mortgage info

Mortgage lending at new lows in June

noreply@blogger.com (Mr Mortgage) — Sun, 20 Jul 2008 02:04:00 +0000

MORTGAGE lending fell to a two-year low last month, new figures out yesterday revealed. The Council of Mortgage Lenders (CML) reported that its members – accounting for 98 per cent of UK lenders – advanced £23.8 billion of loans in June, 3 per cent less than in May and a third down on last year.

The fall in lending between the first three months of the year and the second quarter was just 1 per cent, suggesting the pace of decline had slowed, but that impression is misleading "Market activity during a traditionally busy time of year for mortgages has been muted by funding shortages and, more recently, dampened consumer demand," said Michael Coogan, director-general of the CML.

The year-on-year decline has gathered pace, with the second quarter down 21 per cent on the same period last year, compared with a 11 per cent year-on-year fall in the first quarter.

Coogan said that market conditions would mean lending remains constrained for the remainder of 2008, despite evidence of a fall in short-term fixed-repayment rates. "Borrowers on tight budgets will have to plan ahead to manage higher mortgage payments than they have been used to. Speak to your lender early, remains the advice for anyone struggling to pay."

Some mortgage rates have fallen in the last two weeks, with Nationwide, Abbey, Woolwich and Halifax (twice) reducing the cost of some mortgages. However the reductions primarily benefit borrowers with a 25 per cent deposit.

"I would hope to see other lenders follow suit, bringing some much-needed competition to a market that has been depressingly bereft of vying lenders," said Drew Wotherspoon, head of communications at broker John Charcol.

Pitfalls of a Reverse Mortgage: Things to Remember

noreply@blogger.com (Mr Mortgage) — Sun, 20 Jul 2008 02:03:00 +0000

First, you need to learn that no all senior reverse mortgages are the same. Before applying for a reverse home mortgage, you want to ensure that you are electing the right one. The two principal types are the private reverse home mortgage and the FHA backed reverse mortgage.

With a private reverse mortgage, there are basically no limits on how much you can be charged. Whenever you hear of bad stories of people who applied for a reverse home mortgage and ended up paying way too much is because they picked out this kind of home loan. Keep away from this home loan.

With a FHA backed reverse home mortgage, there are plenty of regulations that lenders must abide by. FHA regulates this kind of reverse mortgage and sets the costs that reverse mortgage lenders may charge you. Obviously, you invariably want to choose this kind of reverse mortgage.

Furthermore, with a FHA backed reverse home mortgage, you have the right to a no-cost consulting session. In this session, you can ask any doubts you have. Write all your questions before the session so that you do not forget later on. Take all advantage of this session.

Another one of the pitfalls of a reverse mortgage is when a mortgage lender is too eager for you to apply for a reverse mortgage in order to pay for something else: a second house, an investment, etc. Normally, be careful of lenders who appear to be way too eager about you applying for the home loan.

Additionally, remember that even though you won’t need to make any monthly payments, you are still responsible for the traditional fees related with the title of a home: taxes, maintenance, insurance, etc.

You may decide to apply a portion of the money you receive from the reverse mortgage to pay for these fees. This way, you can be sure that you’ll stay in your home as long as you want.

Similarly, a reverse mortgage may not be the cheapest solution for you. You may consider to refinance or to sell the home. Of course, a reverse mortgage may be the best answer for you if you want to stay in your home and do not want to make any ongoing payments or if you need a consistent “additional income.”

In conclusion, try to choose a FHA insured reverse mortgage lender. In addition, keep enough funds to pay for the maintenance costs and ensure that a reverse home mortgage is the cheapest or more appropriate solution for you. That way, you can be sure to minimize the pitfalls of a reverse mortgage.

Government Insured and Conventional Mortgages, Trends in Harris County Texas

noreply@blogger.com (Mr Mortgage) — Sun, 20 Jul 2008 02:02:00 +0000

Since the refinance boom of 2003 and 2004, the numbers of conventional refinance mortgages has steadily declined in Harris County, Texas. The number of conventional purchase mortgages have remained static while more recently, FHA/VA mortgages have started to increase. Why have these government issued mortgages become more popular? According to the FHA it is now easier to qualify, it costs less, they have low down payments, and you can have less than perfect credit. The decline in conventional mortgages suggests that these types of mortgages are more difficult to obtain. In Harris County will FHA and VA mortgages dominate in market share?

Intentional Deception or Myth: Do Mortgage Brokers Find the Best Deal?

noreply@blogger.com (Mr Mortgage) — Sun, 20 Jul 2008 02:01:00 +0000

Mortgage brokers do 60 to 80 percent of home loan origination across the country. These people are major players in the mortgage industry, yet their role is entirely misunderstood by the public. Is it intentional deception or myth that mortgage brokers shop for the best deal for their clients? Of course there may be some document somewhere in the stack signed at closing that explains in complicated terms that the mortgage broker is out to make himself/herself the most money and will push high cost, high risk loans to do just that. But, when you talk to brokers, they will often expressly state otherwise or imply that they have found the best deal just for you. (Of course there are some good and decent mortgage brokers out there, just like there are good and decent lawyers, journalists, politicians and used car salesmen.)

Need proof of the public’s perception? How about a national study ordered by the Federal Reserve Bank. The study asked people familiar with the process of buying or refinancing a home and had done so within the last two years. In the study, agreements and disclosures where shown to the folks and then questions were asked of them. Time and time again, regardless of the language of the documents, the prospective borrower believed the broker was looking out for their best interest:

Most participants who read the agreements did not understand how lender payments to brokers created a financial incentive for brokers to provide loans with higher interest rates. While some initially understood that brokers receive more compensation for providing loans with a higher interest rate, this fact was extremely counter-intuitive to participants—many of whom had previously assumed that a broker would work in their best interest. As a result, a significant number had difficulties comprehending and rationalizing the conflict of interest described in the agreement.

Consumer Testing of Mortgage Broker Disclosures, Macro International, Executive Summary, July 10, 2008 (complete report here).

In short, the public ignores what the documents say and bases their opinion on their perceptions. These perceptions are exactly why mortgage brokers are a major player – brokers say or imply they are looking for the best deal for their clients. Brokers want it both ways — they want the public to think they are on their side while sticking borrowers with loans that make them the most money. This defeats the mortgage brokers’ reason for existence. Thus, whether it is intentional deception or myth is irrelevant – a regulatory change is desperately needed.

Noticeably absent from the new amendments to Regulation Z that were published this week by the Federal Reserve (summary here), were changes to disclosures by mortgage brokers. In late 2007, the Federal Reserve was considering better disclosure rules to attempt to notify borrowers how mortgage brokers were getting paid and their duties, or lack thereof. The Fed also commissioned the study above, and as a result, scrapped the new rules. Some were less than pleased with the Fed’s failure to act:

The Fed’s own report states that 60% of loans were originated through mortgage brokers in the last several years. The report candidly acknowledges that consumers “often are unaware, however, that a broker’s interests may diverge from, and conflict with, their own interests.” And yet the Fed left the brokers alone.

Particularly problematic has been the abuse of yield spread premiums, which gave brokers higher compensation for placing a consumer in a higher-interest, riskier loan. Instead of stamping out this perverse abuse, the Fed withdrew its proposal for even a modest rule requiring brokers to disclose whether they were getting a premium.

Article here.

While the Fed’s rules are certainly nothing to be proud of, they are an improvement. (More later on the rules they did enact – but no hurry since none of them become effective until 2009.) But it is clear that the Fed is not done looking at this issue: “Based on compelling evidence from consumer testing, the Board is withdrawing the proposed rule regarding yield-spread premiums. The Board, however, intends to analyze alternative approaches to this issue as part of its ongoing review of the rules for closed-end loan rules under Regulation Z.” Fed Press Release, July 14, 2008 (here).

