GMAC dispenses with HELOC’s, A reminder on Muslim lending practices, Housing Bill, Jumbos

July 28th, 2008 · No Comments


Islamic finance firms help Muslim customers buy homes without compromising their religious principles. Islam forbids charging interest in the belief that it exploits people, but it allows making money off actual goods. Usually the home buyer purchases their home jointly with the “finance company”, and then pays rent and eventually buys the company out of its share. Any fees are considered profit, not interest. Potential buyers need to pay more money upfront and have a good credit score and savings. The Islamic finance industry itself is rather small — bringing in between $2 billion to $3 billion a year.

Here is a solid article on the nitty-gritty details on the Housing Bill from MoneyCNN.   

The legislation the Senate passed 72-13, and is due to go to the president, who says he’ll sign the bill when it reaches his desk, early this week. As best I can tell, it puts a cap of $625,500 on the loans Fannie Mae and Freddie Mac can buy in certain high-priced areas, and a cap in other areas of up to 15 percent above the median home price.

Will jumbo loan buyers, such as GMAC, ING, Chase, Wells, ever “fill up”, and cut their jumbo programs? That is the concern of smaller lenders that still make a market in high-balance loans. Given that the securitization market is in a shambles, financial institutions are holding onto this product, and putting it into their portfolios – but what happens when the amount of capital that they have allocated to purchasing and holding jumbo loans begins to run out? Generally speaking, the institution can end the program entirely, price themselves out of the market, or focus on originating that product through certain business channels. Stay tuned…

Speaking of ending programs, GMAC Correspondent announced that all GMACB Home Equity Closed End and Line of Credit Products have been discontinued, effective August 1. GMAC said that the following product codes will no longer be available: TY33: 5-25 Year Fixed Terms TY33: 15 Year Balloon T510: 5 Year IO, WLTB: HELOC 15 Year Balloon, WL25: HELOC 25 Year, WL30: HELOC 30 Year.

Two banks failed Friday, and its deposits were sold to Mutual of Omaha Bank. It brings to seven the number of bank failures so far this year. The Federal Deposit Insurance Corp. said it was appointed receiver of First National Bank of Nevada , based in Reno , Nev. , and First Heritage Bank of Newport Beach , Calif. - both units of First National Bank Holding Co., of Scottsdale , Ariz. All depositors, including those with deposits in excess of the FDIC’s insurance limits, will automatically become depositors of Mutual of Omaha Bank for the full amount of their deposits, the FDIC said.

The market got knocked around again – must be those summer afternoons in New York . New Homes Sales decline .6% in June, but were higher than forecast and the number of properties on the market dropped by the most in four decades, indicating builders are making some headway in clearing out inventories. There is currently a 10 month supply at the current sales rate. We also had the Michigan Consumer Index increase to 61.2 in July, unexpectedly rising from 56.4 in June, and the lowest level since 1980.  The measure averaged 85.6 in 2007. We are, however, seeing bit of a bounce so far this morning, with the 10-yr at 4.08% and 30-yr mortgage prices better than Friday afternoon by .250 in price.

What’s ahead of us, economic news-wise, this week? Today & Wednesday we have nothing. Tomorrow we’ll have some retail sales figures, along with the Case Shiller Home Price Index and Consumer Confidence numbers. Thursday we’ll see Initial Jobless Claims, GDP, and the Chicago Purchasing Managers survey. Friday brings the July unemployment report, July ISM manufacturing index, and June construction spending.

This is a true story, proving how fascinating the mind of a six-year old is. They think so logically.
A teacher was reading the story of the Three Little Pigs to her class She came to the part of the story where first pig was trying to gather the building materials for his home.
She read, “…and so the pig went up to the man with the wheelbarrow full of straw and said: ‘Pardon me sir, but may I have some of that straw to build my house?’”
The teacher paused then asked the class, “And what do you think the man said?”
One little boy raised his hand and said very matter-of-factly, “I think the man would have said ‘Well, darn! A talking pig!’”

Rob Chrisman

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Tags: Commentary · Mortgage Market

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