Senator McCain reversed his position to let the market sort out the mortgage mess. Yesterday he talked about “using all the resources of this government and great nation to create opportunity and make sure that every deserving American has a good job and can achieve their American dream.” This is in sharp contrast to his comments on March 25th when he said:

I have always been committed to the principle that it is not the duty of government to bail out and reward those who act irresponsibly, whether they are big banks or small borrowers. Government assistance to the banking system should be based solely on preventing systemic risk that would endanger the entire financial system and the economy.

I have much admiration for Senator McCain. In fact he is my man this year - especially considering the fact that the Democrats can’t get their act together and seem to offer nothing but the same old “government fixes” and have not demonstrated to me that they are capable of strong leadership. The fact that Hillary is offering to spend $30 billion to fix the mortgage mess, just makes me scratch my head in complete and utter disbelief. The main reason why I’ve become more and more of an economic conservative is because I think one of the fundamental problems of the US economy is overspending by the federal government.

To think that President Bush in 2002 was the first president to sign a $2 trillion budget and will be the first to sign a $3 trillion budget is mind boggling! It’s almost like we’re building a house of cards that will one day just collapse on its own weight. I know the smart types will have a lot of “intelligent” ways of explaining this, but from a gut check point of view, simply spending by printing more money just doesn’t seem right. Borrowing and spending doesn’t seem right either. To think that the bill will never come due is just silly and irresponsible.

Having said that Senator McCain is offering a modest proposal to help struggling homeowners. It would help 200,000 to 400,000 homeowners and cost $3 billion to $10 billion. His program would apply to people who were falling behind on mortgage payments on their primary residences. These homeowners would need to demonstrate that they would be able to meet the terms of a new, 30-year fixed-rate mortgage.

Senator Obama also has a massive government bail out program for homeowners. However, I found this bit of news kind of interesting:

Barack Obama went to New York Thursday and blamed lobbyists, greedy businessmen and complacent Washington politicians for creating “an ethic of greed” that led to today’s foreclosure crisis.

Not long after he left the stage, the Democratic presidential hopeful attended a fundraiser held by his campaign in a room in the Manhattan headquarters of Credit Suisse, one of the major investment companies caught up in the subprime lending mess.

I guess the two step dance is an integral part of the art of politics. It is practiced by all who seek the nations highest office and involves speaking from both sides of the mouth and relying on people to not “remember”. No wonder I’m not a politician!

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Tags: john mccain, mess, Mortgages, subprime
Categories: Banker, Economics, Mortgages
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Jim Cramer on Bear Sterns:

Kramer goes crazy (from Seinfeld):

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Tags: bear sterns, cramer, kramer
Categories: Banker, Economics, Humor and Fun
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Aimee received a phone call this morning from a real estate agent who told her with a degree of frustration that all her lending contacts and title contacts had left the business. This agent has buyers who need a good lender referral and was eagerly trying to build some new relationships. She was glad to have “found” Aimee. And we’re glad to be in touch with her as well!

This is quite a turn of events for everyone. I know several colleagues in the mortgage and title business who have left, not to mention the real estate agents who are no longer “practicing”. So, this mornings experience was an isolated event. Over the past two months I have been contacted by many real estate agents across the country seeking a quality lender for their borrowers. After being hounded by loan officers and title reps for the greater part of their careers it must be unnerving for a real estate agent to not have several reliable loan officers and title reps as business partners.

So, if you are one of those agents then I want you to know that Aimee and I are still here, while almost 50% of loan originators have left the industry. We’re still closing loans and we’re still helping borrowers make the biggest financial decision of their lives. Just to introduce ourselves to you, here are a few links that might you learn more about us:

• About Aimee and Shailesh (pronounced “sai-lesh”)
• Testimony from past clients
• Our 2007 Customer Satisfaction Rating

We are FHA and VA approved lenders and as a national mortgage broker/banker we have access to all loan programs in the industry. Most importantly we’re here and we’re here to stay!

