Mortgage rates near six-month low

McLean, VA - Freddie Mac (NYSE:FRE) today released the results of its Primary Mortgage Market Survey® (PMMS®) in which the 30-year fixed-rate mortgage (FRM) averaged 6.26 percent with an average 0.4 point for the week ending November 1, 2007, down from last week when it averaged 6.33 percent. Last year at this time, the 30-year FRM averaged 6.31 percent. The 30-year FRM has not been this low since the week ending May 17, 2007, when it averaged 6.21 percent.

The 15-year FRM this week averaged 5.91 percent with an average 0.4 point, down from last week when it averaged 5.99 percent. A year ago, the 15-year FRM averaged 6.02 percent. The 15-year FRM has not been this low since the week ending May 10, 2007, when it averaged 5.87 percent.

Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 5.98 percent this week, with an average 0.4 point, down from last week when it averaged 6.03 percent. A year ago, the 5-year ARM averaged 6.05 percent. The 5-year ARM has not been this low since the week ending May 17, 2007, when it averaged 5.92 percent.

One-year Treasury-indexed ARMs averaged 5.57 percent this week with an average 0.6 point, down from last week when it averaged 5.66 percent. At this time last year, the 1-year ARM averaged 5.53 percent. The 1-year ARM has not been this low since the week ending May 31, 2007, when it averaged 5.57 percent.

(Average commitment rates should be reported along with average fees and points to reflect the total cost of obtaining the mortgage.)

Read full report from Fannie Mac

Timely payments on new mortgages rise

By James R. Hagerty, The Wall Street Journal

RISMEDIA, Oct. 23, 2007-(WSJ.com)-In a glimmer of good news for the U.S. home-mortgage market, more people are managing to keep up with payments on loans made in recent months, according to new data from First American LoanPerformance, a San Francisco research firm.



The trend reflects more-conservative lending policies adopted by mortgage companies this year in the wake of a surge in defaults and foreclosures, said Mark Carrington, director, analytical sales and support, at First American LoanPerformance.

Even so, defaults continue to rise in proportion to the overall number of home loans outstanding nationwide, most of which were made between 2003 and 2006, when lending standards were growing more lax. That means foreclosures are likely to keep rising, adding to a glut of homes already on the market and weighing on prices.

To assess recent results, LoanPerformance looks at loans that are four months old or less. During this year’s second quarter, 6.6% of subprime loans in that category already had been blemished by payments at least 60 days overdue, LoanPerformance found. That was down from 7.2% in the first quarter and a peak of 7.6% in last year’s third quarter. “It’s still really high, but at least it’s dropping now,” Mr. Carrington said.

LoanPerformance says its loan-servicing data base covers about 80% of the national mortgage market. Subprime loans are those to borrowers with weak credit records or high debt in relation to their income.

For prime loans, the rate of new loans going bad declined to 0.6% in the second quarter from 0.8% in the first quarter.

A rash of all-but immediate defaults on loans last year alarmed investors and helped force dozens of lenders out of business. Investors who buy loans often can force lenders to buy back those that go sour within a few months. That can mean big losses for the lenders.

Lenders have blamed the early defaults partly on fraudulent loan applications from people who never intended to make payments and partly on a drop in home prices that has prompted some buyers to walk away from their obligations. Partly as a result, lenders are screening loan applicants more carefully for signs of fraud and requiring buyers to put up larger down payments.

The lax practices of recent years continue to haunt lenders. Including all subprime loans in the database, 18.8% were 60 days or more overdue in July, up from 17.5% in June, according to LoanPerformance. Making matters worse, borrowers face sharply higher payments on those loans after an initial two- or three-year period of easier terms expires.

Readers speak out against "Mortgage Meltdown Quiz"

align="left">RISMEDIA, Oct. 22, 2007-On Thursday, October 18, RISMedia ran a commentary from Ralph Roberts, “Mortgage Meltdown Quiz,” in which Roberts pointed the finger at mortgage brokers for current mortgage industry woes. Roberts’ opinions incited several readers to respond in detail.

Here, we present key excerpts from their rebuttals:


“I take exception to the article you printed by Ralph Roberts entitled a ‘Mortgage Meltdown Quiz.’ It boggles my mind anytime someone in the field of real estate presents themselves as an expert in mortgage banking. At best, you can be a jack of all trades.


