Mortgage Tips

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An Internet-based system intended to better oversee mortgage brokers and their employees whose regulations vary significantly by state was launched today.

The so-called Nationwide Mortgage Licensing System, initially adopted by seven states, applies to mortgage brokers and loan officers at state-regulated banks, but not those employed at nationally supervised banks.

Developed by the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators, the program creates a uniform application for mortgage brokers and a database that banking regulators can use to catch brokers who attempt to work in one state after being banned in another.

“This is the culmination of a four-year effort by state regulators to provide a new and more solid foundation for mortgage supervision and consumer protection,” said CSBS Executive Vice President John Ryan, in a statement.

“NMLS provides the underpinnings of a regulatory framework to address the weaknesses of our current fragmented and complex system of mortgage origination and supervision,” he added.

It is mandatory for brokers doing business in the seven states involved, and regulators can penalize brokers who operate without a license.

Idaho, Iowa, Kentucky, Massachusetts, Nebraska, New York and Rhode Island are the initial states participating, with 42 state agencies committed to joining by the end of 2009.

Eventually, CSBS and AARMR project enrollment of more than 300,000 licensees through the NMLS system.

When the system was initially conceived, the National Association of Mortgage Brokers slammed the plan for failing to include all loan originators, claiming it creates a false sense of security for consumers.

Source: thetruthaboutmortgage.com

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Bear Stearns reported a larger-than-expected writedown in its mortgage portfolio, leading its first quarterly loss in its 84-year history.

The nation’s fifth-largest investment bank, who is also a mortgage lender, took a $1.9 billion writedown in the quarter ended November 30, significantly larger than its earlier estimate in November of $1.2 billion.

“The continued repricing of credit risk and the severe dislocation in the structured products market led to illiquidity in the fixed-income markets, lower levels of client activity across the fixed-income sector and a significant revaluation of mortgage inventory,” Bear Stearns said in the earnings release.

The fiscal fourth-quarter loss after preferred dividends was $859 million, or $6.90 per share, compared to a profit of $558 million, or $4 per share, a year ago.

The company reported negative net revenue of $379 million, compared to revenue of $2.41 billion a year earlier.

It’s likely 2007 is a year Bear Stearns would prefer to soon forget, as profit during the year fell 90 percent from the year-ago period to a meager $212 million.

“We are obviously upset with our 2007 results, particularly in light of the fact that weakness in fixed income more than offset strong and, in some areas, record-setting performance in other businesses,” Chief Executive Jimmy Cayne said in a statement.

Chief Financial Officer Sam Molinaro said during a conference call with analysts that the company cut 1,400 jobs, or about 9 percent of its workforce during the quarter amid ongoing turmoil in the credit markets.

The firm incurred $100 million in severance costs as a result of the layoffs, but they will offset operating costs by more than $250 million, helping to boost profitability in 2008, Molinaro added.

Earlier this week, Bear Stearns cut another 150 jobs as it shut down its loan production operations in Irvine, CA.

The company is also being sued by Barclays, who claims Bear Stearns hid negative information about the performance of two subprime hedge funds the English bank had invested in.

Shares of Bear were down 16 cents, or 0.18%, to $90.44 in late morning trading on Wall Street, just narrowly above their 52-week low of $89.55.

Source: thetruthaboutmortgage.com

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Defunct mortgage lender American Home Mortgage Investment Corp. has been slammed for its plan to destroy 490,000 hard mortgage files to save on warehouse rent.

The failed lender says it can no longer afford the $45,000-per-month lease on warehouse space housing the hard loan files, drawing criticism from Kelly Beaudin Stapleton, the U.S. Trustee monitoring the case.

“Homeowners may have claims against (American Home) and/or third parties stemming from the origination of their mortgage loans,” Stapleton said in court papers filed last week. “These homeowners may need access to the original copy of the loan file to prove their claim.”

But American Home’s deputy general counsel and chief compliance officer John Kalas said today that the planned destruction would not negatively affect homeowners, as the paper copies are supposed duplicates.

“The only loan files that we are destroying or seeking to destroy have been fully imaged,” Kalas said. “Anything related to consumer concerns or loan fraud or anything like that, the information would be available on American Home servers.”