While brokers scramble to raise more money from their borrowers to hire more lobbyists, they explain that a duty to treat their clients as clients, rather than paychecks, invites borrowers to sue them every time they have trouble paying the mortgage. The response is easy:

Medical doctors, lawyers, and realtors do not have to promise that they will get their clients/patients the best surgical results, the best legal results, or the best deal on the house in order to discharge their clear fiduciary duties. Instead, they are promising to do the best job they can; to fully inform their clients of all relevant information and risks; and to carefully make sure that their clients have been provided with the necessary tools and understanding to make a fully-informed decision. Mortgage brokers, bankers, lenders, and consumer finance companies could easily adopt a fiduciary standard for their loan originators if they chose to, and it would be both practicable and fair.

Ethical Lending Foundation (article here)

Hopefully, because of the results of their study, the Fed is not merely planning to require more disclosures, but something more meaningful. Rather than merely eliminate mortgage brokers from the mix, the Center for Responsible Lending, National Consumer Law Center, and others have reasonably called for formalizing what the public already believes — mortgage brokers have a duty of care toward their clients. This duty was just enacted in New York two weeks ago (here) and was recently enacted in Minnesota. See article. North Carolina has had something in place since 2002 (here) and the courts have found a duty to exist in other states in certain circumstances (see article here). Rather than a patchwork of state statutes and legal decisions, the country needs one federal law to provide protection from mortgage brokers out to make money on the backs of the borrowers, lenders, investors, and the rest of world. The Fed knows the effects of abusive lending practices are no myth and maybe they will do something about it rather than wait until the next crisis and consider better disclosures.

Getting a financial adviser to help you find a mortgage

noreply@blogger.com (Mr Mortgage) — Sun, 20 Jul 2008 01:57:00 +0000

Finding a suitable and affordable mortgage can be difficult at the best of times, but in the current financial climate many people are finding it more difficult than ever to get a mortgage that suits that needs and is affordable. For many people trying to go it alone when it comes to finding a mortgage is a difficult if not impossible task, and this is why more and more people have turned to mortgage intermediaries in order to get help with finding a mortgage.

One type of mortgage intermediary that can help with finding the right mortgage is a reputable and experience independent mortgage advisor. First time buyers, in particular, can benefit from the experience and advice of one of these advisers, as otherwise the world of mortgages can become something of a minefield. A good adviser will be able to offer valuable advice and recommendations, enabling the buyer to get the most suitable mortgage for their needs without paying over the odds.

It is a good idea to do a little research and determine what sort of mortgage you want before you go to an adviser, as this will enable you to be more focussed with regards to what sort of mortgage you look at. When you seek advice from an independent mortgage adviser you can enjoy the peace of mind that the adviser is not tied to any particular firm, and therefore the advice that you receive will not be biased.

However, there is one thing that you need to look out for, and this is the fact that these independent financial advisers are paid a commission from the lenders to whom they refer business, and this means that you need to be careful. The last thing you want is to be directed to a particular lender because of the rate of commission that the adviser gets from that lender rather than whether the lender offers the best deal for your needs.

In many cases independent financial advisers charge their fee to the lender rather than to the consumer, which means that you can get the financial advice for free. However, if this is the case how can you be sure that you are getting truly independent advice rather than advice based on how much the lender will pay the adviser? One way around this is to pay the independent financial adviser upfront, as this way the adviser will have no reason to offer anything other than truly independent advice, as you will be the paying client and his or her actions will not be based on what the lender will be paying.

Seeking independent advice from an industry professional can prove truly invaluable these days, particularly given the difficulties that many face when it comes to getting a mortgage. However, you should remember that it may well be worth paying a few hundred pounds upfront simply for the peace of mind that the advice and information that you are getting is totally independent and unbiased.

Are You Getting Mortgage rate Information from a Reliable Source?

noreply@blogger.com (Mr Mortgage) — Sun, 20 Jul 2008 01:46:00 +0000

I cannot tell you how many times I saw headlines and blog posts talking about mortgage rates falling yesterday. What is scarier is the number of mortgage professionals blogging (and talking) about it as well.

Simply put, the exact opposite was true!!!

Every Thursday, Freddie Mac puts out their mortgage market survey, which is basically a weekly average and therefore unreliable at best. Mortgage rates change, sometimes many times, daily. So, if you are getting your mortgage rate information from the wrong source, it will likely cost you lots of money.

If you are looking for a reliable source, granted using technical jargon, look no further than Florida Mortgage Daily. This site features at least once daily updates, usually two or three, that covers what is happening in the mortgage markets and whether or not locking or floating is the better choice. If you had been following it yesterday, you would know that mortgage rates were climbing, and fast, the last couple of days.

Dinged by a mortgage application

noreply@blogger.com (Mr Mortgage) — Fri, 18 Jul 2008 17:55:00 +0000

Question: You have written that preapprovals don't affect your credit score much. But in October of '07, I asked a mortgage company in Florida to render a quote. Two months later, I received a letter from my auto insurer saying I did not get the best rate because I had three mortgage requests for credit within two years.

This has happened to me twice and is obviously a problem. My score is above 750. When I repeat this to insurers, they tell me it doesn't effect my premium. But Progressive has told me twice that it does! You could provide a real service to your agents and buyers if you got to the bottom of this shady and damaging practice.

Answer: You say your score is "above 750," but I don't know whether you are referring to your credit score for purposes of securing a mortgage or your credit-based insurance risk score for obtaining an insurance policy. They are not the same.

Your FICO credit-risk score, so-called because the algorithms and such were created by the Fair Isaac Corp., is used by most lenders, while insurers use the aforementioned credit-based insurance risk score. You also could be referring to one of the brands of "educational" credit scores that are sold on various Web sites, use varying score ranges and are used by no insurers and by few, if any, lenders.

All three varieties use different formulas, so it's important to know which is which.

That said, it is possible for a person to have a credit-based insurance risk score that is not as good as their credit-risk score. According to Craig Watts, public affairs manager at Fair Isaac, the two types of scores use different formulas and predict the likelihood of very different behaviors.

Most insurers use a variety of information to make underwriting decisions as opposed to using a credit-based risk score all by itself. Watts says that in Fair Isaac's scoring models, credit inquiries are nearly always a very minor factor in assessing a person's future risk. So, if those inquiries were cited as a major factor in holding back your insurance score, the person quoting you a price probably was not using the scoring program used by the insurer.

"Some insurers provide their representatives and even their policy holders with good information about credit-based insurance scores," Watts reports, "but most still do not." For first-rate information about credit-based insurance scores, visit www.insurancescore.com. It's a noncommercial site provided by Fair Isaac.

By the way, over time the very same personal credit habits that improve a person's credit-risk score also will improve credit-based insurance risk score. Those are: Pay all your bills on time, keep your credit balances low, and take on new credit only when you need it.

Q: I froze access to my credit reports after having had three incidents of identity theft. After two years, and a lot of headaches in trying to open new credit cards and other transactions in which accessing my credit was necessary, I wrote to all three credit agencies to remove the freeze.

Since that time, I have continued to have trouble and want to contact a human being to find out why, for example, when contracting with Dish TV for satellite service, I had to pay $200 extra because of my credit standing. I know my credit score is in the 700s and have no defaults or late payments.

Who can I contact? Is there a government agency overseeing these credit reporting agencies? Is there any way to talk with a rep at the agencies rather than go through the mail as their automated system directs.

A: Too much information is missing here for me to give you an exact answer. But Fair Isaac's Watts says two possible explanations occur to him:

One, for whatever reason, the credit agencies may not have lifted the freeze on your credit files. If they did not act as you instructed, that could explain why a TV service vendor would require a deposit. The service won't be able to access either your credit report or your credit score while processing the application.

