Mortgage Rates & Trends: Mortgage Blog

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  1. Mortgage Fraud- Meet Your Match!

    By Darren Daneault on April 30, 2009

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    The Senate recently passed a bill that will help fight mortgage fraud over the next few years. With all the activity going on now, it’s easy for mortgage fraud to go overlooked or unnoticed. Low mortgage rates have sparked a new refi-boom and along with that, mortgage fraud has been on the rise, already claiming many victims.

    This piece of legislation sets aside approximately $500 million to be spread out among several agencies, including the FBI’s mortgage fraud task force and the Department of Justice. Overall enforcement will be increased, and more resources and tools will be readily available for investigators and prosecutors to help battle the scammers.

    This initiative is referred to as the Fraud Enforcement and Recovery Act, or FERA. Mortgage brokers or companies not regulated by the government now fall under current federal fraud laws in this act. Those who intend to defraud homeowners will be caught and severely punished.

    What can you do to protect yourself? Simply go with your gut and trust your instincts. If an offer sounds too good to be true, it is. If someone requires you to pay unreasonable fees or point up-front in order to get a low rate, think twice about it. Mortgage fraud will always be a problem, but you can easily stay one step ahead of the bad guys.

    by Darren Daneault

    Category: Current Mortgage Rates, General, Mortgage Rate Trends and Analysis, Stimulus

  2. Applications Are Down, but Refinancing Still Up

    1 By Darren Daneault on April 29, 2009

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    According to the MBA (Mortgage Bankers Association), mortgage loan applications fell the week ending April 24th. Surprisingly, mortgage refinancing has slowed down a bit despite the low mortgage rates. Since March, this was the second week in which applications showed a decline.

    Don’t let the numbers completely fool you though. There are still plenty of applications in the pipelines. Refinancing is still a hot ticket, and so long as rates remain at record lows, banks and brokers will be busy for a while.

    Lenders are starting to get backed up. Turn-times are getting a little worse. Some banks have already hired extra staff just to help with the volume.

    Even with low mortgage rates, government assistance for both purchasing and refinancing, and the decline in home prices, the housing market has yet to see a bottom. It’s anticipated that the stimulus money will ultimately help get the markets back on track. However, it will be a very gradual process that may take quite a while.

    by Darren Daneault

    Category: General

  3. Fannie Mae and Freddie Mac to Enforce Home Valuation Code of Conduct on Appraisals

    By Robert Hyder on April 29, 2009

    by Robert Hyder

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    Fannie Mae’s and Freddie Mac’s latest modification is being implemented in the Home Valuation Code of Conduct, effective Friday, May 1, 2009. The Home Valuation Code of Conduct is a safeguard put into effect to ensure uniform compliance of the appraisal process. According to executives at Global DMS LLC, the creators of the OASIS software, many mortgage lenders are ill prepared to conform to the latest rule revision.

    Mortgage lenders are not required to utilize an appraisal management company rather than an independent appraiser, but that is the leading misconception among lenders. Lenders are incorrectly assuming that if they use an appraisal management company, it will result in compliance.

    Mortgage lenders can no longer pay for appraisals as they are completed. Therefore, they will be forced to handle prepayment of appraisals while they simultaneously manage the appraisal process.

    The OASIS software will enable lenders to manage the appraisal process while utilizing either their own appraisers or the Global DMS LLC appraisal network. OASIS will ensure compliance with the Home Valuation Code of Conduct while simplifying the entire process.

    Global DMS LLC will waive the set-up fee for mortgage lenders that choose to utilize their software. In addition, Global DMS LLC will allow their per-order delivery fee to be passed along to the appraisal management companies or to an individual appraiser. Another company, ServiceLink, also offers software that will comply with the Home Valuation Code of Conduct. ServiceLink’s software, dubbed Appraiser Panel Management (APM), also allows mortgage lenders to draw on the relationships they’ve developed with appraisers over time.

    Because lenders own an interest in appraisal management companies, some appraisers are left to believe that the lenders will remain adept to exercise their influence on appraisals.

