doubtful.

About the Author: Colin Robertson

Before creating this blog, Colin worked as an account executive for a wholesale mortgage lender in Los Angeles. He has been writing passionately about mortgages for 15 years.

Source: thetruthaboutmortgage.com

Mortgage Rates Expected to Stay Below Five Percent Through Early 2012

Last updated on November 30th, 2011

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Here’s some good news if you’re looking to buy or refinance in the near future.

Mortgage rates, specifically 30-year fixed mortgage rates, are expected to stay below five percent through to next year, according to mortgage financier Fannie Mae.

The 30-year fixed mortgage rate averaged 4.80 percent in the first quarter of 2011, 4.70 percent in the second quarter, and is expected to remain unchanged in the third quarter before rising back to 4.80 percent in the fourth quarter.

In 2012, it’s expected to rise to 4.90 percent in the first quarter, 5.00 percent in the second quarter, 5.10 percent in the third quarter, and you guessed it, 5.20 percent in the fourth quarter.

So maybe there’s not that much of a rush after all…

“With a downgrade of the outlook for economic growth and the unemployment rate, as well as an improving inflation expectation, we now expect the Fed to postpone hiking the Fed funds rate until the second half of 2012, instead of earlier in that year,” wrote Doug Duncan and Orawin T. Velz, in a market analysis released today.

“Long-term rates are projected to rise only modestly, with mortgage rates remaining below 5 percent through early 2012.”

In other words, continued bad news is keeping mortgage rates at bay, and with home prices still under a lot of pressure from swelling inventory, it could be wise to take your time.

The pair also lowered their projected purchase-money mortgage origination volume “modestly” and revised refinance loan origination volume “somewhat higher” for the current quarter.

For 2011, total mortgage origination volume is expected to decline to $1.07 trillion from an estimated $1.51 trillion in 2010, with a refinance share of 53 percent.

Tip: What mortgage rate can I expect?

About the Author: Colin Robertson

Before creating this blog, Colin worked as an account executive for a wholesale mortgage lender in Los Angeles. He has been writing passionately about mortgages for 15 years.

Source: thetruthaboutmortgage.com