Investors aren’t pleased about the plan to destroy the files either, noting that it has been difficult to get any information out of American Home, while Bank of America said destroying them could diminish the market value of the mortgages.

Paula Rush, a homeowner who accused the lender of fraud in a recent lawsuit, said in an interview today that destroying potential evidence that could be used for future lawsuits shouldn’t be authorized.

“Leaving American Home Mortgage…total discretion to destroy what they want to destroy and image what they want to image is crazy,” Rush said.

She added that having the complete loan documentation was essential to her battle in court.

Source: thetruthaboutmortgage.com

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According to a report released today by Challenger, Gray & Christmas, the 153,105 job cuts in the financial sector announced last year beat the previous record set in 2001 by a hefty 31 percent and more than tripled the amount at the end of 2006.

In the mortgage sector alone, 86,126 jobs were cut during the year as the mortgage crisis shuttered hundreds of lending operations nationwide.

And despite the record numbers, Challenger expects more layoffs in the struggling financial sector in 2008.

“Job cuts in the financial sector declined in November and December, but major job-cut announcements may be on the horizon for Citigroup and Merrill Lynch,” said John A. Challenger, chief executive officer of Challenger, Gray & Christmas.

Last year, Citigroup announced that it would lay off roughly 17,000 employees and top mortgage lender Countrywide Financial cut at least 12,000 jobs.

“Furthermore, some experts are predicting that the credit crisis resulting from investments in subprime home loans will spread to those who invested in mounting consumer credit card debt,” Challenger added.

Overall, 768,264 jobs were cut in 2007, 8.5 percent less than the cuts announced in 2006 and the lowest since 2000, Challenger reported.

The 44,416 job cuts for the month of December were down by about 39 percent from November and down 18.7 percent from December a year ago.

After the financial services sector, the automotive industry saw the most layoffs in 2007, with 78,880 jobs cut, including 13,000 at Chrysler amid the automaker’s sale to private equity firm Cerberus Capital.

Challenger reported that the weakening dollar has led to high demand for U.S. exports, preventing the housing crisis from leading to widespread job losses in other sectors.

Source: thetruthaboutmortgage.com

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A survey released today by Online Resources Corp. found that the mortgage crisis is spilling over into the broader economy, impacting companies across a variety of industries and their ability to collect payments.

The study of more than 1,000 nationally representative U.S. households found that American consumers are increasingly being forced to prioritize their bills by creating a “delinquency budget” to decide which bills get paid first.

And if forced to choose between which bills to pay, 98 percent of households said they would likely make their mortgage payment first, while credit cards, utility and healthcare bills are among the least likely to be paid.

The survey found that one out of four households reported being delinquent on at least one bill by 30 days or more.

Online Resources also studied a cross-section of billing clients from banks, credit unions, utilities, healthcare companies, card issuers, receivables management and mortgage lenders, finding that only two percent expect it to be easier to collect payments in 2008, while 84 percent expect to spend more on collections in 2008.

“Today’s challenging credit environment could pose a serious risk to companies in all recurring bill industries and their ability to carve out a priority spot in consumers’ budgets,” stated Matthew P. Lawlor, chairman and CEO of Online Resources.

“Billers who provide consumers with more options to resolve their delinquencies will have a distinct advantage in competing to win a priority share of the delinquency budget and also retain valuable consumer relationships.”

Interestingly, the survey found that billers are out of sync with how consumers would like to resolve their delinquencies.

The majority of consumers prefer to use the web to make delinquent payments because of its convenient and non-confrontational nature, but only eight percent of billers offer such online collections services.

These findings could help mortgage companies deal with the ongoing wave of delinquencies more effectively.

Source: thetruthaboutmortgage.com

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The American Bankers Association reported Thursday that late payments on a bevy of consumer loans rose to their highest point since the economy was grappling with a recession in 2001.

The group’s data revealed that the delinquency rate on a composite of consumer loans rose to 2.44 percent in the third quarter, up markedly from the 2.27 percent in the previous quarter.

The composite delinquency rate, which covers eight loan categories, was at its highest level since a 2.51 percent rate in the second quarter of 2001.

