Mortgage 101

Why the Mortgage Industry

2009-10-06T11:35:00.000-07:00

The mortgage industry is one where you literally have to learn from scratch... There is no easy remedy to learn this business. First you either have to spend several hundred dollars to learn from a textbook, or you have to get in and get your feet wet, while learning from your mistakes to get good. I suppose if you asked several of the best Brokers in the world, they would tell you that's how they learned! Lets be be honest thousands of people have a way to do it, but does it work? Just so you understand the mortgage industry is tough, the mortgage industry has one of the highest turnover rate. Plus the job is 100% commission, that means if you don't close a loan you don't get paid!

Now if you close 2 to 4 loans a month when you first get started that is good, although I have seen several people in the industry that don't close that many period. So why would they stay in the business? Hope, some people believe that they will close 1 or 2 this time. In reality they may close 1 but if you are only in the business to make 1 to 3 thousand dollars a month don't waste you time. If you want to make unlimited money(5 to 20,000) in this business then you have come to the right business.

I have closed over 150 loans in one year. Don't let me blow smoke, it was not easy to make make money at this job. To take things to a different level you may have to wait 1 month to get your first paycheck! Why you ask, because most mortgage company's pay every 2 weeks and if you loan has not closed by the deadline day you will have to wait 2 more weeks matters even more intense if you have 10 loans in you pipe line, maybe 3 or 4 will close.

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How the Housing Law Affects Reverse Mortgages

2008-08-19T21:06:00.000-07:00

The housing bill signed by President Bush on July 30 raises the amount seniors can borrow using federally backed reverse mortgages and lowers the cost of getting the cash. But aging experts say you should still be cautious before spending down your home equity.
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Video: Money Considerations
Here's how the new law affects reverse mortgages and what you still need to be wary of.
Instant cash—with strings. A reverse mortgage is a loan against your home if you're generally age 62 and over that doesn't have to be paid back as long as you live in that house. Tapping home equity to finance your golden years is growing in popularity, with 107,367 reverse-mortgage loans made in fiscal year 2007, up from 6,600 loans in 2000, but they still account for only about 1 percent of older households, according to the AARP. After you pay a variety of fees on the loan, you can get a lump sum, monthly payments, a credit line, or a combination of these options based on the value of your house. If the home is sold, the loan must be repaid with the proceeds, and any equity that remains after that is distributed to the borrower.
Know the limits. Most reverse mortgages are home equity conversion mortgages, which are backed by the Federal Housing Administration, so you'll still get your money even if the lender goes under. (The other two types are private loans and single-purpose reverse mortgages offered by some state and local government agencies and nonprofit organizations.) FHA limits the amount you can borrow with a HECM, which ranges from $200,160 to $362,790, depending on the county you live in. The new housing law, which will take approximately 60 to 90 days to implement, creates a single national loan limit of $417,000 that can increase to as much as $625,500 in high-cost areas.
Avoid fees. High cost is the reason 63 percent of reverse-mortgage shoppers ultimately decided against applying for the loan, according to a December 2007 AARP survey. And 69 percent of actual borrowers agreed that costs were high. The origination fees lenders can charge are currently capped at 2 percent of your home's value or the county lending limit, whichever is lower. The housing bill recently reduced the maximum fee to 2 percent on the initial $200,000 of the home's value and 1 percent on the balance thereafter, with a cap of $6,000. But some lenders charge less, so it can pay to shop around and negotiate on the fees charged. Also, bargain on closing costs, service fees, mortgage insurance premiums, and interest rates.
Get counseling. In order to qualify for a HECM, you must discuss the loan with a loan counselor employed by a nonprofit or public agency approved by the U.S. Department of Housing and Urban Development. "You should take the counselor very seriously and be very forthcoming with the counselor so that the counselor can help you do a thorough job of making sure that a reverse mortgage is really the answer for you," says Peter Bell, president of the National Reverse Mortgage Lenders Association, an organization that represents the reverse-mortgage industry. Barbara Stucki, director of home equity initiatives for the National Council on Aging, recommends spending an hour or longer discussing the loan. The counseling is free or has a minimal cost. You can find a local housing counseling agency by calling (800) 569-4287. The Financial Industry Regulatory Authority recommends verifying the independence of counselors recommended by your lender by asking whether they receive any funding from the lender or the mortgage industry.
Be wary of sales pitches. Nine percent of reverse-mortgage borrowers said their lenders offered them specific financial products like annuities and long-term-care insurance, which may be unwise investments depending on the purpose of the loan, the AARP survey found in late 2007. The new housing bill prohibits requiring the purchase of annuities and other financial products. But it never hurts to be cautious of any financial product someone is trying to sell you. "I think seniors still need to be careful that they are not talked into a loan that they don't really need," cautions Stucki. But if cash is a necessity, seniors should crunch the numbers on a traditional second mortgage and downsizing to cheaper housing alongside a reverse mortgage to parse the best deal.

Tips for Getting the Best Mortgage Rate

2008-08-12T20:10:00.001-07:00

As a home buyer, it only makes sense to try and obtain the lowest interest rate when applying for a mortgage. After all, that rate is a primary component of the mortgage payment, so it has a direct bearing on the amount of money you’ll pay each month.
But how do you get a low rate when applying for a home loan? This is the question many home buyers want to know. So in this article, I’ll explain three important concepts you should keep in mind when seeking the best rates from mortgage lenders.
Concept #1 - Your Credit Score Plays a Role
The first thing to realize is that the interest rate you are offered will be partly determined by your credit score and financial history. In other words, the best mortgage terms are usually reserved for those home buyers with the best credit scores.
What does this mean to you when buying a home and applying for a loan? It means that your credit score will often dictate the type of interest rates you are offered. So if you have a bad credit history, and your score illustrates this to the lender, then there’s little chance you’ll be getting the best interest rate. If this is the case, you should focus on improving your credit score before you go shopping for a mortgage online.
Concept #2 - The Mortgage Type Makes a Difference
The type of home loan you select also plays a role in determining the interest rate you receive. So it’s important for home buyers to understand this concept as well. For example, an adjustable rate mortgage (ARM) loan will generally come with a lower interest rate than a fixed-rate loan — but that is only for the first few years. Of course, the rate on an ARM loan will also adjust at some predetermined point in the future, and typically this adjustment means a higher interest rate! That’s another thing to keep in mind when mortgage shopping.
Concept #3 - You Must Compare Lenders on Key Factors
There is one last thing I want to touch on, and that is the need to shop around in order to get the most favorable rates from a lender. Shopping for a loan is just like shopping for anything else — you have to compare multiple lenders in order to find one that offers the best rates and terms on the loan.
Many buyers don’t realize that ten different lenders may offer you ten slightly different mortgages. The interest rate will vary, the terms will vary, the closings costs will vary … you get the idea. And these make a big difference in the amount of money you pay over the long haul. That is why it’s so important to compare lenders and to carefully review the information they present to you, ideally with a financial advisor of some kind (or at least someone who is mortgage-savvy).

Wachovia to close mortgage offices in 19 states

2008-08-12T10:54:00.000-07:00

As part of its plans to scale back its mortgage business, Wachovia Corp. is closing mortgage offices in 19 states where it has few or no retail branches.
The move will cause the elimination of 125 jobs. The reductions are part of 6,350 previously announced full-time cuts, which include 4,400 mortgage jobs to be slashed over the next 12 months.
Wachovia spokesman Don Vecchiarello says the company wants to focus on building fuller customer relationships in states where it has a branch presence. He says it wasn’t efficient for the bank to spend resources on states where it has no branches.
Charlotte-based Wachovia (NYSE:WB) is in the midst of an initative to trim $1.5 billion in annual expenses by the end of next year.
The company will continue to offer limited mortgage-loan offerings in Kansas, Illinois and Mississippi through the small number of branches it has in those states. But in those states and 16 others, the bank will no longer have mortgage salespeople or offices.
Wachovia will continue to offer a full range of mortgage products through its telephone, Internet and direct-mail channels in each of the 19 states.

Fannie Mae raising its servicing fees

2008-08-12T10:51:00.000-07:00

Fannie Mae is raising the fees it pays servicing companies to renegotiate loans, aiming to cut costs by averting more mortgage defaults, the largest U.S. home funding provider said on Monday.
The new incentive fees are for repayment or loss mitigation plans starting Monday, August 11. The fee change was announced on Fannie Mae's web site on Monday.
On Friday, Fannie Mae reported its fourth straight quarterly loss, citing rising credit losses on failing home loans for its worse-than-expected results.
"Incentive fees are only applicable to mortgage loans serviced under the special servicing option, in which Fannie Mae assumes the risk of loss from borrower default," the company said on its web site.
Fannie Mae said it will pay $700 for each successful modification completed on a conventional home loan, for example. The servicer also must stop charging the borrower $500 to cover administrative processing costs but can keep charging for out-of-pocket expenses for credit reports and other allowable documentation.
A spokeswoman was not immediately available on Monday to comment on the extent of the fee increases.
On July 31, Freddie Mac, the second largest U.S. home finance provider, boosted the incentives it pays mortgage servicers to help more borrowers renegotiate loans and curb rising delinquencies.

Another family evicted!

