30-Year Fixed Mortgage Rates Slide Below 4%, For Second Week in a Row …

SEATTLE, July 22, 2014 (GLOBE NEWSWIRE) — The 30-year fixed mortgage rate on Zillow® Mortgages is currently 3.97 percent, down eight basis points from this time last week. The 30-year fixed mortgage rate hovered between 3.96 and 4.08 percent for the majority of the week, before settling at the current rate on Tuesday.

“Rates dropped below 4 percent on Thursday amid the uncertainty and turmoil following the MH17 flight disaster and ongoing military activity in the Middle East,” said Erin Lantz, vice president of mortgages at Zillow. “This week, despite a fair amount of domestic economic data slated for release, we expect events in the Middle East and Ukraine will continue to put a damper on rates.”

Zillow’s real-time mortgage rates are based on thousands of custom mortgage quotes submitted daily to anonymous borrowers on the Zillow Mortgages site, and reflect the most recent changes in the market. These are not marketing rates, or a weekly survey.

The rate for a 15-year fixed home loan is currently 3.01 percent, while the rate for a 5-1 adjustable-rate mortgage (ARM) is 2.77 percent.

Purchase Mortgage Application Activity

Zillow predicts tomorrow’s seasonally adjusted Mortgage Bankers Association Weekly Application Index will show purchase loan activity to increase by 4 percent from the week prior. Zillow combines loan requests made on Zillow Mortgages last week with the previous week’s Mortgage Bankers Association (MBA) Weekly Application Index to predict the MBA’s Weekly Application Index for purchase loans, which will be released tomorrow. For more information about this prediction, visit http://www.zillow.com/research/mortgage-app-index-part-one-7016/.    

Below are current rates for 30-year fixed mortgages by state. Additional states’ rates are available at: http://www.zillow.com/mortgage-rates.


About Zillow Mortgages

Zillow Mortgages, operated by Zillow, Inc., is a free, open, and transparent lending marketplace, where borrowers connect with lenders to find loans and get the best mortgage rates.  Borrowers anonymously submit loan requests and receive an unlimited number of custom mortgage quotes with real rates directly from thousands of competing lenders.  Zillow Mortgages also provides mortgage calculators, mortgage advice, mortgage widgets, and lender directories

Zillow is a registered trademark of Zillow, Inc.

The Zillow logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=10012

CONTACT: Media Contact:
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         206-757-2701 or press@zillow.com

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Article source: http://money.cnn.com/news/newsfeeds/articles/globenewswire/10090475.htm

Reverse mortgages: the basics

Published: July 22, 2014 1:51 PM

By LYNN BRENNER. Special to Newsday

A reverse mortgage can be a good source

A reverse mortgage can be a good source of income if you’re 62 or older, house-rich and cash-poor.
(Credit: iStock)

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First of two parts

I’m 89 and my wife is 85. We’re on a fixed income and find it very difficult to pay our bills, even though we’re very frugal. We’ve been married 67 years. Is it a good idea to get a reverse mortgage on our home of 50 years?

It certainly sounds as if you should consider one.

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I can’t squeeze reverse mortgages into a single column, so this will be the first of two; the second will appear next week. This week: the basics. Next week: the potential pitfalls.

These loans are available only to homeowners who are 62 or older. The amount you can borrow depends on your age, the appraised value of your house and the government’s estimate of future interest rates. Currently, an 85-year-old can borrow 63.5 percent of the appraised value of her house, says Mike Temares, a HUD-certified reverse-mortgage counselor at Nassau County Family and Children’s Association, but this percentage may become smaller after Aug. 3.

You must use part of the loan to pay off any existing mortgage. You can take the rest as a lump sum, a line of credit, monthly payments or any combination of the three. None of it is taxable.

As long as you pay your property taxes and homeowners insurance premiums, no payments are due on the reverse mortgage loan until you move, die or sell the house. Then, you or your heirs must repay the loan plus accrued interest and fees. But your total debt can’t exceed the market value of the house. If it sells for less than you owe the bank, federal insurance pays the difference. The cost of this insurance is included in the price of the reverse mortgage.

The bottom line A reverse mortgage can be a good source of income if you’re 62 or older, house-rich and cash-poor.

Websites with more information nwsdy.li/reversemortgages and nwsdy.li/reversemortgageFTC

TO ASK THE EXPERT Send questions to Ask the Expert/Act 2, Newsday, 235 Pinelawn Rd., Melville, NY 11747, or email act2@newsday.com. Include your name, address and phone number. Questions can be answered only in this column. Advice is offered as general guidance. Check with your own advisers for your specific needs.

