Whether it is homeowners seeking a mortgage to buy a house or business bosses looking for commercial mortgages, it would seem that it is important to get some advice on the subject.
Catherine Hearnden, director of independent financial advice group MyMortgageDirect, said that "there are so many deals out there" to choose from.
She suggested that there are many elements to consider when trying to secure a mortgage such as looking for the best rate, as well as the most suitable "combination of rate, fees, how interest is charged [and] whether you can make overpayments".
Ms Hearnden also indicated that some mortgage holders will have benefited from the low interest rates this year.
The Bank of England's monetary policy committee brought the cost of borrowing down to 0.5 per cent in March 2009 - a record low - and it has remained at this level for the last six months in a row.
Find out more on our commercial mortgages and how we can help you achieve your aims - enquire online.
source: http://www.mortgagesforbusiness.co.uk/news/detail/Seek_advice_before_choosing_mortgage/4361/65.aspx
If you've never bought a home before, when you first start shopping for a mortgage it might seem like the obvious way to choose a lender is to pick the one that offers the lowest interest rate. After all, the interest rate on your mortgage will affect both your short-term and long-term financial well-being because it will determine your monthly mortgage payment and the total amount you'll pay for your home.
Little Things Make a Big Difference
Consider this example: Take out a $200,000, 30-year mortgage at 6.5% interest and you'll pay $1,264.14 a month and $455,090.40 (plus your down payment) over the life of the mortgage. Take out that same 30-year mortgage at 5.5% and you're looking at a mortgage payment of $1,135.58 and a total cost of $408,808.80, or a savings of $128.56 a month and $46,281.60 over 30 years. Even small differences in interest rates, like 6.5% versus 6.2%, can make a big difference. In this case, the 6.2% mortgage rate would save you $39.20 a month and $14,112 over 30 years.
However, taking out a mortgage is a major financial decision, and one that, especially for first-timers, is fraught with potential pitfalls. Just as you consider more than just the sticker price when you shop for a car because factors like safety, fuel economy and reliability are also important, interest rate is only one thing you should consider when shopping for your mortgage. (Learn more about finding the right mortgage in Shopping For A Mortgage.)
Why Low Interest Rates Aren't Always a Bargain
Here are some of the other factors you should consider and why they matter.
1) Teaser Rates
These attractively low advertised interest rates are often just a way to get you in the door. The truth about mortgage rates is that they change multiple times a day. If you contact a lender based on a rate they've advertised, the odds of you actually getting that rate are slim.
2) Fees
There are many costs associated with taking out a mortgage besides the interest rate, like closing costs. Just as the grocery store tries to get you in the door by advertising a gallon of milk for $2 but then wants to charge you $5 for the cereal to pour it on, a bank might advertise a lower interest rate than its competitors but then expect you to pay double the closing costs you might pay elsewhere. Points are another area where lenders can make up for low interest rates by charging borrowers higher fees. However, information on fees isn't likely to be available up front - the only way to find out about these costs is to talk to a lender and have them prepare a good faith estimate for you. (Learn more about avoiding extra fees, read Watch Out For "Junk" Mortgage Fees.)
3) Type of Loan
What type of loan you qualify for will affect your interest rate. That great mortgage rate that you see advertised might be for a 15-year fixed conventional mortgage, but your income and savings might only qualify you for a 30-year fixed FHA mortgage, which will have a higher interest rate and a higher long-term cost. (Read Understanding FHA Home Loans to learn more.)
4) Location
Where you live also impacts mortgage rates. One of the first questions any lender will ask you is the zip code where you plan to purchase property. The national average might be 5.41% on a 30-year fixed, but the average rate in New York City might be 5.49% while the average rate in San Francisco might be 5.33%.
5) Credit Score
The best advertised rates only go to borrowers with the best credit scores. The further below 720 your credit score is, the less likely you are to get a rate similar to the advertised rate.
6) Lending Institution Reputation
Just because you've never heard of a particular lending company doesn't mean that it's up to no good, and just because it's a nationally recognized name doesn't always mean it's a safer choice. Regardless of the lender you're considering, do some research to determine how likely you are to get a fair deal when working with that company. The lender who advertises the best rates is not always a lender who will give you a fair deal.
7) Loan Representative
At least as important as your choice of lending institution is the specific person you work with in that company. Unscrupulous people can work for stellar companies, and people who always put their customers' best interests first can work for shady institutions. This is why the specific person who handles your mortgage for you needs to be someone you trust. Whether this person is competent and ethical in qualifying you for a mortgage, selling you a particular mortgage product, and preparing your mortgage paperwork will have a major impact on your life.
Just ask the people who ended up with mortgages they didn't understand and ultimately couldn't afford and today have foreclosures blemishing their credit reports and are back to renting or even living with relatives to get by. They all probably wish they had looked at more than just the interest rate when they took out their mortgages. (What looks like a good deal often amounts to hidden costs. To learn how to find and avoid them, read Score A Cheap Mortgage.)
Conclusion
Mortgage rates change multiple times a day, and they vary depending on your geographic location, the type of loan you want and your credit score. Perhaps most importantly, they don't tell the whole story about the cost of a loan. A mortgage lender might advertise a great rate, but charge a ton of money in closing costs, or promise a borrower great terms, but then present different numbers in the paperwork at closing when emotions are running high and time is of the essence. Looking at the whole loan package, not just the interest rate, will help you get the best deal.
source: http://www.kvbc.com/Global/story.asp?S=10876571&nav=menu107_11_3_2
Newswise — If you want to know how much debt a corporation is willing to take on, take a look at the CEO’s personal finances.
