Mortgage Rate News

One of the issues cropping up right now is whether or not the Federal Housing Administration (FHA) is being asked to do too much. Both of the presidential candidates, Barack Obama and John McCain, feel that it would be fine for the FHA to underwrite more subprime mortgages in efforts to secure loan modification for those who are finding themselves in danger of foreclosure.

But is too much being asked? Brian D. Montgomery, the FHA Commissioner, pointed out that if the FHA handled all of the mortgage loan modification guarantees, things would get ugly fast. In order to take care of most of the foreclosure problems associated with subprime mortgages, the FHA would need to refinance nearly $300 billion in mortgages. That could be devastating, harming the agency and putting taxpayers on the hook.

But Montgomery does think that there are steps that could be taken. The Redfin blog reports on what the FHA chief things could be done:

The full text of Montgomery’s speech points to the need for more fiscal conservativism - simple things like checking credit and bank references and making sure no part of the loan downpayment was borrowed need to be observed. He is also pushing for RESPA - or “Real Estate Settlement Procedures Act”, which requires full disclosures of fees, charges, interest rates, and loan terms - as another way of preventing foreclosures in the future. This makes sense, and I agree the fine print needs to be a thing of the past.

I agree as well. Home mortgage loans need to be much more transparent. And mortgage lenders need to be more conscientious about who they approve for mortgage financing. After all, just because you can finagle the numbers so that someone can buy a home, doesn’t mean that you should.

Tags: FHA loans, mortgage loan blog, home mortgage loans, subprime mortgages,
mortgage financing, foreclosure, mortgage bailout

As subprime mortgage loans continue to go bad (and investors and others continue to lose money) many mortgage lenders are seeing pressure from many directions. Not only are subprime writedowns affecting them in terms of profits and share prices, but investors in loans wrapped up in securities — and those bought outright as investments — are starting to make demands as well.

As the home mortgage loan market continues to struggle, investors want lenders to buy back their loans. Mortgage News Daily reports on the demands investors are making on mortgage lenders:

Investors, including Freddie Mac and Fannie Mae, are taking a long look at loans they have purchased from lenders over the last few years and the contracts that govern those purchases and are trying to force banks and mortgage companies to buy back growing numbers of troubled loans.

Many loan sales are governed by provisions that require lenders to take back loans that default unusually fast or contained mistakes or fraud.

This whole mess is based on badly-advised loans given to people who — in large measure — had no business getting the loans in the first place. There is plenty of blame to go around: Society with its “instant gratification” fixation, lenders and brokers eager to make money off loans with higher interest rates, borrowers who looked for ways to get what they really couldn’t afford, investors not actually checking to see if they were making good decisions, de-regulation that allowed the government to turn a blind eye to what was going on.

And, unfortunately, there is no”quick fix” to the mortgage market crisis. Instead, things are going to have to work through the system. And hopefully everyone will learn from this and make better decisions in the future.

Tags: subprime mortgage loans, mortgage lenders, home mortgage loan, mortgage loan blog,
mortgage market crisis, mortgage news, mortgage loan market

It’s been an interesting day for mortgage market news. As we are all aware things are getting worse in terms of Alt-A loans and also for subprime mortgage loans. But just knowing this information doesn’t really put a human face on the issues that are afflicting the mortgage market. Consider two items that appeared in my news reader this morning: a HELOC bankruptcy and military foreclosures.

HELOC bankruptcy

When it comes to home equity lines of credit, rules (especially with regard to bankruptcy) are a little different from what you have with a first home mortgage loan. So when National City tried to foreclose on a HELOC, and the borrower filed for Chapter 7 bankruptcy, the lender thought that it would recover most of its money. Not so much.

The judge decided that even though the borrower lied about income (this was for a stated income HELOC), the guidelines National City had didn’t provide for due diligence in making sure that the borrower really did have adequate income. Hmmm…You mean mortgage lenders have to be responsible, too? Well played!

Military foreclosures

This next bit of info just really annoyed me. Some of the highest rates of foreclosure in the country can be found in communities with a lot of military service men and women. This is not right. The constant tours and crappy pay make it difficult for military personnel to keep up on their home mortgage loan payments.

Sure, their homes can’t be foreclosed on while they are on active duty, and sure they have 90 days when they get back. But it doesn’t seem sufficient. You get back from your second (or third) tour of duty in Iraq, only to discover that you have to fix your financial situation in three months. Most of us can’t do that and we haven’t see the hell of war.

Seems to me like our brave military men and women deserve something a little more substantial.