The ABA attributed some of the increase to rising oil prices and homeowner’s inability to keep up with mortgage payments.

“Consumer loans directly related to the housing market were hit the hardest,” said James Chessen, chief economist at the American Bankers Association.

“We anticipate delinquency rates will continue to rise on these types of loans in the fourth quarter of 2007, reflecting continued weakness in the housing sector.”

Late payments on home equity lines of credit climbed to 0.84 percent in the third quarter, up from 0.77 percent in the second quarter, marking the highest level since the final quarter of 1997.

Additionally, the delinquency rate on home equity loans in the third quarter rose to 2.28 percent from 1.99 percent in the prior quarter, marking a two-year high.

“My concern is that delinquencies will continue to rise, because the housing problem will worsen, and disposable income will not stretch as far,” he added. “Lenders will need to take a second or third look at any consumer loans they make.”

Interestingly, the delinquency rate on credit cards dropped to 4.18 percent in the third quarter, down from 4.39 percent in the second quarter, contrasting recent views that suggest credit cards are the next big bust.

The survey is based on information supplied by more than 300 banks nationwide, and a payment is considered delinquent if 30 or more days past due.

Source: thetruthaboutmortgage.com

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The California Association of Mortgage Brokers (CAMB) released its annual mortgage survey for 2008 this week, claiming that the ongoing housing crisis could lead to a recession if the conforming limit isn’t raised in California.

When asked if the current housing slump will create a recession in 2008, 47 percent of mortgage brokers surveyed said yes, while 43 percent believe the real estate market will not fully rebound until 2009.

“In order to stem the tide of a possible recession, CAMB is calling upon state and federal legislators to designate California a high cost state, which will increase the limit for conforming loans in California and provide a more stable mortgage product for consumers,” said Pete Ogilvie, president of the California Association of Mortgage Brokers, in a statement.

Despite the recession worries, 48 percent of members believe that housing affordability will get a little better in 2008 and 17 percent believe it will get a lot better.

“While home prices will continue to decrease into 2008, more stable loan products will reappear for consumers looking to purchase a home,” said Ogilvie. “2008 will be the year of market self-correction, and should also reward those who have been waiting for affordable housing prices.”

Fifty-five percent of those surveyed believe the FHA loan will return to popularity in 2008, while 18 percent feel products such as mortgage insurance will rise in popularity.

At the same time, 59 percent of members believe that qualifying borrowers will be more difficult in 2008 due to tighter underwriting standards, especially for those with below-average credit scores.

And 41 percent think it will be more difficult to find a loan program for qualified borrowers next year.

Additionally, 60 percent of those surveyed believe cash-out refinances will decrease in 2008 as homeowners will likely be wary of refinancing their homes during a declining market, assuming they have any home equity to begin with.

Finally, 31 percent of surveyed members believe that April-June of 2008 will be the best time to buy a home, with 28 percent saying the January-March period will be the right time.

Source: thetruthaboutmortgage.com

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Treasury Secretary Henry Paulson said today that the Bush administration is working in a number of areas to combat the country’s ongoing mortgage crisis, but added that there is no simple solution to the complex problem.

In remarks prepared for a New York speech scheduled for later today, Paulson said the country is facing a wave of 1.8 million subprime mortgage resets over the next two years, an epidemic which could lead to market failure.

He added that the interest rate freeze plan was devised on these grounds, and would be launched soon.

“By preventing avoidable foreclosures, we will safeguard neighborhoods and communities and fulfill our responsibility of protecting the broader U.S. economy,” Paulson said in excerpts of his speech released by the Treasury.

Paulson said mortgage servicers should be prepared to implement the plan within a few weeks, ideally helping some subprime borrowers avoid foreclosure.

“However, let me be clear: there is no single or simple solution that will undo the excesses of the last few years,” he cautioned.

He called the housing correction inevitable after a five-year boom led to record sales and price appreciation, and said the housing downturn will last for some time.

“After years of unsustainable price appreciation and lax lending practices, a housing correction is inevitable and necessary,” Paulson said.

