Wednesday, October 29, 2014

Mortgage Loan Rates Climb Higher

The Mortgage Bankers Association (MBA) released its weekly report on mortgage applications Wednesday morning, noting a decrease of 6.6% in the group’s seasonally adjusted composite index for the week ending October 24. That followed a rise of 11.6% for the previous week. Mortgage loan rates rose during the week on three types of loans.

The seasonally adjusted purchase index decreased 5% compared to the week ended October 17. On an unadjusted basis, the composite index decreased by 7% week-over-week. The unadjusted purchase index fell by 5% for the week and remains 15% lower year-over-year.

The seasonally adjusted purchase index and conventional purchase index were the lowest since February 2014, while the government purchase index was the lowest since August 2007.

Adjustable rate mortgage loans accounted for 8.2% of all applications, down from 9.4% in the prior week.

The MBA’s refinance index decreased by 7%, after rising by 23% in the previous week. The share of refinancings remained unchanged at 65%.

The MBA’s chief economist said:

    Borrowers with jumbo loans tend to be most sensitive to changes in rates, and that sensitivity has been clearly apparent in the past few weeks with double and even triple digit percentage changes in refinance application volume for jumbo loans. The average loan size for refinance applications decreased to $263,600 in the most recent week from a survey high of $306,400 the previous week. The decrease was driven by a 41 percent drop in refinance applications for loans greater than $729,000, which had surged almost 130 percent the week before.

The average mortgage loan rate for a conforming 30-year fixed-rate mortgage increased from 4.10% to 4.13%. The rate for a jumbo 30-year fixed-rate mortgage rose from 4.03% to 4.13%. The average interest rate for a 15-year fixed-rate mortgage remained unchanged at 3.28%, again the lowest rate since May 2013.

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Tuesday, October 28, 2014

Homebuyers deserve better access to low-down-payment mortgages

The Oct. 26 editorial “Everyone back in the risk pool” missed the mark on several important points. When Congress approved the Dodd-Frank legislation, it permanently removed the products that led to the housing crisis and created such great risk to consumers.

Congress never mandated that a down-payment requirement be in the risk-retention rule. Regulators recognize that today we have the greatest protections in history for consumers in mortgage finance. From the creation of the Consumer Financial Protection Bureau to the explicit and conservative standards in the Ability to Repay/Qualified Mortgage rule, it was clearly recognized that any additional underwriting requirements would only exacerbate an overly tight credit market.

Mortgages guaranteed by Fannie Mae and Freddie Mac with 3 percent down payments would require mortgage insurance, protecting taxpayers and lessening taxpayer risk by shifting a segment of mortgages away from the Federal Housing Administration, where taxpayers are on the hook for any and all loss, to private companies, which would be responsible for a majority of the risk.

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Monday, October 27, 2014

Lower down payments OK for some mortgages

Fannie Mae and Freddie Mac are close to allowing consumers to buy a home with as little as a 3 percent down payment and still have the mortgages backed by the two agencies.

More details are expected to be announced in coming weeks, but the move from a 5 percent down payment could increase the ability of creditworthy but cash-strapped consumers to become homeowners and help a faltering housing market regain its traction. Both agencies at one point had accepted 3 percent down payments.

“Through these revised guidelines, we believe that the enterprises will be able to responsibly serve a targeted segment of creditworthy borrowers with lower down payment mortgages by taking into account compensating factors,” said Mel Watt, director of the Federal Housing Finance Agency, Fannie and Freddie’s overseer, during a speech Monday at the Mortgage Bankers Association’s annual convention in Las Vegas. “It is yet another much-needed piece to the broader access-to-credit puzzle.”

Watt also announced other policy initiatives to make lenders more comfortable with the federal government’s mortgage purchase guidelines in the hope it will loosen their purse strings.

“It’s a very big deal,” said Dan Gjeldum, a senior vice president at mortgage lender Guaranteed Rate. “It will dramatically reduce the expense for a first-time homebuyer. The easier it is to do business with the agency, the easier it’s going to be for consumers to work with mortgage companies.”

Fannie Mae and Freddie Mac do not originate mortgages directly to homebuyers. Instead, lenders sell mortgages that meet certain criteria to the two agencies, which in turn package them into securities and sell them to investors. The investments are guaranteed, which means that investors recoup losses if the homeowner defaults. Fannie and Freddie can force lenders to repurchase bad loans.

The upshot of those assurances is a more cautious lending environment that is leaving some would-be buyers on the sidelines.

Watt said Monday the FHFA was taking steps to clarify the circumstances under which Fannie and Freddie could force a lender to repurchase a loan, in an effort to reduce lender confusion. “I hope our actions provide sufficient certainty to enable your companies to reassess existing credit overlays and more aggressively make responsible loans available to creditworthy borrowers,” Watt said in prepared remarks distributed by the FHFA.

