Is California
on fire? It sure seems that way, with over 1,000 individual fires! Check this
out:
http://maps.google.com/maps/ms?hl=en&ie=UTF8&msa=0&msid=110735790609633874400.00044f7bd13c461bb9ba2&ll=38.565348,-121.311035&spn=8.243972,14.0625&z=6&source=embed
OK, if house prices in many markets are continuing to
decline, and Consumer Confidence, based on a survey of 5,000 U.S. households,
fell to 50.4 in June (the 5th lowest reading ever) why aren’t
rates lower? Overnight Fed Funds rates are not directly correlated to mortgage
rates, but expect today’s statement from the Fed meeting to be little
changed from the one released after the April 29/30 meeting. Developments since
then have done relatively little to change the underlying economic picture of
weak growth and possible high inflation, and financial market stress. That is
the key: the threat of inflation. The other news out this morning - new orders
for long-lasting U.S.
manufactured goods – did little to move the market. They were unchanged
in May after two consecutive months of decline. The 10-yr stands at 4.13%
and mortgage prices are about the same as they were yesterday morning.
Fannie and Freddie guarantee payments made by servicers on
their securities, similar to GNMA, but they don't guaranty payments on the
underlying collateral. So if a servicer gets a series of checks that bounce
those checks are guaranteed, but not any of the future payments due on the
loan? The servicer either has to collect from the borrower (a payment plan
is usually the answer), or they have to foreclose, and get the money back from
the foreclosure sale. FNMA and FHLMC don't guarantee that the
actual loans will pay the servicers. Therefore, if the borrower is
simply delinquent, then the servicer is constantly advancing funds to the
investors that the borrower hasn't paid, hence the hesitation on lending to
high LTV, low FICO borrowers.
Here is the latest story on a subject that always rouses a
spirited debate: if one could pay off their mortgage, should they?
http://www.usnews.com/articles/business/retirement/2008/06/19/should-you-pay-off-your-mortgage-before-you-retire.html
Last Friday HUD sent out a letter to lenders (MORTGAGEE
LETTER 2008-17) reminding them of the existing FHA policy regarding the use of
non FHA-approved mortgage brokers when originating FHA-insured forward
mortgages. “FHA loan origination services must be performed by a
FHA-approved lender or FHA-approved mortgage broker (loan correspondent).
A FHA-approved loan correspondent may be compensated for the actual loan
origination services it performs either directly by the consumer or indirectly
by the FHA-approved lender without being in violation of either the Real Estate
Settlement Procedures Act (RESPA) statute and regulations or FHA regulations.
While FHA regulations permit a borrower to engage a broker who is not
FHA-approved to assist him/her in obtaining mortgage financing, the loan
origination services may not be performed by that broker and the FHA approved
mortgagee shall not compensate the broker for such services. FHA requires
that these services be performed by either an FHA-approved lender or loan
correspondent[1]. RESPA prohibits the payment of duplicative fees, and
the payment to the unapproved broker for duplicated services amounts to an
unearned fee in violation of section 8(b) of RESPA.
Speaking of FHA loans, down payment assistance programs are
being scrutinized again. Supporters of the down-payment
programs say they help the FHA fulfill its goal of assisting first-time home
buyers. But critics say the programs will burden the government agency, and
taxpayers, with bad loans. To critics, mortgages with down-payment assistance
are similar to no-money-down subprime loans, which have high default rates
since the borrowers have “no skin in the game”. The FHA
renewed a push to eliminate the programs this month, after warning that
above-average default rates for seller-assisted down-payment programs will
force the agency to request a government subsidy for the first time of over a
billion dollars to cover losses.
After Friday, Wells Fargo correspondent will no longer
accept loans originated using the following products: Non-conforming 40/30
balloon (40-year amortization term with 30-year balloon fixed rate),
Non-conforming 40/30 5/1 LIBOR balloon (5/1 LIBOR with 40-year amortization
term with 30-year balloon), Non-conforming LIBOR ARMs with six-month, 1/1 and
3/1 terms, and Conforming LIBOR ARMs with six-month and 1/1 terms.
The Wall Street Journal reported that the Illinois attorney general's office says it
has found enough evidence of wrongdoing that it plans to file a civil suit
against the mortgage lender and its chief executive, Angelo Mozilo. Illinois
alleges that the company engaged in "unfair and deceptive practices"
in the sale of mortgage loans, loosened its underwriting standards, structured
loans with "risky features" and engaged in "marketing and sales
techniques" that motivated employees and mortgage brokers to push loans
whether or not homeowners had the ability to repay them. Countrywide’s
actions (like most other lenders) were driven by its desire to boost market
share and to satisfy Wall Street's appetite for mortgage securities.
Supposedly taken from an actual court transcript:
ATTORNEY: Doctor, before you performed the autopsy, did you
check for a pulse?
WITNESS: No.
ATTORNEY: Did you check for blood pressure?
WITNESS: No.
ATTORNEY: Did you check for breathing?
WITNESS: No.
ATTORNEY: So, then it is possible that the patient was alive
when you began the autopsy?
WITNESS: No.
ATTORNEY: How can you be so sure, Doctor?
WITNESS: Because his brain was sitting on my desk in a jar.
ATTORNEY: I see, but could the patient have still been
alive, nevertheless?
WITNESS: Yes, it is possible that he
could have been alive and practicing law.
Rob
