Natural Selection at work in the Mortgage industry
By admin on May 23, 2007
Darwinism in the Subprime market? A “natural selection” process or correction is rippling through the Subprime lending market.
We have already seen tighter credit standards becoming the norm and higher interest rates are bringing home sales down in total. Loan production is predicted to be way down in comparison to years past. Many of the fly by night mortgage companies are always going the way of the dodo as the faith in subprime lenders is down.
What Lenders, Brokers and Consumers Can Do
Mortgage executives at realty affiliates offer the following advice in light of the latest flap surrounding subprime loans and other risky mortgage products:
• First and foremost, owner/brokers should be involved in their mortgage companies; if engaged in a joint venture, they should sit down with the venture partner and discuss the lending model being used.
• Lenders should educate agents in their realty firms about the consequences of putting people in homes they really cannot afford; now is a good time to also talk about mortgage insurance as an option.
• Consumers should be made fully aware of what they’re doing. If customers have no doc loans, they should be given separate disclosure statements that identify the loans and reveal that a lower mortgage interest rate loan could be obtained if more documentation is provided.
• Agents and lenders should talk to customers about getting qualified under the new standards and also discuss the pitfalls of subprime loans.
• Agents and lenders can also talk to customers about why they need to either improve their credit before trying to get a home loan or wait six months to build up enough money for an appropriate down payment.
A move to quality in mortgage lending could be in the future. The subprime mortgage may bounce back but with a higher detail to quality. Watch out for changes in the housing market in the future.
Topics: Uncategorized | No Comments »
Senator Clinton weighs in
By admin on May 21, 2007
Swift action against irresponsible lending practices is requested by Senator Hilary Clinton. Senator Clinton has called on Chairman Ben Bernanke to make move quickly to correct problems in the subprime lending industry which have contributed to the current problems in the housing market and growing number of foreclosures.
“Your optimistic forecast about the effect of the current housing market struggles should be encouraging,” Senator Clinton wrote to Chairman Bernanke. “Nevertheless, it remains clear that reasonable measures that will restore stability to the entire housing market and strengthen the American people’s confidence in what is oftentimes their most significant investment are still necessary.”
She revisited her initiative to help those with a subprime loan.
• Face-to-face financial counseling to be made available to more borrowers before they take out mortgages, and to homeowners at risk of foreclosure;
• Limiting the length of time for which prepayment penalties apply, and prohibiting prepayment penalties on mortgages with rates above a certain level;
• Strengthening the Truth in Lending Act and existing federal regulations to ensure that there is plain-talk, no-fine-print disclosure.
She has also reintroduced the 21st Century Housing Act which would help those drawn to the subprime industry to obtain a loan through the FHA.
Topics: Uncategorized | No Comments »
Let’s play the blame game!
By admin on May 18, 2007
Who is at fault for the Sub Prime fallout? Well that’s a coin flip, is the Housing Market to blame or can some of that burden fall on the Financial Industry as well. In the end, the housing market will bear the chore of fixing the problem itself.
Half of the Sub Prime loans were taken out to purchase homes to live in and the other half was taken out to fund other expenses such as inventing in the growing real estate market.
In today’s world, we must have a villain and a victim and the victim in many cases is the person who took out the loan itself. Many individuals purchased homes that were much too expensive for them but were coaxed by evil people that they could afford it. Riigght. Now many of these individuals are defaulting on their current loans and going through the foreclosure process.
But the financial market is feeling the pains of the fall out as well.
Lenders who took too much risk — or failed to know how much risk they had undertaken — are experiencing huge write offs. More than three dozen naïve or deceitful mortgage brokers have already closed. The origination volume of sub prime and other alternative mortgages has dropped nearly 40%.
The FHA is also looking to expand as it will soon issue larger mortgages. And congress may also impose stiffer penalties when mortgages laws are violated and even prohibit contract terms aimed to trap homeowners.
What does this all mean for future homeowners? Well with bad credit reserves on the rise, everyone will pay a higher mortgage rate and new homeownership rates will fall.
Topics: Uncategorized | No Comments »
Higher payments on your reverse mortgage
By admin on May 17, 2007
Do you have a higher valued home and are a member of the older generation of Americans in need of some help financially now that you are retired? Well there is a new reverse mortgage out just for your needs, the Prime Advantage. This option is set up for the higher valued homes with owners seeking to receive more cash than a traditional reverse mortgage with a fixed interest rate for the entirety of the loan.
With interest rates more than doubling over the past three years, many homeowners are uncomfortable with an adjustable rate,” said Robert Sivori, co- president, BNY Mortgage, an EverBank Company.
The Prime Advantage reverse mortgage offers a rate comparable to that of many conventional loans and requires no payments as long as you live in the home. The fact that the interest is set then the borrower actually knows exactly how much they will receive each month.
“A reverse mortgage is a powerful tool that can make a big difference in the lives of older homeowners, offering financial peace of mind and enabling them to live a more fulfilling life,” added Sivori. “Prime Advantage lifts the lending limits of a traditional reverse mortgage, while offering more money, more benefits, and more flexibility to owners of higher value homes.”
Check out the rest of the story here
Topics: Uncategorized | No Comments »
Subprime bailout, not FHA modernization
By admin on May 14, 2007
A bailout for the subprime industry is not exactly what the U.S. Department of Housing and Urban Development has in mind. The HUD is in full support of the FHA modernization to help out borrowers but is warning that a full blown bailout plan for the subprime market is not warranted.
HUD Secretary Alphonso Jackson expressed his sentiments at a press conference on Monday.
“FHA has been a blessing for so many people,” Jackson said. “However, reforms must be made for FHA to adapt to today’s marketplace. We have internally modernized FHA as much as we can. But, the time has come to bring FHA into the 21st Century. A new FHA could be an antidote for predatory lending and subprime difficulties.”