On the contrary, I have been in the mortgage banking industry for over 20 years. I am a Certified Mortgage Specialist and card-carrying member of the local and national association of mortgage brokers.


Although there are rotten apples in every profession, including real estate, Roberts’ article appears to lump mortgage brokers into one distinct category, known in the business as ‘correspondent lenders.’ The opposite is true. Most mortgage brokers do not pool mortgages and sell to investors at a premium. At best, we are small businesspeople who may, on occasion, tablefund loans in our own names. What that means is that the loan is underwritten to a particular lender’s guidelines (by the lender’s own underwriters). The loan is approved by the lender and then funded in the broker’s name at closing. The loan is then immediately assigned to the lender.

The average broker, on the other hand, will close in the lender’s name and not their own. My firm always closes in the lender’s name. There is no profit or mark-up in the transaction. I have often waived YSP and collected my fees on the front end in order to make the loan affordable for the borrower. It is the LENDER’s Account Executives who often encourage YSP on products that their employers design and market to the public through brokers! That is the primary tool that they use to lure brokers into doing business with them. A prime example is the Pay Option ARM. AEs would push the two-point YSP to brokers who would in turn, push the product to borrowers.

Correspondent lenders are the only entities who are authorized to close and fund in their own name. Then they package and sell their inventory anytime post closing and collect a Servicing Release Premium (SRP) from the lender. This is additional income for them. There is nothing illegal or unethical about it. FNMA, FHLMC and HUD have been purchasing loans from Correspondent Lenders and Lenders under the SRP model since their inception. We all have to feed our families under the American capitalist system.

Although Roberts’ article blames the current meltdown on brokers, every example he gave was either a Correspondent Lender or Wholesaler. Sure there will be fraud in any industry when money is the motivator-as much can be said for the real estate industry. Most brokers and sales agents are in the game for their commission. Not all of them belong to NAR or uphold their ethics.

My point is that the broker is a tool of the lender. We market their products. We produce none of our own. How lenders motivate us to do so can encourage certain behaviors. More importantly is that professionals place their customer’s best interests ahead of their own. I have done that for years and have challenged the financial benefit to my borrowers of certain mortgage products that lenders have put out there for the ethical among us to sell.

Some mortgages are just not good regardless of the incentives lenders offer brokers to convince consumers to sign on the dotted line. I would encourage Roberts to do his homework and look at the mortgage products that are currently in default. Not one was designed by a mortgage broker.”

Debra R. Napier CRMS
Sr. Finance Consultant
AMCO Capital LLC
Kissimmee, FL

I must tell you how disappointed I am with the article written by Ralph. ‘Simplistic’ and ‘fundamentally wrong’ are two words I would use to describe it. Again, it reminds me that we will never have an industry that is not prone to the big swings in guidelines as long as we keep looking for scapegoats to blame, as opposed to the serious lack of ethics and oversight the major lenders exhibit in their dissemination of mortgage products. Lenders generally push the products that make the most profits, and that is an industry issue as opposed to a sales issue associated with one segment of the industry. Wholesale lenders have been traipsing through my office for years pushing and promoting the big yield spread premiums (rebates) for the less consumer friendly products on their menu. At some point the heroin dealers need to be blamed for the drug problems as opposed to the users of the drugs only, wouldn’t your think?

I could go on and on as I am a 25- year veteran of the industry and have founded the San Diego Association of Mortgage Brokers with a few of my associates in the late ‘80s. I must say I get so tired of reading articles like this one that skews information enough to make it titillating but fundamentally incorrect.”

Craig S. Brown
Rancho Financial

Actually, Roberts is ‘mis-stating’ the facts regarding mortgage brokers and misleading his readers, adding to the misinformation problem. Mortgage broker’s do not sell loans after they are originated, mortgage bankers do. Mortgage brokers only originate loans for a wholesale lender or investment source, and yes, they do get paid a percentage for their efforts, but the implied ‘incentive’ to originate and then sell the loan for additional profit does not apply to brokers, only to bankers. Yes brokers do originate the bulk of home loans, so to imply that they are driven or motivated by ‘double-ended’ profits is an unfair representation of the broker. Please be accurate when ‘throwing stones’.”

Bruce Wren
Broker
Legacy Home and Loan Center, Inc.