Article source: http://www.newsday.com/lifestyle/retirement/reverse-mortgages-the-basics-1.8865811

Why you may be paying for someone else’s mortgage relief

They'll rent it back to you. (Rick Wilking / Reuters)
They’ll rent it back to you. (Rick Wilking / Reuters)

In recent years, banks have agreed to spend billions of dollars to help struggling homeowners as part of settlements with the government related to the lenders’ alleged misconduct during the housing crisis.

If all works as planned, the relief should end up helping many people who are struggling to keep up with their mortgage payments. But it may not work out as well for investors who purchased the mortgages that these homeowners took out.

Who are the investors? They include unions, pension funds, 401K savings plans and mutual fund shareholders, not just Wall Street firms,  according to the Association of Mortgage Investors. In other words, they’re the general public, as AMI likes to put it.

And recent multibillion-dollar government settlements with JPMorgan Chase, Citigroup and others hurts those investors, the group says.

The settlements call on the banks to grant various forms of relief, such as modifying the mortgages of “underwater” borrowers by reducing the size of their loans. (These are borrowers who owe more on their mortgages than their homes are worth.) When that type of debt forgiveness takes place, whoever owns the loan takes a hit because they don’t get paid as much as was promised. In some cases, the banks own the loans. But in others, the banks have bundled the loans into securities and sold them to investors, which means the investors (and the firms that manage their money) get burned when a loan is modified. That’s why AMI is calling foul.

“If they want to settle and help consumers who need help, terrific,” said Vincent Fiorillo, president of AMI’s board and global sales director at Doubleline Capital. “If you want to take the investors’ money to settle, that’s where I have a problem. The investors are not the bad actors here.”

In its record $13 billion settlement with the government last year, JPMorgan agreed to grant $4 billion in consumer relief.  On Tuesday, the monitor who tracks the distribution of that relief money reviewed a small sample of the bank’s loans (100 of them) to make sure the bank is correctly recording the aid, and it is.  But the review also shows that 44 percent of those loans are owned by investors, not the bank.

More than two years ago, when the government and 49 U.S. attorneys general negotiated a $25 billion settlement with some of the nation’s largest banks, investors paid almost a quarter of the $20 billion that was set aside for relief, said Laurie Goodman, director of the Urban Institute’s Housing Finance Policy Center.

The deal was set up to encourage banks to modify their own loans.  For instance, every dollar of debt that the bank forgave on its own loans would be applied to the $20 billion total.  But for every dollar of debt forgiven on an investor-owned loan, the bank was credited only about 50 cents.  Even so,  investor-owned loans made up 39 percent of relief credited to Bank of America and 29 percent of relief credited to JPMorgan under that deal, Goodman said.

When the government and state authorities last year ordered Ocwen Financial to provide $2 billion of relief for underwater borrowers, investors carried the vast majority of that cost burden, Goodman said. Ocwen only services loans, meaning it collects borrowers’ payments. It does not own loans.

“The investors have a huge point,” Goodman said. “The banks are basically spending their money.”

In some of these deals, like the $7 billion Citigroup settlement last week, banks are not allowed to forgive mortgage debt on investor-owned loans without the investors’ permission. But investors say that the trustees charged with granting permission work for the banks, not the investors, underscoring an inherent conflict of interest regarding the trustees’ role.

The Justice Department, which negotiated many of these settlements, did not return calls seeking comment. It also has not responded to two letters AMI sent to U.S. Attorney General Eric Holder, including one sent last month, said Chris Katopis, the group’s executive director.

“We ask that we be included in any negotiations from this point forward to make sure our economic interests are protected and not sacrificed by the parties the government has charged,” Katopis wrote in the most recent letter.

David H. Stevens, head of the Mortgage Bankers Association, said that investing comes with risks, and just about anyone with a financial stake in the housing sector got hit with unprecedented risks once the housing market tanked and the government rushed to its rescue. No one escaped unscathed, he said.

“Investors can be screaming from the corners that they’ve been harmed, but it’s tough to say the government can touch everybody else’s mortgages but not mine,” Stevens said.

On the other hand, the government is playing an outsize role in supporting the mortgage market right now. Policy makers are struggling to scale back the government’s footprint and lure the private sector back. And these types of settlements are likely to discourage their return, he said.

“If you’ve broken the trust, how do you get them back?” Stevens said.

Article source: http://www.washingtonpost.com/blogs/wonkblog/wp/2014/07/22/why-you-may-be-paying-for-someone-elses-mortgage-relief/

BB&T earnings hit by mortgage, tax charges

BBT 1422

BBT booked net income of $425 million in the second quarter, down from $547 million a year earlier in part due to $88 million worth of mortgage and tax-related reserve adjustments.

