These rates are freezing

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.

Universal REO

Here’s a press release for Universal REO. What’s my connection to Universal REO – my buddy Dan is the CEO.

LOCAL DENVER COMPANY RELEASES NATIONAL WEB-BASED FORECLOSURE EDUCATION WEBSITE FOR REAL ESTATE AGENTS.

UniversalREO.com, a Denver-based company, is reaching out to thousands of real estate professionals across the nation by providing a ‘Resource Center’ for those trying to make a difference in the foreclosure epidemic. According to founder and CEO, Daniel Waterman, “UniversalREO.com is an unparalleled stratagem designed to unify the real estate foreclosure industry. Through the shifting of the REO (Real Estate Owned by Lender) paradigm to meet a more streamlined business model, professionals are enabled by technology and informative resources. Our objective is to elevate the standards by which REO professional operate on every level.”

universalreo.jpg

By offering thorough education on the valuing of properties, the resources and tools on how to determine values, marketing tips, as well as where to obtain new REO business, UniversalREO.com is providing a service that not even real estate colleges offer. After spending years as an REO Specialist for the top REO Real Estate Marketers in the nation, Mr. Waterman realized his true calling as a teacher. His trial-by-fire education in technology was what gave him the foresight to provide this knowledge to the masses via the information highway.

In this “Web 2.0” universe there exist many one-offs offering overnight REO Business success schemes on the web. UniversalREO.com offers more. Education, Valuation, and Marketing are the keys to success in a real estate market flooded with properties for sale due to default mortgage payments. Cutting-edge concepts on moving these properties into the appropriate hands while maintaining value to companies like Countrywide Home Loans who recently took out an $11.5 billion dollar loan to aid their default mortgage deficit is the only way this country will ever jump back on track. By conveying knowledge through on-line video courses, eBooks, blogs, podcasts, certification, and connecting REO Management companies and direct lenders with the educated real estate agent, as well as the end consumer, UniversalREO.com is blazing new trails throughout the nation. UniversalREO.com currently covers over 50% of the nation for Real Estate Agent and Vendor clientele.

The Toll on Lenders is minimized

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

Housing lenders retreat

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

Working with the Enemy

Yahoo is one of the best websites when it comes to consolidating articles. Want news of Lindsay Lohan’s rehab, they’ve got it. Want news on Kobe Bryant desire to be traded, they’ve got it. Want news on real estate, they’ve got it.

Today there was an article entitled: Mortgage Brokers: Friends or Foes?

The article discusses the fiduciary (a person who occupies a position of special trust and confidence) responsibility of mortgage brokers.

According to the article:

Borrowers often see mortgage brokers as their allies, searching far and wide for just the right home loan at an attractively low price.

Yet the article discusses the inherent flaw of the mortgage broker:

Often the broker’s incentives run counter to the borrower’s interests. Lenders pay YSP to the broker when the borrower is paying a higher interest rate than the best he or she could qualify for, which makes the loan more profitable for the lender. The higher the rate, the higher the payment to the broker. (Some lenders put a ceiling on YSP.) Lenders may also pay brokers a bonus for loans with prepayment penalties, which make it expensive for borrowers to refinance within the first few years.

To counter this flaw, the article advocates shopping:

To protect yourself, one strategy is to shop for a home loan directly at a few lenders and then see whether a broker can find a better deal. When choosing a broker, borrowers should ask tough questions first. Among them: In searching for loans, do you feel obliged to put my interests ahead of yours? Exactly how much will you earn on this loan? And how many lenders do you check regularly for rates and terms?

Are Mortgage Brokers the Enemy? The answer is NO.

There are no enemies in the game of life. People will only take advantage of you if you let them. The only true way to protect yourself is through knowledge. Learn as much as you can about getting a mortgage. It’s a pretty simple process but it’s cluttered with confusing terms and complex arithmetic. Where can you learn about getting a mortgage? For $12 you can get Mortgages for Dummies. It’s the book I got when I bought my first place 10 years ago.