I have been a Mortgage Originator, now broker, for nine years. Never before have I felt compelled to comment on an industry article until reading your article by Ralph Roberts. I am amazed at how wrong he’s got it.

Let’s start with the following quote from his article:

When someone borrows $300,000 to purchase a home, for example, the broker receives two points at closing for a total of $6,000. They then package the loan with other loans and sell it to the market at 104% or $312,000. In this case, the originator just ‘earned’ $18,000 off the mortgage loan-the $6,000 commission plus the $12,000 markup.’

For the sake of an apples to apples comparison, let’s assume the broker did make two points at closing. Some will charge that, some won’t. Some of us work for a lot less. But when it comes to ‘packaging the loan and selling to the market,’ the Wholesale Lender who underwrote and closed the loan is making that profit, not the broker. If that were the case, I would be retired by now.

Next quote I take issue with:

‘When bad loans are traced back to mortgage fraud, misrepresentations, and misdeeds, originators takes a double hit. They are forced to buy back the bad loans, and the lender cuts off access to future transactions. With huge chunks of money flowing out and little or no money flowing in, the mortgage originator is forced to close up shop. That is what is currently happening and why we are now seeing a mortgage meltdown.’

Yes, originators who purposely write bad loans do have to buy them back and it can put them out of business. But to say that that is the reason for the meltdown - the buying back of bad loans to originators - sounds like someone needed to do some more homework before writing an article or a book. Is mortgage fraud a problem? You bet. Are there a lot of bad Originators that need to and are getting out of the business? You Bet. Are there brokers like me out there doing business the right way? You Bet!

Where I take issue is when everyone wants to put all the blame on the big bad broker. Everyone and anyone who has been involved in real estate transactions, from Wall Street down to the consumer (borrower), need to take ownership and responsibility for the problem. Enough with the blame game.

It sounds like Mr. Roberts needs to do a lot more research about the lending side of things. NAMB would be a great place to start.

Jennifer Eldred
Broker/Owner
Integrity Home Loans
Medford, Oregon

A mortgage meltdown quiz

By Ralph Roberts

RISMEDIA, Oct. 18, 2007-You have been reading about the mortgage meltdown and seeing daily news reports about the record number of foreclosures. Mortgage lenders are dropping like flies. Even large companies such as Countrywide Mortgage are feeling the crunch, having to borrow billions of dollars to keep their doors open. Based on what you have read, heard, and seen in the media, maybe you feel as though you have a pretty good grasp of what is going on and what caused it, but how much do you really know?

To find out how savvy you really are about this mortgage meltdown, take the following single-question quiz:

Why have so many mortgage lenders gone out of business?

A. Homeowners are unable to make their payments.

B. Massive amounts of real estate and mortgage fraud.




If you are among the multitudes of the ill-informed, you probably chose A. And if this were the 1950s, perhaps you would have been correct. Back in the 1950s when banks loaned money directly to people who were unable to repay the debt, the banks took a direct hit to their bottom line. They felt the pain.

In the current system, most banks rely on brokers to originate the mortgage loans. These brokers typically have loan officers who work for them and are in charge of selling loans to consumers, helping the consumers fill out their loan applications, and performing other tasks to expedite the loan process. Loan originators receive a commission for every loan that’s approved, and because they are lending someone else’s money, they take on risk only indirectly.

When someone borrows $300,000 to purchase a home, for example, the broker receives 2 points at closing for a total of $6,000. They then package the loan with other loans and sell it to the market at 104% or $312,000. In this case, the originator just “earned” $18,000 off the mortgage loan-the $6,000 commission plus the $12,000 markup.

When bad loans are traced back to mortgage fraud, misrepresentations, and misdeeds, originators takes a double hit. They are forced to buy back the bad loans, and the lender cuts off access to future transactions. With huge chunks of money flowing out and little or no money flowing in, the mortgage originator is forced to close up shop. That is what is currently happening and why we are now seeing a mortgage meltdown.

When interest rates were low and housing prices were soaring, mortgage fraud was rampant, but the problem remained hidden because homeowners were awash in equity. Credit was easy to get, and mortgage brokers and loan officers made it even easier. If an applicant couldn’t qualify for a particular loan, the loan officer would simply encourage the applicant to fudge the numbers or would fudge the numbers on the applicant’s behalf. If a home buyer wanted a larger loan to cash out some money at closing, you could always find an applicant to accommodate-inflating the appraisal to make the property appear to be worth more than it really was. Loan officers were tripping over each other to approve risky loans and nab their commissions.