A new study finds that corporations with higher levels of debt tend to have CEOs who also owe more on their own homes.
Firms whose CEOs have home mortgages have about 4 percentage points more debt than do firms whose CEOs do not take out a mortgage to finance their primary personal residences. The results suggest that the personal attitudes of CEOs toward debt have a strong effect on their firms’ financial decisions.
“It’s not just the characteristics of the firm or the industry that determine a company’s debt choices. Our findings suggest that you have to also look at the personal characteristics of the CEO to fully explain these financial decisions,” said Anil Makhija, co-author of the study and Rismiller Professor of Finance at Ohio State University’s Fisher College of Business.
While other studies have shown how a CEO’s personal characteristics shape management styles and some financial policies at a firm, Makhija said this is the first research to show how CEOs’ personal preferences can impact debt use -- one of the most important financial decisions made by a firm. Past studies have ignored the personal debt preferences of CEOs in explaining the use of debt by firms.
Makhija conducted the study with Henrik Cronqvist, professor of economics and finance at Claremont McKenna College, and Scott Yonker, a graduate student at the Fisher College. The study is available as a working paper at the Social Science Research Network, the Dice Center for Research in Financial Economics website, and other places.
The researchers started by looking at the CEOs of the largest U.S. firms – those leading the S&P 1,500. They then used several public data sources to collect information on the CEOs’ primary residences and mortgages.
They ended up with a sample of 1,351 CEOs. This data provided an interesting snapshot of the lifestyles of the country’s top CEOs. Results showed that the average CEO bought his or her home for $1.65 million in 2005 home price dollars. The average house was 5,180 square feet, had four bedrooms, and about 11 rooms in total.
Results showed that 67 percent of the corporate leaders used a mortgage when they purchased their home, and that they borrowed an average of 66 percent of the purchase price – only somewhat lower than the U.S. average of 75 percent. How the CEOs financed their homes is an indicator of their tolerance for debt, a trait that is difficult to measure otherwise, Makhija said.
The researchers then compared how much debt the CEOs had on their homes with how much debt the firms they led had compiled.
They found a strong positive relationship between personal and corporate debt, even after they took into account a wide variety of factors that could affect either kind of leverage, personal or corporate.
For example they took into account house prices in the areas where CEOs purchased homes, interest rates, age of the CEOs and other factors. They also looked at characteristics of firms that can explain why they would take on more or less debt.
“Even controlling for all of that, we still find that that the personal traits of CEOs explain corporate debt,” Makhija said.
Of course, that fact isn’t necessarily bad if corporate boards of directors are choosing CEOs because of their personal views on debt, and with the expectation that they will follow those preferences at the company.
To test that theory, the researchers also looked at what happened when firms changed CEOs. They found that firms generally hired new CEOs that were similar to their previous leaders in terms of personal preferences for debt on their homes.
But when boards did select new CEOs that had different personal views on debt than did their predecessors, the firm tended to change its own debt structure in ways consistent with the new CEO.
“So when the new CEO seems to be more financially conservative based on his own personal leverage, the firm tends to reduce its corporate leverage,” Makhija said.
“It is possible that the new CEO was selected precisely to change the firm’s capital structure in this direction.”
However, the researchers also found evidence of another explanation: CEOs were more likely to imprint their own personal views on debt of the corporations they led when the firms had weak governance, meaning that the boards did not adequately control the actions of their leader.
The researchers defined boards of directors as providing weak governance when they didn’t provide strong incentive-based pay contracts for their CEOs, and when the boards were so large that individual members didn’t feel as responsible for decisions.
“When boards provide strong leadership, CEOs don’t have as much opportunity to let their personal views on debt – instead of only business reasons – impact their management of the firm,” he said. “But when the boards are weak, CEOs can push the firm in the direction of their own traits and preferences.”
Makhija said he was somewhat surprised by the results. Before conducting the study, he believed that CEOs who took on more debt risk in their personal lives would “hedge their bets,” in a sense, by being more conservative at work.
“We expected that CEOs with a lot of personal debt would try not to put their firms at risk by borrowing heavily,” he said.
Instead, the results show that debt tolerance seems to be a strong personal trait that carries over from a CEO’s personal life into his or her work life.
In that sense, the behavior is consistent with the well-known psychological phenomenon of avoidance of cognitive dissonance. In this case, that would mean CEOs try to avoid the discomfort from a conflict between personal and work attitudes towards debt –- aggressive in one and conservative in the other.
The results also show the importance that strong, individual leaders have on all aspects of a company.
“Our study suggests that we have to also look at the personal traits of CEOs, because they can tell us important information about the financial policies of the firms they manage. Past research has generally ignored these traits in explaining how firms are financed.”
source: http://www.newswise.com/articles/ceo-s-home-mortgage-explains-firm-s-use-of-debt
Has your short sale or loan modification been turned down and you have no idea why? Let's examine some of the reasons. These reasons may not make you feel any better or maybe they are just excuses by your lender, however there are a few things you may not even know about your loan. loan modifications short sales
Let's say that you make your mortgage payment to Wells Fargo. You can no longer handle your payments so you ask Wells Fargo to modify your loan- to do a loan modification for you. You are behind in your payments. You are in fact, in foreclosure but you are still living in your home and the judge in your case has not ordered the sale of your home at auction yet. You are scared. You see your neighbors losing their homes all around you. You are hopeful because you see on the news and in the newspapers that the Federal Making Homes Affordable Program has been helping some folks keep their home and get a loan modification.