    Category: General, Mortgage Rate Trends and Analysis

  4. Clever Idea for the $8,000 Tax Credit

    By Darren Daneault on April 29, 2009

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    By now, you’re probably aware of (and maybe tired of hearing about) the $8,000 tax credit for first-time homebuyers. The tax credit was basically created to help boost new home purchasing. Low mortgage rates are encouraging shoppers to get out there and buy, while at the same time, helping existing homeowners lower their mortgage payments. But even with these perks, the housing market is still in the early stages of recovery.

    Everyone likes free money and the $8,000 tax credit is a nice touch, but it doesn’t seem to be making a strong enough impact on the housing market. Part of the issue is that first-time homebuyers might have trouble coming up with a down-payment. That $8,000 would be better used up-front, for closing costs, legal fees, or down-payment assistance.

    The state of Missouri has created such a program. Under the system, first-time homebuyers will receive $8,000 as a loan to help with initial costs, and are expected to pay the money back down the road, interest free. This program has received both praise and criticism.

    The primary drawback to the program is enforcing repayment of the loan. What will happen if the first-time homebuyer is unable or unwilling to pay the money back? One requirement of the $8,000 tax credit is that the recipient must remain in the house for 3 years. What happens if the home is foreclosed in that 3 years?

    Some states already provide assistance (not in the stimulus package) with down-payments, closing costs, or legal fees. Some critics suggest that states and local agencies already provide enough assistant and that this proposal is moot. Another drawback is that the tax credit is only offered through December 1st of this year, which would leave only a few months for states or agencies to set up similar programs to that of Missouri’s.

    All in all, it’s not a bad idea. In this blogger’s opinion, the $8,000 tax credit could use a tweak; maybe give first-time homebuyers the option to use the $8,000 up-front (with government enforcing re-payment), or perhaps even extend the tax credit well into 2010 as the housing market slowly recovers.

    by Darren Daneault

    Category: Current Mortgage Rates, General, Mortgage Rate Trends and Analysis, Stimulus

  5. Obama Offers New Incentives for Mortgage Servicers

    By Robert Hyder on April 28, 2009

    by Robert Hyder

    us_capitol_dome_jan_2006

    A senior member of the Obama administration said the President will reveal additional incentives later today for mortgage servicers to assist homeowners who are facing foreclosure. The new program will pay mortgage servicers an upfront fee of $500, in addition to $250 per year for three years for successfully modifying second mortgages.

    In a separate strategy, the White House will release a schedule of incentives for existing borrowers of second mortgages. The incentives will be for voluntarily terminating their second mortgage liens.

    Additionally, President Obama will publicize his intentions for providing further incentives for mortgage servicers and lenders who are actively contributing to the Bush administration’s Hope for Homeowners program, designed to assist struggling homeowners avoid foreclosure by refinancing them into a more cost-effective 30-year fixed-rate mortgage so their first payment will be the same as their 360th.

    A significant number of borrowers who are in the midst of facing foreclosure proceedings have second mortgages leveraged against their homes. In most of these cases, the investor of the first mortgage is not the same investor for the second mortgage, making it increasingly difficult to modify their first mortgage.

    Many of the most prominent mortgage lenders in the United States, such as Wells Fargo, JPMorgan Chase and Bank of America have already agreed to the President’s newest initiative, and the rest of the mortgage industry will be strongly encouraged to contribute, as well.

    The program entails servicers modifying second mortgages in cases in which the first mortgage has already been refinanced. Servicers of second mortgages must extend the length of second mortgages while reducing the interest rate to mirror the interest rate on the first mortgage.

    Furthermore, benefiting borrowers will receive payments of up to $250 each year, up to five years, for staying current on their monthly mortgage payments. The $250 payments will be applied toward the principal balance of the new first mortgage.

    While the legislation takes its bureaucratic course through Capitol Hill, the U.S. Department of Housing and Urban Development will establish a program to eliminate second mortgage liens.

    Category: Fixed Rate Mortgages, General, Mortgage Rate Trends and Analysis, Stimulus

  6. Pay Your Mortgage Off Quicker with Bi-Weekly Mortgage Payments

    By Robert Hyder on April 28, 2009

    by Robert Hyder

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    By making half of a monthly mortgage payment every two weeks, homeowners can save a substantial amount of money over the term of a mortgage loan. Typically, if a homeowner pays half of their monthly mortgage payment every other week, they will reduce a 30-year fixed-rate mortgage by approximately seven years.

