Dec
17
Colorado and Prepayment Fees
Filed Under mortgage, rates | Leave a Comment
From the Rocky Mountain News:
With foreclosures at record levels, a Colorado regulator has tackled prepayment penalties that can trap borrowers in costly mortgages.
The measure, which took effect Friday and was announced Monday, prohibits fees that extend past the dates loans are adjusted to higher interest rates.
Read the full story: Prepayment fees limited
Dec
6
These rates are freezing
Filed Under economy, mortgage, rates | 2 Comments
Five-Year Mortgage Rate Freeze Looms
Wednesday December 5, 8:42 pm ET
By Martin Crutsinger and Alan Zibel, Associated Press Writers
Bush Mortgage Plan Will Freeze Certain Subprime Interest Rates for 5 Years WASHINGTON (AP) — The Bush administration has hammered out an agreement to freeze interest rates for certain subprime mortgages for five years to combat a soaring tide of foreclosures, congressional aides said Wednesday.
The aides, who spoke on condition of anonymity because the details have not yet been released, said the five-year moratorium represented a compromise between desires by banking regulators for a longer time frame of up to seven years and mortgage industry arguments that the freeze should last only one or two years.
Another person familiar with the matter said the rate-freeze plan would apply to borrowers with loans made at the start of 2005 through July 30 of this year with rates that are scheduled to rise between Jan. 1, 2008, and July 31, 2010.
The administration said President Bush will speak on the agreement at the White House on Thursday and the Treasury Department announced that Treasury Secretary Henry Paulson and Housing and Urban Development Secretary Alphonso Jackson would hold a joint news conference Thursday afternoon with mortgage industry officials.
Treasury also announced there would be a technical briefing to explain more of the proposal’s details.
Paulson, who has been leading the effort to craft a plan, said on Monday that the program would only be available for owner-occupied homes — to ensure the break is not given to real estate speculators.
The plan emerged from talks between Paulson and other banking regulators and banks, mortgage investors and consumer groups trying to address an avalanche of foreclosures feared as an estimated 2 million subprime mortgages reset from lower introductory rates to higher rates.
In many cases, the higher rates will boost monthly payments by as much as 30 percent, making it very difficult for many people to keep current with their loans.
The plan is aimed at homeowners who are making payments on time at lower introductory mortgage rates but cannot afford a higher adjusted rate.
Through October, there were about 1.8 million foreclosure filings nationwide, compared with about 1.3 million in all of 2006, according to Irvine, Calif.-based RealtyTrac Inc. With home loan defaults still rising, the trend is expected to worsen next year.
The plan represents an about-face for Paulson, who until recently had insisted the mortgage crisis could be handled on a case-by-case basis. However, he and other administration officials became convinced the tide of foreclosures threatened by the mortgage resets represented such a severe threat that a more sweeping approach was needed. They opted for a proposal that was along the lines of a plan put forward in October by Sheila Bair, head of the Federal Deposit Insurance Corp.
Paulson and other federal regulators began holding talks with some of the country’s biggest mortgage lenders, mortgage service companies, investors who hold mortgage-backed securities and nonprofit groups that provide counseling for at-risk homeowners.
Under the typical subprime loan — those offered to borrowers with spotty credit histories — the rates for the first two years were at levels around 7 percent to 8 percent. But after two years, those rates were scheduled to reset to levels around 9 percent to 11 percent.
For a typical $1,200 monthly mortgage payment, the reset could add another $350 to the monthly payment, greatly raising the risks of loan defaults by homeowners struggling with the current payment.
The wave of mortgage foreclosures threatened to make the most severe slump in housing even worse by dumping more foreclosed properties onto an already glutted market, further depressing home prices and shaking consumer confidence.
The deepening housing slump has already roiled financial markets, starting in August, as investors grew increasingly concerned about billions of dollars of losses being suffered by banks, hedge funds and other investors.
The administration plan is designed to deal with the crisis by letting subprime borrowers who are living in their homes and are current on their payments to avoid a costly reset for five years. The hope is that by that time the housing downturn will have stabilized, clearing out the glut of unsold homes and halting the steep slide in prices that is hitting many parts of the country.
With sales and prices once again rising, the expectation is that homeowners will be able to renegotiate their current adjustable rate mortgages into a more affordable fixed-rate plan.
The housing crisis has become an issue in the presidential race with Democrats Hillary Rodham Clinton and John Edwards putting forward their own proposals this week that would go further than the administration.
Clinton said her own proposal that would impose a 90-day moratorium on foreclosures and freeze the rates for five years or until they had been converted to fixed-rate loans was a better approach that would help more people.
“Although the administration is finally giving the foreclosure crisis the attention it deserves, it seems that President Bush is going to give struggling homeowners far less than they need,” she said in a statement.
Mark Zandi, chief economist for Moody’s Economy.com, called the administration plan a good first step, but said the government eventually will have to go further given the problem’s size and the threat to the economy.
“This is the most serious housing downturn we have seen in the post World War II period,” Zandi said. “It is a threat to the broader economy. The risks of a recession are very high.”
Associated Press reporters Deb Reichmann and Nedra Pickler contributed to this report.