You are no longer making your mortgage payment because your adjustable rate has been applied and your mortgage payment has gone from $1600 a month to $2300 per month. You just can not make these payments. You have been trying for almost 2 years now to get Wells Fargo to approve your loan modification. You even hired an attorney to help you with your foreclosure defense.
Wells Fargo turns down your loan modification request. You wonder, how could this be? After all, Wells Fargo is one of the large lenders and is participating in the government's Federal Making Homes Affordable program.
But Wells Fargo tells you that the investor is the one that will not allow you to get a loan modification. What in the world is an investor doing making decisions on your loan you wonder. Well, you are not alone in your confusion. Every day we are explaining the whole mortgage note owner thing to buyers agents, real estate agents and homeowners.
Just because you make your house payments to Wells Fargo does not mean they own that note that you are paying on. They are the servicer. Other words you will hear them called are asset management companies.
The very first thing you need to do before you ask for a loan modification is to find out who actually owns your note. You can do this by calling who you make your mortgage payments to and asking them.
If it is Freddie Mac or Fannie Mae that own your note- you have a much better chance at getting your loan modification approved if you qualify. If it is a private group of investors, your chances go way down. Why would this happen?
One in eight homeowners' loans were sold to investors on Wall Street. What happens is that a bunch of loans are packaged together. These are called mortgage-backed securities. They are then sold off to investors. Homeowners who have mortgage-backed securitized loan are five times more likely to be late on their house payments. Many of these borrowers were given loans they were not qualified for from the beginning. Many of the homeowners getting these loans did not read the fine print and did not realize how high their mortgage payments might go when adjusted.
The rules to allow modifications, short sales and terms of foreclosures and deficiencies are ambiguous at best. Homeowners who are told no by the investor have little recourse.
The federal Making Homes Affordable program lenders who participate in the program must modify all homeowners that qualify. The exception is when the investor has a rule that they do not allow modifications.
The Federal Housing Finance Agency reported to Congress on June 3rd that these securitized mortgages are a "hurdle" to the success of the Making Homes Affordable program. The treasury department has not disclosed why the modifications are denied so there are little to no facts to go on.
Why would the investors say no to your loan modification? Well, Wells Fargo's response is that the investors need their money. Wells Fargo has one situation where the borrowers ( the homeowners) are trying to get their loan modified but Goldman Sachs is the issuer and Deutsche Bank is the trustee. But when you go and talk to these investors and we have on several occasions when doing short sale negotiations for our sellers; the investor passes the buck back to the servicer. For instance, Deutsche Bank says that Wells Fargo is solely responsible for the decision to modify a loan or not.
Some people say that the investors are the scapegoats. Everything can easily be blamed on them. Since you rarely get to speak to anyone at the investors' group it is hard to tell who is telling the truth. In this particular situation Wells Fargo is saying that the investor is not forgiving the past due debt and that makes the payment go up on a loan modification because then Wells Fargo would have to put that past due balance along with all the penalties and fees into the loan modification which then may cause the homeowner to not qualify financially for the loan modification.
Servicers have agreements, contracts that they sign with investors. These agreements contain the rules for modifications. These agreements are called Pooling and Servicing Agreements which is known as PSA's. The PSA is most often what the servicer says is the reason for them not being able to do the loan modification or release the deficiency on a short sale.
But when you talk to other people in the management areas or to the investors they claim that there is nothing in the PSA's that would prevent the servicer from approving loan modifications, short sales and releases. There is a new study coming out from a law school wherein they state that only 8% of these mortgage-backed securities agreements contain any language that says the servicer is not allowed to do a loan modification for these notes. That means that about 92% of all the NO's; could actually be YES's. So why would that even happen?
loan modifications short sales Fear of law suits! The language in the PSA in question here, Wells Fargo and Deutsche Bank- it says that Wells Fargo can "waive, modify or vary any term" as long as Wells Fargo as the servicer makes a "reasonable and prudent determination" that the modification is in the investor's best interest. Attorneys examining these agreements say there is quite a bit of room for servicers to make these decisions. But the language itself in this agreement is enough for the servicers legal counsel to be concerned with the investor suing them for not acting in the best interest of the investor. They can not, no matter how inhumane this sounds, put the homeowner ahead of the investor. This is about business and if they want business from investors they need to make sure they are looking out for the interests of the investors.
The treasury department has stated that the fear of law suits is the biggest deterrent to getting the servicers to approve loan modifications and short sales. So doing little or simply turning down the loan modifications are the answer many servicers choose. This is not personal and this is not against you, the homeowner. The position of the servicers is to watch their own backs and to protect the assets to which they have been entrusted with, your mortgage-backed security. The Treasury Department says they can relieve some of the pressure of the fear of lawsuits by standardizing requirements for loan modifications and also provide some type of calculation to figure out if the investor will make more money by the loan modification or by the foreclosure.
We need to keep in mind one big thing in all of this and that is that these investors end up being regular people because most of these mortgage-backed securities were bought by pension funds and retirement plans of folks like your parents or even yourselves. You may well be one of the shareholders of the very loan you can not pay.
source: http://activerain.com/blogsview/1239128/is-your-short-sale-or-loan-modification-being-turned-down-
Sept. 9 (Bloomberg) -- Bank of America Corp. and Wells Fargo & Co., among the worst performers of banks in the U.S. government’s main foreclosure prevention plan, stepped up their pace of mortgage modifications by at least 60 percent in August.
Bank of America more than doubled its number of modifications started through the Making Home Affordable Program to 59,891 in August from July, while Wells Fargo improved by 64 percent to 33,172, the U.S. Treasury said in a report today from Washington. Overall, 47 banks have begun 360,165 modifications through the program, up from about 235,247 in July.