2008-08-12T10:49:00.001-07:00

A COUPLE who lost their home of 13 years after failing to keep up mortgage payments, are living in a shed on an allotment because, they say, only substandard accommodation is on offer from their local council.
Their six children are farmed out to relatives.
“The allotment is cleaner than half the houses they have sent us to. It’s disgusting... six kids are all separated and it’s not fair on them.”
The council say, “Given that she has been classified as intentionally homeless, social housing is not a realistic option. The only other option is to try to secure accommodation for the family in the private rented sector.”
That’s what another council says about a family of four, with another baby on the way, who are living in a car after repossession. The father is a postman and their downfall began when their mortgage payments almost doubled.
Both councils ignore the fact that good private landlords won’t want people with a bad financial record so only dumps are left.
With more than 100 homes being repossessed each day, the highest level for 12 years, are they all going to be classed as authors of their own misfortune? And can children ever be said to have rendered themselves “intentionally homeless”?
A total of 18,900 homes were repossessed in the first half of 2008 – a 48% increase since the same time last year. The number of people who are falling behind with their mortgage payments is also increasing.
Shelter’s chief says: “We know that behind these figures are thousands of families facing sleepless nights worrying about how to make their next mortgage payment, and many thousands more will be waking up to the frightening reality of repossession.”
The Legal Services Commission has announced that emergency legal schemes are to be set up so anyone in danger of eviction can get free legal advice. I’m glad to hear it because, frankly, there aren’t enough sheds to go round.
A step too far for the ladies of the WI?OH deary, deary me. What have the WI been up to? When they announced their intention to look into prostitution and try to improve things I applauded them. I still applaud the intention, but their sortie into the media, the WI Guide to Brothels, gave me some uncomfortable viewing. Two members, lovely ladies, visited Amsterdam, Nevada and New Zealand to see for themselves.
Seeing them in fluffy dressing gowns, lined up on display with the Nevada Buddy Ranch’s available talent, was too much, as was their stint in an Amsterdam window brothel.
The trouble was that perfectly nice and honest women had fallen for the blandishments of a television reporter.
Fortunately, the decency of the WI shone through and at times the programme was genuinely informative. So, top marks for bravery, ladies, but nul points for being streetwise. Keep up the crusade, though. It’s worthwhile.
You’ve made your bed, now lie in itTracey Emin rose to artistic fame by exhibiting her bed, complete with stained sheets, used condoms, fag ash, empty bottles and dirty panties.
Now she complains, “There is no place for my love to go,” and bewails the fact she doesn’t have a husband and children.
Doesn’t the silly mare realise that no man in his right senses would want to sleep with a woman who had a bed like that.

Help is on the way for troubled homeowners

2008-08-04T20:48:00.000-07:00

By RICHARD SIMON
Los Angeles Times
WASHINGTON Congress completed work Saturday on the government’s most sweeping response yet to the nation’s housing crisis, sending to President Bush a bill to help at least 400,000 homeowners avoid foreclosure.
The measure, regarded as the most significant housing legislation in decades, lets homeowners who cannot afford their payments refinance into more affordable government-backed loans rather than lose their homes.
The legislation also is intended to spur homebuying and prop up struggling mortgage giants Fannie Mae and Freddie Mac.
The Senate, in a rare weekend session, overwhelmingly approved the measure 72-13, a reflection of the election-year jitters on Capitol Hill over the troubled economy. Bush has said he will sign the bill, which the House approved last week 272-152.
“Today, Congress did more than send a bill to the president. We sent a message to American families that help is on the way,” said Sen. Christopher Dodd, a Connecticut Democrat and the Senate Banking Committee chairman. Dodd helped write the legislation.
“In addition to providing urgently needed relief to homeowners on the brink of losing their homes, this legislation will address our broader economic problems by helping to reform our housing sector and provide reassurances to our financial markets.”
Bush had withdrawn his veto threat last week over $3.9 billion in neighborhood grants. He contended that the money would benefit lenders who helped cause the mortgage meltdown, encouraging them to foreclose rather than work with borrowers.
“Because of the Democratic Congress’ delays and the need for action now, President Bush will sign this bill when he receives it, despite our concerns with some provisions, including nearly $4 billion to help lenders, not the homeowners this legislation is intended to serve,” said Tony Fratto, deputy White House press secretary.
Voting for the legislation were 43 Democrats, 27 Republicans and the Senate’s two independents. Republicans cast all the votes against.
Sens. Pat Roberts and Sam Brownback, both Kansas Republicans, voted for the bill, as did Sen. Claire McCaskill, a Missouri Democrat.
Sen. Kit Bond, a Missouri Republican who expressed objections to the measure, didn’t vote on it.
Presumptive presidential nominees Sen. John McCain of Arizona and Sen. Barack Obama of Illinois expressed support for the measure but missed the vote.
Democrats who control Congress are looking at other proposals aimed at turning around the economy, including an economic stimulus package that would provide $50 billion or more for bridge and road projects, and home-heating assistance.
The bill passed Saturday, the American Housing Rescue and Foreclosure Prevention Act, contains a key provision that would allow the Federal Housing Administration to guarantee as much as $300 billion in lower-cost mortgages — provided that lenders accept significant losses.
The bill would give the Treasury Department authority temporarily to increase its lending to Fannie Mae and Freddie Mac and buy their stock, a provision that Treasury Secretary Henry Paulson has called crucial to bolstering confidence in the companies and stabilizing housing finance markets.
The Congressional Budget Office recently estimated that there was a “probably better than 50 percent” chance that the federal bailout would not be needed. But if it is, it could cost taxpayers $25 billion, budget analysts said.
The measure includes about $15 billion in tax breaks, including a tax credit that is in effect an interest-free loan of as much as $7,500 for first-time homebuyers.