Matt Evans
Reporter- Triad Business Journal


BBT Corp. second-quarter’s profit dropped 29 percent, in part due to $88 million worth of mortgage and tax-related reserve adjustments.

The Winston-Salem, N.C.-based reported a profit of $547 million, or 58 cents per share, down from $425 million, or 77 cents, in the year-ago period.

The $88 million adjustment to the amount of reserves the bank holds came after the U.S. Department of Housing and Urban Development notified BBT late in the quarter that it would be auditing its Federal Housing Administration-insured loan origination process. While HUD hasn’t made any findings yet, BBT CEO Kelly King said based on the experience of other mortgage lenders with such audits and on a review of BBT’s own exposure, it’s appropriate to set aside money to pay potential charges now.

The bank (NYSE: BBT) also had a tax adjustment of $14 million after the IRS notified it of a stance related to an income tax position currently under examination.

Beyond those issues, King said BBT’s core results were strong and included a 7 percent annualized growth rate in average loans and 12 percent growth in deposits. Revenue was up 3 percent annualized from the first quarter, and credit quality also improved.

“Average loan growth was robust in nearly all loan portfolios,” King said. “Commercial lending was up across the board during the second quarter, with CI up 10 percent, CRE – construction and development up 18 percent, and CRE – income producing properties up more than 3 percent. The sales finance portfolio increased 26 percent during the quarter, and the other lending subsidiaries portfolio was up 12 percent, reflecting seasonally stronger demand.”

Matt Evans covers technology, entrepreneurship, higher education and financial services. Contact him at 336-370-2916.

Article source: http://www.bizjournals.com/baltimore/news/2014/07/21/bb-t-earnings-hit-by-mortgage-tax-charges.html

China’s First Mortgage Debt Since Crisis Shows Li Concern

China will revive mortgage-backed debt sales this week after a six-year hiatus, as the government extends help to homebuyers in a flagging property market.

Postal Savings Bank of China Co., which has 39,000 branches in the country, plans to sell 6.8 billion yuan ($1.1 billion) of the notes backed by residential mortgages tomorrow, according to a July 15 statement on the website of Chinabond. The last such security in the nation was sold by China Construction Bank Co. in 2007, Bloomberg-compiled data show.

Premier Li Keqiang is seeking to avert a collapse of the real-estate market after data last week showed new home prices dropped in a record number of cities in the world’s second-largest economy. The central bank in May called on the nation’s biggest lenders to accelerate the granting of mortgages to first-home buyers, and cities including Nanning, Hohhot and Jinan eased property restrictions.

“The government has eased its attitude toward the property market since property demand plunged this year,” said Wang Ying, an analyst in Shanghai at Fitch Ratings Ltd. “The policy measures it has taken this year have conveyed a message that property curbs will not be as strong as before.”

Prices Fall

Selling mortgage-backed securities can help banks free up space on their balance sheets for more lending by transferring the risk of the loans to buyers of the products. Authorities are allowing the revival of such offerings after housing prices fell in 55 of the 70 cities last month from May, the National Bureau of Statistics said on July 18, the most since January 2011 when the government changed the way it compiles the statistics. New mortgages in Shanghai, China’s financial center, declined 2.2 percent in the first half, according to a statement posted on the central bank’s Shanghai head office website last week.

Photographer: Brent Lewin/Bloomberg

Premier Li Keqiang is seeking to avert a collapse of the real-estate market after data last week showed new home prices dropped in a record number of cities in the world’s second-largest economy. Close

Premier Li Keqiang is seeking to avert a collapse of the real-estate market after data… Read More


Photographer: Brent Lewin/Bloomberg

Premier Li Keqiang is seeking to avert a collapse of the real-estate market after data last week showed new home prices dropped in a record number of cities in the world’s second-largest economy.

The pressure on Chinese developers was underscored by the collapse in March of Zhejiang Xingrun Real Estate Co., a builder south of Shanghai. Developers, including China Vanke Co. and Greentown China Holdings Ltd., have cut property prices since March to boost sales. The slump comes as economic growth is set to cool to 7.4 percent this year, the slowest in more than two decades, according to the median estimate of economists surveyed by Bloomberg.

“The economy’s slowdown and the property market’s weakness are quite obvious in the first half,” said Fitch’s Wang. “Many developers’ first-half sales account for only less than 50 percent of their annual targets while they used to achieve more than 50 percent of the targets in previous years.”

Supplemental Measure

The northern city of Hohhot responded by waiving checks limiting the number of properties each resident is allowed to own, according to a statement on the local housing authority’s website on June 27. The eastern Chinese city of Jinan canceled purchase limits from July 10, the official Xinhua News Agency reported on its official microblog earlier this month, citing the local property management bureau.