Wells Fargo and Bank of America, which have taken a combined $70 billion in taxpayer-funded aid, had been criticized by lawmakers for not doing enough to offer assistance to struggling homeowners. The banks have cited the time needed to boost staffing in loan servicing departments and government delays in distributing information about the program.
“A lot of our momentum pickup is working with those customers we had already made offers on, making sure they were aware of the offer and converting those offers into trial starts,” Steve Bailey, a Bank of America home retention strategies executive, said in an interview yesterday.
Bank of America’s modification pace may quicken as the Charlotte, North Carolina-based bank accounted for about 22 percent of the 571,354 modification offers made to borrowers, though not all started, through the program. San Francisco-based Wells Fargo accounted for about 13 percent.
Capacity and Transparency
Bank of America and Wells Fargo still lag their peers including JPMorgan Chase & Co. and Citigroup Inc. As of August, Bank of America had started modifications on 7 percent of its eligible loans. Wells Fargo was at 11 percent. Citigroup’s rate was 23 percent, while JPMorgan’s was 25 percent. The best performer among servicers that had at least 100 qualifying mortgages was Morgan Stanley’s Saxon Mortgage Services, which had begun trials for 39 percent of its 73,694 eligible loans.
The Treasury said today that the program has been more successful than any other foreclosure relief effort for “at- risk borrowers.”
“Nonetheless, we recognize that challenges remain in implementing and scaling up the program,” Michael Barr, the Treasury’s assistant secretary for financial institutions said in written testimony to the House Financial Services Committee panel on housing. “We are focused on addressing challenges in three key areas: capacity, transparency and borrower outreach.”
Millions of Foreclosures
Barr said the Treasury has asked loan servicers to expand call centers, add more staff than planned, increase training and to allow borrowers to escalate complaints, among other things.
The program won’t be able to help everyone, Barr said. “Even if HAMP is a total success, we should still expect millions of foreclosures, as” President Barack Obama said when he announced the program in February, Barr said.
Eligible loans under HAMP are those originated prior to 2009, where the owner is “at risk of imminent default” and the underlying property is owner occupied and conforms to Fannie Mae and Freddie Mac loan limits, which can be as high as $729,750 in some areas. The data excludes Federal Housing Administration and Veterans Affairs loans.
‘Besieged With Volume’
“The servicers are still besieged with volume,” said David Sisko, the head of default management services for Deloitte & Touche LLP.
Molly Sheehan, a senior vice president for JPMorgan’s home lending business, told the panel that her company has made progress by hiring more people and investing in technology.
“We believe that the industry as a whole is making significant capacity investments like those made by Chase to provide assistance to as many families as possible,” she said.
The program requires banks that received federal aid from the Treasury’s Troubled Asset Relief Program, or TARP, as well as mortgage-finance companies Fannie Mae and Freddie Mac to lower monthly payments for borrowers at “imminent risk” of default. Banks can lengthen repayment terms, lower interest rates to as low as 2 percent and forbear outstanding principal, among other methods.
The Treasury numbers released today doesn’t include redefault rates on the HAMP modifications.
“A lot of these loans shouldn’t have been made in the first place,” Sisko said. “The issue really comes down to how many are going to be successful.”
Unemployment Rate
Government-controlled mortgage-finance company Fannie Mae reported last month that 41 percent of the loans it modified in the fourth quarter, before HAMP was implemented, were still current or had been paid off.
“With unemployment still near 10 percent, even the most ambitious loan modification program will not be able to assist borrowers who have no ability to make a reasonable mortgage payment,” Jack Schakett, a credit loss mitigation strategies executive at Bank of America, said in written testimony to be delivered today to the House subcommittee.
The U.S. jobless rate in August jumped to 9.7 percent, the highest since 1983, and employers cut another 216,000 jobs, highlighting threats to consumer spending.
Mike Heid, co-president of Wells Fargo Home Mortgage, said the program is too new to calculate meaningful success rates and that previous redefault rates may not apply.
“The last couple of months the vast majority of mods all have payment decreases,” Heid said in an interview today. “So historic redefault rates really are no longer appropriate given that the type of mod that’s getting done is just very, very different than it used to be.”
Obama announced the programs in February, and final criteria for administering the modifications on loans owned by Fannie Mae and Freddie Mac were released in April. Specific program guidelines for loans owned by other investors were provided in June, and the Treasury later gave new details for loans backed by the Federal Housing Administration.
To contact the reporter on this story: Dawn Kopecki in Washington at dkopecki@bloomberg.net.
source: http://www.bloomberg.com/apps/news?pid=20601087&sid=alOtDve_vu1s
SALEM, Ore. (AP) -- Attorney General John Kroger has won a federal grant to help prosecute mortgage fraud as part of his effort to help Oregonians stay in their homes.
Kroger said people threatened with losing their homes during a recession often get desperate, putting them at risk for fraud.
(kgw.com Graphic)
Kroger said the grant will fund one new prosecutor and one new investigator to coordinate Oregon Department of Justice prosecution of mortgage fraud cases.
The attorney general's office has opened nearly a dozen mortgage fraud and foreclosure scam investigations in the past year, including several criminal cases.
source: http://www.kgw.com/business/stories/kgw_090909_mortgage_fraud_grant.162efad02.html
The irony-meter at Anfield is plainly on the blink if an email sent out to Liverpool fans earlier today is anything to go by.
"Be in with a chance of winning a fabulous prize when you get a quote for a Liverpool FC Mortgage!" it declared.
