Mortgage Rate News

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

Even as analysts tout a stronger economy (using retail sales data and CPI data — and a stronger US dollar — for support), it is clear that the housing market crisis is far from over. Indeed, May saw yet another increase in foreclosures.

CNN Money reports on the continuing, and dramatic, increases in foreclosures:

The housing crisis grew worse in May, as more than 73,000 American families lost their homes to bank repossessions, up a staggering 158% from the 28,548 households that were dispossessed in May 2007.

Foreclosure filings of all kinds, including default notices, notices of sheriff’s sales and bank repossessions, were up 48% from May 2007, according to the latest release from RealtyTrac, the online marketer of foreclosed properties. Filings increased 7% from April.

“May was the 29th straight month we’ve seen a year-over-year increase,” RealtyTrac’s CEO James Saccacio said in a statement.

Florida, California and Nevada continue to be the places where foreclosures see the highest rate, but there are plenty of other markets that are experiencing difficulty as well.

Even with attempts at loan modification, it is clear that it is not enough to stem the tide of foreclosures. Part of that is because mortgage lenders only allow borrowers to use loan modification programs if it will be more profitable for them. In many cases, homeowners can’t even afford the loan modification terms. In such cases, it makes more sense for the mortgage lenders to foreclose on the homes and take the smaller losses.

If you are looking for a loan modification, it is important that you show your lender that you will be able to pay off the mortgage — and that you are determined to do so. Otherwise, you are likely to join the swelling ranks of foreclosures.

Tags: foreclosures, housing market crisis, home mortgage loan, loan modification,
mortgage loan blog, retail sales data, US dollar