Residential mortgage-backed debt is one of the supplemental measures the government can use to help avert a plunge in the property market, according to Frank Chen, Shanghai-based head of China research at CBRE Group Inc., a commercial real-estate services company based in Los Angeles.

Cooling economic expansion has pushed the yield on China’s benchmark 10-year sovereign note down 25 basis points this year to 4.3 percent. The yuan has fallen 2.5 percent against the dollar in the same period.

While China started allowing securitization in 2005, it halted the development in 2009 after a collapse in subprime RMBS triggered the global financial crisis. The government resumed approving issuance in 2012 with limits to ensure risks are properly taken into account.

Complication Risk

“MBS can help banks diversify risks and boost liquidity,” CBRE Group’s Chen said. “But if the financial engineering gets overly complicated, it may pose similar risks as what we saw in the U.S. subprime crisis. That’s why China has been cautious in developing the securitization market.”

Even with the gradual approach, sales have expanded at a faster pace this year. Chinese banks have issued 89.6 billion yuan of securitized products, compared with 3.6 billion yuan in the same period last year and 15.8 billion yuan for all of 2013, Bloomberg-compiled data show.

China Postal Savings will sell 6 billion yuan of AAA rated tranche A securities, 477 million yuan of A- rated tranche B notes and 341 million yuan of subordinated securities, according to the statement to Chinabond. The maturity date is December 31, 2039.

Economic Support

The residential mortgage default rate for China Construction Bank Co., the biggest provider of home loans in the country, was only 0.17 percent last year, compared with 0.99 percent for all types of lending, according to the bank’s annual report.

The relative safety of mortgages stems in part from the 30 percent minimum downpayment requirement for first-time home buyers. That is a high percentage globally, according to CBRE’s Chen.

“Risks of China’s RMBS are very low, in our view,” Chen said. “In China, mortgage default rate is the lowest among all types of bank loans. Also, China’s homebuyers are required to pay a minimum down payment of 30 percent, which is a high percentage globally.”

Xu Hanfei, an analyst at Guotai Junan Securities Co., also said the resumption of mortgage-backed securities is a signal that the government is relaxing controls on the property market.

“The regulators will accelerate approval of ABS and MBS to make better use of existing credit and support the economy,” Xu said.

To contact Bloomberg News staff for this story: Judy Chen in Shanghai at xchen45@bloomberg.net

To contact the editors responsible for this story: Katrina Nicholas at knicholas2@bloomberg.net; Sandy Hendry at shendry@bloomberg.net Andrew Monahan, Sandy Hendry

Article source: http://www.bloomberg.com/news/2014-07-20/first-mortgage-debt-since-crisis-shows-li-concern-china-credit.html

This is the worst thing about getting a mortgage

By Amy Hoak, MarketWatch

Prospective home buyers are confident that they’ll be able to find an affordable mortgage to make their purchase. Still, they’re thoroughly overwhelmed by the amount of information they have to wade through when securing a mortgage.

That’s according to a survey to be released on Monday by Discover Home Loans, a subsidiary of Discover Financial Services

/quotes/zigman/470130/delayed/quotes/nls/dfs DFS

. It found that 87% of people planning to buy a home in the next year and a half are pretty sure they’ll be able to get a mortgage they deem affordable. The survey also found that 94% of prospective buyers think purchasing a home is a good investment.

Getty Images

More than 75% of first-time home buyers report feeling overwhelmed by paperwork and other mortgage information.

But 63% are overwhelmed by the amount of mortgage information available, including anything from what they find online, to offers from lenders, to the stack of paperwork that accompanies any mortgage transaction. An even greater percentage, 76%, of first-time buyers reported feeling overwhelmed.

It makes sense that buyers today are confident they’ll be able to get an affordable mortgage—they’re taking a lot longer to educate themselves on the mortgage process before they start shopping, said Cameron Findlay, chief economist of Discover Home Loans. If they weren’t pretty sure they could get a mortgage they’d be able to afford, they probably wouldn’t consider buying to begin with. (Although presumably that doesn’t apply to everyone; 13% of those planning to buy a home said they aren’t confident they’ll be able to secure an affordable rate on their mortgage.)

This longer education period (for most) is a change from a decade ago, when people who wanted to buy a home may have felt compelled to jump into the process fairly quickly, before they were priced out of the housing market, Findlay said.

But many are still shaky when it comes to understanding their home financing, and have some work to do before fully understanding how a mortgage will fit into their budgets.