Two, your credit score may be old, or may be based on "educational" scores which the vendor in question does not use. Another possibility is that your "700s" score may be based on a credit score that has a distinctly different score range than the FICO score's range of 300-850. If that's the case, your score in the 700s might actually not be so hot.

I'd try again with all three credit repositories to remove the credit freeze, just in case. I don't know of any way to speak with a human other than to follow the step-by-step procedures as spelled out by each agency. I know following the prompts is frustrating. Boy do I know, I was on with Verizon the other day for at least 30 minutes just trying to obtain a label so I could send back a modem I never needed in the first place.

Unfortunately, that's what you gotta do. It's cheaper to build a baffling computerized system than to pay a human to sit their and route calls to the proper place. Those infernal machines don't need fringe benefits like health care and vacations.

New rule for getting a mortgage today: Don't assume anything

noreply@blogger.com (Mr Mortgage) — Fri, 18 Jul 2008 17:51:00 +0000

In today's mortgage market, there's still money out there for those with good credit scores, significant down payments and decent income streams.

But even borrowers who think they're well positioned to be approved for a mortgage "can't assume anything," said Guy Cecala, of Inside Mortgage Finance. And they'd better be prepared to shop around to get the best rates.

Cecala estimates that a third of the people who were able to get a loan in 2005 and 2006 no longer qualify for financing today. That takes into account the disappearance of subprime and Alt-A loans as well as the tightened requirements for getting prime mortgages, he said.

"Mortgage credit is as tight as we've seen it in a generation," said Cecala, publisher of the industry newsletter. "When does it get looser? When people feel that the housing market is stabilized, and that's really not going to happen until we start seeing an end to rising defaults and foreclosures, and housing prices have stabilized in markets throughout the country."

If he had to guess, it'll be another year before getting a mortgage becomes any easier.

In some cases, lenders are even looking beyond the numbers for proof not only that an applicant has a job with a steady income stream but is also likely to keep that job, said Bob Moulton, president of Americana Mortgage Group on Long Island, N.Y.

Case in point: One of his clients, an employee at Bear Stearns, was recently required to get a statement from the human resources department indicating continued probability of employment at the firm. The statement could not be obtained, and the mortgage wasn't approved, he said.

"They're trying to be a lot smarter than they were three, four or five years ago," he said.

And when looking at a borrower's income, lenders have become more skeptical of counting on bonuses to come through this year, said Steve Habetz, president of Threshold Mortgage in Westport, Conn.

A barrier to buying?

Borrowers are definitely getting the message that the rules these days for getting a mortgage have changed.

According to a recent survey by Move Inc., 28% of would-be buyers perceive the lack of funds for a down payment as a barrier to owning a home these days. Coming up with the cash was the second highest hurdle people saw to buying, while 31% said that high home prices constituted the biggest roadblock to buying in this market. Move is the operator of Realtor.com.

That said, people are seeing opportunities to buy -- especially in some of the areas hardest hit by home-price declines -- as searches in these areas have been increasing substantially at Realtor.com, said Errol Samuelson, president of Realtor.com.

A buyer's challenge, then, often is: "How do I figure out the financing?" he said.

Seventy-eight percent of prospective home buyers said that they're willing to make sacrifices to save and earn extra income for down payments -- and would make some compromises on where they decide to live -- in order to buy a home in this market, according to the Move survey.

But some at the National Association of Realtors think getting mortgage might not be as hard as consumers believe -- and might even be getting easier. A June survey of more than 2,000 NAR members hinted that buyers aren't finding it impossible to obtain financing.

When asked why their most recent prospective buyer postponed a home-buying decision, 6% said it was because of mortgage difficulties. On the other hand, 23% said the prospective buyer didn't buy because of waiting for prices to drop further.

Mortgage rates, in general, have drifted up from their low levels at the beginning of the year, which could take away one advantage people might have seen to making a home purchase in today's market, Habetz pointed out. Freddie Mac reported that the 30-year fixed-rate mortgage averaged 6.26% this week; Habetz said fixed-rates need to be closer to 5% in order to jump start home buying. See full story.

What to know

If you're shopping for a mortgage these days, here's what you need to know:

For the best rates on a conforming loan, people need a 20% down payment and a FICO of 750 or higher, Cecala said. Not surprisingly, very few people meet those requirements, he added. Risk-based pricing by Fannie Mae and Freddie Mac will cause those who don't meet those basic parameters to pay more for their mortgage. So even if you're able to get a mortgage with a 640 credit score, the loan terms will be more expensive, he said -- and if you have a low credit score you'll probably have to put more money down than someone who has better credit.
Borrowers who aren't able to put 20% down will likely have to purchase mortgage insurance, and to get that there's another set of requirements that must be met. Insurers are being "very cautious" with regard to what they will insure, Habetz said. Requirements differ at each mortgage-insurance firm, but if a home is in a market where prices are declining, borrowers may be asked to put down 10%.
Borrowers who are eligible for a loan backed by the Federal Housing Administration may be able to put down as little as 3%. That has become a more popular option for those with weak credit scores.
Most nonconforming jumbo loans today are being made by portfolio lenders, who keep the loans on their books, Cecala said. Consumers may do well by doing some legwork and comparing rates at local community banks, which have been "coming out of the woodwork" to offer competitive rates, he added.

"There's money to be had, you just have to jump through hoops to get it," Cecala said.

Reverse Mortgages: Pros and Cons

noreply@blogger.com (Mr Mortgage) — Fri, 18 Jul 2008 00:10:00 +0000

Reverse mortgages understandably have their fair share of both advocates and critics. A financial tool to help seniors pay for home improvements, stay in their home, and increase their standard of living, the downside of reverse mortgages is that the cost can be high. I recently met with a family who asked me to help them talk with their aging parent about moving. The senior and her adult children shared with me their concerns about why they thought it was a good time for her to move. The mom—let’s call her Susan—recognized she needed some help with preparing meals and housekeeping, but really wanted to stay at home. The challenge was finding the money and the services to help Susan stay home for as long as possible, and in a way that would meet her daily needs and give her family some peace of mind, knowing that she would be safe. This gave us the opportunity to talk about reverse mortgages.

First, to be eligible, you must be over sixty-two years of age, own your home, and be living in it as your primary residence. The amount you are eligible for depends on your age, interest rates and the value of your home. Most reverse mortgages are set up so the home owner can receive monthly payments.

Advantages

The reverse mortgage can be set up as a monthly payment, line of credit or a lump sum—whatever works best for the senior.
No matter how the reverse mortgage is set up, the home owner does not make any monthly payments.
No monthly payment is due from the home owner unless he or she dies, moves or sells the home. At that time the loan is due in full, plus interest and fees.
The home owner can receive monthly income from a reverse mortgage as long as he or she lives in the home as a primary residence. A home owner could potentially continue to receive monthly payments even after the loan balance is higher than the amount that the house is worth.
Neither the home owner nor his or her heirs will ever owe more than the home is worth, no matter how many payments are received or how high the interest rates become.
It’s fairly easy to qualify for this loan since credit scores and income are not part of the qualification process.

Disadvantages

The closing costs are high. The senior must pay origination fees that are about double what they are for conventional mortgages and mortgage insurance. The interest rates are adjustable.
For seniors who depend on Medicaid or other state or federal programs, it’s important to consider if reverse mortgage payments will affect their eligibility.
The senior is required to attend counseling by an independent HUD counselor prior to receiving a reverse mortgage. These are complex loans and this is a measure of consumer protection.

Possible Alternatives

A line of equity may be an alternative. There are fewer fees, and the money is available on an as-needed basis, but it requires monthly payments.
Refinancing the home with a conventional mortgage may save mortgage insurance fees that a reverse mortgage would require. However, this too requires monthly payments.

