Category Starting A Business

Medical Collections Killing Refinance Frenzy?


Everyone knows mortgage rates have plummeted in recent weeks, but what does that actually mean for those looking to refinance?

With tough guidelines in place and flagging property values, it could equate to a lot of spinning wheels and paperwork.

And one mortgage banker is arguing that erroneous medical collections showing up on potential borrowers’ credit reports are throwing another wrench in the deal.

“The tragedy is that the collection accounts, even those that have been paid in full, are lowering these individuals’ credit scores, often to the point that they either can’t qualify for a loan, or will have to pay higher interest rates if they do,” said Rodney Anderson of Rodney Anderson Lending Services.

According to Anderson, 45 percent of the 1,701 loan applications his company received between June and September involved borrowers with at least one medical collection.

And these collections can kill an applicant’s credit score (whether legitimate or not), even if the remainder of their credit profile is sound, eliminating the possibility of any mortgage rate relief.

Anderson noted that medical billing is “notoriously error-prone,” and as a result, has launched a petition to lessen the severity of medical collection-related credit dings, which he says can lower credit scores more than 100 points.

The petition essentially calls for a new federal law mandating the removal of a medical collection from a borrower’s credit report within 30 days of it being paid or settled, instead of it kicking around for seven years.

Medical billing is certainly an area that needs to be looked at, but the whole credit reporting industry is in need of some serious revamping, and could easily be blamed for a share of the mess were in now.

(photo: paulkeleher)

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.


Bank of America Refinancing Under Making Home Affordable Program

Last updated on February 2nd, 2018


Bank of America said today it has begun processing refinance applications under the Treasury’s “Making Home Affordable” program, with nearly 200,000 customers contacting the company to determine eligibility.

“Combined with historically low interest rates, this program has generated significant interest from borrowers seeking the benefit of lower mortgage payments,” said Barbara Desoer, president of Bank of America Mortgage, Home Equity and Insurance Services, in a release.

“We are proud to be one of the first lenders to take loans from application to closing under the Treasury’s plan, providing the opportunity for more Americans to save money on their monthly mortgage payments and supporting efforts to stabilize the nation’s housing market.”

However, the bank seems to be focused on specific applicants, namely those with Bank of America or Countrywide serviced loans and no mortgage insurance on their current loans.

The bank said additional customers will be served “as systems become operational.”

In the next two weeks, the company expects to begin offering trial loan modifications under the Treasury Department’s “Home Affordable Modification” program, and has extended its foreclosure moratorium on potentially eligible loans until April 30.

Bank of America, since snatching up former top mortgage lender Countrywide Financial, services roughly one out of five mortgages in the United States.

I’ve been told by my friends in the industry that Bank of America has been offering mortgage rates much lower than the competition, effectively pricing out them out in the process.

The company is also planning to roll out a jumbo mortgage program focused on loan amounts between $730,000 and $1.5 million, with 30-year fixed mortgage rates beginning in the upper five-percent range.

Apparently there are profits to be made in mortgage.

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.


Wells Fargo Hired 5,000 Employees to Handle Mortgage Workload

Last updated on August 9th, 2013


San Francisco-based bank and mortgage lender Wells Fargo reportedly hired 5,000 employees to handle its ever-increasing mortgage workload, according to Bloomberg.

Wells Fargo CFO Howard Atkins said in an interview that the bank increased staff over the past couple of months to process its record haul of mortgage applications, which made it the top mortgage lender over Bank of America/Countrywide.

The company originated $101 billion in first mortgages during the first quarter, more than double the $50 billion in the fourth quarter and nearly half the $230 billion for all of 2008.

The correspondent/wholesale channel contributed $49 billion to that, practically double the levels seen in earlier quarters; home equity lines and loans, however, totaled just $1 billion.

All those applications led to the best mortgage origination quarter since 2003, contributing to the company’s record $3.05 billion net income in the first quarter.

But what happens once mortgage rates rise and refinance dries up, pushing volume back to more historical levels?

Sure it’s great that the bank took on thousands looking for work, but it seems to be only temporary employment.

And it’s wonderful that they’re upping their fulfillment areas, but what about staff in the company’s loss mitigation department?

“We remain focused on proactively identifying problem credits, moving them to nonperforming status and recording the loss content in a timely manner,” said Chief Credit Officer Mike Loughlin in a release.

“We’ve increased and will continue to increase staffing in our workout and collection organizations to ensure these troubled borrowers receive the attention and help they need.”

I doubt they’ve hired many employees in their workout and collection units, as they seem pretty focused on bringing in all those new mortgages with the low mortgage rates.

Shares of Wells Fargo were up $1.24, or 6.59%, to $20.05 in midday trading on Wall Street.

(photo: jasontester)

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.


Obama Urges Americans to Refinance Mortgages

refinance now

During a Housing Refinance Roundtable today, President Obama urged homeowners to take advantage of the record low mortgage rates currently on offer.

He made the remarks while sitting with a number of families who were able to refinance their mortgages after struggling with unaffordable mortgage payments (what about all those who are too far underwater or hold jumbo loans?).

“What you’ve seen now is rates are as low as they’ve been since 1971,” Obama said. “Three-quarters of the American people get their mortgages through a Fannie Mae-Freddie Mac qualified loan.”

“And as a consequence of us being able to reduce the interest rates that are available, we have now seen some extraordinary jumps in the rate of mortgage refinancings.”

“We’ve already seen a substantial jump — 88 percent increase in refinancings over the last month. We’ve seen Fannie Mae refinance $77 billion of mortgages in March, which is their highest volume in one month since 2003. And rates on 30-year mortgages have dropped to an all-time low of 4.78 percent.”

He noted that the families who accompanied him at the event were able to achieve more sustainable monthly mortgage payments via refinancing, and estimated that the average family could save $1,600 to $2,000 a year if they took advantage of the offers currently on the table.

“So the main message that we want to send today is, there are 7 to 9 million people across the country who right now could be taking advantage of lower mortgage rates.”

He added that the Administration is also working to implement some “additional phases of the program,” such as its loan modification program for “responsible homeowners who made their payments” but fell behind because of job loss, sickness, etc.

“The main message we want to send today is, is that the programs that have been put in place can help responsible folks who have been making their payments, who are not looking for a handout, but this allows them make some changes that will leave money in their pockets and leave them more secure in their homes.”

Obama plugged the website several times throughout his address to ensure homeowners actually knew where to go to get help.

He also warned against loan modification scams, urging homeowners to steer clear of companies that demand money for services upfront.

I’m somewhat curious if we’re helping the banks/mortgage lenders more than the homeowners here because private label mortgages seem to be at the root of the problem, not Fannie/Freddie loans.

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.


MBA Ups 2009 Mortgage Forecast by $800 Billion


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.


Senator McCain Unveils Mortgage Refinance Plan


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.


FHA Short Refinance Option Coming Soon


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.


Rate and Term Refis Reduce Mortgage Payments by Billions

Last updated on November 30th, 2011


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.


FHA Short Refinance Program Has Resulted in Only 15 Refis

Last updated on January 25th, 2018


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.


Is the Refinance Boom Finally Over?


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.