Of the 1,037 prospective buyers surveyed, 87% know what type of property they can afford, and 83% say they’re prequalified for a mortgage. But only 52% have determined their projected monthly payment. And only 59% have calculated their down payment.

One change is coming next year that could potentially help borrowers gain a clearer understanding of their options: Lenders will be required to use simplified disclosure documents to inform borrowers of mortgage terms, Findlay said. The most helpful part of the new disclosures is that all lenders will be required to use a standardized display of information, which should make comparing loans easier, said Keith Gumbinger, vice president of HSH.com, a provider of consumer loan information.

Below are some tips to make the mortgage process less confusing.

Understand your finances

“It’s best to have your financial ducks in a row so there are no surprises,” said TJ Freeborn, mortgage professional with Discover Home Loans. Start by developing a good understanding of your finances. And have a general working knowledge of what your credit score is, said Anthony Hsieh, chief executive of Loan Depot, a mortgage lender. Get prequalified or even preapproved for a mortgage loan before you start house shopping, Freeborn said.

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Analysis: What’s next from the Fed

Federal Reserve Chairwoman Janet Yellen is still cautious about the strength of the economy.

Also think about how long you plan on staying in the home, as well as your tolerance for risk—both of which will help you determine whether to even consider adjustable-rate mortgages, Gumbinger said. By knowing the type of mortgage you want—before even talking with a mortgage banker—you won’t have to sit through pitches that don’t apply to you.

“You could lose your mind in conflicting advice,” Gumbinger said, so before talking with someone, know where you stand financially and the type of mortgage that interests you.

Find a lender you trust

When choosing a mortgage banker, get recommendations from friends and family, and check the Better Business Bureau for any red flags. The chosen person can be your guide through the process, pointing you to helpful online resources and answering all your questions, Freeborn said.

When deciding who to work with, you also want someone with a reputation for getting purchase deals done on time, Gumbinger said. And while some people may be open to online lenders, first-time home buyers may feel more comfortable with a local lender, someone they could sit across from at a desk, he said.

No questions are too small or silly

Don’t be intimidated, and ask the mortgage banker any and all mortgage questions you have. A good one will be more than happy to get you the answers you need to feel comfortable and prepared for the next steps in the process, Freeborn said.

“You have a right to ask questions, and you have a right to expect answers—and answers that you can understand,” Gumbinger said. If you get an explanation you don’t understand, speak up and say so. Don’t sign anything until all the details are clear.

Trust your instincts

If something seems too good to be true, it probably is. So when things don’t add up or you can’t get straight answers, step back and reconsider whether you’re working with the right person, Freeborn said.

Understand, however, that application and appraisal fees most likely aren’t refundable, Gumbinger said. So if you’ve already paid these costs, you might be out several hundred dollars if you switch lenders.

Also on MarketWatch:

Why mortgage rates haven’t risen as expected

How to get thousands of dollars in mortgage relief from Citigroup

To win a house bidding war, get creative


add Add to watchlist



Article source: http://www.marketwatch.com/story/4-ways-to-fight-mortgage-information-overload-2014-07-21

Debt-to-income ratio can sink mortgage application

WASHINGTON — For many home buyers, qualifying for a mortgage not only is a tough challenge but one that ends unhappily: They get rejected.

The reasons for the turndowns typically involve multiple factors, including below-par credit scores, inadequate documented income to support the monthly payments, and little savings in the bank.

lRelated U.S. penalizes lenders over maternity-related mortgage discrimination
Real EstateU.S. penalizes lenders over maternity-related mortgage discriminationSee all related

But a new survey by credit-score giant FICO offers buyers a rare peek inside the heads of credit-risk managers at financial institutions across the country and in Canada. Researchers asked a representative sample of them what single factor in an application makes them most hesitant to fund a loan request — in other words, what’s most likely to prompt them to say no.

The results provide practical insights to anyone who is thinking about applying for a mortgage. Tops on the list? Surprise, it’s not your credit scores. It’s not how much you’ve got for a down payment or what’s in the bank. It’s your “DTIs” — your debt-to-income ratios. Nearly 60% of risk managers in the FICO study rated excessive DTIs their No. 1 concern factor — five times the percentage who picked the next biggest turnoff.

Yet many new buyers have only a rough idea in advance of an application — even for a pre-approval letter — about their own DTIs, how lenders view them, and what sort of limits they’re likely to encounter.

Since they are so important to a successful application, here’s a quick overview on what goes into DTIs and why they are such a big red flag. Debt-to-income ratios for home loans are the most direct indication to a bank about whether you are going to be able to afford to repay the money you want to borrow.

Debt ratios for home loans have two components.