How to Stop the Foreclosures

2008-07-31T06:46:00.001-07:00

A Review of the Policy Proposals
By Fred Moseley
This article is from the July/August 2008 issue of Dollars & Sense: The Magazine of Economic Justice available at http://www.dollarsandsense.org/archives/2008/0708moseley.html
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Over one million U.S. homeowners have already lost their homes due to foreclosures since the mortgage crisis began last summer. Another one million homeowners are 90 days past due on their mortgages (foreclosure notices usually go out after 90 days) and two million more are 30 days past due, so three million more households may face foreclosure in the months ahead. If current policies do not change, it is estimated that up to five million homeowners would lose their homes due to foreclosure over the next few years. Five million is roughly 10% of the total number of homes with mortgages. This is clearly the worst housing crisis since the Great Depression, and will wreack havoc in the lives of millions of families unless something is done. A high foreclosure rate also has a deteriorating effect on surrounding neighborhoods, further depressing housing prices and quality of life.
Many of those facing foreclosure are low- to middle-income homeowners who were enticed into buying houses by fraudulent mortgage companies and low “teaser” interest rates that are adjusted up (“reset”) after two to three years. As long as housing prices were increasing, homeowners could always refinance their mortgages and get a new teaser rate for another few years. However, now that house prices are falling, these homeowners can no longer refinance, and many of them cannot afford to pay the higher interest rates when they are reset. Falling prices also mean that many of these homeowners owe more on their mortgage than the current value of their house (i.e. they have “negative equity” in their house). The recession is also resulting in declining employment and income, meaning even more homeowners are struggling to make their monthly mortgage payments. The further housing prices decline, and the worse the recession is, the worse the foreclosures will be, in a vicious cycle.
Clearly, the federal government must take some positive actions to stop the spreading foreclosures, especially for low- and middle-income families, who would suffer the most. But what should those actions be? At a minimum, policies should apply only to owner-occupied homes, and not to “investor” or “speculative” homeowners (those who buy houses in order to sell them later at a higher price). But beyond this, various policies have been proposed, and not all of them would truly help homeowners at risk.
Workouts, not bailouts
There are two main types of anti-foreclosure policies: bailouts and workouts. In bailouts, the government gives aid either to lenders (e.g. by purchasing bad mortgages at their full original value) or to homeowners (e.g. by giving them loans so they can repay their lenders). Of course, aid to homeowners indirectly bails out the lenders as well. In workouts, the terms of the original mortgage contract are modified, either by reducing the rate of interest or reducing the principal owed, or both, in order to make the loan more affordable. So far, most of the proposals to deal with the foreclosure crisis have been more workouts than bailouts, although there are elements of bailout in some of them as well. The lenders made fortunes on these risky mortgages during the housing bubble, so if someone has to suffer losses now, it should be the lenders. There should be no bailouts of the lenders in any way.
Lender-initiated workouts
There are two types of workouts, depending on whether they are initiated by the lenders or the homeowners. Most of the policies proposed and enacted so far have been initiated by the lenders, i.e., they are voluntary on the part of the lenders. The main policy of the Bush administration is called “Hope Now,” in which the lenders voluntarily postpone the resets of interest rates that are scheduled to take place in the months ahead, and leave the principal of the loan unchanged (or sometimes the foregone interest is added to the principal). The Bush administration claims that over 500,000 mortgages have been modified in this way in recent months, and estimates that another 500,000 mortgages will be modified in the months ahead. However, critics argue that these numbers are exaggerated and that many of these modifications have been simply allowing homeowners more time to make the same payments. It is likely that in the months ahead, many of these homeowners still will not be able to make their payments, and many of them will be foreclosed on, which has led some critics to call this the “No Hope” plan. The only lasting solution is to reduce the mortgage principal owed to more affordable levels. The main problem now is not the reset of interest rates, but rather declining housing prices, which has the effect that more and more homeowners now owe more money on their mortgage than their house is worth.
The House of Representatives has recently passed a bill (H.R. 5830, introduced by Rep. Barney Frank, D-Mass.) that is primarily a workout, but also is potentially part bailout, and is also lender-initiated The bill would replace existing mortgages with new mortgages that would have a value of 85% of the current market value of the houses, and these refinanced mortgages would be guaranteed by the Federal Housing Administration (how this “current market value” is to be determined is a crucial detail which so far has not been specified). This 15% “write-down” of the principal, plus the prior 10% decline of prices means that the total write-down for lenders will be approximately 25%. For example, a homeowner with an original mortgage of $300,000 would have the principal reduced to $225,000, and the monthly payments reduced by a similar proportion. The bill appropriates $300 billion for this purpose, which it estimates could help up to 1.5 million homeowners. A similar bill appears likely to pass in the Senate (introduced by Christopher Dodd, D-Conn.). President Bush initially threatened a veto, but has now said he will sign the bill. In any case, it does not appear likely that many lenders will “volunteer” for this writedown.
Another problem with this bill is that housing prices in some areas are likely to fall more than an additional 15%. Mortgages on these houses are likely to be the ones that the lenders will voluntarily refinance, and any further losses would have be borne by the government (i.e., by the taxpayers). This would be a partial bailout of the lenders.
Homeowner-initiated workouts
Another bill has been introduced into the House (H.R. 3609) and Senate (S. 26360) that would provide workouts that would be initiated by the homeowners and would be mandatory for the lenders. These bills would allow bankruptcy judges to modify mortgage contracts (by reducing the principal and/or by reducing the interest rate) in order to make monthly payments more affordable for homeowners. It used to be possible for bankruptcy judges to modify mortgage contracts, but this was explicitly prohibited in a 1993 bankruptcy law. One can see the hand of the mortgage bankers in the writing of that provision. Modifications on other types of loans are allowed: for investment properties, for vacation homes, and even for boats, but no modifications allowed for primary residences! So all that needs to be done is to delete this one phrase in the law which prohibits modifications for primary residences. A significant advantage of this plan is that it would not cost taxpayers anything.
One problem with this bill is that homeowners would have to declare bankruptcy, which is expensive (about $2000) and would hurt their credit rating in the future. But at least they would still have their home, with an affordable mortgage, and thus would have the chance to restore their credit rating.
This bill is supported by the AFL-CIO, SEIU, NAACP, ACORN, the Center for Responsible Lending, and many other consumer protection groups. It is of course strongly opposed by the Mortgage Bankers Association, and does not seem to have enough support for passage at the present time.
Another homeowner-initiated plan has been proposed by Dean Baker of the Center for Economic and Policy Research. According to this “own-to-rent” plan, homeowners faced with foreclosure would have the option to stay in their houses as tenants, rather than as owners, and would pay the prevailing rental rates, which are generally much lower than mortgage payments. Eligibility for the plan would be capped at the median house price in a metropolitan area and thus would not benefit high-income homeowners. This plan also would not cost taxpayers anything. A bill along these lines was recently introduced in the House (H.R. 6116).
Looking ahead
The presidential candidates have had disappointingly little to say about the foreclosure crisis and anti-foreclosure policies. Senator Barack Obama has expressed support for the Frank-Dodd FHA bill, but not yet for the bankruptcy modification bill. In good Republican tradition, McCain advocates “no government intervention.” But the foreclosure crisis is likely to worsen in the coming months, and the public may well demand more policies to address this growing problem. The homeowner-initiated policies are preferable because they provide the most protection for homeowners against foreclosure. Both of these options should be available to homeowners facing foreclosure, especially for those with low or moderate incomes.
The guiding principles of government anti-foreclosure policies should be: (1) homeowners should be allowed to stay in their homes; and (2) there should be no bailouts for the lenders. And the long-run objective of government housing policies should be: decent affordable housing for all.
Fred Moseley is a professor of economics at Mount Holyoke College. His publications include The Falling Rate of Profit in the Postwar United States Economy (1992) and “The Rate of Profit and the Future of Capitalism,” Review of Radical Political Economics, 1997.
Resources: For more information about H.R. 3609 and S. 26360, visit the website of the Center for Responsible Lending. For more information about Dean Baker’s “own-to-rent” plan (introduced in the House as H.R. 6116), visit the website of the Center for Economic and Policy Research

Mortgage bailout nears final passage

2008-07-31T06:41:00.000-07:00

DeMint
A landmark housing bill crafted to aid hundreds of thousands homeowners facing foreclosure and to buttress the mortgage market cleared a final procedural hurdle Friday and is expected to get final congressional approval Saturday.
"It addresses the root of the broader economic crisis - record-high foreclosures - by helping Americans keep their homes and keep their home equity," said Senate Majority Leader Harry Reid, Nevada Democrat.
The measure, which President Bush backed Wednesday when dropping his veto threat, includes a $300 billion aid package to allow homeowners trapped in subprime loans they can't afford to refinance their mortgage at lower rates. The new loans, which would help an estimated 400,000 homeowners keep their properties, would be backed by the government.
The legislation gives the Treasury Department power to extend a line of credit to Fannie Mae and Freddie Mac - government-sponsored companies that either guarantee or own almost half the nation's mortgages.
Many Capitol Hill Republicans were frustrated with the president for supporting the Democratic-crafted bill, which they considered a bailout for unscrupulous lenders at taxpayers expense. Thirteen Republican senators defied Mr. Bush and voted against the bill Friday. In the House two days earlier, 149 Republicans - three-quarters of the chamber's GOP membership - also voted no on the bill, which passed by a vote of 272-152.
Senate Democratic leaders had hoped to finish the bill Friday, but Sen. Jim DeMint, South Carolina Republican, held up a final vote until Saturday, demanding that Democrats allow a vote on barring Fannie Mae and Freddie Mac from lobbying and making political contributions.
Mr. DeMint added that the bill was in danger of "crossing that line I think between freedom and socialism, where we actual get so involved in the private sector."
"This is a huge, unprecedented bill - putting on the line $300 billion that can be used for mortgage companies to unload bad loans onto the taxpayers, making the federal government the owners of mortgages in real estate for the first time," he said.
The Senate voted 80-13 Friday to allow a final vote Saturday. The House easily passed the measure Wednesday, hours after Mr. Bush withdrew a threatened veto and promised to sign the bill if it reached his desk.
Mr. Bush used the veto threat to ensure Fannie Mae and Freddie Mac had a Treasury credit lifeline, saying it was vital for bolstering investor confidence in the two mortgage giants.
Fannie Mae and Freddie Mac stock prices have plummeted in recent weeks over worries about how they will cope with billions of dollars of losses on mortgage loans.
The package calls for the establishment of an independent regulator to oversee Fannie Mae and Freddie Mac, provides first-time home buyers with $7,500 in tax credits, overhauls the Federal Housing Administration and allows lenders who agree to take a substantial loss on their mortgages to reclaim at least some money and avoid a costly foreclosure.
Mr. Bush also opposed the legislation because it included a $3.9 billion provision to award local government grants to buy and refurbish foreclosed properties, a program he said was unnecessary and too expensive.
On Friday, senators punted on the ongoing energy debate, as a measure aimed at curbing excessive oil market speculation died in the chamber after it failed a procedural vote that would have moved it forward.
The bill failed to get the 60 votes needed to overcome a filibuster. The 50-43 vote was largely along party lines, with Maine Sens. Susan Collins and Olympia J. Snowe the only two Republicans to support the bill.
No Democrats supported the bill, although Mr. Reid switched his vote to "no" on a procedural move that will allow his party to reintroduce the measure in the future.
The legislation was designed to rein in excessive speculation in the oil futures market, which has been blamed as contributing to the skyrocketing gasoline price increases. The bill would have required traders to put up more collateral in the energy futures markets, and called for federal regulation of traders who are based in the United States but use foreign trade platforms.
But Republican opponents disputed Democratic claims the measure would reduce the price of gasoline at the pump, and chastised the majority party for introducing an energy bill that would produce no new fuel sources.
"The American people have been telling us for months that the house is on fire, and the Democrats just showed up at the scene with a squirt gun," said Senate Minority Leader Mitch McConnell, Kentucky Republican. "Americans are insisting we do more. They want us to do something to cut the price of gas and lessen our dependence on Middle East oil."
House Democratic leaders have said they may introduce their own anti-speculation bill next week before Congress recesses for its annual month-long August break.

Regulators Seize Mortgage Lender

2008-07-19T15:02:00.000-07:00

By LOUISE STORY
Published: July 12, 2008
Federal regulators seized IndyMac Bancorp on Friday evening, marking one of the largest bank failures in American history.

