From the WSJ this morning “FDIC Faces Mortgage Mess After Running Failed Bank“:

It turns out that the U.S. government itself was one of the lenders giving out high-interest, subprime mortgages, some of them predatory, according to government documents filed in federal court.

Reminds me of Lisa Simpson’s line in “Homer the Vigilante“, when Homer sets up a group to track down a cat burglar.  Lisa’s line goes along the lines of (paraphrase): “but if you’re the police, who’s going to police the police?” To which Homer replies “I don’t know, the Coast Guard?”

Share This

Welcome to the Arizona Mortgage Guru blog, a great resource for all your home financing needs. If you're new here and like the content, you can subscribe to my RSS feed to get regular updates on all things related to mortgages. Thanks for visiting.

Categories: Congress and Government, Subprime Mortgages
1 Comment »

With stocks down 98% from a year ago, rising loan delinquencies and very little liquidity, Indymac, one of the nations top 10 mortgage lenders is done! It’s closing its wholesale and retail operations as well as halting any new locks. At one time IndyMac was a major player in the “Alt-A” market (loans with risk levels between subprime and prime). From Bloomberg earlier today:

IndyMac, the second-biggest independent U.S. mortgage lender last year behind Countrywide Financial Corp., has lost almost $900 million in the nine months ended in March amid tumbling home prices. The company is focusing on mortgages that can be sold to government-sponsored enterprises like Fannie Mae and Freddie Mac.

If you are in the market for a home mortgage and were working with a mortgage broker, call your broker to ask if the loan was to be placed with IndyMac. You’ll need a new lender!

In other bleak news, it was disclosed today that Fannie and Freddie may be required to raise as much as $85 billion in additional capital. To be fair it’s due to new accounting rules, but still the markets were in turmoil.

Share This

Tags: credit crisis, indymac, liquidity
Categories: Economics, Mortgages, Subprime Mortgages
5 Comments »

A few weeks ago I started a weekly series on the mortgage market attempting to cover important elements from news items to blog posts. Regular readers know I slacked off on this promise after week one. However, I must say I did have good intentions. Inertia is the main issue here and converting potential energy into kinetic energy is difficult. However, I have not forgotten my desire to keep a weekly mortgage round up alive and kicking.

In that spirit, today I want to bring to your attention a brilliant post by the North Phoenix Agent, Heather Barr. She has proposed a very practical way to fix the foreclosure mess. Since she doesn’t trust any of the “big three” presidential candidates to offer anything that would work (she does admire the Obama overall theme though). So in the spirit of citizen government Heather proposes her own “real world” solution. This is a great post and a wonderful read. If only our leaders could think like her!

If you haven’t read it already, then head on over to the North Phoenix Agent Blog. We’d all love to hear from you on what you thought about her plan - so leave your comments. If you like the plan then maybe we can convince one of the candidates to select Heather as their running mate? I’ve already made a campaign sticker!

Share This

Tags: foreclosure, Mortgages, Real Estate, subprime
Categories: Economics, Real Estate, Subprime Mortgages
3 Comments »

I want to make clear to everyone that I don’t agree with everything in this video. Not everyone who took at a sub-prime loan was like Bob (as shown in the video). However, the video does make a point and demonstrates that while the greater focus is on helping those in distress, those who do things “right” should not be asked to pay the bill. There is a balance and in this election season its important to be reminded of this. As the website points out renters represent 32% of the population and they should not be asked to help the 2% who made a poor financial decision.

Your thoughts?

Share This

Tags: bailouts, government, renters
Categories: Congress and Government, Real Estate, Subprime Mortgages
4 Comments »

Former executives at New Century, which went bankrupt early last year, should be sued and so should it’s auditor KPMG. That is what a bankruptcy investigator is recommending. New Century as you may recall was the No. 2 sub-prime lender before it went down in flames in the Spring of 2007. An excerpt from Yahoo! Finance:

Michael J. Missal, a Washington, D.C. attorney appointed by a bankruptcy judge to probe years of accounting missteps by Irvine, Calif.-based New Century, said the company’s leaders turned a “blind eye” to the increasing risk of making loans to people with bad credit.

Operating out of a “brazen obsession” with cranking out mortgages, New Century ignored an alarming rise in signs of trouble with it loans, Missal said. He found the company engaged in seven improper accounting practices, including one that some witnesses said was recommended by KPMG.

Share This

Tags: bankruptcy, Mortgages, new century, subprime
Categories: Mortgages, Subprime Mortgages
2 Comments »

Bank of America is buying Countrywide. I guess we should have seen this coming considering how Bank of America had been posting “bail” for Countrywide for quite a few months. From MarketWatch:

NEW YORK (MarketWatch) — Bank of America Corp. said Friday it’s purchasing Countrywide Financial Corp. for $4 billion, effectively doubling down on a previous investment in the troubled firm and catapulting the buyer into the top spot among mortgage lenders and loan servicers in the U.S.

The stock-swap deal will put an end to the independence of the troubled California lender headed by Angelo Mozilo, and represents an increase from the Charlotte, N.C., bank’s August investment of about $2 billion.

