Thursday 28th: Scams? Rates dropping - and there sure is a lot of mortgage news!

February 28th, 2008 · No Comments


“He offered to get a loan to cover for the value of the house and to get a second loan which it will include all my debts through a company that it is willing to invest. He said I will need to establish a corporation so I will need to pay him $5,000 so he could register the business, then he will look for a company that is willing to invest in a small business. At the same time, he said that he will create a savings fund and once I get to a minimum of $24,000, he will tell us how to invest that money so I can start working towards my retirement. It all sounded good, but in reality I’m not sure what to believe.” How many loan agents get an e-mail like this from their client about a competitor? Scary. 

Or what about this, from an agent who has a client that bought a house in July 2007, using an 80/20, who got this letter from the owner of the 1st: “We are pleased to offer you an opportunity to pay off the balance of your loan through refinance or sale the property for less than you currently owe. As you know, Wilshire Credit Corporation is currently servicing your loan; it is not the owner of your loan. Steel Mountain Capital LLC, the owner of your loan, has contracted us and advised that it would be willing to accept a Short Refinance or Short Sale to settle your outstanding debt. Steel Mountain is willing to settle your outstanding debt for $400,000 in certified funds as full and final satisfaction of your loan if this amount is received by Wilshire by March 20th. Your current unpaid principal balance (which does not include interest and fees owed) is $450,000, so this reduced amount saves you at least $50,000. If the payment is made by the requested date, Wilshire will release the mortgage lien and cancel the note.”

Locks are certainly slowing everywhere: the MBAA Mortgage Applications index fell 19.2% last week, as refinances dropped 30.4%.

Lenders wishing to sell their mortgages to the nation’s two largest sources of home finance would have to make sure that they did not rely on in-house appraisers and did not own an appraisal firm itself, according to an outline of the plan drafted by Fannie Mae and which has been obtained by Reuters.

NAMB learned that HUD plans to publish the new FHA loan limits during the first week of March, and that they will publish separate lists for the FHA program and the GSEs. Additionally, HUD will be recalculating the median home prices which are used to calculate the loan limits. The new loan limits will be based on 125% of the median home price in counties across the country, and will be capped at $729,750. The floor for FHA loans will be raised from $201,060 to $271,050, and originators can begin processing applications now for any loan that was assigned an FHA case number after February 13th (the date the bill was enacted).

Some very good news: the Office of Federal Housing Enterprise Oversight, OFHEO, said it was ending a cap on mortgage purchases that it imposed in 2004 as a reaction to accounting irregularities at Fannie Mae and Freddie Mac. The two companies operate under a government guarantee, buying up, repackaging and re-selling mortgages in order to stimulate lending activity. Politicians have complained since the start of the credit crisis that the caps were constraining the two companies just when they were most needed. OFHEO said it would also gradually reduce the amount of capital the two companies are required to set aside to cover their loans.

Do Fed chairmen always say, “”the FOMC…will act in a timely manner as needed to support growth and to provide adequate insurance against downside risks.”? When wouldn’t this be the case? Federal Reserve Chairman Ben S. Bernanke signaled the U.S. central bank is prepared to lower interest rates again even amid signs of accelerating inflation. Bernanke’s remarks may reinforce investors’ expectations that the central bank will lower interest rates further to help a faltering economy. Durable Goods fell 5.3%, New Home Sales fell last month to the lowest level since 1995 in spite of price declines. The odds favor another 50 basis point cut in overnight rates at the March 18th FOMC meeting.

What is the market up to today? GDP came out – unrevised at +.6% for the 4th quarter. That, and the Jobless Claims number (Initial claims jumped by 19,000, to 373,000 from an upward-revised 354,000 reported last week), has sent the yield on the 10-yr down to the low 3.70’s again, and mortgage prices are better by .375-.750, depending on the coupon. Today is Round 2 for Bernanke as he testifies before the Senate on the last day of his semi-annual policy presentation to Congress, and we also have Freddie Mac’s fourth quarter results today

Did you hear the one about the young man who was asleep on Monday morning and his mother came in and woke him? “Son you need to get up and go to school”.  He responded “Mom all the kids hate me, the teachers don’t like me and I am not going to school.” The Mom said, “Son you must, you are the principal and they are counting on you!”

Rob Chrisman

Tags: Commentary · Economy · GSEs · Mortgage Market

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