Chances are you’ll need a mortgage broker if your loan doesn’t meet Fannie Mac or Freddie Mac guidelines. In other words, if you’re loan is somewhat unorthodox, you need a broker.

FAQ: What exactly do you do?

I get this question more than any other: What exactly do you do?

A mortgage broker acts as an intermediary who sources mortgages on behalf of individuals or businesses.

My role as a mortgage professional is to “broker” a home loan for a home purchase, home refinance or a home equity loan/line. I interface with borrowers (clients) and companies that buy mortgages.

Before I got into the mortgage business I worked as a systems analyst. I never thought of it this way but my previous life in the software field and my current life as a mortgage professional are one and the same. This clip from Office Space best sums up my previous life.

Something is rotten in the state of Denmark

hamlet.jpg During my senior year in college, I took a high level English class devoted entirely to Shakespeare’s plays. We studied several including Hamlet. While everyone always remembers the classic line “To be or not to be,” I always liked “Something is rotten in the state of Denmark.”

I didn’t think the line was useful until now…

Recently I came across an article entitled A look at how home mortgages operate around the globe. According to the article the Danish has a similar system as ours. If their mortgage system is anything like ours then something is rotten in the state of Denmark.

Their (the Danish) mortgage system, like ours, relies heavily on the capital markets. Consequently, it is the only country to have home loans with most of the key features of those found in the United States. But there are limitations.

For one thing, lending criteria are extremely rigid, much more so than in the U.S. For another, Danish borrowers must come up with far larger down payments. In the United States, borrowers who make a 20% down payment tend to get the best terms available. But in Denmark, to achieve an 80% loan-to-value ratio, borrowers must take out a variable-rate second mortgage to cover the difference.

Danish mortgages are also “portable,” meaning that when owners sell their homes, they can carry their mortgages over to the new house.

Let’s hope that Danish mortgages aren’t brokered by dirty “rotten” scoundrels.

Countries covered in the article include the aforementioned Denmark, Great Britain, Italy, Japan, Germany, and our neighbor’s to the north, Canada. The general consensus among these countries is to require substantial down payments.

Musings on my search results

I’d like to think that my blog is unique, I don’t just blog about mortgages cause quite frankly mortgages isn’t the most exiting subject on the planet. Most mortgage brokers don’t blog (do they even know what a blog is?) so I thought blogging would separate me from the pack. Most of my traffic is derived via Google searches. When I started blogging I sent my url to my past clients, friends, etc. and over the past couple of months I’ve received links from other blogs and sites, but I still get more traffic from google than any other medium. It’s not even close.

Here are some of the search terms (in UPPER CASE) that were used to find my site:

  • NY PIZZA in DENVER: If there’s something I know, it’s NY Pizza. The site for Original New York Pizza is www.originalpizza.us and it’s located here: 1300 W Midway Blvd in Broomfield, CO 80020 to order a pie call (303) 469-9117. Pantaleone’s is another good NY Pizza joint despite the owners being from Soprano country (NJ) here’s their address: 2120 S Holly St # 6 Denver, CO 80222 and number (303) 757-3456.

  • My DENVER BLOG covers Denver real estate, Denver trends, Denver mortgages, and just about anything the gooey substance above my medulla oblongata comes up with.

  • TEDY BRUSCHI of the New England Patriots is one of my favorite NFL players because he plays the way the game should be played and yes, he’s HALF-FILIPINO and HALF-ITALIAN. DEAN CAIN and WILL FERRELL are not Filipino.

  • You can buy STARBURY SNEAKERS in DENVER, Colorado, you can go to Steve and Barry’s located at 8501 West Bowles Avenue in Littleton, CO 80123 call them at 303-904-7513 for directions.

  • FORECLOSURE is a hot topic in COLORADO and DENVER. Fellow Colorado bloggers have tried to minimize the problem. When 90% of the leads that I get from my websites is from Colorado Home Owners facing foreclosure, I’d say foreclosure is a problem. Any way you cut it, people don’t want to lose their homes and saying “sorry, I can’t help you” really sucks!