"Get a Liverpool FC mortgage quote for your home and you could win an amazing trip to Liverpool FC's home, Anfield."
Given the ongoing failure of the Reds' attempts to move home, it remains to be seen exactly how many supporters will be signing up with Messrs Hicks and Gillett to finance their own house move.
Indianapolis - The fund designed to help Indiana's unemployed is bankrupt, and it's a problem that must be fixed. That effort is underway right now.
Earlier this year, the Indiana House of Representatives passed bill number 1379 to help pay for the fund that issues checks to unemployed Hoosiers. But now a summer study committee is reporting that there is a problem. The federal government says part of the bill which requires compliance centers is non-conforming. That means Indiana must adjust its plan before the law goes into effect next year.
The state has already borrowed $1.1 billion to meet payments. By the end of 2010 it will be up to $2.7 billion.
"Federal law provides that we would continue to pay benefits as we go into bankruptcy. We would borrow a loan from the federal government and Indiana right now is at $1.12 billion. That's the current drawdown that we've got on the fund. That number has pretty much been steadily increasing the borrowing with the exception of a short time where I think it ticked up barely when we saw the first quarter tax receipts. It's the largest tax receipt of the year so we wouldn't expect that to happen again," said Josh Richardson, Indiana Workforce Development.
The Indiana Department of Workforce Development said Wednesday that the state had been expected to stop borrowing from the federal government by 2012. But newer, less optimistic unemployment projections predict it will now be 2015 before the state can stop borrowing, and then it will take several more years to pay back the federal loans. The state wouldn't start paying interest on the loans until 2011.
"The picture is much worse," Richardson said.
Indiana has been paying out hundreds of millions of dollars more in jobless benefits than it has been taking in through taxes. The tax increase on employers is expected to raise about $300 million in additional money each year to help turn the fund around.
But the federal government plans to begin charging interest on the state's loans in 2011, and can begin raising federal taxes on employers that year that would compound annually until the loans are repaid.
State Rep. Russ Stilwell, D-Boonville, said the unemployment bill passed this year was not designed to fix the problem immediately.
"It's a fix that stops the bleeding and hemorrhaging, and it's still going to bleed," he said. "We were very clear about that. It's a long-term black hole."
Indiana is not alone. Currently 21 states and territories including Indiana are borrowing from the federal government. The current debt is $14.3 billion. By the end of the recession it is anticipated that 33 states will borrow at total of $50 billion.
source: http://www.wthr.com/Global/story.asp?S=11099200
The lowest mortgage rates in 3 months had US consumers clamouring for home loans last week even as the government said on Wednesday it expected millions more foreclosures.
The Treasury Department followed up with a report saying only 12 per cent of US homeowners eligible For loan modifications under the Obama administration's housing rescue plan have had their mortgages modified.
Survey shows US recession may be over
US job openings fall to lowest level in 9 years
But aside from the mixed picture on housing, the Federal Reserve said the overall economic situation was improving in spite of weakness in the housing and labor markets, while Treasury Secretary Timothy Geithner added that the economy was starting to grow again.
The housing market has been showing signs of stabilization in recent months, with sales on the increase and home price declines moderating in many regions of the country. In fact, home prices in some areas have risen.
Mounting foreclosures could mean another leg down for home prices and perhaps send the sector into a vicious cycle, analysts say.
The Treasury said 360,165 people had their monthly payments reduced through August, up from 235,247 through July, but a senior Treasury official conceded much more must be done to soften the impact of a severe and prolonged housing crisis.
"The recent crisis in the housing sector has devastated families and communities across the country and is at the center of our financial crisis and economic downturn," Michael Barr, assistant Treasury secretary for financial institutions, told a House of Representatives Financial Services subcommittee.
But the housing crisis is showing signs of easing. The Federal Reserve's Beige Book survey said most regions reported some improvement in hard-hit residential real estate markets.
And US mortgage applications surged last week to their highest since late May as consumers sought to take advantage of the lowest interest rates in months, data from the Mortgage Bankers Association showed.
The MBA said rates on 30-year fixed-rate mortgages tumbled to a 3-month low, spurring a surge in demand for home refinancing loans. Applications to buy a home, a tentative early indicator of sales, also climbed, hitting their highest since early January.
Low mortgage rates, high affordability and the government's $US8000 tax credit -- part of the economic stimulus bill -- for first-time home buyers have helped pave the way for stabilization.
"CAUTIOUSLY POSITIVE"
The Fed report said half of Federal Reserve districts saw evidence the US economy had improved by the end of August, although labor markets remained weak and retail sales were flat overall.
"Most districts noted that the outlook for economic activity among their business contacts remained cautiously positive," the Fed said.
But it also said there was still downward pressure on housing prices, and that business people in some areas believed recently higher vehicle sales levels were likely not sustainable after the government's "cash for clunkers" incentive program lapses.
Geithner, however, said the government's efforts to help the financial sector were paying off and helping the overall economy.
"The economy is now growing again. We've seen the cost of credit start to come down. Banks are repaying the investments the government had to make in them with a significant... return," he said during a speech at Syracuse University in New York.
"We are going to keep at this until we fix it --- until we get it back on track," he added.
source: http://www.businessday.com.au/business/world-business/us-home-loan-demand-rises-despite-foreclosures-warning-20090910-fhux.html
CNN Money reports today that 12% of eligible borrowers have been placed into trial loan modifications, up from just 9% a month ago. This comes from the second progress report issued by the government, which also says that 360,165 homeowners — who were at least two months behind in payments — received assistance through August. The goal of Obama’s Making Home Affordable Loan Modification program is to have 500,000 loan modifications under way by November 1.
