Mortgage Rate News

The FBI has released its 2007 mortgage fraud report, and it is no surprise that the agency is finding that mortgage fraud is on the rise. Indeed, according to the report, the current mortgage market and real estate market trends are conducive to fraud:

The downward trend in the housing market provides an ideal climate for mortgage fraud perpetrators to employ a myriad of schemes suitable to a down market. Several of these schemes have emerged with the potential to spread as the recent rise in foreclosures, depressed housing prices, and decreased demand place pressure on lenders, builders, and home sellers. Emerging and re-emerging schemes for 2007 included builder-bailouts, seller assistance, short sales, foreclosure rescue, and identity thefts exploiting home equity lines of credit.

It is important to be on your guard at this time. Here are a couple mortgage fraud schemes to be on the lookout for:

• Foreclosure assistance. Beware of those claiming that they can stop a foreclosure on your home. Some scammers will claim that they can stop a foreclosure and help you save your home. They charge a “fee” of between $600 and $2,000 in order to “take care of paperwork” and “negotiate with your mortgage lender.” They have you fill out a bunch of forms, take your money — and your home goes through foreclosure anyway.
• Equity stripping. This is when scammer arranges to take over the loan on your home and let you live there as a renter. It stops the foreclosure, but you are signing your home over. The scammer may charge high rent. At some point, though, you fall behind again, but with no house now. You are kicked out, and the scammer has your home plus its equity.
• Bait and switch. Watch out for this. You are told that you are signing forms that bring your loan current — or restructure it. You pay an “administrative fee” or make a “loan payment.” In reality, the papers have you signing over the deed to your house. So you lose ownership of your house — and the money you paid.

Be sure to carefully examine all documents before signing. Or have a trusted attorney review them. If you are worried about foreclosure, talk to your mortgage lender well in advance and see if you can arrange something. Here are some resources that can help you avoid foreclosure:

• ACORN’s HELP program: 888-409-3557.
• Neighborhood Assistance Corporation of America: 888-302-6222.
• Homeowner’s Hope: 888-995-4673

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Janet Yellen, the president of the San Francisco Federal Reserve, has said that housing markets have “hit the skids” since the days of easy credit and booming home sales. Finally, years of easy money and easy mortgage financing requirements have caught up with the markets. Housing relief bills and other government measures may not be enough. Calculated Risk reports on some of Yellen’s comments about housing markets:

Since then, housing markets have “hit the skids.” In inflation-adjusted terms, residential construction fell by 13 percent in 2006 and by 14 percent in the first half of last year. Of course, once the financial shock hit last summer, things got even worse, with real residential construction dropping at a 24 percent rate on average since then. And, indicators of conditions in housing markets are pointing lower for the future. Housing starts and permits as well as sales are trending down, and inventories of unsold homes remain at very high levels. These inventories will need to be worked off before construction can begin to rebound.

Indeed, with housing markets showing increased inventory, it is no surprise that home prices are down quite a bit as sellers try to do what they can to sell their homes. Also contributing to the lower home prices overall are the foreclosures. These are sold at low prices so that mortgage lenders do not have to sit on them.

If you are savvy with your decisions, and if you have the credit score and down payment to make it possible, you can probably not only get a good deal when you buy a home, but you could also get a good deal on a home mortgage loan. Now might be a good time to invest in real estate.

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Even as individuals wonder how they are going to deal with rising gas prices and food prices inflation, commercial real estate is starting to see the problems associated with the mortgage market crisis. Large building projects are being scaled back, delayed and even scrapped altogether. Some are even being foreclosed on as real estate values plummet and access to domestic capital is harder to come by. The Wall Street Journal reports on commercial real estate and the mortgage market crisis:

The current downturn is particularly damaging to grandiose plans because so many of them rely heavily on debt financing. That’s something difficult to come by these days as major financial institutions struggle with huge losses from the commercial real-estate debt they’ve been unable to move off of their books.

Even deep-pocketed investors usually plan to borrow heavily to jack up their returns. “When debt is not readily available, even well-capitalized offshore groups, are going to take a step back,” says Michel Seifer, managing director for Jones Lang LaSalle, a real-estate brokerage, management and services firm.

So, it is not only those of us on the ground level worried about the economic slowdown and the mortgage market crisis. Even commercial real estate developers are feeling the pinch.

This is likely to affect other areas of the economy as well. Commercial real estate developments provide jobs and economic stimulus to localities, and the current troubles are likely to further exacerbate problems that are already being seen around the country in terms of individual financial situations. All of this comes as some analysts insist that the credit market crisis is coming to an end. But that doesn’t mean that the economic worries are. Add in gas prices, food prices and continued payroll data, and the economic problems may be just beginning.

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