Archive for Financial News
How Wells Fargo Layoffs Will Affect the Mortgage Loan Industry
Posted by: | CommentsAfter years of hearing negative mortgage news, I have become numb to refinance guideline tightening, lenders going out of business and mortgage giants shedding jobs. For some reason though when Wells Fargo Home Mortgage announced they were eliminating almost 4,000 jobs in their home finance division, I started to wonder —- How could this happen to them? Wells Fargo is a conservative mortgage lender that never sold risky mortgage products like Option ARM’s, No Income No Asset home loans, 125% home equity loans, etc.
Wells Fargo announced today that they were closing their mortgage lending division that was originating subprime mortgages. I started thinking again—–Wells Fargo did not originate has not been originating subprime loans, but they did buy Wachovia who bought World Savings and they certainly originated risky loans. World Savings was the first wholesale lender that extended option ARM loans to mortgage brokers nationwide. Option ARMs are the high risk loans that featured a negative amortization loan payment option. That means that borrowers had the ability to pay less than an “interest only” and the deficit would be applied at the end of the year to the borrower mortgage balance. These loans were the first of their kind, because borrowers could have their outstanding mortgage balance compounding negatively like a credit card. For years World Savings succeeded with the negative amortization loans because they had strict underwriting criteria that required the borrower to demonstrate they had they ability to pay the loan back.
To get approved for the Option ARM, borrowers needed to supply income documentation and have home equity that was assessed by a licensed local appraiser. Self-employed borrowers loved the World Savings Option ARMS because it gave them the ability to pay less in month’s in which their cash flow was low. World Savings offered bad credit mortgage loans to borrowers who had a significant amount of home equity and income that could be documented. After a while however, World Saving got sucked into the competitive mortgage broker market as Countrywide and WAMU were pushing competitive Option ARM products that paid high yield spread premiums that made loan officers wealthy. All the while, Wells Fargo never jumped into the option ARM market. The company maintained it did not want to put their prime loan portfolio in jeopardy because they did not believe the Option ARM product was a good risk. Wachovia Corporation, another prime lender could not resist the option ARMs and the lure of these exotic home loans so they bought World Savings.
In 2006 the subprime mortgage crisis exploded when home loan lenders started going out of business as loan defaults started mounting. Home values started plummeting nationally and in 2007 the economy took a turn for the worst. In 2008 employment skyrocketed and mortgage giants like WAMU and Wachovia were on the verge of bankruptcy. The government stepped in and brokered Chase to take-over WAMU and Wells Fargo to take-over Wachovia.
Don’t you find it interesting that after years of refusing to originate the risky option ARM product that Well Fargo went out and bought, Wachovia who just failed because they bought the biggest option ARM lender, World Savings? I find it strange that after nearly escaping the mortgage industry debacle because of their wavering from their conservative lending philosophy that Wells Fargo would make this kind of catastrophic investment. Did they ever think to do a back-ground check on this billion dollar bank they were buying? This is sad because 4,000 people would still have their job today at Wells if it were not for this impulsive and uncharacteristic transaction. Maybe they should take a page from Obama and blame their mistake on Bush. Regardless of this giant financial blunder, Wells Fargo is still a great company that will survive the series of crisis’s and continue to be America’s most trusted mortgage lender.
Moving forward, I would anticipate Wells Fargo will originate more government finance programs like FHA and VA. Since 1934, FHA home loans have performed better than conventional mortgage products and the government continues to insure FHA refinance and home purchase loans. VA home loans are another good bet, because Wells know that the borrowers have the income in the military and again the government guarantees these loans as well.
I would not hold my breath for Wells to reopen and of their subprime lending divisions anytime soon, nor would expect them to roll out competitive jumbo mortgage loan programs until the housing sector begins to actually rebound.