The first measures your gross income from all sources before taxes against your proposed monthly housing expenses, including the principal, interest, taxes and insurance that you’d be paying if the lender granted the mortgage you sought.

As a general target, lenders like to see your housing expense ratio come in at no higher than 28% of gross monthly income, though there is flexibility to go higher if other elements of your application are viewed as strong. In May, according to mortgage software and research firm Ellie Mae, the average borrower who obtained home purchase money through investors Freddie Mac and Fannie Mae had a housing expense ratio of 22%. Federal Housing Administration-approved borrowers had average housing expense ratios of 28%.

The second DTI component — the so-called back-end ratio — measures your income against all your recurring monthly debts. These include housing expenses, credit cards, student loans, personal loan payments and others. Under federal “qualified mortgage” standards that took effect in January, your back-end ratio maximum generally is 43%, though again there is wiggle room case by case.

Most lenders making loans eligible for sale to Fannie or Freddie prefer not to see you anywhere close to 43%. In May, according to Ellie Mae, the average approved home purchase applicant had a back-end ratio of 34%. Even at FHA, which tends to be more lenient on credit matters than Fannie or Freddie, the average back-end ratio for buyers was 41%. The average for denied applications was 47%.

A good place to learn more about DTIs and to compute your own is Fannie Mae’s consumer-friendly “know your options” site (www.knowyouroptions.com), which includes calculators and other helpful tools.

The new FICO survey found that the second leading cause of concern for loan officers is “multiple recent credit applications.” Lenders spot these on your credit reports and take them as signals that you are seeking to add on even more debt, which could affect your ability to repay the mortgage money you’re asking them to give you.

In third place as an instant turnoff: your credit scores. Most lenders want to see FICO scores well above 700 — Fannie and Freddie averages were in the 755 range in May; FHA average approved scores were a more generous 684.

Bottom line here: If you want to be successful in your mortgage application, be aware of these key turnoff points for lenders and take steps to avoid the tripwires. Most important: Postpone your purchase until your DTI ratios tell you that yes, you can afford the house you want and lenders won’t reject you out of hand.


Distributed by Washington Post Writers Group.

Copyright © 2014, Los Angeles Times

Article source: http://www.latimes.com/business/la-fi-harney-20140720-story.html

Is Another Mortgage Crisis Coming Soon?

According to recent data from the FHFA’s monthly Foreclosure Prevention Report, nearly 4% of the 28 million mortgage loans owned by Fannie and Freddie are in some stage of delinquency.

While this sounds like a lot, and it is (about 1.1 million loans), the more troubling statistic is the impact of borrowers’ credit scores on the delinquency rate. The report indicates that borrowers with low original credit scores have an incredibly high rate of mortgage delinquency, even more than you might expect.


Since many lenders have relaxed their credit standards this year, should we be worried about loose credit standards causing another real estate crash?

The data look pretty bad
Basically, the FHFA’s report breaks borrowers into just two credit categories: those whose credit score (when the loan was originally issued) was 660 or above, and those who obtained their mortgage with scores lower than 660.

The vast majority of current borrowers (almost 90%) fall into the higher credit score category, and of that group only 2.6% of loans are in any stage of delinquency, and less than 1.5% are seriously delinquent (over 90 days).

However, of the more than three million loans whose borrowers started with lower credit scores, an alarming 14.4% are in some stage of delinquency, with more than 7% seriously delinquent (which are rather likely to turn into foreclosures or short sales).

Seeing data like that makes me think: maybe we shouldn’t be loosening our credit standards.

But bear in mind…
Of these delinquent loans, you have to bear in mind that many were made during the real estate bubble of the 2000′s. There is a right and a wrong way to do almost anything, and subprime lending is no exception.

In the current market, it’s nearly impossible to get a traditional mortgage with a credit score below 620, or an FHA loan with a score below 580. However, this hasn’t always been the case.

A lot of the delinquent loans were made with little or no down payment, with little or no documentation, and to borrowers whose credit scores were well under what is considered acceptable today. There was a time during the last decade when virtually anyone with a pulse could qualify for a mortgage, regardless of credit, income, or cash in the bank.

For a humorous (and somewhat frightening) trip down memory lane, take a look at these actual commercials for mortgages from before the crash. Or, how about this 2005 print ad from Chase Bank, offering mortgage loans with nothing but a signature. These are some of the loans that make up the bloated delinquency rate, even several years after the bubble burst.

Window advertising subprime mortgages in 2008 (flickr/ The Truth About)

Should we be worried?
Not yet, but the trend back toward mortgages for lower-credit borrowers is definitely worth keeping an eye on.

Wells Fargo, for instance, has lowered its minimum credit score for conventional financing from 660 to 620, and for FHA financing from 640 to 600.