The bank, once part of the Countrywide Financial Corporation, is the first major bank to shut its doors since the mortgage crisis erupted more than a year ago. (IndyMac is not related to Fannie Mae and Freddie Mac, the big mortgage finance companies that alarmed the stock market this week.)
The closure followed a frenzied week during which IndyMac’s executives tried to bolster the ailing bank. IndyMac, based in Pasadena, Calif., stopped making new loans and announced layoffs of more than half of its 7,200 workers. But IndyMac’s customers, afraid their savings might disappear, stampeded tellers and demanded their money.
Most of IndyMac’s deposits are guaranteed by the Federal Deposit Insurance Corporation, which will operate the bank and try to sell it.
The run on the bank came after a critical letter about the bank from Senator Charles E. Schumer, Democrat of New York. Federal regulators said on Friday that Mr. Schumer’s letter had prompted the collapse by causing the run and scaring away potential acquirers.
“The senator made comments in his letter questioning the viability of the institution,” John M. Reich, director of the Office of Thrift Supervision, said in a phone call with reporters. “When a member of the United States Senate makes such a statement, it frightens depositors.”
In the days after Mr. Schumer’s letter was released on June 26, IndyMac customers withdrew an average of $100 million a day from the bank, or a total of $1.3 billion, the government said. Before Mr. Schumer’s letter, the bank had been receiving net inflows of money from depositors, Mr. Reich said.
Mr. Schumer, who has been critical of bank regulators for months, released a statement criticizing Mr. Reich’s agency.
“IndyMac’s troubles, like Countrywide’s were caused by practices that began and persisted over the last several years,” he said. “If O.T.S. had done its job as regulator and not let IndyMac’s poor and loose lending practices continue, we wouldn’t be where we are today.”
For all the write-downs and bad news on Wall Street over the last year, only five local and regional banks have shut their doors. The handful that have failed have been a fraction of the size of IndyMac. IndyMac held $32 billion in assets as of late March, according to the government release.
“It’s the biggest failure in 24 years,” said Chip MacDonald, a banking lawyer at Jones Day in Atlanta. “You haven’t had a lot of failures of that size, yet.”
It has been 15 years since any bank larger than $10 billion in assets collapsed. The largest bank failure on record was in 1984 when Continental Illinois National Bank and Trust in Chicago hit trouble, presaging the savings and loan crisis.
IndyMac ran into trouble late last year when it was not able to sell off a chunk of its Alt-A mortgage loans, which go to homeowners with credit that is better than the sub-prime category. IndyMac was being shopped to potential investors this summer, but their interest disappeared after Mr. Schumer’s comments, said Timothy T. Ward, deputy director of examinations, supervision and consumer protection at the O.T.S.
William Isaac, chairman of the F.D.I.C. in the early 1980s, cautioned against panic. Bank failures so far pale against the 3,000 bank failures in the 1980s, he said.
Elizabeth Sullivan, an IndyMac customer in the Pasadena area, said she almost withdrew her money after hearing about Mr. Schumer’s letter two weeks ago. Once she felt assured that the F.D.I.C. would insure her money, she decided against it, in part out of loyalty to a teller she likes at her local branch and because she felt a public duty not to contribute to “mass panic.”
“Now I wish I had withdrawn it,” she said. “That was in my gut.”

Fannie & Freddie rebounded after melt down

2008-07-19T06:12:00.000-07:00

The vast government-backed lenders, which have their origins in Roosevelt's New Deal, have more than 40 per cent of the outstanding mortgages in America on their books, and there have been increasing concerns about their financial health.
On Friday, after rumours emerged that Treasury Secretary Hank Paulson was considering a bailout, the shares of both plummeted, dragging down stock markets on both sides of the Atlantic.

The anxiety over Fannie Mae and Freddie Mac, crucial to a recovery of the battered housing market and the economy as a whole, reached a fever pitch on Friday and took shares of the companies and the broader markets on a wild ride. The distress is alarming for two reasons. First, it demonstrates that as house prices have continued to decline, mortgage defaults have spread well beyond the sub-prime sector; secondly, as a slew of other lenders have shut up shop, government-backed Fannie and Freddie have been crucial in preventing the supply of mortgages from grinding to a complete halt.'They've played a key role in keeping the housing market afloat, filling the vacuum created by the collapse of the private securitisation market, which has all but disappeared,' says Richard Iley, US economist at BNP Paribas. 'The concern is, if they continue to pump cash into the market, it will increasingly undermine their financial health and leave them requiring more capital, which is probably getting harder and harder to acquire.'
The wild day capped a brutal week for the shares of the two companies, as investors fled the two giants on worries they would need a bailout that would wipeout the value of their stock.
An early selloff was fanned by speculation of a looming government bailout. The stocks recovered on assurances by a leading senator that no rescue is needed and a Reuters report that said the Federal Reserve is opening up its discount window to Fannie and Freddie.
But after the market closed, Federal Reserve spokeswoman Michelle Smith told CNN that no discussions with Fannie or Freddie about access to the discount window have taken place.
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Immediately after the markets opened Friday, shares of Fannie (FNM, Fortune 500) and Freddie (FRE, Fortune 500) fell more than 47% from their already battered closing price the day before.
But the stocks made up much of their earlier losses. Fannie finished the day down 22% while Freddie's stock closed with a 3% loss.
Friday's selloff left both shares down just over 45% for the week and about 75% for so far this year.
Still, analysts say there is little doubt that the federal government would step in to rescue Fannie and Freddie should rising losses and plunging stock prices leave them without the capital they needed to continue to be the primary source of mortgage funding in the nation.
Fannie and Freddie hold or back $5 trillion between them, or about half the mortgage debt in the country.
They play a central role in the U.S. housing market, providing a crucial source of funding for banks and other home lenders, especially since a credit market crisis last summer left them the only major players in packaging pools of mortgage loans into securities for sale to investors.
If they were unable to do so, it would significantly raise the cost and restrict the availability of mortgage loans, causing significantly more problems for already battered housing prices and sales. That in turn would be another significant problem for the overall U.S. economy, as well as global credit markets.
Trying to restore a sense of calm
The problems for Freddie and Fannie weighed on broader markets, causing a sell-off in U.S. stocks, especially hitting major banks, Wall Street firms and home builders. At one point during the day the Dow fell below the 11,000 mark for the first time in nearly two years.
Fannie and Freddie both said in statements issued late Friday that they have the adequate capital they need to operate and to meet targets required by regulators.
"In fact, we have more core capital, and a higher surplus over our regulatory requirement, than at any time in this company's history," said Fannie's statement.
Freddie's statement said speculation in media reports about a government takeover of the firms through a process known as conservatorship was not accurate.
"Freddie Mac is not on the threshold of conservatorship because we are adequately capitalized," said the statement. "The preliminary indications of our expected financial performance for the second quarter, while reflecting the challenges that face the industry, do not point to an immediate need to raise additional capital."
Others also tried to reassure Wall Street that Fannie and Freddie were not in immediate danger of collapse.
In fact, shares of both companies started their modest rebound shortly after 2 p.m. when Sen. Christopher Dodd, D-Conn., the chairman of the Senate Banking Committee, defended the strength of both firms.
Dodd said his discussions with Federal Reserve Chairman Ben Bernanke, Treasury Secretary Henry Paulson, the regulators who oversee the firms and the two companies' CEOs convinced him they have more than adequate capital and that there was no need to even discuss failure or a bailout.
He also vowed quick passage of a long-debated housing bill to give greater oversight of the two companies. The bill passed the Senate Friday night and is expected to be taken up by the house next week.
"There is a sort of a panic going on," he said. "The facts don't warrant that reaction in my view. Fannie Mae and Freddie Mac were never bottom feeders in the residential mortgage markets. People ought to feel confident about them."
Talk about a bailout
The New York Times reported Friday that senior Bush administration officials are considering a plan to have the government take over one or both of the companies if their problems worsen.
But Paulson said Friday that the government's primary focus is making sure that Fannie and Freddie remain "in their current form." On Saturday, The Wall Street Journal reported that Paulson is adamant that a rescue of either company not benefit shareholders - for fear that a bailout would inure investors to risk.
Even before the latest report on a possible rescue plan, investors fled the two stocks this week due to speculation about their future. The drop in their shares raised questions about how difficult and expensive it will be for them to raise needed capital in the future, which fueled further losses in their stock prices.
"Fannie Mae and Freddie Mac have lost investor confidence evidenced by the rapid brutal sell-off in their stocks, which could dramatically hinder their ability to raise any additional capital going forward," wrote Richard Hofmann of research firm CreditSights in a note Friday.
Hoffmann added that the firms' ability to function normally "remain at the core of government efforts to stabilize the mortgage markets."
A number of scenarios were being discussed by bankers and analysts about what the government may do to deal with the crisis of confidence facing the firms.
Jaret Seiberg, a financial services analyst for the Stanford Group, a Washington research firm, said Thursday that the Federal Reserve could purchase some of Freddie's and Fannie's debt or mortgage-backed securities. He also said the Treasury Department could make billions of dollars in loans to the companies or even buy the firm's stock.
"Government officials are always planning for worst-case scenarios and our note is intended to highlight some options that may be available to policymakers," he wrote. "We suspect hybrid versions of these plans also are possible."
Under current law, the Office of Federal Housing Enterprise Oversight (OFHEO), the regulator of Fannie and Freddie, could take control of the firms if their capital falls too far below required levels. It is unclear how the firms would operate in that situation, known as a conservatorship.
OFHEO Director James Lockhart issued a statement late Thursday saying that his agency was closely monitoring the firms' credit and capital positions. But he pointed out that they had already raised $20 billion in capital and that they adequately capitalized, holding funds well in excess of his agency's requirements.
Investor panic
Still, investors were worried that continued problems in the housing market would cause more than the $12.7 billion losses the two firms have lost between them since last July. The decline in their stock value makes raising additional capital to cover those future losses that much more expensive and difficult.
"Our primary concern about Freddie and Fannie is that credit losses are likely to be worse than the management's current judgment, which will further pressure the capital base, and we remain cautious until we are better able to quantify these risks," wrote UBS analyst Eric Wasserstrom in a note Thursday.
Those concerns prompted him to raise his estimated loss for Freddie and to cut his price target for the stock, although, he retained his neutral rating on both firms, rather than urging clients to sell their holdings.
But the biggest worry Fannie and Freddie shareholders faced Friday was what would happen if the government did have to step into rescue them. Certainly, the big selloff earlier in the day reflected some investors' fears that shares of Fannie and Freddie could become worthless in a bailout scenario.