The HUD’s core belief in homeownership was reiterated by Jackson at the press conference as well as other beliefs which include the theory that homeownership is a long-term investment which should be without predatory and poor lending service in the mortgage industry. The proposed subprime bailout will “not resolve housing concerns” were Jackson’s final thoughts.
Topics: Uncategorized | No Comments »
HUD secretary returns home to St. Louis
By admin on May 10, 2007
Former Public Safety Director of St. Louis and current HUD secretary announced the release of nearly $1.8 billion in efforts to promote affordable housing and ownership all around the United State in his former stomping grounds of St. Louis.
Alphonso Jackson, the nation’s housing chief, held the press conference at City Hall to announce the current efforts of the Housing and Urban Development. He once served the city as the public safety director and also as the head of the St. Louis Housing Authority.
The funds of $1.75 billion will be used to build affordable housing and help many first-time homeowners with expenses such as closing costs and down payments. The city of St. Louis will reportedly receive more than $4.2 million dollars.
Topics: Uncategorized | No Comments »
Down payment assistance under fire
By admin on May 9, 2007
Could the current aid assistance with down payments be a cause in the rise of foreclosures? The HUD is seeking a ban on certain down payment assistance programs which are used in government-backed mortgages.
Nehemiah Corp. and AmeriDream Inc. provide the funds to aid in the down payment on home purchases and are then reimbursed by the seller themselves.
The programs are “a contributing factor of increased risk in our portfolio” of loans, HUD spokesman Lemar Wooley said in an e-mail.
In 2006, over 100,000 low and moderate income families purchased homes with the help of these programs. The number of foreclosures on these types of loans is double that of any other loans sponsored by the FHA.
Many times this assistance is paid for by the consumer in the end with the seller raising the price of the home to cover the expense to them. On average the seller raises the price of the home by 3% to recover the cost they have to pay.
There has been a rise in these FHA-backed homes from 14/603 in 2000 to 102,921 in 2006.
Topics: Uncategorized | No Comments »
Who can be helped by a FHA refinance?
By admin on May 8, 2007
So you are locked into a sub-prime loan and think the FHA can help you out. Well the FHA wants you know exactly who can be helped out by a FHA Refinance and who can’t.
Here is a list of the qualifications to those that can be helped out by the FHA:
1. Can afford payments on a fixed-rate loan at a market rate of interest, with FHA insurance premiums
2. Have a property with sufficient equity to qualify for FHA financing
3. Can meet other standard underwriting criteria that balance the overall risk of the mortgage; and
4. Are owner-occupiers
What hurts for most of the individuals with a sub-prime loan is the fact they actually owe more than the house is worth. Financially “upside down” can be a result of not being able to make the increased monthly payments when the mortgage interest resets or the value of the home depreciates in value.
Here is the list of individuals that can’t be helped by the FHA:
1. Took out sub-prime loans because of an inability to document income and assets
2. Are involved in speculative investments
3. Have accumulated other debts that make it impossible to sustain their current property with a new fixed-rate loan with current income, or who lack sufficient positive equity in their homes.
Be sure to check out all of your options when deciding whether to refinance your current loan.
Topics: Uncategorized | No Comments »
Visit the source when hardships fall
By admin on May 7, 2007
When applying for and receiving a home mortgage you never think about what you would do if you lose your job, all of sudden can’t pay your mortgage, and then become one of the many to be foreclosed upon but there are many individuals throughout the country who are facing this exact scenario. Many of them do not understand what options they have or where they can find help and it is necessary to find out these things before it is too late and you are without a home and your credit is shot.
There are many lenders who will be more than happy to set things up with you to arrange for payments. Many of these lenders have great “loss mitigation” staff that can come up with a couple of scenarios in order for you to pay your mortgage during those down times. There are many nonprofit consumer and housing advocates, regulators, lawmakers, and independent mortgage companies that are developing programs in response to the skyrocketing number of foreclosures.
But before you seek out help from these sources you should first check out your lender. Many of these lenders do not want to become landlords or homeowners and would prefer that you work out a way to pay them rather than the lender themselves having to deal with that. Oh yeah, and then there are legal fees that they have to incur during the foreclosure period.
Just remember that when you run into problems with paying your mortgage you should go straight to the source. The source will much rather arrange payment rather than take away your home.
Topics: Uncategorized | No Comments »
I should avoid what when I get a Mortgage?
By admin on May 4, 2007
I found this really great article today on Google News which listed the 37 best mortgage shopping list. I just wanted to share with you a few of the tips I found most interesting.
The writer first points out about common misnomer that getting as many “Good Faith Estimates” and choosing the lowest one is the best way to shop. Well experience has taught the writer that this is the wrong approach.
2. They don’t have you sign anything…no application, good faith estimate etc. (self-explanatory)
Well, what kind of a mortgage business would they be if they didn’t do any kind of background check or application process? Definitely not the right lender to go with. Maybe they can print you up a college diploma while you are at it.
12. They push a sub-prime or bruised credit loan without attempting an “A” credit loan first.
We all know where a sub-prime can get you as of late. Definitely need to avoid getting locked into a sub-prime loan. The FHA is currently trying to help sub-prime borrowers by allowing them to refinance into a FHA Loan.
25. They are new to the business and therefore lacking in experience.
This one should need no introduction. Of course you want an experienced group of mortgage professionals helping you with the largest loan of your life. It is best to do some research and find the best loan provider out there.
Here is a link to the rest of the article. I just wanted to point out a couple that I like.
The Run, Don’t Walk Checklist.
Topics: Uncategorized | No Comments »