As a potential consumer of any financial tool, be cautious and seek out accurate information before making a decision. If you are looking for information on reverse mortgages, I suggest you talk with a HUD counselor or someone impartial. Reverse mortgage officers may be prone to selling only the advantages since they get paid when you take out a reverse mortgage. Real estate agents may be prone to selling only the disadvantages of them, as they get paid when you sell your home. Your best bet is to find an impartial advisor such as a financial planner (whose brokerage doesn’t sell reverse mortgages), an elder law attorney or a certified reverse mortgage counselor, all of whom will be able to share practical information to help you make your decision.

Govt OK Sought for Top Pay at Mortgage Giants

noreply@blogger.com (Mr Mortgage) — Fri, 18 Jul 2008 00:09:00 +0000

Washington (AP) - A plan emerging in Congress would require government approval of executives' pay at Fannie Mae and Freddie Mac as part of a federal lifeline for the mortgage companies.

The idea comes as lawmakers scramble to limit the potential taxpayer costs of the rescue plan and satisfy critics of the government-sponsored companies who fear an open-ended bailout.

Rep. Barney Frank, chairman of the House Financial Services Committee, also wants to require that the companies delay issuing dividends until they reimburse the government, if the Treasury Department had to prop them up.

Frank, D-Mass., said Thursday the House plans to count any rescue effort under the overall $10.6 trillion statutory limit on the national debt. That approach is intended to answer charges that the aid amounts to a blank check.

"The fact that any expenditure under this bill would be subject to the debt limit is a cap, in effect, on the amount that you could put here. That invalidates these claims," Frank said.

"I'm optimistic that we will be able to send (the Bush administration) something that they will be able to accept," Frank said after meeting with the chairman of the Senate Banking, Housing and Urban Affairs Committee, Sen. Christopher Dodd, D-Conn.

Treasury Secretary Henry M. Paulson has lobbied Congress for quick approval of his plan that temporarily would empower the government to extend unlimited lines of credit to Fannie Mae and Freddie Mac and buy their stock. The Federal Reserve has offered to let the companies draw emergency loans.

The companies' shares have plummeted because of fears about their financial stability. Fannie Mae and Freddie Mac are private. But they were created by Congress to encourage homeownership by buying mortgages from banks. The two hold or guarantee more than $5 trillion in home loans - almost half of the nation's total.

The House plans a vote next Wednesday on a housing bill expected to include the help for Fannie Mae and Freddie Mac. President Bush has threatened a veto unless there are changes, but now is pressing to add the mortgage rescue as part of a broad compromise.

House Speaker Nancy Pelosi said she did not believe Bush would follow through on the veto even though Democrats plan to attach $3.9 billion in grants he opposes to buy and fix up foreclosed properties in areas hit hardest by the housing crisis.

"Let me get this straight. The president is asking us to do something quite significant to address this housing crisis, which has long been neglected by his administration, and he is going to resent the ability of state and local governments to buy up these properties?" Pelosi said. "I don't think the president is going to veto this bill. I don't think so."

Paulson says he does not expect to use the new federal authority to prop up Fannie and Freddie. By granting it, however, Congress would boost market confidence in the companies and thus avert a collapse that could ultimately require the government to step in with huge sums of money, he says.

He has refused to specify an upper limit on the rescue power, saying that doing so would wreak market havoc.

But congressional analysts have to issue a cost estimate for all legislation before lawmakers vote on it. Frank and Dodd are working to find ways to lower the projections.

Paulson has asked lawmakers not to subject the rescue authority to the debt limit, which Congress sets. By rejecting that request, lawmakers essentially would cap how much the government could spend to prop up the mortgage giants without further approval from Congress.

They are casting about for "what things we can do here that will give members and the taxpayers some assurance that this thing isn't a runaway horse," Dodd said.

The housing measure already tightens controls on Fannie Mae and Freddie Mac, creating a strong regulator to oversee their operations. But given the GOP backlash over the proposed rescue plan, "we're going to make it explicit" that the regulator would have to approve executives' pay, Frank said.

He also has floated the idea of giving Treasury a preferred class of stock that would enable the government to be reimbursed before other shareholders in the event of any collapse. Dodd has questioned the idea, saying it could discourage private investors from buying the companies' shares.

U.S. mortgage rates declined

noreply@blogger.com (Mr Mortgage) — Fri, 18 Jul 2008 00:07:00 +0000

WASHINGTON, July 17 (UPI) -- Interest rates for 30-year, fixed-rate mortgages declined in the United States in the last week, the Federal Home Loan Mortgage Corp. (NYSE:FRE) said Thursday.

The 30-year fixed interest rate averaged 6.26 percent with an average 0.6 points for the week ending July 17, compared with 6.37 percent the previous week, Freddie Mac (NYSE:FRE-W) said.

A year ago, 30-year fixed rate mortgages averaged 6.73 percent.

At 5.78 percent with an average 0.6 points, the 15-year fixed rate average declined from the previous week's average of 5.91 percent.

"Mortgage rates fell this week amid market speculation that the Federal Reserve may not raise the overnight bank-lending rate this year after all," said Frank Nothaft, Freddie Mac vice president and chief economist.

Types of Mortgages

noreply@blogger.com (Mr Mortgage) — Thu, 17 Jul 2008 21:46:00 +0000

There are many different types of mortgages to fulfill various needs that one might have. Most lenders should be able to detect which type of mortgage is best for you: the one which will fulfill your needs, but is also affordable based on your credit. Then the lender will show you the various types of mortgages. Here are four main mortgage kinds, including fixed, adjustable, 1-yr treasury adjustable, and intermediate adjustable rate.

Fixed-Rate Mortgage

A fixed mortgage has an interest rate that does not vary when the rates fluctuate. Fixed rates are fixed for an agreed amount of time. They are nice because you always know exactly how much your monthly bill will be. You will never be guessing whether or not the interest rates are going up or down and by how much. On the other hand, fixed-interest rates will not go down as interest rates drop. If the rates do drop enough, you are able to refinance the mortgage loan. Overall, fixed-rate mortgages are the more conservative mortgage types.

Adjustable-Rate Mortgage (ARM)

Adjustable-rate mortgages vary along with an indexed rate and a set margin. There are limits to the minimum and maximum rates that the rate can adjust to called rate caps. Adjustable-rates are lower than fixed-rates at the time of the loan. These are very common among buyers who are: not planning on staying in a house for long; are in a market where houses are appreciating rapidly; or are planning on refinancing. The problem is that the rates do adjust and one should always expect the worst - that interest rates will increase not decrease. With adjustable-rates, people are trying to start off with low rates that will make up for the higher rates that are bound to come. While doing preliminary research, you should check out the frequency of the adjustments. The more frequent, the lower the initial rate will be, but the more unpredictable the fluctuations will be. The less frequent, the higher the initial rate will be, but it will also be more predictable. It is important to understand how much you could possibly be paying and how much you can afford.

1-yr. Treasury ARM

The 1-yr. treasury adjustable-rate loan is a fixed-rate for the first year, after that it becomes an adjustable rate. The new rate is ultimately determined by the treasury average index plus the loan margin. This rate is usually given out for a term of 30 years. The benefit of this mortgage is that the rates are usually lower than fixed rates and you will pay less when interest rates go down. It is important to keep track of the margin, which is added to the index to make up the new adjusted rate. It is possible to end up paying more than you would for a fixed-rate if the index increases enough.

Intermediate ARM

The intermediate ARM is fixed, and then adjusts by a predetermined schedule. Commonly, the rates are fixed for three years and then adjustable for one. The new rate is based on an economic index plus the loan margin. These mortgage loans are usually given for 30-year term limits. A pro is that the rates are lower than fixed rates; as interest rates increase, you tend to see more ARMs because they are easy to qualify for. The problem with this loan, as it is with all ARMs, is that once the initial period is over, the loan will adjust - most of the time to a higher interest rate.