I’m sure Wells will continue to originate conventional mortgages because that is what they have always done well. The bottom line is that Wells Fargo maintains that good credit borrowers that can document their income deserve low rate home mortgages with minimal lending fees. The company offers stellar customer service and typically their loan officers have extensive financing experience. And who can argue with Wells Fargo on the prime lending criteria as it has performed well through 6 wars and they have been lending for more than half of the time that the United States of America has existed. Some critics may consider the Wells Fargo layoffs to be a setback for the mortgage industry but it is my contention that Wells Fargo is taking a few steps back in an effort to regroup and survive. Like the Los Angeles Lakers did after the 3rd quarter in game 7 against the Celtics, sometime you need a time-out to shake off your mistakes so you get get back and focus on what you are good at. Like the Lakers with basketball, people will associate Wells Fargo with mortgage lending for many years to come.
30-Year Fixed Rate Home Loans and 5-year ARMs Fall to Record Low
Posted by: | CommentsInterest rates on fixed rate 30-year home loans for refinance or purchase officially hit record lows today! On Thursday, Freddie Mac released their report that also indicated the 5-year adjustable-rate mortgage dropped to record lows this week acccording to the survey of conforming mortgage rates. The 30-year fixed rate mortgage reported averages of 4.69% for the week ending June 24th. This was lower than the low rates of 4.75% from the previous week and 5.42% a year ago. Fifteen-year fixed rate mortgage loans averaged 4.13%, down from 4.20% last week and 4.87% a year ago. The 10-year fixed rate mortgage has fallen to 3.75% and 3.875% on the no cost mortgage option.
VA home loans are still available at record low rates as well. If you already have a VA mortgage and want a lower rate talk to one of our VA lenders about qualifying for the VA streamline.
Freddie Mac Says Lowest Fixed 30 Year Mortgage Loans Since They Began Recording Rates in 1971
Conventional and FHA mortgage lenders reported averages of the 5-year Treasury-indexed hybrid adjustable-rate mortgage averaged 3.84% this week, down from 3.89% last week and 4.99% a year ago.
One-year Treasury-indexed ARMs averaged 3.77%, down from 3.82% last week and 4.93% a year ago. While not a record, this is the lowest the ARM has been since the week ending May 6, 2004, when it averaged 3.76%.
To lock into these home mortgage rates, the 30-year fixed-rate mortgage and both ARMs required payment of an average 0.7 point and the 15-year fixed rate mortgage required an average 0.6 point. A point is 1% of the home loan amount, charged as prepaid interest. According to Frank Nothaft of Freddie Mac “Mortgage rates for all but traditional 1-year ARMs hit all-time record lows this week in our survey while activity in the housing market slowed in May following the expiration of the home-buyer tax credit”. “Freddie Mac began collecting rates for 30-year fixed loans in April 1971, 15-year fixed home loans in September 1991 and 5-year ARMs in January 2005.”
Mortgage Loan Applications Surge
Posted by: | CommentsAccording to the Mortgage Bankers Association, the demand for mortgage loans increased to a seven-month high last week as consumers rushed to get federal homebuyer tax credits that ended April 30th. Home loan applications jumped 13% in the week ended April 30th to the highest level since early October, overshadowing a 2.1% drop in home refinancing demand. Total mortgage loan applications rose by a seasonally adjusted 4 %, the trade group reported. It was the third straight weekly increase in purchase applications, rising almost 24% in the month. MBA said the share of mortgage refinancing fell to 51.9% of all applications, the lowest since early July 2009.
The thirty-year mortgage rates dropped 0.06 percentage point to 5.02 %, the lowest rate since mid-March. Eligible borrowers seeking to take advantage of federal tax credits of $8,000 for first-time buyers and $6,500 for existing homeowners were required to sign contracts by last Friday and to close on their mortgage loans by June 30th. The big question now is whether the U.S. housing market has enough traction to continue recovering without government help.
In addition to the tax credit, the Federal Reserve bought more than $1.4 trillion mortgage-backed securities intended to keep home loan rates down to revive the housing market. That program ended on March 31. “All the data that we’ve seen recently point to the fact that consumers are in a better place today than they were six months ago, and because of that they will likely be more active in the housing market,” Schenk said. The difficult labor market, however, will keep the housing recovery slow, he added.