Fannie and Freddie go broke

2008-07-17T19:22:00.000-07:00

The truth about the duo threatening US capitalism

Fannie Mae and Freddie Mac sound like a popular singing duo or the latest craze in children's dolls. Until a few days ago, even most Americans hadn't heard of them. Now they threaten, if you believe some accounts, to bring down American capitalism. It's not quite as good (oh, all right, bad) as that, but they can certainly inflict further damage to the US economy and housing market, to say nothing of the beleaguered dollar.
Since they are government-sponsored enterprises (known as GSEs) with a mission, as Fannie's website puts it, "to help those who house America", you may be surprised to learn they exist at all. Isn't this, er, what you'd expect from socialist countries or at least from the despised European social market? And since they still provide funds for the housing market when nearly every other source of money has dried up, shouldn't Britain copy Fannie and Freddie? Alas, no. They are textbook examples of the corruption of the US public realm by the mores of the private sector.
Fannie - the Federal National Mortgage Association - was once a perfectly decent public institution, set up during Franklin Roosevelt's New Deal to provide liquidity for the housing market when millions risked losing their homes. It didn't provide mortgages directly but bought or guaranteed them, so that banks had more money to lend out. It did much to lift America out of Depression.
In 1968, it was privatised by a Democratic administration, which didn't subscribe to free-market dogma but wanted the debts off the books. Two years later, Freddie - the Federal Home Loan Mortgage Corporation - was set up to provide competition. Both are shareholder-owned companies, but their GSE status carries privileges in return for minimal regulation. They don't pay taxes; they can borrow from the US Treasury; they don't have to keep as much cash in hand as conventional banks. Though all the debt they issue comes with the disclaimer "not guaranteed by the United States", everyone assumed that, if necessary, the government would bail them out (they were right). That's why Fannie and Freddie could borrow cheaply. They now control half the US secondary mortgage market.
In recent years particularly, they have behaved as badly as any other pillar of American capitalism. Their directors pay themselves enormous salaries and bonuses, sometimes on the basis of false earnings figures. They have been investigated for dodgy accounting and for making illegal campaign contributions, mainly to members of congressional committees that are supposed to oversee them. Worst of all, they hire superannuated politicians and presidential favourites who line their pockets with stock options. Fannie's recent hirings have included Franklin Raines, Bill Clinton's former budget director, and Robert Zoellick, an official in both Bush administrations and now head of the World Bank. Fannie and Freddie are straightforward examples of crony capitalism.
They can't be blamed directly for the sub-prime crisis. One of the few laws that is rigorously applied to them requires that they buy only mortgages that involve substantial deposits and documented incomes.
Nor can they buy loans of more than $729,000 - a figure that was raised from $417,000 in this year's budget stimulus package. But they virtually invented the opaque financial instruments - mortgage-backed securities - that created the housing bubble and made sub-prime possible. Now they are hit by the bubble's deflation because even "good" loans are threatened by falling house values and rising unemployment.
During the bubble, Fannie and Freddie prospered, making fat profits for shareholders and executives. Only now things have gone wrong does socialism come into play. The US government will seek approval from Congress to lend extra funds and buy shares in the two companies. It may end up nationalising them - though it will be called "conservatorship" - increasing the US national debt by a scarcely credible 50 per cent.
Fannie and Freddie have a half-sister that nobody talks about: she's Ginnie Mae (Government National Mortgage Association). She is wholly government-owned and provides guarantees for housing loans issued by official bodies to low-income buyers. There is a case for Britain adopting that model, possibly with a wider brief to bring some stability to the perpetually volatile housing market. But there's no case for Fannie and Freddie. They are devices that allow the government to give hidden subsidies (probably over $10bn a year) to middle-class housebuyers and private shareholders. They are a warning of what happens when you develop public-private hybrids while leaving accountability and regulatory responsibility hanging in the air. Next time you hear a British politician proposing an "innovatory" solution to something, involving, as it usually does, mixing private and public, think of that.

Fannie & Freddie rebounded after melt down

2008-07-14T20:01:00.000-07:00

Shares in Fannie Mae and Freddie Mac surged initially today after a near-meltdown last week, boosted by a weekend plan offering a lifeline of fresh credit from the US Federal Reserve and Treasury.
Freddie Mac's shares shot up 17.6% and Fannie Mae's 24.9% at the opening of Wall Street trade following a plunge last week in the face of widening fears about the solvency of the mortgage finance titans. Both share prices later settled back to gains of around 2%.
A bold plan announced yesterday gives the struggling giants that underpin trillions of dollars in home loans access to central bank lending facilities and a temporary increase, pending congressional approval, of their lines of credit from Treasury.
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A Fed statement said its Board of Governors had granted the Federal Reserve Bank of New York authority to lend to Fannie Mae and Freddie Mac 'should such lending prove necessary.'
The loans would be at the primary credit rate offered to investment firms and would be backed by US government and federal agency securities.
Shares in the Federal National Mortgage Association, know as Fannie Mae, and its partner company, Freddy Mac, had fallen heavily over worries about their financial viability.
The US Treasury Secretary, Henry Paulson, announced the measures last night in a bid to halt one of the gravest threats ever to the US financial system. The two federal mortgage agencies underpin some $5.3 trillion of mortgage debt, or almost half of the US mortgage market.
They convert mortgages sold by banks into bonds which are underpinned by what is considered the implicit guarantee of the US Government. Concern that some of that debt will never be repaid has driven down the share price of the two institutions by over 70% this year.
'Their continued strength is important to maintaining confidence and stability in our financial system and our financial markets,' US Treasury Secretary Henry Paulson said in a statement that he read on the steps of the Treasury building last night.
'Therefore, we must take steps to address the current situation as we move to a stronger regulatory structure,' he said.
Unveiling the emergency measures to calm markets roiled by the country's prolonged housing crisis, the Fed said Fannie and Freddie could have access to its emergency cash, echoing a move to support investment banks after the Fed organised a takeover of ailing investment bank Bear Stearns in March.
The Treasury separately said it would temporarily raise its line of credit to the two mortgage financiers, as well as purchase equity in them, a step never taken before, if needed.
Both companies said they were adequately capitalised, but welcomed the measures and said they would help confidence.
Officials are desperate to calm nerves after US bank regulators on Friday seized mortgage lender IndyMac Bancorp in the third-largest bank failure in US history.
Housing woes have forced the Fed to slash benchmark interest rates since September and open its discount window to investment banks for the first time since the Great Depression some 80 years ago.
The two companies play a vital role in US housing markets, which already are experiencing their deepest downturn since the Great Depression, and Treasury and the Fed are on the spot to make sure they do not put a sorely stressed financial system in worse shape than it is already in.
Many fear that were they to fail it would unhinge already battered world financial markets and inflict a deep recession in the US that would chill growth everywhere.

The 'Mortgage Meltdown'