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Tags: banker, lender, loan officer, mortgage broker
Categories: Banker, Broker
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Lenders are in a bind. With foreclosures increasing every day, their REO departments are overloaded. Foreclosure is expensive and banks are in no mood to be property owners. So, why not just try to work thing out with the distressed borrower? That seems to be the line of thinking as major lenders have announced that they will put foreclosures on hold for 30 days. During this time they will work with the borrower to figure a workable solution for both parties. This applies to all kinds of borrowers, not just subprime. From MSNBC:

These lenders say they will contact homeowners who are 90 or more days overdue on their monthly mortgage payments. They will be given the opportunity to put the foreclosure process on pause for 30 days while the lenders try to work out a way to make the mortgage more affordable to the homeowner.

To clarify, this appears to be a voluntary program and is not a “law”. Which means a lender has the last word and is not under any obligation to award the 30 day freeze. If you think you qualify contact your lender directly.

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Tags: banks, foreclosures, lenders
Categories: Banker, Mortgages, Real Estate
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If you are having trouble making payments on your home then the first thing you should do is call your lender/servicer. For many people this can be a frightening proposition. You might be afraid you’ll end up saying something that will put your home in jeopardy. Or, you might not understand the different options the lender offers. Or, you may simply just not know what to say.

The Mortgage Bankers Association has created a foreclosure avoidance center website. Under this page it has published a twelve-step guide on the things you need to know when you call your lender. This should ease your fears a bit. Additionally, as you go through this guide you’ll realize that a successful resolution is in the lenders best interest as well. Contrary to public perception the bank does not want to own your home and bank executives do not go to bed at night salivating at the prospect of foreclosing on your home.

Below is a quick run down of the twelve steps, but read the “12 Things You Should Know When You Call Your Lender” page on their webpage for complete information.

1. Contact your servicer immediately
2. Ask your servicer about alternatives to foreclosure
3. Provide any information requested by your servicer
4. Be prepared to provide detailed financial information
5. Be ready to change your spending habits
6. If you’re uncomfortable calling your servicer, then call a reputable third party (see HUD website)
7. Open all mail you receive from the servicer or it’s law firm
8. Do not hesitate to ask critical questions
9. Resolve any payment issues on your escrow accounts (taxes and insurance)
10. Stay in contact with your servicer and/or counselor at all times
11. Be realistic about your own financial condition
12. Understand that the servicer wants a positive outcome

Related entry: Kits to help you avoid foreclosure and payment defaults

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Tags: defaults, foreclosures, Mortgages, servicers
Categories: Banker, Mortgages, Personal Finance
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I saw a news flash on Drudge yesterday afternoon saying banking regulators and the Federal Reserve had issued some loan guidelines. There was no meat in the story. It was a breaking story at the time. This morning I found that various regulatory bodies as well as the Federal Reserve are asking lenders and loan servicers to restructure loans for borrowers facing difficulty. According to the WSJ:

The guidance doesn’t compel lenders and the investors who buy loans to restructure the loans — but it puts an added burden on them to try to do so, while clarifying that they shouldn’t face negative tax or accounting implications from such restructuring. The statement was issued by the Federal Reserve, the Federal Deposit Insurance Corp., the Office of the Comptroller of the Currency, the Office of Thrift Supervision, the National Credit Union Administration and the Conference of State Banking Supervisors.

The WSJ story also said it’s unclear how many would benefit from restructuring loans. Given the sheer number of ARM’s (in excess of 1 million) which will reset in the next year or so this should have a significant impact.

It is a make sense idea in my opinion. From the lenders perspective taking a smaller loss as opposed to  having to write off the entire loan may make sense. Same goes for investors. However, these companies appear to be concerned about the tax consequences. That should be no problem to  Uncle Sam though, all they have to do is add one more page to the 60,000 + pages in the current tax code.