Housing demand will likely falter after the recent influx of home sales ahead of the tax credit expiration, but then mount a slow upturn, many industry experts expect. New home sales rose almost 27% in March, and sales of existing home increased by 6.8%. According to UBS economists, “The pending home sales index, based on initial contracts, will likely be boosted again in April, with some payback thereafter. “However, we believe the combination of low prices, still relatively low mortgage refinance rates and the nascent recovery in employment will support home sales later in the year.”
The latest unemployment figures will be reported on Friday. April’s rate is seen holding at 9.7% for a fourth straight month, based on a Reuters poll, after touching a more than 26-year peak over 10% last year. Homeowners have increasingly turned to the government for home financing with programs like FHA home loans. These FHA loan programs including low down-payment home loan products from FHA. The MBA said that more than one-half of all purchase applications last week were for government mortgage loans, the highest share in two decades.
Prime credit borrowers are really taking advantage of their leverage in this market as no cost mortgage refinancing has become very popular with people who have ficos that exceed the 720 range. It is important that you do the math on these no cost loans, because the interest rate is typically higher so you need to make sure it makes sense financially to payt a higher rate in an effort to eliminate closing costs.
FHA Premium Rising for Bad Credit Mortgage Loans
Posted by: | CommentsFHA loan programs may see changes in 2010. The HUD is seeking White House approval to increase the upfront mortgage insurance premium charged by the Federal Housing Administration to borrowers. FHA officials announced more changes, including tighter underwriting standards for refinance mortgages and new home loans. If approved by the White House, FHA mortgage loans will see an increase to 1.75% upfront mortgage premium paid by borrowers who do not have enough equity to mitigate the risk of a loan default.
Mortgage Rates Creeping Up
Posted by: | CommentsThe 30-year mortgage rates rose above 5% for the first time in a while. Conventional, jumbo and FHA mortgage rates rose slightly across the board. The Treasury department has announced that they will stop buying mortgage backed securities as 2009 winds down. The Feds will continue to purchase mortgage backed securities until March 31, 2010, as pledged earlier this year. But what happens after March 31st?
There really is no security in this investment anymore. Few, if any investors actually service the loans, and with the housing industry still very weak, and loan servicers holding almost all the power over the loans, investors are no longer flocking to purchase the loans from the original lenders. The lenders control modifications, payment forebearance rights, collections pricesses, foreclosure proceedings decisions, etc.
It is predicted that in order to entice investors, mortgage rates will have to rise dramatically in the near future. We are hearing rates numbers in the mid 5% range up to “the sky’s the limit” types of rates.
California Mortgage Rates Rebounding
Posted by: | CommentsAccording to California mortgage lender, Bryan Dornan, “Record low rates have made a significant impact on the housing recovery statewide.” 30-year fixed California mortgage rates have been reported as low as 4.5% for conforming and FHA loans. Unfortunately for many local residents, California home loans are more difficult to qualify for because stated income and no document mortgages have all but disappeared. The higher California FHA loan limits have been able to broaden the scope for many new borrowers to qualify for refinancing.
Yesterday, the Federal Reserve announced they were keeping mortgage rates unchanged and extending the government mortgage buying program which is good news for Americans but great news for borrowers living in California. 2010 may be the year that California home values rebound and many distressed homeowners have found comfort with the Home Affordable Refinance Program because it enables borrowers with no equity to refinance their Fannie Mae or Freddie Mac loans up to 125%.
Fed Keeps Mortgage Rates Low
Posted by: | CommentsThe Fed announced today that they were keeping mortgage rates unchganged. Refinance loan applications rose respectively due to the demand for distressed homeowners to refinance into a more affordable loan featuring a fixed interest rate. Conforming and FHA lenders have announced tighter lending guidelines for refinancing and home buying.
According to Mortgage Bankers Association, the home mortgage rates rose for the 2nd straight week to 4.92% from 4.88%, based on the MBA weekly interest rate report Home loan applications held relatively steady, too, increasing only .3% on a seasonally adjusted basis. Applications for refinancing represented 75.2% of all applications.