However, in order to qualify for a loan with a low credit score, you’ll be required to come up with a sizable down payment of at least 20%, pay a higher interest rate, and have a rock-solid employment history.

As I said a minute ago, there is a right way and a wrong way to do things, and until we start hearing things like “no money down, even with a 575 credit score”, as in one of those old mortgage commercials, we should be all right.

The housing market needs subprime borrowers to create enough demand for homes, and with lenders acting responsibly, things are very different this time around.

Article source: http://www.fool.com/investing/general/2014/07/20/is-another-mortgage-crisis-coming-soon.aspx

Yuba Co. man awarded millions in mortgage modification fraud case

PLUMAS LAKES – A Plumas Lakes man has won a major judgement in a mortgage modification fraud case dating back to 2010.

A Superior Court jury in Yuba County awarded Phillip Linza $513,902 in damages and $15.7 million in punitive damages against PHH Mortgage Corporation.

It began when Linza was struggling to pay his mortgage in 2010 in the middle of the mortgage crisis. He thought he was on the road to saving his home when his loan provider PHH Mortgage agreed to a loan modification, taking his payment from $2,100 a month to just over $1,500 a month.

“I made the payments for months,” Linza said. “Then I get a letter in the mail that says, ‘oops, we made a mistake, your payments aren’t $1,530, they’re $2,300.’”

A few weeks later, the company sent Linza another letter.

“They jacked it up, never explained why. They sent another letter demanding $7,000, never explained why,” said United Law Center attorney Andre Chernay, who helped represent Linza.

Linza testified he tried repeatedly to reach someone with the company who would help him straighten things out, but got nowhere. When, in desperation, Linza threatened to sue PHH Mortgage, the company did respond.

Linza said he was told, “‘We’re a multi-billion dollar company. Stand in line because we’ve got a busload of attorneys that are on retainers.’”

The ruling Thursday is being called one of the largest of it’s kind in California and a message to the banking industry.

“It’s a classic case of David v. Goliath,” according to Jon Oldenburg, Managing Attorney and partner at United Law Center. “No one thought the banks could be beaten. This award is a huge step in the right direction to help us continue to punish the banks for violations against millions of California homeowners.”

Linza said the entire issue could have been avoided if PHH Mortgage had simply owned up to their mistake and honored their agreement. He said the verdict sends a broad message.

“You people have been taking advantage of enough people and the country’s tired of it. I mean, society’s tired of it,” Linza said.

The case is expected to be appealed.

No one from PHH Mortgage was available for comment late Friday.

Article source: http://www.news10.net/story/news/local/auburn-grass-valley/2014/07/19/mortgage-modification-fraud-housing-trial/12876749/

For one Habitat homeowner, a mortgage burn party

The Richardson Park house was charred inside and out when prospective homeowner Pamela Ford got her first look at it 20 years ago.

The former owner had been “firebombed,” she said. He got the insurance money and donated the property to Habitat for Humanity, where staff and volunteers saw it as a perfect fit for Ford.

She couldn’t see its beauty at first, with all that fire damage, she said, but she helped rehabilitate it and fell in love with it.

“She was a totally hard worker, dedicated, and ready to take on anything,” said the Rev. Jennifer Kerby, pastor at Mt. Lebanon United Methodist Church, who was part of the selection process for Habitat when the match was made and worked on many such rehabilitative projects.

Ford proved it Friday morning, when – surrounded by family, friends and several Habitat volunteers and staffers –she put a lighter to those loan papers and an end to 20 years of monthly mortgage payments.

The three-bedroom, brick rowhouse on Forest Drive is now hers, free and clear.

Yes, the tax man will still have his hand out, demanding property and school taxes that last year totaled about $830.

But that $50,000 mortgage is history – and paid off a few years early, too.

That’s no small feat in this age of foreclosure, a fate that has touched 27,054 homeowners in Delaware since 2008, when the recession made nightmares of many homeowners’ dreams – including 1,452 in the first six months of this year, according to figures from the Delaware State Housing Authority. Delaware’s foreclosure rate remains higher than the national average, but both are declining now. And Delaware now has a mediation program in place now to help eligible homeowners climb out of their crises, with almost 70 percent of those who have gone into foreclosure this year qualifying for such assistance.

Video : Habitat mortgage paid in full

Story: Art collectors give 100 paintings to Habitat

Ford, an administrator at Little Friends Learning Academy in New Castle, paid her debt the old-fashioned way: One check at a time. She often paid two months ahead, she said, to be sure she was never late.

And that meant she paid off her mortgage in a most unusual way: Early.

