Although their performance was worse in the third quarter, it had more to do with derivatives than the housing market.

Late Tuesday, U.S. taxpayers got some more bad news: Fannie Mae announced a big quarterly loss and requested another $7.8 billion from taxpayers. This comes a few days after Freddie Mac posted a big loss and needed $6 billion more from the government. These Treasury draws, which amount to nearly $14 billion, easily dwarf their second quarter cash request of $6.6 billion. As bad as this looks, it isn’t really due to housing market deterioration.

The Devil’s in the Derivatives

Although each company still lost plenty of money due to defaulted mortgages, their bad derivatives bets really hurt them this quarter. The firms use derivatives to hedge interest rate risk. In this case, the hedge created a sizable loss for each company as long-term interest rates declined more in the third quarter than in the second. How big were those losses? Freddie lost $4.8 billion, and Fannie lost $4.5 billion — on derivatives alone.

Here’s a brief breakdown of the companies’ financial performance in the third quarter:

As you can see, without those massive derivatives losses, the firms wouldn’t have done nearly as badly. They won’t have done well, but they wouldn’t have needed nearly as much money from taxpayers.

What About the Housing Market?

Of course, you can see above that these companies still had pretty significant credit losses thanks to foreclosures and guaranty losses. So how did they stack up? Here’s how the firms’ credit losses looked compared to a quarter and year earlier:

So actually, credit losses were worse in the third quarter than in the second, but better than a year earlier. To explain the better year-over-year tally, each company notes that foreclosures have slowed due to procedural challenges, which may lead to higher charge-offs in 2012. Fannie, however, also notes that more aggressive repurchase requests (wherein they force bad loans back to the lenders that created them) have helped to drive down charge-offs.

A clearer way to measure the health of these firms’ portfolios would be to look at serious delinquencies:

In each case, delinquencies are down significantly compared to a year earlier, but appear to be treading water from last quarter.

So the story here isn’t a great one, but it could be worse. As the economy continues to move sideways, these companies aren’t seeing their portfolios deteriorate much — but they also aren’t seeing them improve much. Yet home prices have stopped dropping dramatically, which should help to limit loss severity. Taxpayers aren’t off the hook yet, but unless the economy clearly worsens, Fannie and Freddie’s losses should begin to wane.

Image Credit: REUTERS/Jason Reed

Getting a loan boils down to one thing, use a trusted source to get referral for your loan officer. There are significantly fewer loan officers working today so they are more professional, but the new disclosure laws actually make it more difficult to figure out how much you’re being charged.

So be careful and don’t be afraid to ask your loan officer how much your loan really costs. A good one will tell you without hesitation.

If you have any questions you would like us to answer on our show, please call our listener line at 951-547-1812 or email mortgagepodcast@gmail.com.

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Credit to wtfnoway.com

The guide asks for the regular items any mortgage company will ask you for. Now before you get too excited, I’ll give you my experience with loan modifications.

I don’t know anyone personally who has ever received a loan modification.  However, I do know 2 people that help people get loan modifications and have been pretty successful.

I have heard from followers that Indymac loses every piece of paper you send them and then declines you, pretty pathetic.  Suntrust doesn’t return calls.

If you have an option arm you have a great chance of getting a loan modification.

By all means take a look at this guide and take a good look at your financial situation.  This real estate downturn still has some time to bottom so you might want to make some decisions on your future budget and housing ideas.

If you have any questions you would like us to answer on our show, please call our listener line at 951-547-1812 or email mortgagepodcast@gmail.com.

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If you have any questions you would like us to answer on our show, please call our listener line at 951-547-1812 or email mortgagepodcast@gmail.com.

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The question is simply, “Is it a good time to refinance, what are interest rates at, and what must one consider if they have no equity and about refinances in general.”

If you have any questions you would like us to answer on our show, please call our listener line at 951-547-1812 or email mortgagepodcast@gmail.com.

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Mortgage refinance applications continue to pour in nationwide as homeowners look to take advantage of falling rates.

As a whole, mortgage applications in mid-September hit their highest level since May, with refinancing applications increasing 17 percent from the week prior, according to data from the Mortgage Bankers Association.

