Mortgage Rate News

With home prices dropping and with foreclosures continuing to mount, the government is announcing that new measures are being considered to help struggling homeowners. The idea is for the government to take a more direct role in helping prevent foreclosures by guaranteeing loan modifications. CNN Money reports on some of the issues surrounding the ideas to help prevent foreclosures:

“Loan guarantees could be used as an incentive for servicers to modify loans,” Bair said. “Specifically the government could establish standards for loan modifications and provide guarantees for loans meeting those standards.”

That way, she said, “unaffordable loans could be converted into loans that are sustainable over the long term.”

Authority for this — along with the funding — would, of course, come from the recently passed $700 billion bailout. It seems to me that there is an awful lot that is now being done in the name of that bailout. Billions of dollars are being thrown about. Is anyone keeping track? Have we already exceeded, with all of these promises of cash to various industries, the $700 billion? Does it really matter anymore? I guess since none of the money is “real” at this point, arbitrarily throwing it around doesn’t really make a difference right now. Things are just sort of going to “happen.”

While the idea of guaranteeing home mortgage modifications is nice, if it was going to be done it should have been done months ago — before people began losing jobs due to the economic slowdown brought on by home foreclosures. It’s a vicious circle. At any rate, it may be too late; my guess is that many of the people seeking home mortgage modifications can’t even afford a modified loan at a modest fixed rate. It may be necessary to offer 40 year or 50 year fixed rate mortgage loans to make them affordable for some of those facing foreclosure.

Tags: home prices, home mortgage, home mortgage loan, home mortgage modifications,
prevent foreclosures, mortgage lenders, government home loans

It seems a little counter-intuitive that the government insurance agency would take over a failed bank and then continue its practices. But that’s just what the FDIC did back in 2001 when it took over Superior Bank FSB. As new information comes to light about the mortgage market crash, there are questions about the way the FDIC runs the banks it takes over. Instead of cleaning up some of the subprime mortgage lending practices, the FDIC continued on with Superior’s policy of approving subprime loans to homebuyers — some of which were obviously unqualified.

When the FDIC takes over a bank

When the FDIC takes over a bank, it basically operates the bank until it can find a buyer. The FDIC manages the day to day banking transactions, and allows people to withdraw their money from the bank if they wish. Indeed, IndyMac is a prime example of what happens when the FDIC takes over a bank. Most operations are moving forward, including the acquisition of some of the real estate and mortgage sections by Prospect Mortgage.

The problem is that sometimes it can take months to find a buyer. With Superior, the FDIC decided to keep on providing loans to homebuyers. Unfortunately, the FDIC decided to follow the trend back in 2001, rather than evaluating the lending practices. As a result, quite a few of the foreclosures we are seeing with the current mortgage market mess were given by the government — using some of the same shoddy (and even predatory in some cases) lending practices that caused the downfall of the housing market.

One hopes that everyone can learn from the current mortgage mess: lenders, government regulators and homebuyers alike. But until then, one hopes that we don’t receive any more revelations like those regarding the FDIC’s subprime mortgage lending practices.

Tags: subprime mortgage, FDIC, home mortgage loan, mortgage loan blog,
subprime mortgage, IndyMac

One of the signs that the subprime mortgage crisis is still very much affecting the economy and the financial markets is the continued issues that mortgage lenders are having. Among the latest to experience difficulties is IndyMac.

IndyMac has been halting trading, and the company is going to pretty much shut down its home mortgage loan origination business. For the most part, IndyMac focused on Alt-A loans. Alt-A loans are just starting to go the way subprime mortgage loans did last year. National Mortgage News reports on the IndyMac story:

IndyMac said as of July 7 it would no longer accept any new loan submissions or rate locks in its retail and wholesale forward mortgage lending channels, except for its servicing retention channel, and would cut roughly half its staff of 7,200 over the next couple of months. The company said it plans to honor all its existing rate-locked loans and continue to fund them

Other mortgage lenders are having problems as well. Reports of larger than expected losses by government charted mortgage lenders Fannie Mae and Freddie Mac are creating concerns that a great deal of capital will be needed in order to offset losses. Both Fannie Mae and Freddie Mac lost a great deal of value in their stock prices.

The fact that both of these government chartered organizations will be expected to take on more casualties of the subprime mortgage mess (due to the fact that they can now accept loans that were once unacceptable for a government charter) will not likely help much in the coming days and weeks.

Even though some are saying that the economy is on the road to recovery, it appears that mortgage lenders still aren’t. And the continued issues in the financial sector mean that decreased liquidity will be the norm across other financial and credit markets.

Tags: Fannie Mae, Freddie Mac, home mortgage loan, IndyMac,
subprime mortgage, mortgage lenders, Alt-A loans