Home Loan Rate - Tips on Finding the Best Rate

noreply@blogger.com (Mr Mortgage) — Thu, 17 Jul 2008 21:45:00 +0000

The home loan rate applied to your home mortgage is the cost of the money that you have borrowed. The money itself is called the principal, while the price you pay to borrow the money is considered the interest. In addition, you can expect to pay at least a few of the closing costs on your home loan. Usually, it is the seller who pays closing costs, but that is traditional, rather than a requirement. Each and every factor that is associated with the acquisition of the loan itself should be explored. A few dollars for a loan cost item, or a half percentage point on the loan rate can add up to thousands of dollars.

Know your broker

Choosing a loan broker that you trust or have done business with in the past can help you to find the best home loan rate on a mortgage. If you have not worked with a broker previously, do the due diligence required to get to know his or her reputation. Check the Better Business Bureau for complaints. Ask friends, family and neighbors who they used when they obtained a mortgage loan on their property. Ask why they selected the broker--it may be their brother-in-law. Your real estate buyer's agent may be able to help you with the names of brokers they have dealt with in the past.

Clean up your credit file

Another way to improve your home loan rate is to clean up any inaccuracies that may have accrued on your credit file. There are three major credit reporting agencies that many lenders use to access information about how you have managed your financial obligations in the past. If you obtain a copy of these credit reports for yourself--which can be done each year at no cost--and remove any inaccurate or misleading information, you are much more likely to have a lower interest rate on your home loan.

Closing costs

Closing costs are those which typically are paid during the completion, explanation and signing of the loan documents. While they do not usually have a direct bearing on the home loan rate, they may require you to come up with cash in order to complete the loan. Many of the closing costs can be rolled into the cost of the mortgage, but this action means that you will be paying more interest dollars out during the course of the mortgage term.

Interest and term

The interest rate and the term are the two most critical factors when it comes to determining the home loan rate. The interest rate may be fixed or adjustable. The loan type may be an option adjustable rate mortgage, contain a balloon payment or sometimes an interest only loan. Only your personal financial circumstances will help you determine which is the best rate for you. Take time to review the factors in building the cost of the money for your mortgage and decide which will be the best option for your household.

Recommended Stuff:

Home Refinancing Industry Exposed!
Do-It-Yourself Mortgage Marketing Made Easy
Guide To Preventing Foreclosure
Mortgage Secrets For Investors.
Mortgage Loan Tips.

Costs Associated With Home Refinance

noreply@blogger.com (Mr Mortgage) — Thu, 17 Jul 2008 21:44:00 +0000

Many people are surprised when they look into home refinance or even as they go through the process to find out how many costs are associated with such a loan. Many people forget this, but when you get one of these loans it is just like applying for a home loan the first time around, the only difference is that you are replacing the first loan with this second one. Because this is the same with one small difference, there are still costs - often called closing costs - that are associated with it. You need to be prepared to pay these and you need to review the Good Faith Estimate so you can be sure that the savings that you will get when you refinance will justify the money that you are paying out.

Home Refinance Costs

You may not know this, but when you are thinking about home refinance costs, you should plan to pay three to six percent of the remaining principal balance. This sounds like a lot, but it isn't any more than you paid when you got your home loan, the only difference is that you are doing it again. There are many fees that you can expect to pay and these fees will vary from area to area as well as from lender to lender. Some of these fees will be just $15 in some areas while they will be $100 or more in other areas.

Some very common fees that you will see are an application fee, appraisal fee, homeowner's hazard insurance, and review fees. In addition, you will probably be charged for a title search and title insurance, home inspection fees, loan origination fees, points, and mortgage insurance. When you add all of these things up, you will usually be looking at a total in the thousands of dollars, but this is truly dependent upon the type of loan you are applying for, as well as how much money you have left on the loan principal.

One fee that many people forget about when they are calculating the cost of home refinance is any pre-payment penalties. If you are lucky, you will not have any, but many loans have this penalty written in so that they get money if you decide to pay off the loan sooner or if you decide to refinance. Sometimes just asking for a lender to waive these fees is possible or asking them to lower it. Many people don't think to ask and a good deal of the time the lenders are willing to waive the fees or reduce them substantially to make the home refinance more affordable for you.

When you look at all of the costs associated with home refinance, you may be wondering if this is something that you are ready to do. This process does cost money and it does take time and it is not the best option for every homeowner. Some people find that when they look into it, there simply is not a reason to refinance based on the cost of doing this as well as their current loan program. Other homeowners find that refinancing can help them save a lot of money, not to mention stress! Consider your options carefully before assuming that this is your next step in home ownership.

Recommended Stuff:

Home Refinancing Industry Exposed!
Do-It-Yourself Mortgage Marketing Made Easy
Guide To Preventing Foreclosure
Mortgage Secrets For Investors.
Mortgage Loan Tips.

How Many Times Can You Refinance?

noreply@blogger.com (Mr Mortgage) — Thu, 17 Jul 2008 21:42:00 +0000

Have you owned your home for many years and have refinanced once and are thinking of doing it again? Many people question how many times home refinance is an option and the answer is that you can refinance as often as you would like. Of course, you could refinance often, but it wouldn't be a good idea. If you refinanced your loan every couple of years, you will end up losing money because this process will take a few months to pay for itself.

Refinancing is Not a Catch All Solution

Many people consider home refinance only when they are struggling financially. The reason that many people consider refinancing during this time is because this process is known to save homeowners money. While refinancing is a great way to save money, it is not something that will continue to save you more money each time you do it. In fact, there are costs that are associated with refinancing and in many instances refinancing is something that pays for itself over a period of three to five years, so your savings with this is not always immediate when you factor in the costs of home refinance.

How many times can you refinance? There is truly no limit, but if you are a habitual user of these programs, you will find that many lenders are no longer interested in loaning you money. The reason for this is that repeatedly refinancing is like financing a car, and then two years later trading it in and refinancing another and then another. Eventually you may owe $50,000 on a car that is actually only worth $7,000. This is often referred to as being "upside down" on a loan and it means that you owe more on something than it is worth. Even though you are trying to save money through home refinance, because there are costs associated with it, you can end up owing more money through the process than you save.

This being said, there are cases out there where many people have refinanced twice. This is usually something that is done by someone who owns their home for a long period of time, for instance 20 years. With rate changes being considerable over the last 20 years, it may be possible to benefit from refinancing twice during the ownership of a home, but this is not at all the norm. Most people consider refinancing once during their home ownership adequate because hopefully the second time around they decided on a loan program that would fit their needs long term.

Home refinance is not a catch-all that will solve all of your problems. The fact of the matter is that you can end up in more financial trouble when you continue to refinance than if you never refinanced at all. Don't take the process of home refinance lightly; instead you need to carefully weigh your options as well as the pros and cons of the options before you decide to actually go through with anything. Try not to rush into anything, and if you need help, ask a third party for some advice. Remember not to be pressured into refinancing or not; this is something that you need to consider carefully before you decide to go for it.

Risks of Home Refinance

noreply@blogger.com (Mr Mortgage) — Thu, 17 Jul 2008 21:39:00 +0000

Generally speaking, when you look into home refinance there are more benefits than risks. This being said, it is important to understand the risks and educate yourself to limit or eliminate some of the risks or pitfalls of refinance. Many of the people that suffer from these pitfalls are people who did not get all of the information that was needed about refinancing to make the best decision for their situation.