2008-07-01T06:35:00.000-07:00

How the mortgage industry stole black America's hard-won wealth.
Research support for this article was provided by the Investigative Fund of The Nation Institute.
George Mitchell's wife, Lillian, took her last breath in the house she loved, on New Year's Day 2006. "Right there in that spot," says George, 77, nodding to the far end of his worn, floral-print couch. "I think the last words she spoke was my name."
"Yup," confirms his youngest daughter, Chandra Chavis. "I was trying to perform mouth-to-mouth resuscitation at the time." She points out the living room window to the small, sloping front yard and drive. "There was no address on the house, so I had to stop doing that to get the ambulance to come in." But Lillian's heart had seized, and Chandra knows there's not much she could have done anyway. She figures if even the trauma team at Atlanta's century-old public hospital couldn't revive her mom, she must have been long gone. "Nobody can bring you back if the Lord calls you," concludes an older daughter, Gwen Russell.
It was Lillian's tenacity that led the Mitchell family to Atlanta's Westwood neighborhood, in 1968. "She was determined," Chandra explains, "not to have her children in an apartment -- I know the story; I've heard it a million times -- so she found somebody, a real estate agent, and they came out and they looked in this neighborhood. I don't know what brought them to this part of town, 'cause at the time they were living in Dixon Hills" -- then an up-and-coming black neighborhood -- "but she decided she wanted a house, and this is where she found it."
"All I did was sign the paper," says George with a shrug.
That made the Mitchells one of the first African-American families to move into Westwood. Atlanta has long been known as the "black Mecca," a place where African-Americans have been able to claw up the socioeconomic ladder and plunge into America's consumer culture. Nowhere is that striving more visible than in the massive subdivisions of large, new homes that Atlanta's black bourgeoisie have erected, reaching far into the suburbs. But the process began generations ago in a cluster of inside-the-beltway neighborhoods wedged into the city's southwestern corner, including Westwood. Today that area is reeling, having been one of the nation's communities hardest hit by the one-two punch of subprime lending and home foreclosures. The Mitchells have not been spared. Like hundreds of thousands of Americans, they are scrambling to keep the house Lillian found for them.
Nearly 18,000 homes faced foreclosure in the Atlanta area during the first quarter of 2008, an almost 40 percent jump from the first quarter of 2007. In Fulton County, which encompasses most of the city's core and is heavily African-American, one in 122 homes was in foreclosure in the first week of April. A digest of Atlanta's March 2008 "foreclosure starts" was as thick as the phone book, and the Mitchells' 30310 ZIP code topped the list.
The area boasts an old stock of quaint, midcentury houses painted in bright yellows and crisp blues, accented with quirky touches that now feel more haunting than homey. On block after block, as many homes sit vacant or bank-owned as not. Boarded-up windows lurk behind white-columned front porches, and the yards are slowly going to weeds and trash. On one block, eleven boarded-up houses line the street, making the area look like it's been hit by a natural disaster.
But the disaster is depressingly man-made. And this neighborhood reveals a deeply troubling dimension of it, one that will echo long past the recovery everyone hopes will soon come: for black America, the "mortgage meltdown" looks less like a market hiccup than a massive strip mining of hard-won wealth, a devastating loss that will betray the promise of class mobility for tens of thousands of black families.
As the mortgage crisis unfolded, observers of all political stripes repeated a boilerplate line: the "affordability products" that have flooded the lending market in recent years -- from subprime to interest-only loans -- have done more good than bad by fueling a surge in black and Latino homeownership. But while minority homeownership may have grown in the short term, the long-term outlook promises quite the opposite, as southwest Atlanta painfully illustrates.
First-time homebuyers have originated less than a tenth of all subprime loans since 1998, according to a 2007 Center for Responsible Lending analysis. As recently as 2006, just over half of all subprime loans were refinances of existing home loans. The expected foreclosure toll from these loans will outpace the ownership gains by nearly a million families, the center estimates.
That's particularly true in established black neighborhoods like Westwood, where banks and brokers targeted vulnerable longtime homeowners and lured them into needless and rapidly recurring mortgages they clearly couldn't afford and from which they never stood to gain. More than half of all refinance loans made to African-Americans in 2006 were subprime, according to an analysis by the advocacy group ACORN. That's nearly twice the rate among white borrowers. Among low-income black borrowers, 62 percent of refinance loans were subprime, more than twice the rate among low-income whites.

What is an ARM

2008-05-10T16:27:00.001-07:00

ARM is an Adjustable Rate Mortgage. So many time time customers freak out when they know that their loan is ready to adjust. Some even think that there loan is going to balloon to 12, 13, or 14 percent interest rates. When no information is given or no one took the time to explain how an ARM actually works a creates a fear of the unknown . So the general public has developed a preconceived notion. Today I will show you why your rate rises and in some cases will fall. In April 1,1987 the interest rate was 7.75%. So lets say you were 2 points over prime your that would make your interest rate 9.75. Now 6 Months later in October the prime rate is 9% so now your interest rate is now 11%. The one thing that I want you to see that the rates don't jump in leaps, it rises in increments.

The prime rate history does not stay high and will not stay low, it will be like time, consistent. The ARM is directly related to the Prime Rate (The prime rate is defined by The Wall Street Journal as "The base rate on corporate loans posted by at least 75% of the nation's 30 largest banks."). Above is a Prime Rate history so you can see the fluctuations of the prime rate. So when you are offered an ARM its based on so many point over prime. The better your credit history the better your interest rate will be.

So even if you have an ARM, and can not refinance your loan here is the key. An extra $10 or $20 dollars a month can help you to not only pay your loan off 4 to 8 years sooner, but it can also help you control how much money you pay in interest!

If you have your truth and lending paper work nearby take a look at it, you will pay over 2.5 times the actual loan amount. So if you borrowed $100,000 in 30 years you will pay about $270,000.

Solutions to not Foreclose

2008-05-08T16:07:00.001-07:00

Everyday I hear about someone loosing their homes to foreclosure and it just keeps getting worse. The last 6 years as a Loan officer has afforded me the opportunity to help many people who are behind on their mortgage. So this is information is something that can help you in the even that you are behind on your mortgage.
1) Generally speaking Foreclosure proceedings start about the 4Th month of no payments.
2) Important information to always remember Mortgage companies do not want your homes. They loose when they foreclose. The reason why is the interest. The mortgage companies are betting on you paying 30 years on your mortgage so that they could collect on all that interest!
3) If you are behind the first thing is to call the mortgage company and tell them your issue. If you are not making any head way with the customer service rep, kindly ask to speak to the supervisor. You will get more help from supervisor than from the customer service rep. 4) These are things that you need to express when you call, if they have a forbearance program, modify the mortgage, this catches you up and what you owe gets put on the back of the loan. What by you offering suggestions you open the door for finding a way to get help.
The key is don't ignore the problem. Because the further behind you become, the harder it will be to reinstate your loan and the more likely that you will lose your house. Always remain in contact with your lender as soon as you realize that you have a problem.Lenders do not want your house. They have options to help borrowers through difficult financial times. Please don't ignore mail from your lender.The first notices you receive will offer good information about foreclosure prevention options that can help you weather financial problems. Later mail may include important notice of pending legal action. Your failure to open the mail will not be an excuse in foreclosure court. Know your mortgage rights.Find your loan documents and read them so you know what your lender may do if you can't make your payments. Learn about the foreclosure laws and time frames in your state (as every state is different) by contacting the State Government Housing Office. 5. Understand foreclosure prevention options.Valuable information about foreclosure prevention (also called loss mitigation) options can be found on the Internet at portal.hud.gov/portal/page?_pageid=33,717348&_dad=portal&_schema=PORTAL .

Reverse Mortgage, questions and answers

2008-05-02T10:05:00.000-07:00

“Reverse mortgages are a huge area of opportunity for us in this current
mortgage market! Here are just a few reasons why!”

“Kenneth, is any income needed to qualify?”

While the Fannie Mae form 1009 (reverse mortgage application) does have a place on it for income, no income is required to qualify for a reverse mortgage! And no payments are ever made!

“Kenneth, is ‘bad credit,’ or even ‘no credit’ ok?”

Credit information is put on the Fannie Mae 1009, but it is not used to qualify for the loan! Remember, no mortgage payments are ever required of the borrower! So, “no credit” is ok! And “bad credit” is ok too!

Credit information is used for reverse mortgage counseling purposes, and to aid in avoiding identity theft.

“But Kenneth, why aren’t monthly mortgage payments required of the borrower?”

In a reverse mortgage, interest accrues, and is added to the pay-off balance. No monthly principle or interest payments are ever made.

Therefore, the borrower borrows “x” today, and when they pass, “x+accrued interest” is what is paid-off by the heirs.

The heirs do this by either buying the home with cash, buying it with a forward mortgage, or by selling the home.

And remember, the house still has at least 15% equity in it, making a sale very easy!

“How old do reverse mortgage borrowers have to be?”

All borrowers on title at the time of closing must be 62 years-old or older. “Baby Boomers” are turning 63 this year! Plus, more people were born in 1946, than in the previous 10 years! And now they need reverse mortgages!

“Kenneth, can reverse mortgage borrowers ever lose their homes?”

No. Reverse mortgages are a safe, government-regulated program, and a senior can never lose their home.

“But do their heirs get ‘screwed?’”

No. In fact, most heirs prefer their family members use the captive equity in their home for living expenses. And, about 50% of the time, the heirs are the ones who ask for information on a reverse mortgage!

Besides, the heirs get the property back, with equity still in it! And they may elect to keep the property in the family, by purchasing the home with a forward mortgage, or with cash from a life insurance policy, or other source.

Besides, reverse mortgage lenders are understanding of a family member’s passing, and do allow adequate time to complete any financing needed for the heirs to purchase the home.

Remember, lenders don’t want houses, they want money.

“Kenneth, how can reverse mortgage borrowers take their money?”

Borrowers can elect a lump sum, a line of credit, a monthly income check, or any combination of the three!

And, the money they receive is not taxable, and will not reduce their Social Security, pension, and MediCare benefits!

Remember, it’s not “income,” it’s their captive equity in their principle residence!

“Kenneth, does their house have to be ‘free & clear?’”

Borrowers can be helped, with a reverse mortgage, even when already owing as much as 85 LTV! Remember, a reverse mortgage can be used to pay-off an existing forward mortgage, and erase their existing monthly mortgage payments!

“How much can we make on a reverse?”

We can get 2 points to 3-1/2 points on a reverse! And, those points are calculated on the home value, NOT on the loan amount!

Sample call scripts

2008-04-24T20:55:00.000-07:00

HELLO,
MAY I SPEAK TO (CUSTOMERS NAME), PLEASE? MY NAME IS _________________, I’M WITH ***** ***** ***** WE RECENTELY MAILED YOU OUT SOME MATERIAL TELLING YOU SOME OF THE GREAT SERVICES WORLDWIDE CAN NOW PROVIDE FOR NOT ONLY HOMEOWNER BUT RENTERS AS WELL. DO YOU OWN OR RENT YOUR HOME?