MILA, a subprime wholesale lender that was based in Mountlake Terrace, Washington shut down during the spring of 2007, primarily due to the fact that its loan officers were responsible for huge numbers of fraudulent loans. Several employees who refused to go on the record reported that they passed along proof of fraud committed by at least one of the company’s loan officers. This person made so much money for the company that instead of firing its employee, MILA relocated and promoted the person.

Now that the housing market is in a slump, it’s as though the water has been drained out of the pond, and now we can see what is at the bottom… a whole lot of muck.

Ralph Roberts is a real estate fraud expert and activist and co-author of Protect Yourself from Real Estate and Mortgage Fraud: Preserving the American Dream of Homeownership (Kaplan, August 2007).

Visit http://www.flippingfrenzy.com or contact Ralph at RalphRoberts@ralphroberts.com or 586.751.0000.

Outlook bright for future mortgages

RISMEDIA, Oct. 11, 2007-Conditions in the mortgage market are improving for consumers, which should help to release some pent-up demand in early 2008, according to the latest forecast by the National Association of Realtors(R).



Lawrence Yun, NAR senior economist, notes that widening credit availability will help turn around home sales. “Conforming loans are abundantly available at historically favorable mortgage rates. Pricing has steadily improved on jumbo mortgages since the August credit crunch, and FHA loans are replacing subprime mortgages,” he said.

Yun said it’s important to place the current housing market in perspective, and that 2007 will be the fifth highest year on record for existing-home sales. “Although sales are off from an unsustainable peak in 2005, there is a historically high level of home sales taking place this year — a lot of people are, in fact, buying homes,” he said. “One out of 16 American households is buying a home this year. The speculative excesses have been removed from the market and home sales are returning to fundamentally healthy levels, while prices remain near record highs, reflecting favorable mortgage rates and positive job gains.”

He emphasized all real estate is local with naturally large variations within a given area.

“Markets like Austin, Salt Lake City and Raleigh have been outperforming recently and will continue to do well next year,” Yun said. “Other areas like Denver and Wichita will likely move up in the price growth rankings due to very positive local economic developments.”

Existing-home sales are expected to total 5.78 million in 2007 and then rise to 6.12 million next year, in contrast with 6.48 million in 2006. New-home sales are forecast at 804,000 this year and 752,000 in 2008, down from 1.05 million in 2006; a recovery for new homes will be delayed until next spring.

“A cutback in housing construction is a positive sign for the market because it will help lower inventory and firm up home prices,” Yun said. Housing starts, including multifamily units, are likely to total 1.37 million in 2007 and 1.24 million next year, down from 1.80 million in 2006.

NAR President Pat V. Combs, from Grand Rapids, Michigan, and vice president of Coldwell Banker-AJS-Schmidt, said, “Housing is still a good long-term investment, and we’ll be seeing a broad, modest improvement in home prices in 2008. With widely varying conditions, the best advice for consumers is to consult a Realtor(R) in their area to learn about local market conditions because supply and demand can change from one neighborhood to the next.”

Existing-home prices will probably slip 1.3% to a median of $219,000 in 2007 before rising 1.3% next year to $221,800. The median new-home price should drop 2.1% to $241,400 this year, and then increase 1.0% in 2008 to $243,900.

The 30-year fixed-rate mortgage is expected to average 6.4% for the next two quarters and then edge up to the 6.6% range in the second half 2008. Additional cuts expected in the Fed funds rate will help to keep mortgage interest rates historically favorable.

Growth in the U.S. gross domestic product (GDP) is estimated at 2.0% this year, below the 2.9% growth rate in 2006; GDP is likely to grow 2.7% next year.

The unemployment rate is forecast to average 4.6% this year, unchanged from 2006. Inflation, as measured by the Consumer Price Index, is expected to be 2.8% in 2007, compared with 3.2% last year. Inflation-adjusted disposable personal income will probably increase 3.6% in 2007, up from 3.1% last year.

The National Association of Realtors(R), “The Voice for Real Estate,” is America’s largest trade association, representing more than 1.3 million members involved in all aspects of the residential and commercial real estate industries.