The loan modification initiative was announced in February, began accepting applications in April, and is projected to help up to 4 million homeowners. The plan calls for servicers to reduce monthly payments to no more than 31% of a mortgage holder’s pre-tax income.
There are now 47 servicers participating in the program, and, though the performance of the providers has been all over the map, Bloomberg News reports banks are stepping up loan modifications. The administration is releasing monthly servicer performance reports in an effort to hold the institutions responsible for their performance and so the public will be able to see which institutions are lagging. Many borrowers have complained that servicers are not responding to their calls and applications, and that they are denied without explanation.
Even with all the efforts to refinance, the number of people falling behind on their payments continues to mount as unemploument rises.
source: http://www.zillow.com/blog/obama-loan-modification-plan-gets-closer-to-the-goal/2009/09/09/
Last week I got my first peek at the new Good Faith Estimate all lenders will be required to use by the Department of Housing and Urban Development after January 1st, 2010. It is a tremendous improvement over what we have now. They're not even in the same ball park! It is so good, in fact, that I predict the quiet rumblings of criticism I've heard within the industry will grow louder. Why? Because this is one of those rare, government mandated documents that actually and truly helps the people it purports to help: the borrowers! This is not good for those lenders that rely on borrowers' gullibility and ignorance as a crucial aspect of their business model.
A quick overview: the new Good Faith Estimate is three pages long. Within those three pages borrowers will find these helpful sections:
* Important Dates showing how long the rate and terms of the offered loan are valid and the terms of the rate lock.
* Summary of your loan including term, rate, amount, whether it is adjustable, negatively amortizing, subject to a prepay penalty and so on.
* Escrow Account explanation and information.
* Summary of Loan Charges in plain black and white.
* Origination Charges revealing fees charged directly by the lender.
* Other Settlement Charges making clear third party fees not quoted by or given to the lender.
* Instructions clearly explaining which charges cannot increase at closing as well as any limits on increases for those charges that can change at settlement.
* Trade-off Table wherein the lender compares how the payment (rate) and closing fees move in opposite directions for the same loan as the rate moves higher or lower than that quoted.
* Shopping Cart giving borrowers an organized way to compare lenders.
This new Good Faith Estimate is transparency on steroids! Take a look again at those last two items: a Trade-off Table and a Shopping Cart. Lenders like Brian Brady and myself have been providing this kind of understanding for years. We've spent hours explaining the concept of rates vs. costs to borrowers who are often misled by other lenders and even the industry in general. I can not count the number of times I've heard a client remark to one or both of us, "Gee, no one's ever told me this before." I guess we can expect to hear that a lot less often.
I also expect an even greater share of business to come our way. For a number of lenders out there, this new Good Faith Estimate means their model for doing business is going to change. That benefits the borrowers (obviously) but it also benefits those of us who have been doing this all along. As a matter of fact, I am going to start using this new Good Faith Estimate now, along side the older one. Why wait until January 1st, 2010? This is the clearest explanation of fees I've seen yet and it will only serve to educate our customers. As Brian is fond of saying: "An educated customer is our best customer."
source: http://delmar.typepad.com/brianbrady/2009/09/new-good-faith-estimate-debuts-january-1st-2010-but-why-wait.html
Over the past few weeks, a full-blown price war has erupted in the home-loan sector. Right from the moment one bank reduced its home loan rates to about 8 per cent, others have been forced to follow suit. So where does this leave you, the borrower?
Well, in a fairly comfortable position really, because who doesn’t want to benefit from cheaper home loan rates. However, while these low rates are tempting, we would caution borrowers to understand all aspects of cheap home loan rate schemes and the process associated with it, and suggest a few useful tips to think about when considering a home loan.
First of all, remember that these recently announced low rates are only for new loans, and not for existing loans. But whether you are a fresh borrower or an existing one, you want to take advantage of the new lower-rate environment. So let’s take each of these two cases starting with existing borrowers.
If you are an existing borrower
If you took a home loan in the last few years, chances are that you pay a rate close to 10 per cent. Now that rates have fallen to close to 8 per cent you are probably wondering what you can do to save money. Most rational people would like to “refinance” their more expensive home loan to something cheaper, as long as it makes economic sense to do so, i.e., the cost of the refinance is not expensive.
This process of refinance is known as balance transfer — you transfer your outstanding home loan balance from one lender to another. The way it works is that the new lender pays your old lender the money outstanding on your loan. Your obligation for repaying the outstanding amount is now towards the new lender.
source: http://www.indianexpress.com/news/what-lies-beyond-the-teaser-rate/513712/
Half of all fixed rate mortgages now charge arrangement fees which are based on the amount of money customers borrow, research showed today.
The proportion of providers charging a percentage fee has risen by 14% during the past year to 49% of all fixed rate deals, according to financial website MoneyExpert.com.
The fees vary from just 0.4% of the mortgage size to as much as 2.5%, with an average fee of 0.89%, or £1,335 on a typical mortgage of £150,000.
But for people borrowing larger sums the fees can run into thousands of pounds, with a homeowner taking out a £250,000 mortgage with a 2.5% fee paying £6,250.
Only 4% of fixed rate mortgages with a percentage fee have a cap on the amount borrowers have to pay.
Among lenders who levy a fixed fee regardless of the amount being borrowed, the average amount charged has fallen during the past year, dropping from £860 to £790.
However, the reduction is largely due to lenders introducing low fee or fee-free mortgage ranges, which offset the lack of an arrangement fee by charging higher interest rates.