In its most recent report, the FHFA said the average FICO credit score of borrowers was 744 for Fannie Mae and 742 for Freddie Mac, lower than at the end of 2013. FICO scores range from 300 to 850.

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Friday, October 24, 2014

Refinancing your mortgage? Opportunity knocks

Homeowners seeking to save some on mortgage payments can celebrate: The average rate for 15-year, fixed-rate mortgages, one of the most popular refinance products, has dipped to its lowest level since June 2013.

The 15-year fixed hit 3.08% according to Freddie Mac's weekly survey, a tenth of a percentage point lower than last week and down sharply from 3.36% early in the month. Rates for 30-year loans dipped 0.05 percentage point to 3.92%.

 "For borrowers hoping to pull the trigger on a refinance, this spate of the lowest mortgage rates since June 2013 is a pretty good opportunity," said Keith Gumbinger of, a mortgage information company.

With equity markets on a roller coaster and bad economic news roiling Europe, investors have fled to safe havens in bonds and mortgage-backed securities, depressing interest rates.

It's a boon for existing homeowners with mortgages a few years old. Borrowers can swap their old 30-year loans at, say 5% or more, for spanking new 15-year loans at the current rate.

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Thursday, October 23, 2014

Regulators approve risk-retention rule for mortgages

Six federal agencies wrapped up final approval of a rule on Wednesday requiring banks to keep a stake in the mortgages they package and sell.

The main prong of the long-awaited regulations requires lenders to keep at least 5 percent of the risk associated with loans on their books in an effort to avoid the shoddy mortgage practices that contributed to the recession and housing crash.

Housing and Urban Development Secretary Julián Castro called the rule an "important step forward in creating an environment where good lenders and good borrowers can work together without reservation."

He said the effort is part of the Obama administration's commitment to create certainty for lenders to expand access to credit to underserved borrowers, while ensuring that past abuses aren’t repeated.

The final qualified residential mortgage (QRM) rule, required under the Dodd-Frank financial law, aligns with the Consumer Financial Protection Bureau’s (CFPB) qualified mortgage (QM) regulations, which went into place in January to ensure borrowers have the ability to repay their home loans.


Wednesday, October 22, 2014

Top Mortgage Firm Accused of Abuses

 One of the nation's largest servicers of home loans may have denied struggling borrowers the chance to fix loan problems and avoid foreclosures, New York's financial regulator has alleged.

An investigation by the state's Department of Financial Services found that Ocwen Financial Corp. inappropriately backdated foreclosure warnings and letters that rejected mortgage loan modifications, making it nearly impossible for borrowers to appeal the company's decision.

Many borrowers who had fallen behind on loan payments also received warning letters months after the deadline for avoiding foreclosure had passed, department investigators found.

Potentially hundreds of thousands of backdated letters may have been sent to borrowers, likely causing them "significant harm," Benjamin Lawsky, New York's Superintendent of Financial Services, wrote in a letter to Ocwen released Tuesday.

"Ocwen's indifference to such a serious matter demonstrates a troubling corporate culture that disregards the needs of struggling borrowers," Lawsky wrote in the letter to company's general counsel.

In a statement, Atlanta-based Ocwen blamed software errors in the company's correspondence systems for generating improperly dated letters.

The latest claims of wrongdoing against Ocwen come less than a year after the company agreed to reduce struggling borrowers' loan balances by $2 billion as part of a settlement with federal regulators and 49 states over foreclosures abuses.

It's the most recent evidence that many of the same kinds of abuses that made the housing crisis and the Great Recession worse are still happening some seven years after the housing bubble burst.

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Tuesday, October 21, 2014

Pact Could Expand Mortgage Access

A top federal housing regulator in a speech Monday said Fannie Mae , Freddie Mac and lenders had reached an agreement in principle that could expand access to mortgages for many Americans.

Federal Housing Finance Agency Director Mel Watt said the agency, along with mortgage-finance giants Fannie Mae and Freddie Mac, reached a deal on what kinds of mistakes could trigger penalties for lenders years after a loan is issued.

The agreement, whose details Mr. Watt said would be unveiled in coming weeks, would help close off one big concern that lenders had said discouraged them from lending to less-creditworthy borrowers.

Mr. Watt called the pact “a significant step forward” that will “facilitate market liquidity without compromising the safety and soundness” of Fannie and Freddie.

“Those were extraordinary announcements and extremely positive” for lenders, said Mortgage Bankers Association President David Stevens immediately following the speech.

Fannie and Freddie buy loans from lenders, package them into securities and guarantee to make investors whole if loans default. When lenders sell loans to the companies, they make promises that the loans meet the companies’ standards.

After the financial crisis, Fannie and Freddie required lenders to buy back billions of dollars in loans that the companies said didn’t meet the standards. As a result, lenders have said they have been wary to grant mortgages to riskier borrowers.

The FHFA has tried a few times to mollify lenders’ concerns. The latest agreement clarifies what kinds of mistakes could trigger a repurchase demand many years after the loan is granted.

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