As she made those payments, Habitat used the money to help others get a shot at a home of their own.

More than 200 homes

Habitat for Humanity of New Castle County is part of an almost 40-year-old national network of volunteers who join forces and finances to address the nation’s abysmal lack of affordable housing, a malady well-documented in Delaware.

They do it by building or renovating a house and selling it – at zero percent interest – to an eligible person or family.

The nonprofit Christian ministry gained national prominence in 1976, when President Jimmy Carter pulled on his overalls and got to work.

The keys to more than 200 Habitat houses have been handed to homeowners in New Castle County, according to Kevin Smith, chief executive officer. But Ford is one of only three or four to have paid down the mortgage so far.

Habitat’s role goes much further than hammers, nails, paintbrushes, and shingles, Smith said, serving as a mortgage company, general contractor, social service agency and real estate company. Its ReStore shop collects and re-sells donated furniture, appliances, and assorted housewares.

It was a burned-out mess when she first saw it, but Pamela Ford and volunteers with Habitat for Humanity rehabilitated the home – 20 years ago. Friday, Ford paid off her mortgage and now owns the house, free and clear.

The nonprofit draws support from private donors, area churches, businesses, grants and foundations.

And families like Ford’s.

‘Sweat equity’

To qualify for a Habitat home, an applicant must have had a full-time job for at least a year, must meet income guidelines – between $25,000 and $50,000 a year for a family of four – have a minimum credit score of 570, and no delinquent debt greater than $1,500, Smith said.

That last requirement – the one about delinquent debt – is the biggest hurdle for applicants, Smith said. Most already figure they will never be able to buy their own home and so don’t see any need to impress a bank officer.

But some see the chance to have a home as a worthwhile goal, he said, and they work at improving their credit ratings until they qualify – even if it takes two or three applications.

An applicant who meets those criteria demonstrates commitment to the program, willingness to pay the bills and the resolve and ability to find and keep a job – all traits that help Habitat make wise loans and good use of volunteers’ muscle and time.

“It’s hard work – nine months to a year to go through our program,” Smith said.

Part of the process is learning how to maintain a home and make repairs to it. Each prospective homeowner must help with the rehabilitation, too – “sweat equity,” they call it.

Ford, learned a lot that way, and can point with pride to the tile she laid at the threshold of her front door.

She has made many improvements since move-in day, including new floors and a new patio area that provides room for kids and friends and family to enjoy grilling and other outdoor gatherings.

Habitat homebuyers must commit to living in the property for at least 10 years, Smith said.

Ford has doubled that time already – and has made room in her home for others in need, too, caring for almost three dozen foster children over the years.

‘A cause we believe in’

Among those celebrating with Ford on Friday was real estate attorney Debi Galonsky, whose boss – Ed Tarlov of Elzufon Austin Talov Mondell – handled Ford’s settlement 20 years ago. The firm has handled all 213 Habitat settlements in New Castle County, Smith said.

For free.

“It’s a cause we believe in – home ownership,” Galonsky said. “Ed Tarlov has taken this on many years ago as a way of giving back to the community and helping others realize the dream of homeownership.”

Seventeen families moved into Habitat homes in 2013, Smith said, and 16 more will do so this year.

Many projects are in Wilmington – including Coopers Run on Carter Street, where Lutheran Volunteer Corps members Ben Arbeiter and Daniel Guntermann have been part of the construction crew for the past year.

Arbeiter, 23, of Rapid City, South Dakota, is on his way to med school. Guntermann, 24, of Detmold, Germany, hopes to work in international relations or economics. The Habitat project is a perfect fit with their volunteer objectives – promoting sustainability, simple living and intentional community.

Habitat’s Smith said he is concerned about continuing violence in Wilmington and the chilling effect it has on all communities. “At the end of the day, we have to sell a house,” he said.

But each month, the agency holds an orientation program – meeting with new prospects, people who dream of having a home of their own. Together, they build on that hope – using real numbers, hammers, saws and one wise choice after another.

Some of those dreams come true, as Ford has proved.

“Everything worked out,” she said. “It was amazing.”

Contact Beth Miller at 324-2784 or bmiller@delawareonline.com. Follow on Twitter @BMiller57.

Qualifying for a Habitat home

An applicant must have:

• A full-time job for at least a year.

• Must meet income guidelines – between $25,000 and $50,000 a year for a family of four

• Have a minimum credit score of 570, and no delinquent debt greater than $1,500.

For more information about Habitat for Humanity’s New Castle County programs, visit habitatncc.org or call (302) 652-0365.

Article source: http://www.delawareonline.com/story/news/local/2014/07/18/one-habitat-homeowner-mortgage-burn-party/12870791/