Only one mortgage had a fee of between £100 and £200 12 months ago, but today 49 different products have a fee of this level.
But the highest fixed fee charged has soared by 25% during the past year, rising from £1,999 in September 2008 to £2,499 now.
Pierre Williams, head of research at MoneyExpert.com, said: "Borrowers looking for a mortgage focus on rate, but fee has to be a consideration particularly when these can run into thousands of pounds. All too often we forget about the fee by rolling it straight into the loan.
"Fees are often linked to loan to value ratios and anyone without a significant amount of equity in their house can expect to pay a hefty fee."
Meanwhile, research by financial information group Moneyfacts.co.uk found that the average cost of a two-year fixed rate mortgage has increased by 0.31% to 5.15% since March, when the Bank of England base rate was cut to a record low of 0.5%.
The rise comes despite swap rates, upon which the deals are based, falling during the same period.
But the average cost of a two-year tracker deal has reduced slightly during the same period, dropping by 0.14% to 3.72%.
There has also been an increase in the number of different mortgages available for people with smaller deposits, with the number of 90% loan to value loans rising by 17 to 106, while there are 80 more 75% LTV deals, giving a total of 509.
Competition appears to be slowly returning to the mortgage market, with a number of lenders reducing the cost of their mortgages during the past week.
HSBC launched a discount mortgage of just 1.99% last week, which went straight to the top of the best buy tables, while Cheltenham & Gloucester, part of the Lloyds Banking Group, and Barclay's lending arm the Woolwich also reduced some of their rates.
They were followed yesterday by first direct, which launched a market leading offset tracker mortgage of base rate plus 2.29%, giving a current rate of 2.79%, and nationalised bank Northern Rock reduced the cost of some of its fixed rate deals by up to 0.4% and introduced a two-year tracker.
Michelle Slade, spokeswoman for Moneyfacts.co.uk, said: "All is not lost for borrowers as competition slowly seems to be returning to the mortgage market.
"The number of mortgages available is slowly increasing and the launch of the sub-2% HSBC deal will hopefully spur other lenders on to reduce rates and bring much needed competition back to the market."
source: http://www.24dash.com/news/Housing/2009-09-08-Half-of-all-fixed-rate-mortgages-charging-arrangement-fees
| 29% |  | Up |
| 50% |  | Down |
| 21% |  | Unchanged |
Will rates rise or remain relatively unchanged? Experts and Bankrate analysts provide their insights.
This week (Sept. 3 - Sept. 9) the experts say: Rates probably are headed down. This week, half the panelists believe mortgage rates will fall over the next 35 to 45 days. Another 29 percent think rates will rise, and the rest believe rates will remain relatively unchanged (plus or minus 2 basis points).
| Experts' comments | Panel |
Inflation fears are overblown. While it is true that the Fed is printing an extraordinary amount of money, that extra money won't cause inflation until it is borrowed (new credit is created). Credit is being destroyed faster than the Fed can print money because consumers have neither the ability nor the inclination to take on additional debt. As these facts become more and more evident, deflationary concerns drive mortgage rates lower. If you missed out on the low rates of earlier this year, get ready, because this fall we may approach the lows in mortgage rates reached earlier this year. Michael Becker, mortgage consultant, Green Pastures Mortgage & Finance, Lutherville, Md. | down |
The economy just can't seem to stabilize regardless of the fact that many experts have declared the recession over. Rates are now nicely under 5 percent but who can qualify? One third of all homeowners are upside down on their mortgages and we have a very understated national unemployment rate in the 9 percent range. Jeff Lazerson, president, Mortgage Grader, Laguna Niguel, Calif. | down |
The daily tech has run its bullish course (higher prices, lower yields) and we should see higher Treasury yields and mortgage rates for 15 to 20 days. We may see a "bouncing along the ceiling" for a week or so as the techs top out and prices stay flat. Presumably that would happen if consequent to erosion in equity prices. This is not the end because the weekly remains bullish, as we should get another dip when the daily gains its bullish steam in about six weeks. Dick Lepre, senior loan officer, Residential Pacific Mortgage - SF, San Francisco | higher |
Seasonal trends push mortgage rates down. Dan Green, TheMortgageReports.com, Waterstone Mortgage, Cincinnati | down |
After sounding like a broken record for months now saying that rates would stay the same, we're starting to see some improvement. As the stock market struggles, we're seeing mortgage-backed securities testing new highs, and if they can remain at this level, we'll see improved mortgage interest rates. If you've been unable to refinance due to decreased property values, touch base with your mortgage adviser to see if one of the new 125 percent RefiPlus loans might work for you. David Kuiper, mortgage planner, First Place Bank, Holland, Mich. | down |
The 10-year is currently trading at 3.34 percent, which is down 35 basis points from two weeks ago. The inflation component is currently at 1.7 percent, which is also down from almost 2 percent earlier this year. ADP said the private sector lost 298,000 jobs -- 85,000 more than expected. It is now becoming clear to everyone that while things are evening out we are still a long way from real improvement as opposed to lessening bad news. Remember, we need job growth to get this all moving again. Mitch Ohlbaum, loan officer, Bank of America, Los Angeles | down |
Without notable market news or government intervention this week, consumers may turn to market analysis regarding the future direction of rates. Currently, the average mortgage rate is only 0.05 percent away from the record low of 5.19 percent. However, the high end of that scale is now slightly lower than before, at 5.53 percent. As we appear to have hit a resistance level within those numbers, we can expect rates to move up within that range between now and Sept. 23. Cameron Findlay, chief economist, LendingTree.com, Charlotte, N.C. | higher |
Even though rates are very low, I'm cautiously paying attention to how the market will react with the concerns of unemployment. If anything, there is a greater potential for rates to slightly increase from today's average. Mark Madsen, mortgage consultant, Raintree Mortgage, Las Vegas | unchanged |
I say unchanged, and one would tend to think that would equate to stability in pricing. I am not saying that. Last year in the month of October, we saw four runs in mortgage-backed securities pricing in excess of 400 basis points, up and down. This translates into rate swings of over 1 percent off the highs and lows. While I am not expecting a repeat, the fact that it happened cannot be lost on consumers that rates can change quickly. Lock when rates make sense and short term, these rates make a lot of sense. Jim Sahnger, mortgage consultant, Palm Beach Financial Network, Stuart, Fla. | unchanged |
| Bankrate's analysts | Panel |
Mortgage rates have pulled back, even as better economic news mounts. Don't wait too long to lock in. The recovery will be weak but the mortgage markets remain very dependent on the Fed's checkbook. Greg McBride, senior financial analyst, Bankrate.com | up |
I expect more of the same -- small changes on a week-to-week basis Holden Lewis, senior reporter, Bankrate.com | unchanged |
source: http://www.bankrate.com/finance/mortgages/mortgage-rate-trend-index8-132129.aspx
Taxpayers could foot bill for inflated valuations of assets in government’s protection scheme amid talk of potential ‘fraud’
Banks are significantly overvaluing assets to be included in the government’s insurance scheme, which could leave the taxpayer footing the bill for any shortfall, experts have warned.