Understanding the Pitfalls of Home Refinance

Many people get caught up in the idea of saving money when they are going through the process of or considering home refinance. They forget that they need to slow down and look at everything carefully and consider the front- and back-end expenses and specifics of the new loan. There are countless people out there that find that refinancing actually ends up costing them more money than they saved. You do not want to be one of these people, so make sure that you go about refinancing with care.

One of the biggest risks or pitfalls associated with home refinance is the fees that are associated with them. Not only do you have closing costs that are associated with the new loan, you may actually have to pay a pre-payment penalty on your first mortgage loan. This can be a small sum or it can be in the thousands of dollars, depending on the way your original home loan was set up. This is something that you should absolutely look into because if you have a pre-payment penalty, it can do away with all of the benefits of refinancing with one fell swoop.

Another of the risks associated with refinancing is the instability of some loans that are out there. For instance, if you refinance and you choose to go with an adjustable-rate loan you have taken on a new risk of an increasing or fluctuating interest rate. A lot of people do just fine with these loans, but other people do not and they end up losing their home after they have gone through steps to save money. These loans can be very appealing because the interest rate starts out so small but then it grows and grows. Make sure that you understand how the loan will change in the future, if at all, so you are sure that the new loan is something that you will be able to maintain in the future.

Something that a lot of people suffer from when it comes to home refinance is the fees that are associated with a new loan. Many people don't realize that there are closing costs that are associated with the new loan, just like there was with the original home loan. This home refinance loan will have the same costs associated with it, and perhaps some others, and you need to be prepared for this. These costs can run in the thousands of dollars and can make the difference between being able to afford the process of refinancing and not being able to afford it. You also need to determine if the savings of refinancing justify the costs that you will occur as a result of the whole process. This is something that you will need to consider carefully to guard yourself from the pitfalls of refinance as well as possible.

Financing Your Real Estate Investment

noreply@blogger.com (Mr Mortgage) — Thu, 17 Jul 2008 21:37:00 +0000

Many Canadians don't even know there are 40 year amortization options available now. In the U.S. they have had extended amortizations for quite some time, but in Canada the 40 year was introduced in the last year.

Now, should you consider a 40 year amortization for your mortgage? It really depends...Here's an example:

$250,000 mortgage at 5.80%
Amortization is 25 years
Payments are $1,569.92/month
Total interest paid over 25 years = $220,974
Amortization is 40 years
Payments are $1,328.97/month
Total interest paid over 40 years = $387,908. 40 Year Amortization Mortgages

That is a difference of $166,934 over the life of your mortgage to potentially stretch yourself thinly over a property that is out of your affordability range. And it's going to take you 15 more years to become mortgage free. You also have to realize that because you are paying the principal of the mortgage down slower, you will be building equity in the property at a decreased rate. In fact, for the first 10 years of the mortgage you will have only paid down about one-third as much as in the first 10 years of a 25 year mortgage.

But, before you turn away and decide that option is not for you, there are some advantages of signing up for a longer amortization that are worth considering:

1. If your dream home is just out of your affordability range at 25 years, stretching it out to 40 years may make it affordable

2. You can qualify for a larger mortgage because it lowers your payments

3. If it's a rental property, lower payments will help it produce positive cash flow until rents can be raised

4. If flipping a property, this will reduce your carrying costs until you sell it (this is also a benefit when using interest only mortgages).

It's great to have the flexibility if you need this. But, my caution to clients is that as soon as you can:

Change your monthly payments to bi-weekly - this will reduce your mortgage length by 3 - 4 years
Add $50, $100, or $200 to each payment and this will further reduce the length of your mortgage
Make lump sum payments every year with your tax refund (or other income). Putting that money towards your principal will reduce your amortization by up to 10 years (just check for the maximum allowed without penalty before you do this).

A 40 year amortization may not be for everyone, but with house prices still out of reach for many, it may be an option more and more people will consider. It's important to know how a longer amortization can effect you and you are diligent about paying down the mortgage as I have noted above, owning a home becomes possible for many would-be homeowners and remains a viable option for those wishing to keep their monthly payments smaller.

Mortgage Lender Rescue Prompts Concerns Among Investors

noreply@blogger.com (Mr Mortgage) — Thu, 17 Jul 2008 00:43:00 +0000

CAMBRIA COUNTY, Pa. -- The feds are coming to the rescue for nationwide mortgage lenders like Fannie May and Freddie Mac. Now, some local homeowners and investors may be wondering: What now?The word from financial experts is don't panic.

While there may be serious problems with the national lenders like Fannie May, Freddie Mac and Indy Mac, experts say your mortgage is safe.According to an investor with Asset Planning Group in Johnstown, if you have a home mortgage with these national organizations, you are likely going to be fine.

The problem is, if you solely invest in them. If you have a 401k or an IRA with a lot of shares in Fannie and Freddie, you are most likely going to see your investment plummet. Shares in both companies are down by 45 percent. However there is a saving grace and it's called "spreading the wealth."

"Anybody that has invested, if you are diversifying properly, a situation like this is never going to be a problem," said financial planner Franklin Banfer.According to Banfer, banks and credit unions across the Alleghenies are in little or no danger of needing to be rescued by the FDIC.

That's mainly because the mortgage crisis hasn't hit the region nearly as bad as other states.The bottom line he said is that these things happen and eventually the lenders will rebound, so a knee jerk reaction would likely be a bad financial move.

Recommended Stuff:

Home Refinancing Industry Exposed!
Do-It-Yourself Mortgage Marketing Made Easy
Guide To Preventing Foreclosure
Mortgage Secrets For Investors.
Mortgage Loan Tips.

Mortgage Confidential: Fed's new sub prime rules will have little effect

noreply@blogger.com (Mr Mortgage) — Thu, 17 Jul 2008 00:41:00 +0000

Late last year, the Fed approved some new mortgage guidelines as part of a broad effort to fix the housing woes. These guidelines, aimed at the sub prime mortgage industry:

Requires lenders to determine the borrower's ability to repay a mortgage loan by using the highest potential mortgage payment during the first seven years of the loan.
Ban "no verification" loans -- meaning lenders must now verify both income as well as assets.
Ban prepayment penalties if the payment could change any time during the first four years of the new loan.
Require insurance and tax escrow accounts, called "impound" accounts in many parts of the country.

There. That will fix those mean old sub prime lenders. No more sub prime lenders making bad loans to people who can't afford them. Yeah, that'll teach 'em. The problem is, just exactly who will these new rules apply to, hmmm? I don't see any sub prime lenders, they're all out of business. Went away last year. Can anyone say, "too little, too late?"

Hey, I'm as cynical as the next guy, but these rules needed to be in place five years ago when sub prime lenders began testing waters they never swam in.

Sub prime mortgages have been around for years, when the interest rates on those loans were higher than conventional and government notes to offset the additional credit risk. But even then, sub prime loans required some down payment. Depending upon the credit grade, sub prime loans could require 20% or more down. I can pick out lots of areas in our country right now that could have benefited from requiring 20% down, at least someone can refinance when values drop.

But these new rules won't help anyone because there are no sub prime lenders to be found. Okay, there might one or two left, but the sub prime mortgages they offer look more like a regular loan and are nothing near to what they used to be one, two or even 10 years ago.

It's easy to look in the rear view mirror, we all do it. But the fact is that the horse already left the barn on this one some time ago. I watched the Fed announcement on these new rules and was just wondering how much those committee members got paid to come up with rules like, "Make sure they can afford the loan." Goodness gracious.

Mortgage cover UK policies explained in simple terms

noreply@blogger.com (Mr Mortgage) — Thu, 17 Jul 2008 00:38:00 +0000

Mortgage cover UK policies – also known as mortgage payment protection insurance policies - can be taken out to ensure that if you should find yourself without an income due to being unable to work because of redundancy; if your suffer an accident; or have a prolonged illness, then you would have a monthly income with which to repay your mortgage commitments.