Mortgage refinance rates for a fifteen-year loan maintained 4.33%. These fixed-rate mortgage loans accounted for nearly 20% of refinance mortgage applications in October, Ruth Simon reports in today’s Wall Sreet Journal. That’s up from 9.1% a year earlier and 7.5% in October 2007.
Many loan applicants are interested in the fifteen-year mortgage rates because they have reached such low levels. However, borrowers who are used to a 30-year mortgage payment may suffer from sticker shock, because even with a 4.375% rate, the 15-year mortgages have a higher monthly payment. Mortgage rates have been at near-record low territory for the last couple of months, but the good news for 2010 was received as the Federal Reserve announced they were extend their program in which the government buys mortgage loan securities in the upcoming year.
Mortgage Bankers Association Sees Home Refinancing Trend
Posted by: | CommentsIn a recent article, the MBA forecasted mortgage trends for 2010 interest rates, mortgage refinancing activities and more. According to Mortgage Banker Association’s Weekly Application Survey, thirty-year mortgage loans with fixed rates dropped through November, falling 18 basis points relative to the month prior and ending November at 4.79 %. Fifteen-year home mortgage rates reached a new record low for the survey of 4.27%. The percentage of borrowers selecting the 15-year has risen in 2009 as a result of the widened spread between 15- and 30-year home loans. MBA forecasts that 30-year mortgage rates will rise through 2010 to end the year at 5.7%. In addition to conventional loans, MBA believes that both VA and FHA mortgage rates will rise a percentage point between now and 2011.
On a seasonally adjusted basis, home purchase loans applications declined almost 20 % from October to November. Mortgage refinance applications rose by about 1% over that time. MBA projects that mortgage loan originations will decrease from almost $2.0 trillion in 2009 to about $1.5 trillion in 2010. MBA forecasts that purchase originations will increase from $718 billion in 2009 to $804 billion in 2010, while refinance loan originations are projected to fall from $1.246 trillion to $693 billion. The Federal Reserve and U.S. Treasury home loan programs continue to dominate the secondary market. In November, Federal Reserve purchases of agency MBS accounted for about 80% of new MBS issuance from Fannie Mae and Freddie Mac.
FHA Mortgage Rates Dip
Posted by: | CommentsAfter four days of rising home mortgage rates ended today as consumers can now lock 30-year mortgage rates starting at 4.375% today. Conforming and FHA mortgage rates increased 0.25% to .375% last Friday and many borrowers put their refinance loan on hold hoping for rates to come back down. News came from HUD Friday that the Federal Housing Administration has decided to tighten credit standards for FHA home loans. In 2010 FHA lenders will be required to carry large bonds with significantly higher net-worth requirements for companies that plan to originate FHA loans in the future.
FHA loan defaults and foreclosures have caused HUD to reconsider FHA requirements and loan guidelines. Mortgage refinancing activity continues to be robust even through the Christmas season, because so many borrowers stand to benefit from a refinance loan that reduces their mortgage payments by hundreds of dollars.
Home Affordable Refinance Program and 125 Mortgage
Posted by: | CommentsEarlier this year, the government announced several new obama mortgage programs including the Home Affordable Refinance Program that extends refinancing to borrowers with 125 mortgage alternatives. The Home Affordable Refinance loan enables borrowers to qualify for a 125 refinance that enables homeowners to borrow up to 125% of the properties appraised value. This is not to be confused with the 125% home equity loan that borrowers would use for cash out and debt consolidation for credit card debt. The Affordable Home Refinance Program is a rate and term refinance that does not allow cash out or consolidation. Qualifying borrowers must currently have a Fannie Mae or Freddie Mae home loan that does not exceed $417,000. Borrowers need a 620 credit score and only one 30-day late mortgage payment is allowed with compensating factors. This latest obama mortgage may create an opportunity for millions of homeowners to refinance into a low fixed rate mortgage even if the borrower is upside down on their home loan.