RENT: THIS A GREAT TIME TO PURCHASE A HOME.
1. INTEREST RATES ARE LOWER THAN THEY HAVE BEEN IN OUR LIFETIME.
2. THIS IS ALSO A BUYERS MARKET, SO WITH SOME PROGRAMS THAT WE OFFER YOU CAN PURCHASE A HOME WITH LITTLE OR NO MONEY DOWN.

OWN HOME:
1. BECAUSE INTEREST RATES ARE LOWER THAN THEY HAVE BEEN IN YEARS NOW WOULD BE A PERFECT TIME TO EITHER GET A FIXED INTEREST RATE OR POSSIBLY A RATE WITH A LOWER PAYMENT.
2. NOW ONE GREAT THING ABOUT MY COMPANY IS, DO WE DEAL WITH GOOD CREDIT, WE DEAL WITH LESS THAN PERFECT CREDIT AND WE EVEN BUY PEOPLE OUT OF THE WAGE-EARNER CHAPER 13.

Overview

2008-04-24T20:48:00.001-07:00

One of the biggest problems that we have as sales people is that we target the wrong people. With the information that you are about to receive why waste your search on information that you don’t need? It is very rare that you are going to help someone refinance there home that has only been in it for 6 months. Then there are very few people that have been in their home for 25+ years that actually want to refinance their home. So if that is the case why do a random search. Refine your search to a certain number of years in the home. Then you can target a specific customer and you can give them what they want, an option!
The key to success is to remember that once employed by that individual; the service that you offer dictates exactly what you will get paid… Never sell has a one hit wonder (the sales professional that sells and never looks back). I have always looked at that person as a highway sell because all he knows is to get a sell then start the process all over again. What a waste of time and effort. Base your selling process on the tree. You first sell is the seed once it is planted, it will grow if you take care of it. The roots branch out (the message about you). So just imagine that tree turning in to a forest and each one has its own roots. Income unlimited is now what you have created. The information that you are about to receive is worth its weight in gold… Simply because no one else has it! Think AT&T, Memphis Light & Gas; think Microsoft all these company had something, the plan. By implementing these powerful tools you have now created wealth without risk! When you have something that no one else has you create a Monopoly! The plan needs to be simple and direct but it has to make sense or it will never work… I promise that the time you delegate to create it will help you developed a powerfully tool for success. What does success really mean? I of-course can only give you my definition. What you want out of life will determine what you define as success! The reason that you will dedicate minutes, hours or even days to your plan is because this will lead you to where you want to be…When I designed my plan I had to see it in my mind, to know that it could work. So now ride your own wave on what you create, for once you reach the top- the view is different! I shared with you a testimonial that was created by Kenneth T. Merritt, not to brag or boast. Simply to let you know how powerful the information you are about to receive is and how it changed my life!

The Overview

2008-04-22T21:37:00.001-07:00

One of the biggest problems that we have as sales people is that we target the wrong people. With the information that you are about to receive why waste your search on information that you don’t need? It is very rare that you are going to help someone refinance there home that has only been in it for 6 months. Then there are very few people that have been in their home for 25+ years that actually want to refinance their home. So if that is the case why do a random search. Refine your search to a certain number of years in the home. Then you can target a specific customer and you can give them what they want, an option! The key to success is to remember that once employed by that individual; the service that you offer dictates exactly what you will get paid… Never sell has a one hit wonder (the sales professional that sells and never looks back). I have always looked at that person as a highway sell because all he knows is to get a sell then start the process all over again. What a waste of time and effort. Base your selling process on the tree. You first sell is the seed once it is planted, it will grow if you take care of it. The roots branch out (the message about you). So just imagine that tree turning in to a forest and each one has its own roots. Income unlimited is now what you have created. The information that you are about to receive is worth its weight in gold… Simply because no one else has it! Think AT&T, Memphis Light & Gas; think Microsoft all these company had something, the plan. By implementing these powerful tools you have now created wealth without risk! When you have something that no one else has you create a Monopoly! The plan needs to be simple and direct but it has to make sense or it will never work… I promise that the time you delegate to create it will help you developed a powerfully tool for success. What does success really mean? I of-course can only give you my definition. What you want out of life will determine what you define as success! The reason that you will dedicate minutes, hours or even days to your plan is because this will lead you to where you want to be…When I designed my plan I had to see it in my mind, to know that it could work. So now ride your own wave on what you create, for once you reach the top- the view is different! I shared with you a testimonial that was created by Kenneth T. Merritt, not to brag or boast. Simply to let you know how powerful the information you are about to receive is and how it changed my life!

1003 borrowers information

2008-04-22T20:55:00.001-07:00

The one thing that you must always remember when filing in the borrowers information is that, 2 years of residence must be shown or an underwriter will question where did they live before their current residence. Always include the birthday, social security, address and the number of years they have lived in the residence.

Residental Loan Application/ 1003

2008-04-20T11:36:00.000-07:00

When you address a client always let them know that the Residental Loan Application is the 1003, that is what we as Originators call it.

Calyx is one of the most user friendly programs that I have ever seen. I even if you had no clue, the program tells you what forms that you will need. It gives you the option of what kind of loan do you want to use. Conv (conventional), FHA, VA, USDA and other. In most cases you will do either a conventional loan or a FHA. I will begin with a Conventional Loan, with a fixed rate.

The refinance has a fixed interest rate of 7.5%. The loan amount is $125,000 and the payment is $874.02. Include the street adress and city state, zip code and the system will pick up the county. The Year Built and legal description is important. Generally the property will be SFR ( single family residence) .

The next section will be borrowers information. If you have any question please feel free to inquire and I will answer them promptly.

Qualified credit application needs ICE

2008-04-19T16:34:00.001-07:00

THE QUALIFIED CREDIT APPLICATION

The qualified credit application has (ICE) income, equity and credit. Without, ICE that application may get turned down. Lets say in a week you turn in 10 credit applications. How many do you think will close? The law of numbers says that generally 5 to 6 credit apps will close. Whatever the reason TSB, NEE, LCS the list could go on and on but what you need to know is, that some loans will not close. From the standpoint as a LO you need to know this! Nothing more frustrating than putting 6 apps in and watching them fall out one by one. Once you understand the process, then you will know what to expect.
Think of your credit apps like a snowball rolling down hill the more it picks up (apps), the bigger it gets (your pipeline). Most important, the time it takes to close a loan averages 20 to 40 days. The key is to be patient and know what you put in and when… Remember, it’s your money and your responsibility to keep tabs on it.
Now to generate leads so that you can achieve your goals. The next group of programs that I will introduce you to will help you get all the leads that you will ever need!

THE GOAL FOR SUCCESS

2008-04-18T16:22:00.000-07:00

As a Loan Officer you have to be willing to dedicate 10 to 12 hours a day for 6 days a week for 3 solid months. This will help you build your pipeline to achieve the greatest level of your success. If you have ever heard of residual income, your customer base gives you an opportunity to receive money in this fashion. This is one of the few sales jobs that you can work where you can take off for a month and still receive an income for 2 months. The pipeline, once it is full, will allow you to work 5 days a week and 8 hours a day if you choose to. This is not rocket science, just a strict plan…

The Science of the Cold Call

2008-04-16T06:27:00.000-07:00

Many people do not realize the value of the phone; no matter where you work as a sales person, you have to generate leads. In most cases you will get no’s, the person won’t just wanders in and says, “I want the service that you offer” I need a car, I need a loan. Consider these opportunities for you just being in the right place at the right time.Recently, I had an outbound appointment with a customer who had called me for a loan. I was sitting in his dining room and the phone rang and he said something that shocked me “Man you just don’t know how many calls I get from people trying to sell me something” He looked at the caller ID and said “just what I thought and sat back down”. Now what shocked me is that 70% of the time that I call people are home watching their caller ID and refusing to answer their phone. Have you ever just got out in your neighborhood and walked down the block to see just how many cars are at home? I think that you would be surprise. Why do I say that, because of the diversity of the job force. With first second and third shifts, scheduling your calling times have to change.When I first came to the company, generally speaking, everyone really focused on 4pm to 8pm time frame. If you had this kind of thinking so did 90 percent of the sales force. You have to be different to succeed! Now you have to look at it for what it’s worth, call in morning, afternoon and evening. That is a sure bet that someone is will pick up that phone!

Pulling Credit through Calyx

2008-04-10T14:31:00.000-07:00

Getting started with Calyx 6.0 . I love working with Calyx, this program allows you to imput your loan information and pull credit. I am going to walk you through inputing a loan into this program.

Now click new.

This is where you input the the name and social security number.

The subject property has to filled out now save the information, use the last name. Now you are ready to pull credit.