“The steady improvement in housing is continuing,” Joel Naroff, chief economist at Naroff Economic Advisors Inc., told Bloomberg News after the MBA figures were released. “This sector is likely to start adding to growth rather than holding back the economy.”

The MBA’s index of applications rose 13 percent for the week ending Sept. 18. The association’s refinance index jumped almost 23 percent, the largest single jump since March.

With interest rates now hovering near 5 percent, there’s no better time to consider a refinance. That’s especially true for FHA loan recipients, who can take advantage of one of the most flexible and economically efficient refinance programs on the market.

The Federal Housing Administration administers several refinance options. Borrowers can get a cash-out refinancing, although this option is typically geared toward those whose properties boast significant equity and rising market value.

A more common and popular approach is the FHA’s streamline program, which has helped thousands of Americans refinance during the last 20 years.

The program has a few basic criteria:

• You must have an FHA mortgage
• You must be current on your mortgage
• The refinance must lower the monthly principal and interest payments
• You cannot receive cash

Some qualified borrowers can obtain no-cost refinances. In some cases, closing costs can be rolled into the cost of the refinance.

Borrowers can get a streamline loan without getting their home appraised, but remember that the refinance cannot be for more than the original loan.

This article was written by Brandon Laughridge of Mortgage Loan Place. Learn more about FHA Loan Requirements and FHA vs. Conventional Loans at MLP today!

If you have any questions you would like us to answer on our show, please call our listener line at 714-519-7833 or email mortgagepodcast@gmail.com.

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And the second question is “You’ve located a property that has lots of equity, you’re intention is to take control of the property before someone else does. So you locate the listing agent, you team up with a money partner to fund the deal, you say to that person, hey I have a property under contract that has lots of equity. I need X amount of money to close the deal, would you like to be part of it? Would this be considered equity sharing or a deal structure for locating a private lender?”

The fist question is a capital gains tax question. Unfortunately, you can’t transfer equity. But the tax law allows you to take up to a $250,000 capital gain without paying tax, $500,000 if married, on your primary residence. If the property is an investment property you can sell it and put the gain into a new property with no capital gains tax in a 1031 tax exchange.

The second question deals with an equity sharing type deal which were more common in the past but are almost unheard of today. Essentially you match up a borrower who doesn’t have enough cash for a down payment with an investor who would like to share in the price appreciation of real estate without having to worry about tenants. In this case his tenants have an interest in the home so they have a reason to make the payments on time.

In today’s environment lender guidelines are much stricter on where the down payment is coming from. This would more likely be a deal for a private lender, who is not as concerned with where the money is coming from just as long as it’s there. If you wanted to structure this for conventional financing they would have to be co-borrowers but they must have some type of prior relationship. There is a website that matches up these types of people, but I’m not sure how or if they can obtain conventional financing.

If you have any questions you would like us to answer on our show, please call our listener line at 714-519-7833 or email mortgagepodcast@gmail.com.

Please consult your tax adviser for tax advice.

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A recourse loan allows the lender to try to collect the money they lose on a foreclosure or short-sale from the homeowner in what’s called a deficiency judgment. A non-recourse loan, on the other hand, doesn’t allow the lender to collect any money on their loss. This is the most common type of residential loan.

A cash out refinance now requires a homeowner to have at least 20% equity depending upon certain loan characteristics. Jumbo loans, loans over $417,000, require more equity. The problem in the current lending environment, however, is if your credit scores are below 740 the rate is increased. So it might be better to contact a local bank for a 2nd in order to get a better interest rate.

If you have any questions you would like us to answer on our show, please call our listener line at 714-519-7833 or email mortgagepodcast@gmail.com.

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Mortgage loan payment schedules are based upon a formula that is heavily favored toward paying interest. Very little principal is paid during the first 10 years or so of a loan. An old rule of thumb is if you make 1 extra mortgage payment per year you will decrease your loan term by 8-9 years on a 30 year fixed rate loan. Try for yourself with the link below or email us and we’ll help you out.

If you have any questions you would like us to answer on our show, please call our listener line at 714-519-7833 or email mortgagepodcast@gmail.com.

Amortization Schedule

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