If a mortgage cover UK policy is suitable for your circumstances then it would provide a tax free amount of money after you have been out of work for 30 days and would continue to pay out for up to 12 months or with some providers a policy can be taken out to pay out for up to 24 months. There are different policies; you can take out one just to cover you against coming out of work due to becoming unemployed, a policy to cover against you being out of work due to an accident or sickness, or one to protect you against all three.

The quotes for mortgage cover in the UK vary greatly from lender to lender and for this reason it is essential that you shop around for the insurance. Quotes can vary by hundreds of pounds so it is really worthwhile getting several quotes, making sure that you get them from specialist providers as they are very often the cheapest when compared to the high street lender.

The majority of people who have a mortgage are mistaken in thinking that help by the State would be given to help you in your time of need, however very little financial help is given even if you are entitled to receive it. This means that it is down to you to protect the roof over your head against the unknown and mortgage payment protection could be the answer providing you meet the requirements of a policy.

Another misconception the consumer is under is that mortgage cover UK policies have to be taken out alongside the mortgage from the same lender; however this is dearest way to purchase peace of mind. High street lenders often charge way over the odds for the premium and often know very little about the products they are selling. As such the consumer gets little advice - if any - regarding the product’s suitability, and this led to many consumers buying a policy that they didn’t need and wouldn’t be able to claim on due to exclusions it.

The mis-selling of payment protection insurance products, of which mortgage cover is one, was brought to light after a super complaint by the Citizens Advice in early 2005 to the Office of Fair Trading (OFT). Following this an investigation by the Financial Services Authority, lead to many big names receiving fines and the sector was passed on to the Competition Commission. The Competition Commission conducts in-depth investigations into major regulated industries and it is thought the review will be completed by February 2009 by which time changes for the better will be made when buying mortgage cover.

For the time being, if you wish to purchase a quality, cheap mortgage cover UK policy, then go with a standalone and specialist provider after getting several quotes and make use of the information that they will give regarding the exclusions and key facts within mortgage cover policies to ensure that a policy is right for you.

Federal Reserve tightens mortgage rules

noreply@blogger.com (Mr Mortgage) — Thu, 17 Jul 2008 00:33:00 +0000

Faced with an expanding housing crisis, federal officials took steps to shore up the nation's largest sources of mortgage funds at the same time they issued stiffer mortgage rules to prevent a repeat of the subprime debacle.

Among other new guidelines announced Monday, lenders cannot make high-risk loans without assuring that borrowers are able to repay them, and they will have to verify those borrowers' income and assets.

While these may seem common-sense safeguards, widespread loose lending standards led to today's teetering credit markets, surging foreclosures and slumping home prices.

The new rules "are intended to protect consumers from unfair or deceptive acts and practices in mortgage lending, while keeping credit available to qualified borrowers and supporting sustainable homeownership," Federal Reserve Chairman Ben Bernanke said in a prepared statement.

The guidelines, most of which will take effect Oct. 1, 2009, will also in many cases ban "prepayment penalties" on subprime loans. These penalties levy big fees against borrowers if they pay off or refinance their loans within a certain time frame.

In a separate plan to buck up the struggling housing market, the federal government moved over the weekend to extend more credit to Fannie Mae and Freddie Mac, and open the door to possible partial government ownership of the two companies.

Fannie and Freddie are the largest sources of funding for the nation's mortgage market. But the moves are unlikely to have any immediate effect on consumers' ability to get home loans, experts said. Mortgage rates could move higher in the future depending on how the government assistance is implemented.

Message to investors

The government's promises were meant to assure investors worldwide that the two companies will be able to continue the business of purchasing loans from banks and packaging the loans for sale on Wall Street - business that's essential to getting the housing market back to health.

"What would have changed things is if the Fed and Treasury had given the cold shoulder to the current circumstances" - in which investors were losing confidence in Fannie and Freddie's ability to raise capital, said Greg McBride of Bankrate.com. "Then mortgage rates would have skyrocketed, and the availability of mortgage credit would have plummeted. It would have been a catastrophe."

Richard Green, chairman of the Lusk Center for Real Estate at the University of Southern California, said underwriting guidelines at Fannie and Freddie are very unlikely to change because of the government's plan to step in if the companies need help.

Lending standards were already tight at Freddie and Fannie, and the loans they back were not the risky subprime loans that have sunk the housing market, he said.

But he said government intervention to bolster Freddie and Fannie could eventually lead to higher rates for loans, if new, proposed oversight by the Federal Reserve required the two companies to raise more capital. To attract investors, the companies would need to offer attractive returns on their bonds, and the high rates they might pay investors would likely get passed along in part to mortgage borrowers.

Brad German, a spokesman for Freddie Mac, said Monday that the company is doing business as usual and has more than enough capital to satisfy the requirements of its regulator, the Office of Federal Housing Enterprise Oversight.

Green, who worked for one year as a Freddie Mac economist and still owns 300 shares of the company's stock, said panic seems to be driving down Freddie Mac's and Fannie Mae's shares, not any immediate risk of their failure.

"I don't see where they're going to run out of cash anytime soon," he said.

Advertising practices

Among the stricter guidelines approved by the Fed on Monday was one banning several misleading advertising practices, such as calling a loan's interest rate "fixed" when in fact it can change.

"These are protections for folks that have been preyed upon or may be vulnerable" to loan deals offered by brokers who don't have the borrowers' best interests in mind, said Todd Flesner, a mortgage broker with Stern Mortgage in Palo Alto.

One controversial proposal was removed from the final amendments that would have disallowed so-called "yield-spread premiums," which are the fees mortgage brokers earn from lenders for obtaining certain loans for borrowers.

During the subprime lending boom, some brokers earned huge fees from lenders for steering some borrowers to high-cost loans when they could have qualified for lower rates and better terms. The Fed said it will review alternatives that would prevent excessive broker fees.

Against Mortgage Company Bailouts

noreply@blogger.com (Mr Mortgage) — Thu, 17 Jul 2008 00:32:00 +0000

It seemed like the party would never end – the American dream could become an American reality for those of us invested in the idea of an ownership society. Millions of us bought into it, heavy and hard, and because so many of us were willing to buy into it, businessmen saw a way to profit. Soliciting customers via mass-mailings and television ads mortgage companies made loans by the millions, booking first-time buyers and second-mortgages under sight-unseen conditions.

Loan officers encouraged borrowers to fudge their incomes so that an underwriting committee could more easily approve loans applied for. Some borrowers didn't need to be coerced into lying about their professions, loose standards in income and employment verification allowed home-buyers to say anything short of being God and being able to make infinite payments. Mortgage companies and borrowers share an equal portion of blame when it comes to honesty of loan applicants. When loans were booked without the appropriate verification, people who once had little buying power now had the ability to own a home.

Further compounding the problem is the issue of adjustable-rate mortgages. These mortgages offer low initial payments, with borrowers being offered a low introductory interest rate that would adjust at some point in the future. Most of these borrowers were able to make payments for the initial period prior to rate adjustment, but wittingly or unwittingly would not be able to make the monthly payments after that point.

Not all of these loans were originally very risky – subprime, per the current standards – and lenders began to lose money when people who had signed these adjustable rate mortgages, signing at a low rate and getting booted into an usurious rate after a certain amount of time, were no longer able to make payments. Some customers entered into bankruptcy, some arranged agreements with their lenders to re-enter new loans at lower fixed rates, and others bailed on the properties entirely.

Normally mortgage companies would act on the liens against the properties and re-coup the money lost on the mortgages via repossession and resale of the property. However, this would not happen in markets impacted by significantly declining home values, and mortgage companies, their investors, and other agents of securitization would be forced to eat the loss. With defaults on payments in declining markets increasing, mortgage companies began to find themselves in deepening troubles.