  • KOSI 101 plays CHRISTMAS MUSIC. Tune to 101.1 on your FM dial.

  • DENVER is not going through a HOUSING BUBBLE BURST. Denver may have flat lined in terms of property value over the past 4 to 5 years but Denver’s real estate hasn’t popped. Who in their right mind would want to move to a booming city that features 300 days of sunshine a year, skiing in our backyard, hiking, biking, great sports, light rail, international airport, great restaurants, and affordable housing? (sarcasm)

  • THE NEXT WASHINGTON PARK could very well be Stapleton, Lowry, Riverfront or anywhere near the Pedestrian Bridge. A realtor would probably be a better person to ask (now there’s an idea for a blog post) so if you need a realtor, just ask. I only work with realtors that won’t waste your time or mine.

  • The DIFFERENCE between a MORTGAGE PLANNER and a MORTGAGE BROKER: a mortgage planner actually gives a rats ass about you as a human being and your long term future. For the record, I consider myself a MORTGAGE PLANNER.

  • HGTV is scouting for new home buyers in the DENVER metro area for their show, MY FIRST PLACE. However, I think this train came and left.

  • REAL WORLD DENVER takes place in LoDo (Lower Downtown) and no I won’t be making any cameos on the show. I believe they filmed the show on Market Street a stone throw away from Coors Field. I’d actually like to see MTV show music videos like they did when I was a kid.

  • CASEY SERIN is facing FORECLOSURE and blogging (www.iamfacingforeclosure.com) about it. The guy is going through hell.

  • DENVER FIX and FLIP and FLIPPING HOUSES in DENVER, please refer to Casey Serin’s blog before you call me about a loan.

  • Yes, there are NY JETS FANS IN DENVER. I’m a die hard NY Jets fan but I don’t know what bar the NY Jets fans congregate. A few years ago it was the Sports Column but when I showed up in my Vinny Testaverde Jersey, there were more Pats fans in the house. Old Chicago on 14th and Market is always a good bet, they show all the games.

  • ALTUS HOME LOANS is not the most reputable mortgage company in Colorado. Their DECEIVING ADS are what they are that’s why they’re in trouble. What’s more concerning is that we want politicians to clean up the mortgage mess. What’s the difference between politicians and a mortgage company? They too make just about any promise necessary to get the deal (elected), then fall short of expectations time and time again.

  • You really need TITLE INSURANCE in Colorado it’s necessary and not a JUNK FEE.

  • WHAT IS WRONG WITH THE DENVER BRONCOS? I don’t have that line anywhere on any of my posts but here’s my answer is “Jake the Snake is not John Elway and neither is Jay Cutler!”

Weekend Highlights: Altus again in the news

Here’s the latest from this past weekend:

Weekend Highlights

Here are the some of the more interesting articles this past weekend in case you missed it:

  • Realtors discuss merging listings to compete with Internet rivals: the Colorado Association of Realtors plans to consolidate the Colorado MLS (Multiple Listing Service) in an effort to compete with their internet rivals.

    The Colorado Association of Realtors plans to form a task force to study creating a “one-stop shopping” regional listings of houses for sale. The idea is to combine a number of the estimated 16 MLS services in the state, such as Metrolist in Denver and Information and Real Estate Services. IRES serves northern Colorado cities such as Boulder, Fort Collins, Loveland and Greeley.

  • In FINANCE 101, the Denver Post discusses interest only mortgages. They also discussed the perils of NO MONEY DOWN HOME LOANS.
  • Todd Carpenter of Lenderama, offers up his view of the foreclosure »”>Colorado foreclosure situation in “Some Perspective is in Order.”
  • Pulte Homes and Centex Homes are the top builders according to the latest JD Power surve.
  • Dan Green of The Mortgage Reports discusses the difficulty of blogging, watching football and managing two fantasy football teams.
  • The Broncos beat the Chiefs 9-6. The Chiefs are now coached by former Jets head coach, Herm “You Play to Win the Game” Edwards. A more apropos nickname is Herm “Clock Mismanagement” Edwards.