Mortgage Refinancing Expanded Under Home Affordable Refinance Program
Posted by: | CommentsAccording to recent mortgage lending reports, the Obama administration eased eligibility rules Wednesday for its Home Affordable Refinance program, lifting the maximum loan-to-value ratio to 125% from 105. The shift, which regulators had hinted was coming, is aimed at making refinancing available to more people whose homes are worth less than their mortgage loans. Clearly under the President’s new mortgage relief program, more homeowners will be eligible to refinance their bad credit mortgages or high rate ARM’s that they can no longer afford. 125% mortgage refinancing could pave the road for a quicker recovery.
HARP is open to homeowners whose loans are owned or guaranteed by Fannie Mae or Freddie Mac, the mortgage financing giants now under government control. It covers 1st mortgages only. Second mortgage loans are not eligible for the Home Affordable Refinance Program. The mortgage refinance program, launched this year, has gotten off to a slow start, in part because the maximum 105% loan-to-value ratio was too low to include many homes that have fallen sharply in value. The new 125% maximum means an eligible homeowner with a $375,000 home loan can refinance if his or her house is worth at least $300,000. But the borrower still must be able to afford the new loan. Income requirements are an increasing problem as unemployment soars and many workers are dealt pay cuts.
Treasury Secretary Timothy F. Geithner said the move to raise the loan-to-value limit was “a crucial step in our broader efforts to get America’s housing market and economy on the path to recovery.” But refinance activity in general remains vexed by the jump in mortgage rates from their generational lows in April. Refinance applications to lenders have tumbled since mid-May as rates have surged, according to Mortgage Bankers Assn. data released Wednesday. Despite a down-tick in rates in the last two weeks, refinancing activity hasn’t rebounded.
Home refinancing applications fell 30% last week from the previous week, to the lowest level since November. Home loan applications fell 4.5%, according to the report. The average contract interest rate for thirty-year fixed-rate home loans decreased to 5.34% from 5.44% a week earlier. For fifteen-year fixed loans, the rate averaged 4.81%, down from 4.93%. The average upfront fees known as points, including the origination fee, edged up to just over 1%.
The 30-year fixed rate bottomed out at 4.61% in late March, the lowest level since the mortgage group started keeping track in 1990. The recent mortgage rate trends may delay the arrival of a solid housing recovery, Federal Reserve Bank of San Francisco President Janet Yellen said in a speech Tuesday. “I am concerned that FHA mortgage rates, which have risen of late, could place a drag on a still very sick housing market, potentially driving home prices still lower and pushing more borrowers into foreclosure,” she said.
Mortgage Refinancing Modifications and Obama Home Loans
Posted by: | CommentsFormer Ditech executive, Jeff Morris, says “When the average borrower with a jumbo mortgage can qualify to refinance at a competitive interest rate, I’ll know we have turned the corner.” Morris continued, it’s a mess out there…Many homeowner think that Obama is going to give them 2% fixed rate even if they are 120 days late on their mortgage.” FHA mortgage rates have been low, but not that many borrowers qualify because the credit crunch is still preventing mortgage refinancing and new home loans for many 1st time home buyers. Mortgage loan modification requests are piling up higher than refinance applications.
According to Lawrence Yun, chief economist of the Realtors’ group, the number of home foreclosures may rise to 2.5 million this year and that would be the highest since keeping records of home loan defaults. “The foreclosure wave we’ve been through is not over,” said Susan Wachter, a real estate professor at the University of Pennsylvania’s Wharton School in Philadelphia. “That’s why we don’t see a bottom in housing yet.”
According to Seattle-based real estate data service Zillow.com. About 20.4 million of the 93 million houses, condos and co- ops in the U.S. were worth less than their loans as of March 31st. After the Federal Reserve pledged to acquire as much as $1.25 trillion in mortgage-backed securities to free up money for mortgage loans, mortgage interest rates fell to a record low of 4.78 percent twice in April. Rates began climbing last month on investor concern federal spending will fuel inflation.�
More Mortgage Loans May Qualify for Refinancing
Posted by: | CommentsThe Government released a statement that more homeowners with high LTV mortgage loans could soon be eligible for refinancing under the Obama administration’s plan to stem foreclosures. According to a Bloomberg, the government is thinking about how to expand the existing foreclosure prevention initiatives to help homeowners who are more deeply underwater on their mortgages than the current program allows. Millions of homeowners have lost their home equity with the housing crisis hindering loan to value levels significantly.