Now segments of the market are asking for the government to interfere and help prop up the companies being adversely impacted by the current market. They are requesting billions of dollars in taxpayer-provided aid to alleviate the problems of their companies, these same problems that they themselves caused through unwise business practices and extraordinarily risky lending. The government, by offering bailouts of these companies, provides an incentive for poor business practices by large companies to continue. These bailouts have already cost taxpayers billions of dollars and will likely cost billions more before this mortgage crisis ends.

Congress should not offer to bail out any company, but rather Congress should take a further step and assume control of any mortgage company on the verge of collapse, secure it, conduct a mass audit, and determine whether or not one of three steps should be taken. Those three steps shall be: 1) to return the company to previous management, 2) to return the company to public control by selling off the assets and liabilities to other, more secure mortgage providers, or 3) to assume control of the company in full and service only the mortgages held on the books until all mortgages and liens are satisfied, provided that there are regularly scheduled audits done on the company while under government control.

Moreover, the government must put into place regulations prohibiting lenders from levying excessive interest on borrowers. In an ideal world, fixed-rate mortgages would be the rule and adjustable-rate mortgages would be rare exceptions to the rule instead of the common corollary to the rule.

What You Should Know About Mortgage Refinancing

noreply@blogger.com (Mr Mortgage) — Thu, 17 Jul 2008 00:28:00 +0000

Mortgage refinancing has advantages and disadvantages for every homeowner. If you are considering refinancing your mortgage you will need to weigh the advantages and disadvantages to decide if refinancing is right for your situation. Here is what you need to know in order to get started.

There are many reasons for refinancing your mortgage. These reasons include lowering your monthly mortgage payment, paying off your mortgage faster, or cashing out equity in your home. You can lower your monthly payment by qualifying for a better interest rate and/or choosing a mortgage with a longer term length. If your goal is to pay off your home faster, choosing a mortgage with a shorter term length will build equity in your home at a faster rate. Finally, if your goal is to cash out equity in your home for a variety of reasons, refinancing with cash back is your answer.

Mortgage refinancing decision would, of course, also depend on the remaining term of your mortgage (for mortgage refinancing would make no sense if you had just a short period of say 4-5 years remaining on your current mortgage). These criteria for mortgage refinancing are based on the various costs associated with mortgage refinancing. These mortgage refinancing costs include prepayment costs for the current mortgage, closing costs of the new mortgage and other fees etc. Generally, people use mortgage refinancing as a tool to move from a higher adjustable rate mortgage to a lower fixed rate mortgage. Though the reverse is possible too in some cases but adjustable rate mortgage to fixed rate mortgage is generally the case.

There are also costs associated with refinancing your mortgage loan. You will be required to pay many of the same expenses you paid when taking out your first mortgage. These expenses include application fees, lender fees, points, and closing costs. If you are unable to foot the bill for these expenses many lenders allow you to finance your closing costs; however, the cost you pay over the duration of your mortgage severely outweighs any advantage from doing this.

Another common reason for mortgage refinancing is to borrow against the equity you own in your home. Mortgage refinancing with cash back is an affordable alternative to costly home equity lines of credit and second mortgage loans. By refinancing your mortgage and taking cash back you have one lower payment instead of two mortgage payments to juggle each month. Because your home is secured by one loan instead to two, you will qualify for a lower interest rate with mortgage refinancing. You can learn more about mortgage refinancing, including costly homeowner mistakes to avoid by registering for a free mortgage guidebook.

How To Lower Your Payment When Refinancing Your Mortgage

noreply@blogger.com (Mr Mortgage) — Wed, 16 Jul 2008 19:57:00 +0000

If you are in the market for a new mortgage loan because you need a lower monthly payment, there are several ways to accomplish this. Even if your credit prevents your from qualifying for a lower mortgage rate there are ways to lower your payment amount when refinancing. Here are several tips to help you get a lower mortgage paying without paying lender junk fees.

The most desirable method of lowering your monthly mortgage payment is to refinance with a lower mortgage rate. If your financial situation has improved since you purchased your home you may qualify for a lower interest rate. This improvement could be due to paying down your bills, getting a higher paying job, or even getting married. Remember that even though your mortgage payment has gone down you will not realize a savings from refinancing until you break even from your expenses.

You can calculate how long it will take you to break even by dividing your total costs from refinancing (closing costs, points etc) by the amount your mortgage payment went down each month and dividing by twelve. This will tell you the number of months it will take to recoup your expenses from refinancing the loan.

If you are unable to qualify for a lower interest rate when refinancing your mortgage you can still lower your monthly payment by extending the term length of your loan. This is a less desirable option as it will result in paying more to the lender for financing; however, as a short-term solution it could provide much needed relief to your monthly budget. Term length is simply the amount of time you have to repay the loan and along with your interest rate determines your payment amount. Common term lengths are 15 or 30 years; however; there are now mortgage loans available with 40 and 50 year term lengths.

Homeowners who are able to qualify for a lower mortgage rate could lower their payment amount further by combining both options. Extending the term length with a lower mortgage rate would allow you take advantage of the lowest payment while paying less to the lender for your financing. You can learn more about your mortgage refinancing options, including costly pitfalls to avoid with a free mortgage toolkit.

Recommended Stuff:

Home Refinancing Industry Exposed!
Do-It-Yourself Mortgage Marketing Made Easy
Guide To Preventing Foreclosure
Mortgage Secrets For Investors.
Mortgage Loan Tips.

Moving Home? Research is the Key to Cheap Conveyancing

noreply@blogger.com (Mr Mortgage) — Wed, 16 Jul 2008 19:46:00 +0000

Moving home, buying or selling any form of property is stressful enough but to make sure it is all legal and above board as well as to make sure it goes on smoothly without any glitches one needs to consult a conveyancer.

The moment you decide to buy or sell your property and go as far as to place an offer, the first thing your estate agent asks for is the details of your conveyancer so they can pass it on to the seller's conveyance or vice versa so it is always important to contact a conveyancer as soon as you think of buying or selling your property to avoid making the decision in a rush.

Conveyancing is the legal process of buying and selling property and a conveyancer is the term given to a conveyancing solicitor. All legitimate conveyancing solicitors are registered with the Law Society in England and Wales; there are separate societies in Northern Ireland and Scotland.

A conveyancer takes care of all the legal aspects of your moving house which include

Local search

Land searches

Land registry

Stamp duty

Home information packs

The secret to cheap conveyancing is research, if research is not done one runs the risk of making the decision of a in a hurry which will lead to hiring the first one you come across. This might lead to hiring a costly conveyancer or an incompetent one which will lead to problems later on down the line.

One of the best ways of getting cheap coveyancing is by word of mouth, you could ask family and friends to recommend conveyancers they have used in the past or you could ask for references from your estate agent or mortgage broker. You could also do research using internet search engines as they are thousands of conveyance companies offering cheap conveyancing services on line. Once you have gathered all relevant information it is a good idea to get about three or more quotes from different companies before making a decision. Also make sure the quotes you get state clearly what is included. Normally you will have to pay for the conveyancers 'time, his phone calls, letters, faxes as well as his indemnity fee. The quote usually states any unforeseeable problems warrants an extra charge.

Another way of making your conveyancing costs even cheaper is to get your conveyancer to act for the lender. The main task they would have to do on behalf of the lender will be to draw up a mortgage deed which will set the conditions of your loan, the lender then holds the title deeds of the property until the loan is paid in full.

You should also be aware that most conveyancers will require you to pay for land registry and local authority search fees upfront and then the balance will be due after you've completed on your home. Also depending on whether the property is freehold or lease hold you will have to pay a bit more as leasehold properties require additional work checking the lease.