There were rumors earlier this week that Countrywide was running out of cash.

Share This

Categories: Mortgages, Real Estate, Subprime Mortgages
3 Comments »

In the coming months you will hear a lot about “declining markets”. This is because both Fannie Mae and Freddie Mac along with all major mortgage insurance providers have introduced strict rules regarding such markets.

Staring January 15, all loans going to Fannie Mae will be subject to the decling markets guideline:

“Current home price trends indicate that home values continue to decline in many markets across the country. As a result, and based on our continued monitoring of loan performance, Fannie Mae is reinstating a policy to restrict the maximum loan-to-value (LTV) ratio and combined loan-to-value (CLTV) ratio for properties located within a declining market to five percentage points less than the maximum permitted for the selected mortgage product.”

“The reinstatement of the maximum financing policy and the other changes outlined in this Announcement are necessary in light of current market conditions. These policies are effective for all loans delivered with application dates on or after January 15, 2008.”

What this means to you is that if the appraiser indicates that the property is in a declining market then you may be required to put an additional 5% down. However, be aware that only MyCommunity and Flex loans are severely affected since until now we were able to do such loans upto 100%. Now we can only go upto 5% in a declining market scenario.

Does this mean 100% financing is no longer available? Most certainly not. Remember that FHA and VA loans are still around and neither agencies have any immediate plans to change guidelines. This is not to say they don’t care about potential falling values.

In fact both FHA and VA will be asking for detailed explanation in the appraisal on whether or not the property is in a declining market. But they neither program has indicated that they will then force the borrower to put more money down.

I know that most of Maricopa and Pinal county zip codes (Phoenix Metro area) fall with declining markets. While this does not disqualify you from 100% financing, make sure your lender offers FHA as a possibility (and VA if you qualify). With higher lending limits and competitive rates, these are certainly loan options you need to seriously consider.

Share This

Categories: FHA, Mortgages, Subprime Mortgages
3 Comments »

Countrywide seems to be in trouble and the market smells blood. According to The Street:

Countrywide Financial’s … shares plummeted to new lows Tuesday amid rumors — later denied — that the mortgage lender could be nearing a bankruptcy filing.

The beleaguered company’s stock closed down 28.3% to $5.43, a new 52-week low. Shares dipped as much as 34% to $5.05 in Tuesday trading — even after a brief trading halt on the New York Stock Exchange and the company issued a statement denying the rumors Tuesday afternoon — challenging the notion that the nation’s largest mortgage lender is too big to fail.

The rumors don’t appear to be without merit, according to MarketWatch:

“Countrywide is severely challenged and might falter if it does not receive an infusion of at least $4 billion within the next couple of weeks,” Egan-Jones Ratings Co., a ratings agency, wrote in a note Tuesday. “The GSEs likely curtailing purchases have hurt Countrywide.”

It’s really bad news if the nations largest mortgage lender fails. That would send the industry in a further tailspin.

Share This

Tags: bankruptcy, countrywide, Mortgages
Categories: Mortgages, Subprime Mortgages
1 Comment »

Well whaddyou know, the mortgage industry impacts the culture at large.  The American Dialect Society chose “subprime” as the word of the year! According to CNN it beat out “waterboarding”, “Facebook”, and “Googleganger?”.  

The group of wordsmiths chose “subprime” as 2007’s Word of the Year at its annual convention Friday.

“‘Subprime’ has been around with bankers for awhile, but now everyone is talking about ’subprime,”‘ said Wayne Glowka, a spokesman for the group and a dean at Reinhardt College in Waleska, Georgia. “It’s affecting all kinds of people in all kinds of places.”

About 80 members of the organization spent two days debating the merits of runners-up “Facebook,” “green,” “Googleganger” and “waterboarding” before voting for an adjective that means “a risky or less than ideal loan, mortgage or investment.”

2007 was truly a remarkable year for the mortgage industry, but alas for all the wrong reasons. I think it will be remembered as a watershed year and people will be talking about its impact for a long long time to come.

Share This

Tags: 2007, subprime, word of the year
Categories: Humor and Fun, Subprime Mortgages
3 Comments »

I know it’s strictly business, but I find this piece of news rather fascinating:

Morgan Stanley posted its first quarterly loss ever Wednesday after taking an additional $5.7 billion write-down related to subprime mortgages. The investment bank also said it would sell a $5 billion stake to China Investment Corp., a sovereign wealth fund, to shore up its capital.

The sale, which would give the Chinese government a stake of about 9.9 percent in one of Wall Street’s biggest investment banks, is the latest example of a foreign investor aiding a Western financial firm after the housing meltdown.

It’s rather interesting to observe how much the world has changed since the end of the Cold War. The Chinese Communist Politburo now controls almost 10% of a major US investment bank (Morgan Stanley) and it’s not even major news. Mao may have said “political power flows through the barrel of a gun” but modern Chinese leaders also realize that “money begets power”. 

Share This

Tags: chinese, morgan stanley, subprime woes
Categories: Subprime Mortgages
No Comments »