    The reason is simple: instead of making 12 monthly payments, homeowners are making half a payment every two weeks, resulting in 26 half payments per year, or the equivalent of 13 monthly payments in a 12-month period. In the end, the principal is paid down a great deal faster, saving a significant amount of money on mortgage interest payments.

    Most banks and mortgage lenders offer bi-weekly payment options, and many even offer a weekly mortgage payment option. If you’re willing to pay your mortgage bi-weekly, and your lender offers the opportunity for weekly mortgage payments, take full advantage.

    Does this opportunity to pay off your mortgage early sound too good to be true? Well, there is one caveat: most banks that offer the bi-weekly or weekly payment options also charge a fee to sign up, often hundreds of dollars. However, there is a way to achieve the same results without having to pay these unnecessary fees. Merely make one extra monthly mortgage payment per year or simply distribute an extra month’s payment evenly throughout the year by paying down the principal each month. Most monthly mortgage statements provide an extra line for an “extra principal payment.”

    To see exactly how much money a bi-weekly or weekly payment plan can save you over the life of your mortgage loan, an online accelerated mortgage calculator will do the figuring for you. You will be pleasantly surprised at how much time will be removed from your mortgage term.

    Category: Fixed Rate Mortgages, General, Mortgage Rate Trends and Analysis

  7. Home Prices Still Falling

    1 By Darren Daneault on April 28, 2009

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    Home prices in the United States continue to decline, but at a slower pace. Prices dropped by approximately 2.2% in February versus 2.8% in January. An evaluation of 20 major cities shows that home prices fell almost 20% in February, compared to where prices were a year ago. While 20 cities are hardly representative of the entire country, it’s a pretty good indicator that we may still have a way to go before we see a recovery in the housing market. In addition to the drop in home prices, existing home sales were also down this year by about 3% from February to March.

    This is good news for those in the market looking to buy a new home. Average home prices are down about 30% from their peak in 2006. Mortgage rates are low, prices are low, and the $8,000 tax credit for first-time homebuyers puts the icing on the cake. Unfortunately, the economy is fairly unpredictable now, so no one can say how much lower (if at all) home prices could fall.

    A continuing decline in home prices, while good news for some, means hard times for others. Some current homeowners are finding themselves ‘underwater’, that is, they owe more than what their home is worth. This makes it virtually impossible for these homeowners to refinance into lower rates and better terms. The best defense against this scenario is Fannie Mae’s DU Refi Plus, which can allow for up to 105% financing. Amazingly, some homeowners owe more than 105% on their home, and there is no remedy.

    Since the market is a tad unstable, our best method for predicting the housing market’s future is to evaluate the data from month-to-month as it comes out. In the meantime– Future homeowners, have fun shopping!  Existing homeowners, hang in there!

    by Darren Daneault

    Category: Current Mortgage Rates, General, Mortgage Rate Trends and Analysis, Stimulus

  8. FHA Doing Its Part…

    By Darren Daneault on April 28, 2009

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    …but some homeowners are not doing their part.

    Many people are having difficulty keeping up with their FHA mortgage payments. With unemployment still rising, it should come as no surprise. Those lucky enough to find new jobs may have taken a pay-cut, and other economic factors have likely helped contribute to the rising delinquencies. Let’s face it;  it’s rough out there for us all.

    FHA mortgages have become popular over the last few years. More and more first-time homebuyers use FHA since underwriting guidelines are less strict and the programs require as little as 3.5% down-payment. Combined with the new $8,000 tax credit for first-time homebuyers, FHA programs are helping many Americans purchase their first home with ease. But as we’re finding out, it’s not taking long for some homeowners to feel the effects of the recession.

    According to the Wall Street Journal, recent data shows that 10% of homeowners who received financing from FHA in the first 3 months of 2008 were already 2 months behind with their payments in that first year. The government has recently taken drastic steps to help the housing crisis, but as it turns out, no one is immune to the difficult market conditions in which we currently live.