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Tags: restructuring loans, subprime mortgages
Categories: Banker, Broker, Subprime Mortgages
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I just finished reading “Truth-in-Lending Disclosure Failure Leads to Mortgage becoming “UnSecured”" at The Big Picture. This article sent chills down my spine. The main reason being that if borrowers are successful in detaching the collateral from their mortgages then we are indeed headed for some really bad economic times.

The premise of the post is that many of the Truth in Lending Disclosure for 2/28 ARM Loans (sub-prime) did not adequately document the actual interest rate, payment and cost of the mortgage over the loan term. This is a direct violation of many state and federal lending laws. In the authors own words:

Let me put on my lawyer hat for a moment: The Truth-in-Lending Act requires “clear and conspicuous” disclosure to borrowers of the key provisions of their mortgages. This includes such details as the eventually reset interest rate, specific loan terms, and the total dollar amount the mortgage will cost over time:

And lawyers for borrowers losing their homes are very aware of this noncompliance of existing laws:

This seems to be where many of the subprime 2/28 ARMs ran afoul: They failed to meet the disclosure laws regarding actual interest amounts and payments.

Who has gotten tagged with these cases so far? Subprime lender NovaStar Financial Inc. (NFI) in Kansas City settled a class action suit for $5.1 million. And, consumers in Wisconsin recently won a class-action TILA suit (its under appeal).

Go over to the article and read the whole thing. It makes you wonder what everyone was thinking, especially those buying and selling mortgages. Aren’t they supposed to be reading this stuff?

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Tags: mortgage, subprime, TIL, Truth in Lending Laws
Categories: Banker, Broker, Mortgages
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Between First Magnus (Great Southwest Mortgage) closing shop and Countrywide going through some serious turbulencethings are very unpredictable right now. To calm markets the Federal Reserve just lowered the discount rate by 0.5% to 5.75%. The discount rate is what the Fed charges banks for short term loans.

What is a consumer to do? If you have any loans in process right now it’s a good time to check with your lender to make sure everything is on track. As long as the loan is locked it should be okay. However, moving forward that may not always hold. In fact Brian Brady, a veteran mortgage professional in California is advising mortgage brokers to lock with two lenders - just in case. As a broker we can do this even though it may not be fair to the good lenders, as Brian points out.

Countrywide is the nations number one home mortgage lender. So, anything bad on that ship sends waves that could even rock Fannie and Freddie. The market knows that both Fannie and Freddie will not crash because they have the full faith and commitment of the Federal government behind them.  However, this is not to say that loan guidelines can not change over night and become more restrictive. From what I know they are not thinking of any changes but the way the market changes you never know.

Below are some notable market news from MarketWatch and LA Times:

• Fed cuts discount rate to 5.75%
• Moody’s downgrades 691 mortgage-backed securities
• NovaStar Financial to cut 37% of workforce
• A rush to pull out cash (LA Times)

Stay tuned. I’ll have some more information and analysis on the mortgage market as it becomes available.

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Categories: Banker, Broker, Economics, Mortgage Backed Securities, Subprime Mortgages
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It’s hard to believe but half of 2007 is over. The chart below shows what the 30 year fixed mortgage rate has done so far this year. It also includes the average points lenders are charging for the interest rates shown. 

Keep in mind that the historical average mortgage rate is somewhere between 8% and 9%. The Phoenix Real Estate Guy has a great chart here. So with that in mind we see that rates are still pretty low. It is important to understand however that rates are higher for those with poor credit, self-employed borrowers and those requesting loan amounts higher than the conforming limit ($417,000). These are only some of the factors affecting interest rate. It is also important to understand that just like there is more to an apple pie than just the apple, there is more to a mortgage loan than just the interest rate. 

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Categories: Banker, Interest Rate, Mortgages
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House Bill 2040 is headed to the Governers desk. This bill makes mortgage fraud a felony. According to Inman News:

House Bill 2040 would make deliberate misrepresentations to lenders — such as inflated appraisals or falsified borrower incomes used to obtain loans that exceed a home’s true worth — class four felonies, punishable by up to three years in prison.

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Categories: Arizona, Banker, Broker, Fraud, Mortgages
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