Property loans – which will be part of the £575bn government’s asset protection scheme (APS) to ring-fence the most toxic assets of Lloyds Banking Group and Royal Bank of Scotland – will be dated as of the end of December 2008 although commercial real estate values have fallen by just over 10% since then, according to data from the consultancy Investment Property Databank.
Matthew Oakeshott, the Liberal Democrat Treasury spokesman, said: “The APS is a ticking time-bomb for the British taxpayer. These poisonous property loans must have an independent, up-to-date valuation in accordance with the Rics [Royal Institution of Chartered Surveyors] valuation ‘red book’ when taxpayers actually go on the hook.
“If not, the APS will be a fraud on the British taxpayer – just like someone insuring a car after it has crashed.”
Oakeshott is writing a letter to the chancellor, Alistair Darling, raising his concerns about what he called “taxpayers being stung in an APS cover-up”. According to him, Britain should follow the Irish government, which is contracting independent valuers to put a price on banks’ property loans before they go into a so-called “bad bank”.
Governments around the world have designed programmes to insure, protect or ring-fence toxic assets to help re-establish confidence in the financial system and encourage banks to start lending again. RBS is putting about £60bn of commercial property loans into the APS, out of a total £315bn of assets, while Lloyds’ property loans in the scheme mount to £90bn, out of an overall £260bn, according to Credit Suisse estimates.
Industry specialists say any insured asset should be priced as realistically as possible. David Lovett, managing director of the restructuring firm Alix Partners, said: “The assets to be transferred should be valued at the date of transfer; it has to be at that date to ensure there is an accurate assessment and the issue has been resolved.
“To have a valuation of any other date has the potential for distorting the claim and creating an over- or an underpayment for the claim,” he said.
The government and the banks, however, claim the valuation date goes back to the end of last year because that is when coverage of the losses started. The taxpayer will pay 90% of any losses suffered by the two partially nationalised banks after a first loss to be taken by the banks.
Ann Cairns, managing director at the restructuring firm Alvarez & Marsal, said: “If the government insured portfolios at today’s prices, the insurance would be less expensive for the banks, but the value of that insurance would be limited.”
The banks are paying a fee to the government for insuring their toxic assets and analysts differ over whether they will be forced to shoulder losses above that level. The government made a £25bn provision for APS-related losses in the budget.
Jonathan Pierce, of Credit Suisse, estimates that the two banks’ losses will not surpass the £32bn that the banks are paying the government in fees. However, he added: “This is highly sensitive to small changes in the proportionate loss rate because the amount of assets is so big and the length of time that the assets are covered.”
Future losses depend on whether the economy recovers quickly enough, with predictions also varying widely. According to CB Richard Ellis, a real estate consultancy, property prices may only increase by 5% to 10% over five years, short of the near-30% decline in value since the peak of the market. BNP Paribas forecasts a rise of about 30%.
Analysts complain that the scheme has so many uncertainties that it is difficult to predict any outcome. Final details are not yet ready, after months of negotiations following the initial announcement in February. A deal may be struck later this month, a source said. Lloyds is also having second thoughts about it and has been sounding out investors about an alternative rights issue.
Analysts agree that the announcement of the scheme helped calm the markets at a time when bank shares were in freefall. But since then, the design of the APS has been slow to take shape and has failed to re-ignite inter-bank lending, critics say. People and firms are still finding it difficult, or expensive, to access finance and encourage economic growth.
Simon Adamson, credit analyst at CreditSights, said: “Clearly, it has taken a long time to put together and there are still a lot of doubts about how and when. It helped to restore confidence to banks but in terms of stimulating lending, it doesn’t really seem to have achieved much.”
Oakeshott believes it would be better to be more realistic and take the pain right away. “Japan’s long agony in the 80s and 90s after a property price crash should teach us one single lesson – it’s far better to take the pain up front and move on than trying to hide overvalued property off balance sheet for years on end,” he said. “Our government must not sweep this £500bn problem under the carpet until after the election.”
source: http://www.world-biggest-news.com/banks-are-overvaluing-toxic-property-loans-experts-warn/