Nov
7
Interest rate last week
Filed Under rates | Leave a Comment
The Fed’s lowered rates on Halloween:
The Federal Reserve handed out a second interest rate cut on Halloween, giving markets and borrowers the treat they were expecting.
It was my daughter’s first Halloween. She dressed up as a “Happy Pumpkin.” Not the evil wicked pumpkin that her dad (me) carved the night before. I on the other hand haven’t dressed up for Halloween since 1999 when I dressed up as Mike Piazza. I still can’t believe I lost to a person who wore an orange hooded sweat shirt and claimed to be Kenny from Southpark.
Read the full article: Interest rate cut spooks skeptics
Oct
22
Option Arms are in the news again
Filed Under foreclosure, mortgage, personal finance, rates | Leave a Comment
File this under: Unsuspecting borrower duped into getting a difficult loan to comprehend.
From Sunday’s Denver Post: Crushing ARMs squeeze homeowners
In 2003, 1.1 percent of mortgages originated for a purchase or refinance in Colorado were option-ARMs and another 2.5 percent were interest- only loans that didn’t pay down principal, according to First American LoanPerformance, a San Francisco mortgage research firm.
…
Many borrowers don’t understand negative amortization, how their payments are rising, and why the loans they expected to rescue them are dragging them into foreclosure, he said.
The mortgage brokers who sold these loans were (most of them are out of the industry) dumber than dirt yet were great at selling these products. If you went with a mortgage broker because they sold you on a loan products, who’s really to blame?
Oct
12
Oct
5
Alan Blinderis an American economist, on the faculty of Princeton University. He has served as the Deputy Assistant Director of the Congressional Budget Office, on President Bill Clinton’s Council of Economic Advisors, and as the Vice Chairman on the Board of Governors of the Federal Reserve System. Sounds like a government conformist right? Wrong
He has recently wrote a controversial column for the Foreign Affairs magazine about globalization in which he opined that globalization could cause more disruptions in service jobs than originally believed. He says that he still believes that globalization would be a net plus for the United States. This analysis has not been published in a peer-reviewed journal of economics. His views on this issue is not widely accepted by economists.
Then comes this gem: Six Fingers of Blame in the Mortgage Mess
Who’s the first finger? Everyone who has a mortgage.
The first finger points at households who borrowed recklessly to buy homes, often saddling themselves with mortgages that were all too likely to default. They should have known better. But what can we do to guard against it happening again?
Not much, I’m afraid. Gullible consumers have been around since Adam consumed that apple. Greater financial literacy might help, but I’m dubious about our ability to deliver it effectively. The Federal Reserve is working on clearer mortgage disclosures to help borrowers understand what they are getting themselves into. (“Warning! This mortgage can be dangerous to your family’s financial health.”) While I applaud the effort, I’m skeptical that it will work. If you have ever closed on a home, you know that the disclosure forms you receive are copious and dense. Should we add even more?
Fewer words, and in plainer English, might help, especially if they highlighted the truly important risks. (“In two years, your mortgage payments could double.”) But the truth is that there is much to disclose, that complicated mortgage products are, well, complicated, and that people don’t read those documents anyway.
He does go on to blame Lenders, bank regulators, and countless others. If you don’t read the New York Times, you should. Real estate is local, mortgages are national.
Oct
4
Just recently Fannie Mae and Freddie Mac had their fare share of accounting scandals. Now they’re seen as the cover to the mortgage cesspool.
Fannie Mae and Freddie Mac, the largest U.S. mortgage-finance companies, would be allowed to expand their $1.5 trillion mortgage portfolio to buy subprime loans under a Democratic plan to help struggling borrowers.
Read the full article: Dems seek subprime help from Fannie and Freddie
Sep
26
Two Colorado Springs Air Force bases are poised to get 839 new homes, which could bolster the city’s homebuilding industry as it works its way through a slump. Read the full article: Springs AF bases to get new housing
If you’re moving to the Springs and need a VA LOAN, call me today. Wow. Did I just write that? Yikes! How about this:
As a mortgage professional licensed in Colorado, I help military borrowers procure VA loans.
Sep
25
The Toll on Lenders is minimized
Filed Under denver post, mortgage | Leave a Comment
The headline is much better than the article:
“Quick action by Erin Toll, state Division of Real Estate director, kept lenders from pulling out of Colorado because of new laws.”
In June, some major lenders (OptionOne Mortgage, IndyMac, SunTrust Mortgage and Aurora Loan Services) threatened to stop making home loans in Colorado after they disagreed with new requirements the state placed on mortgage providers.
The lenders were beefing about this law:
Mortgage providers must show that loans are reasonable and benefit borrowers, and they must also disclose more about how they are compensated.
Seriously, don’t waste your time reading the full article: Regulator keeps money flowing for homebuyers
Sep
12
Housing lenders retreat
Filed Under mortgage, real estate, rocky mountain news | 2 Comments
Mortgage article from the Rocky Mountain News:
A third of home loans originated by mortgage brokers failed to close in August as investors shied away from riskier borrowers, a new survey says.
Read the full story: Housing lenders retreat