    One thing to remember is that owning a home is a risk and an investment. It’s a huge responsibility, and sadly, not everyone can handle it. The government can step in to assist, but they can only do so much. We’ve seen how bad the economy can get, but hopefully we can all take away a little something from this experience.

    by Darren Daneault

    Category: Current Mortgage Rates, FHA, General, Mortgage Rate Trends and Analysis, Stimulus

  9. Working Around The Psychology

    By Darren Daneault on April 27, 2009

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    Homeowners can evaluate their home’s value is several ways. When it comes time to upgrade, your thought process can get in the way of an opportunity to purchase a new home. Homeowners need to get around the psychology of what their current home was worth…and focus on what it is worth.

    No one wants to lose money, that’s a universal truth. When it comes to current home values, a homeowner may compare its value to when it was highest, in our example, this was probably around 2007. Today, the same home is likely worth a lot less. But, in the end, the home might now be worth more than when it was purchased. This is where a homeowners’ mind might play some tricks. Do you consider the home to have lost value since 2007, or do you consider the home to have gained value since it was purchased?

    Picture this scenario-
    You buy a home in 2002 for $100,000. Today, it is worth $150,000, and the value peaked in 2007 at $200,000. This is not a loss of $50,000; it’s a gain of $50,000. The ‘glass is half empty’ crowd would call this a ‘loss’ of $50,000.
    Now, you’re looking to upgrade into a bigger home. Imagine how this homeowner feels; in 2002 he bought a home for $200,000, now it’s worth $300,000, and it peaked in 2007 at $400,000. You’re both up 50% (or, ‘down’ 25%). Who is hurt more?

    If you are in the ‘glass is half empty’ category, consider that in order to reap the profits in 2007, you would have had to sell your home. Was that an option at the time?
    Also consider that house values will eventually rebound. If you’re looking to upgrade to a bigger house, you’ll be well positioned to make a great return on your new investment. If home values increase 10% across the board in the next few years, we know that a 10% increase on a home worth $300,000 is a lot more than a 10% increase on a home worth $150,000.

    The bottom line is that you will need to think long term, and think positively when upgrading to a bigger home. Don’t let your mind play tricks on you; work around the psychology.

    by Darren Daneault

    Category: General, Mortgage Rate Trends and Analysis

  10. Bank of America Rids Itself of Countrywide Association

    2 By Robert Hyder on April 27, 2009

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    by Robert Hyder

    In an effort to strengthen their mortgage brand, Bank of America is dropping the Countrywide moniker from its identification. Prior to the sweeping decline in property values, Bank of America was the second-largest mortgage lender in the United States.

    Starting with their branches in California, Bank of America is retiring the Countrywide label just 10 months after purchasing the company in July of 2008. With mortgage rates as low as they have ever been on record, Bank of America intends to increase their leverage in the mortgage industry by continuing to build on the powerful momentum they gained last quarter when they wrote more than $85 billion in home loans.

    The Countrywide brand was born in 1969 and is being retired nearly 40 years later after being purchased by Bank of America as it neared collapse. Many believe the Countrywide designation was too toxic to save, so executives at Bank of America were resolved to abandon the name. As the re-branding is completed, it coincides with what is traditionally the busiest time of the year for home buying.

    Heavily involved in the sub-prime lending movement, Countrywide was the largest lender in the United States at the pinnacle of the housing market. When borrowers of sub-prime mortgage loans progressively began to default on their monthly mortgage payments in 2007, the housing market began to collapse. As loan losses mounted and mortgage volume slowed, Bank of America negotiated a deal to acquire the failing Countrywide in January of 2008. Six months later, the deal was closed at a value of about $2.5 billion, which was $1.5 billion less than initially agreed upon due to a severe decline in Bank of America’s stock. The acquisition agreement was an all-stock deal originally valued at $4 billion.

    Bank of America has pledged no “gimmicks” or surprises to their customers. The days of sub-prime and exotic mortgages are gone, and Bank of America has assured their borrowers to keep loans simple and affordable.

    Category: General, Mortgage Rate Trends and Analysis
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