Right now, homeowners with mortgage loans guaranteed by FHA, Freddie Mac or Fannie Mae – and who meet various other criteria – can qualify for the government’s Making Home Affordable plan as long as their loan is equal to 105 % or less of their property’s value. The program has already helped tens of thousands of borrowers refinance into new home loans with reduced monthly mortgage payments. And now, even more people could qualify. “We’re actively considering how to structure a refinance program that makes sense over 105%,” James Lockhart, directory of the Federal Housing Finance Agency, told Bloomberg.
Recently, rising mortgage rates have become a potential roadblock to the program’s success, he added. The most recent figures from the Mortgage Bankers Association show that refinancing activity fell by nearly one-quarter (23 %) in the week ended June 12. The proportion of mortgage applications to refinance home loans declined to 54.1 % from 59.4 % one week earlier. Despite the fact that average rate for a 30-year, fixed rate mortgage decreased slightly to 5.5 %, it could not match the record-low rates seen in April. “Higher mortgage rates will keep re-fi activity under pressure,” economist Tom Porcelli of RBC Capital Markets told Bloomberg.
Mortgage Refinancing Applications Drop as Interest Rates Rise
Posted by: | CommentsMortgage refinance loans continue to make up the majority of the market with both VA home mortgages and FHA home loans dominated. A according to industry data released today, mortgage loan applications dropped last week as mortgage rates crept up. The mortgage market composite index, a measure of mortgage loan application volume, fell 16.2% on a seasonally adjusted basis compared with a week earlier, according to the Mortgage Bankers Association. The drop was reflected mostly with the home refinancing activity. The home refinancing index fell 24.1% last week, while the home purchase index increased 4.3%.
According to the MBA the rate hike comes as the average thirty-year fixed-rate mortgage interest rate increased to 5.25% last week from 4.81%, That was the most significant mortgage rate increase since October 2008.
Mortgage interest rates have been slowing rising up as demand for long-term government bonds has eased in recent weeks, analysts have said. Bonds are a traditional safe haven during market turbulence, but stocks have been buoyed by optimism that the recession was easing. Also, investors have also begun to shy away from government debt on fears the government and FHA was taking on too much to fund federal recovery efforts. “If you were looking for mortgage refinancing for under 5%, this puts the brakes on that,” said Guy Cecala, publisher for Inside Mortgage Finance. Refinance mortgages have been in high demand as adjustable rate loans have been resetting in 2009 at an alarming rate.
Mortgage refinance rates are still low by historical standards and could fall again as the government continues to buy up mortgage-backed securities and government bonds, Cecala said. The housing market has remained weak this year, though a plummet in home sales prices has attracted buyers in some of the hardest-hit parts of the country. Although some mortgage insiders and esteemed economists believe sales could begin to show improvement later this year, prices are expected to continue to fall.
New Affordable Mortgage Refinance Program
Posted by: | CommentsAn important part of Fannie Mae’s role in the Making Home AffordableSM Program is Home Affordable Refinance, available for mortgage refinance transactions of existing Fannie Mae loans only. The goal of the mortgage refinance effort, as announced by the President, is “to provide access to low-cost refinancing for responsible homeowners suffering from falling home prices.” The expectation is that mortgage refinancing a Fannie Mae loan will put responsible borrowers in a better position by reducing their monthly principal and interest payments or moving them from a more risky home loan structure (such as interest-only or short-term ARM) to a more stable product.
Home Affordable Refinance provides two Refi Plus™ options for Fannie Mae lenders to provide Fannie Mae to Fannie Mae refinance solutions to eligible borrowers: 1) Refi Plus, which requires manual underwriting, and 2) DU Refi Plus™ for mortgage loans underwritten through Desktop Underwriter® (DU®). FHA home loans continue to be the most popular method for refinancing adjustable rate mortgages into fixed rate loans.