Archive for Mortgage News that Matters
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 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 mortgages for people with bad credit 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. Many industry insiders were nervous about the government getting involved with bail lout and take-over. In the wake of the biggest adjustable mortgage refinance boom, banks began failing.
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, home loans with FHA have performed better than conventional mortgage products and the government continues to insure refinance from FHA and home purchase loans. VA mortgage 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.
Top 5 Mortgage Refinance Loans in 2010
Posted by: | Comments2010 has been an interesting year for mortgage refinancing for both homeowners and lending professionals. Qualifying for a refinance loan has certainly been an easier process in years past. Since the subprime mortgage crash of 2006, the mortgage industry has transformed mortgage refinance programs to reduce risk and decrease foreclosure rates.
Mortgage refinance rates are at record lows and homeowners that do qualify can benefit from a fixed rate mortgage that will reduce their monthly payment and eliminate years of compounding interest. There is also an opportunity for millions of homeowners to escape the fear of their adjustable rate home loans. Al Pereida, the branch manager for iServe Lending in Irvine, California said, “Homeowners should not pass up these opportunities to lock in fixed rate mortgages below 5%.”
Listed below are the Top 5 Mortgage Refinance Loans in 2010:
1. FHA Refinance Loan – This is the most common refinance loan for homeowners this year, because FHA doesn’t require much equity and the credit score requirements are not as stringent as conventional lending guidelines. Low credit scores and lack of equity are the biggest obstacles for homeowners in this market.
2. VA Streamline Refinance – This is the most cost effective refinance loan available this year, but you must have VA loan eligibility. The VA refinance overlooks the lack of equity because there is no appraisal needed for the VA streamline program.
3. No Cost Mortgage Refinance – Refinancing into a low rate mortgage with no points and no fees is a great option for borrowers with good credit scores and worthy income documentation.
4. Loan Modification – This is technically not a refinance loan, but it accomplishes the same goal of achieving a lower monthly payment. Millions of distressed homeowners find themselves being rejected by lenders because they do not meet the tighter mortgage refinance guidelines.
5. Cash Out Refinance – Home equity loans have nearly vanished so the cash out refinance has remained a popular choice for home improvement financing and debt consolidation. FHA refinance loans allow 85% cash out. VA refinancing guidelines allow 90% cash out and most conventional lenders limit cash out to 80%.
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.”
Is Mortgage Refinancing the Best Way to Consolidate Debt?
Posted by: | CommentsHomeowners seem to have the ability to accumulate more debt than non-homeowners. Maybe it’s because typically their housing expenses are greater than non-homeowners or maybe it’s because homeowners have been leveraging the debt with tax deductible mortgage refinancing for the last few decades. Credit card debt is the most common debt that homeowner look to refinance by they also like to refinance home equity credit lines, automobile loans and existing second mortgage loans. If the borrower has the ability to make their mortgage payments on time, then we recommend refinancing a large amount of debt if doing so doesn’t increase the interest rate of your first mortgage. If your job or income is unstable then we would likely not advise you to use your home as collateral for a loan you may not be able to pay back.
Second mortgage refinancing would be less of risk in this case, because 2nd mortgage lenders can rarely foreclose on a home if the borrower is current with their first mortgage. Home equity loans can also be used as a debt consolidation loan. All of these types of loans are considered cash out refinance loans and this form of financing is used as a vehicle for homeowners to consolidate debt and lower their monthly payments.
Before utilizing the cash out refinancing features, homeowner should consider the pros and cons of leveraging their debt with a secure mortgage loan that uses their homes equity to pay off debt. Debt consolidation refinancing can offer many benefits, but you should evaluate your financial goals before committing to another mortgage.
Mortgage Refinance Tips to Maximize Low Rates
Posted by: | CommentsMortgage refinance guidelines tightened this year, so many homeowners are being rejected by their lender for refinancing. Just when you think that you have seen the lowest mortgage rates ever, the interest rates get even lower. Most mortgage executives have indicated they believe the low rates won’t last and that mortgage rates will begin to rise again in 2011. With that being said, it is important to qualify for a mortgage refinance loan, now while the rates for home refinancing are so favorable. Nationwide loan officers provide mortgage refinancing tips at no cost.
Looking for an Affordable Home Refinancing Solution Online?
We outlined the top 3 mortgage refinancing benefits:
1. When refinancing, your new loan should have a mortgage refinance rate at least .5 percentage points less than your present interest rate.
Years ago most financial advisors had recommended mortgage refinancing if you could get a mortgage rate at least 1 percentage point less than your current mortgage. Well, the rules have changed, because refinance rates in recent years have been at historical lows, so a half point drop makes up a larger percentage of your existing rate.
2. Typically most people refinance into the same type of home loan they started, simply because they do not know any better. That can be a financial blunder that could cost the borrower thousands of dollars a year. If you are a few years into a thirty-year mortgage, don’t just refinance into a new mortgage because you save a little bit of money with a reduced mortgage interest rate. The new mortgage could be stretching out your payments over several more years, so you might not really be saving money. For example, let’s say you only have twenty years left on your existing home mortgage. If you can refinance into a thirty-year home loan you would be adding ten years to your existing mortgage loan. If you have the option to qualify for a no cost loans we recommend that you seize the opportunity.
3. Closing costs and lender fees should be recovered within the first 3-5 years or less. Closing costs factors should be considered before signing the paperwork need to close a loan. You’ve got to make sure the proposed mortgage rate makes sense on paper financially. Don’t assume that the closing costs are justified. Many home refinance loans will see closing costs in the $5,000 to $10,000 range and some have even higher lender fees.
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.
MGIC Adjusting to Compete with FHA Loans
Posted by: | CommentsFixed rate refinancing remains in high demand for homeowners who have an adjustable rate mortgage, but have not been able to qualify to refinance because their home is worth less than the their mortgage balance. Reuters reported last week that MGIC Investment Corp who is the largest home mortgage insurer in the United States, reduced its premium rates in an effort to recapture market share lost to FHA loans insured by the Federal Housing Administration. FHA mortgage rates have remained competitive with conventional interest rates since 2007.
The low mortgages rates have been available to consumers with high credit scores. Higher interest rates will be offered to borrowers with lower credit scores under the new pricing system. According to mortgage advisor, Sandy Sarconi, “MGIC may be too late reacting to FHA because they have taken 30% of the market-share.”
Presently, FHA loan guidelines do not consider credit scores when pricing its insurance for FHA mortgage loans. The new prices will be effective May 1, the company said. In January, MGIC reported its tenth straight quarterly loss because of increasing delinquencies. More and more homeowners are failing to make their mortgage loan payment on time. The company did make a statement that they anticipate home loan delinquencies to reduce towards the end of 2010.