“We will likely have further indications of slower growth in the weeks and months ahead,” he warned. “The overhang of unsold houses will contribute to a prolonged adjustment, and poses by far the biggest downside risk.”

Paulson is also expected to warn that there will be no quick announcement of a fiscal stimulus package to solve the current crisis.

“Working through the current situation and getting the policy right is more important than getting the policy announced quickly,” he said.

Paulson also repeated his call for Congress to pass legislation that will allow the FHA and government financiers Fannie Mae and Freddie Mac to purchase more loans.

Source: thetruthaboutmortgage.com

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Baltimore Mayor Sheila Dixon’s administration filed suit today in U.S. District Court alleging that Wells Fargo Bank engaged in predatory lending practices in black neighborhoods within the city.

According to a lawsuit, black neighborhoods in Baltimore were disproportionately affected by the subprime mortgage crisis, with most of the company’s loans that ended in foreclosure made in neighborhoods where the population is more than 80 percent black.

“When you have foreclosures, the property values drop, and you get less tax revenue. There’s fire and police costs that come from abandoned and boarded-up and vacant properties,” said John P. Relman, a Washington-based attorney who is representing the city in the lawsuit. “It leads to crime and drugs and school problems as the community is being destabilized.”

The lawsuit claims Wells Fargo used a practice known as “reverse redlining”, which instead of denying loans to a certain group or community, exploits that group with higher fees, rates, and penalties, an illegal practice under the federal Fair Housing Act.

For example, it claims that mortgages for homes worth $75,000 or less, most of which happened to be located in black neighborhoods, had inflated mortgage rates that were riddled with fees and surcharges.

“You could be equally well-qualified, but if you happen to buy a house that’s worth $75,000 or less, you’re going to pay more,” Relman said.

San Francisco-based Wells Fargo does not comment on pending litigation, but spokeswoman Debora Blume said in a statement that the bank did not consider race when originating loans.

“We do not tolerate illegal discrimination against, or unfair treatment of, any consumer,” Blume said. “Our loan pricing is based on credit risk. We are committed to serving all customers fairly – our continued growth depends on it.”

Wells Fargo has been one of the two largest mortgage providers in Baltimore since 2004, making 1,285 loans a year totaling more than $600 million from 2004 through 2006.

The lawsuit says more than 33,000 homes in Baltimore have been subjected to foreclosure filings since 2000, and Wells Fargo has more foreclosures than any other mortgage lender.

Source: thetruthaboutmortgage.com

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Credit counseling agencies across the nation are being inundated with scores of phone calls from struggling homeowners looking for answers to a growing problem.

“It’s not only the sheer volume of people needing help but the emotion,” said Mohammed Ibrahim, a counselor at the Neighborhood Housing Services of Staten Island in New York, in a statement. “Each person comes with a different story. Often they break down and cry.”

Ibrahim, who helps homeowners in Staten Island, New York avoid foreclosure, said the number of calls to his office surged last summer as the mortgage crisis took center stage.

Between October and December of last year, he took on 63 cases, compared with just 77 cases for the previous nine months and just a handful in 2006, with 2008 expected to be even busier.

Meanwhile, Scott Scredon, Director of Public Relations for Consumer Credit Counseling Service of Greater Atlanta, says his company plans to hire about 130 new staff members.

Scredon said that since the interest rate freeze plan was announced, CCCS has received such a huge swell in calls that it had to limit its services to customers who were delinquent on their mortgage payments, and refer those who were not to their own mortgage lenders.

The so-called HOPE NOW alliance has garnered a lot of attention from struggling homeowners since it was announced, but doesn’t seem to be helping at-risk borrowers.

“We’re getting so many calls about the government plan, but no real answers on how we are supposed to help them,” said Eileen Anderson, who runs two NeighborWorks counseling centers on suburban Long Island.

The volume of calls to her offices rose more than tenfold in 2007 compared to a year earlier, and since October more than half of those calls have been referrals from HOPE NOW, she said.

The Homeownership Preservation Foundation, the nonprofit group that runs the national mortgage counseling hotline as part of the HOPE NOW alliance, has taken 140,000 calls since it joined up in October, according to vice president Tracy Morgan.

Source: thetruthaboutmortgage.com