If you are not set up call Point at the the toll free number (800) 342-2599. Tech support is very helpful an will walk you through any problems that you are having. You may also receive online help. You can go to the help section and you can either find it online or in the help section. The next section we will begin with filling out the Uniform Residental Loan Application, or our language 1003

Minimum are need for FHA

2008-03-28T07:28:00.000-07:00

Minimum FICO Scores Are Now Required on Some FHA Loans
FHA limits have gone up, way up. This is exciting news for the mortgage industry! Finally HUD has caught up with rising housing prices, has thrown itself back into the ring and is emerging as a leader in high LTV lending and bringing stability back to our housing market.
Although it is temporary (expiring 12-31-08) it is great news for mortgage professionals nationwide. But with this great news comes a caveat. Many lenders have now instituted minimum FICO scores on FHA loans. While there is a clear benefit to using the FHA, loan officers are now plagued with figuring out which lenders have placed FICO restrictions on FHA programs. I have found that the FICO restrictions on FHA loans changes from lender to lender. Some lenders have set minimums at 530, 580, 600, and even 620! Keeping track of each lender is a logistical nightmare! Keeping track of each county limit is also a hassle. There is however a great automated solution that can make your search for loan products easy.
As a loan officer in today’s market you are being bombarded with guidelines that are constantly changing. Imagine logging into a system that locates every lender that does your scenario in seconds. You don’t have to read guidelines, call Account Executives, wait for return calls or log into multiple lender websites. This system goes beyond FHA loans. You can search for A, Alt-A, Sub-prime, Jumbo, Construction, Bridge and Investor Rehab & Bridge loans too!
In addition, you can increase the accuracy of your results by importing your credit report into the search system. The SearchMyLoan system goes “beyond the FICO score” and grades the credit automatically! We interface with over 132 Credit Reporting Agencies (CRAs).
Many loan officers have said, “I’ve seen systems like this before and I don’t get accurate results.” Keeping up to date with the guidelines IS OUR MISSION! We have a team of data analysts looking at changes in guidelines and we update the system daily
So now the all time solution of I'll take it FHA if they have no credit score is not going to be a thing of the past.

10 Reason why mortgage brokers should use...

2008-03-26T12:24:00.000-07:00

Top 10 Reasons Why Mortgage Brokers Should Use Credit Repair Companies!
These services make so much sense, you would assume everyone in the mortgage originating industry would be using them. However, this is simply not the case! So the question is, why not? Let's outline the top 10 reasons why loan officers and mortgage brokers should utilize the services of credit repair companies.1) Credit repair works!
HTDI Financial has years of experience in the credit repair industry. The credit bureaus hate us and our clients love us. We do not dispute that the client has these trade lines; we simply take the creditors and credit bureaus to task for what they report.
We use the consumer protection laws to force the creditors and credit bureaus to produce the information that they must have to verify the debt. More specifically, they must prove that everything is exactly accurate. If they do not have the documentation or they reported something incorrectly, by law they must remove it! Knowing the specifics of the ever-changing laws is crucial. Now if the consumer knows the in's and out's of the laws as well as HTDI Financial and has years of experience doing this work day in day out, they could possibly get the same results. They can also represent themselves in a court of law, do their own taxes and sell their own homes. But they hire attorneys, accountants, and realtors everyday to get the job done most effectively and as quickly as possible. 2) Credit repair makes a client's credit better.
HTDI Financial's primary focus is credit score improvement. This is done by removing negative items on the client's credit report as well as educating the client on how to use credit to positively affect credit score. The value of our advice can last a lifetime.
3) When negative items are removed, they stay away.
After we have removed negative items from a credit report it is always possible that the original creditor can re-report the negative item. However, this is rarely the case. Given that the original creditor generally will only hold the debt for 4-6 months, they do not waste the time or the money to check on these items and re-report them. What typically happens is that the debt is sold or transferred to a collection agency which will re-report them in an effort to pressure the client to pay the debt. When this occurs we can go back and dispute the items under the same dispute that removed them in the first place.
4) Removing old negative items improves scores.35% of your client's scores are based on these derogatory items. This is the biggest chunk of the credit score pie! The less derogatory items they have, the higher their score can be. On average, our clients see a 40% cleanup in the first 45 days.
5) It frees up your time if you are trying to repair your client's credit yourself.Consider this, as a loan officer you are paid to originate loans. The more loan volume you write, the more money you make. A simple business concept called “leverage” dictates that the way to make the most money is to spend your time doing the things that generate the most income for your business. For you, that means meeting with clients and taking applications.

Show me a loan officer who processes their own loans and I will show you a loan officer who does very few loans. Focus on the things that pay you the most money for the time you spend doing them and delegate the other tasks to people who are proficient at those activities. How many times have you spent hours trying to repair someone's credit only to be unsuccessful or have them go somewhere else to get the loan? Allow HTDI Financial to be your "Ace in the Hole" for all of your short term and long term credit score improvement needs.6) The client saves significantly more compared to the cost of service.

Given the tremendous impact credit score has on a person's overall financial life, the question really is, How can your client afford not to contract with HTDI Financial? Credit affects your client's mortgage payments, car payments, credit card payments as well as auto & homeowners insurance, and the list goes on. If we improve your clients credit score 50-100 points, how much can you lower their monthly mortgage payment?
7) Not everyone you work with has great credit.If you have been in the mortgage business for 10 years or more you are seeing more bad credit reports than you probably ever have. With the change in the bankruptcy laws this trend will only increase. Currently at least half of people in the market for loans are candidates for sub-prime mortgage products.
8) At HTDI Financial, we can be trusted.Every industry has people who do not operate in the utmost professional manner. HTDI Financial looks upon this as a tremendous opportunity to distinguish ourselves. In addition, a lot of the negative stigma in the credit industry about credit repair companies is hyped up by none other than the credit bureaus themselves.

Think about it for a minute. A dispute by a consumer or a credit repair company is going to add overhead to the credit bureaus operations. If the dispute process is successful, then the consumer will not be applying for credit as often because they do not need it as much. This reduces the credit reports sold by the credit bureaus. Is it any wonder that the credit bureaus would create bad press about credit repair companies?
9) Five out of ten clients are loan worthy in the first 45 days!There are many credit repair companies who only work on 1-3 negative trade lines at a time until they are removed. If the client has 20-40 negative trade lines, which is not uncommon, this could easily take 2-3 years. Given this, we understand why you might feel the process takes too long.

At HTDI Financial, we pride ourselves on speed and are not limited to a couple of trade lines per bureau per month. We give you the ability to receive automatic email notifications each time your clients file is updated. You can login to a portal and track each client you have sent to us, no matter how many there are. Proper follow-up is KEY to closing more loans.10) It is important to care even if you cannot close the loan this month.
In certain situations we may be able to bring the score up in 30-45 days to get a loan done. If it can be done, we are uniquely qualified to get it done. However, the goal of our service is to increase the scores 50-100 points in 90-120 days. This may allow you to do a band-aid loan today and guarantee a second transaction in the future. In addition, the long term loyalty this creates between you and your client will keep them coming back to you for life

Bear Sterns Bought out.

2008-03-18T21:05:00.000-07:00

Everyday I want to share all these great techniques to help all become better loan officers. Then I hear information that brokerage giant, Bear Sterns is having its stock purchased by JP Morgan Chase at $2 per share. The 85-year-old firm was trading near $90 at the end of February, with a 52-week high near $160. Bear Sterns was the number one buyer of sub-prime loans and was near insolvency last week. So that just etches in stone what is going on in the mortgage world. If you are a shaky loan right now, you can hang it up. The lenders are not going to give you a chance for at least 6 months worse case scenario 1 year. So what does that mean? Only the strong will survive. The foreclosure numbers have reached record highs. Don't be surprised that even more homes will be lost as well.

So many loans were given to people that was not suppose to have them is the key to all the problems that we have been experiencing today. You see the problems that help to initiate a lot of issues was that people were getting paid to buy homes and could not afford to make the payments. So basically they lived free for 4 to 6 months, when it cam time to foreclose on the property they moved out.

What do I do now?

2008-03-11T21:22:00.001-07:00

If you are a loan officer you can see that the mortgage industry has been gradually deteroriating since February 2007 to February 2008. My count to date is that over 100lenders have folded. The lenders that have managed to hang in their are only lending to people with perfect credit or no credit at all. How? FHA. So what this means right now if you don't know FHA you might not make it. The market is very unstable right now and the market is going to make a change but it is not going to happen no time soon. You are going to need need patience and more knowledge. The great thing is loans are still closing and people are still working. Its funny but the people who on the A squad still manage to make A's. The B,C AND D squad may need to change jobs or work a second job. The key is do what ever it takes to make a living until the market changes.

The Mortgage Industry is confusing.

2008-01-08T17:56:00.001-08:00

The Mortgage Industry can be very confusing, because of the amount of information that a person has to retain when he becomes a Broker. Most people are attracted to the origination industry because of the unlimited amount of money a broker can make. Six figures a year can be earned but you have to be willing to dedicated 50 to 70 hours a week to achieve that goal. A lot of people ask “why do I need to work so many hours”? Nothing in life is easy, for starters. Then you have to realize that you have a Knowledge gap. What is a knowledge gap, not having enough information to help you succeed in the mortgage business? How much information do I need? Great question, more than you will ever know.
Eighty percent of the mortgage brokers are 100% commission. That means if they don’t sell and close loans; they don’t eat. It takes about 2 weeks to close a loan if you know what you’re doing. So for a new person it might take a month or two and could be longer, and that is no exaggeration. A broker has to have the ability to know people; if he lacks that skill he will starve for sure. Learn good habits, because the bad ones will get you in trouble. Use your head in this business take notes and always remember what you did yesterday if you don’t you may have wished that you did.
The credit application will be your first hurdle. How do I get one? Most people it’s the phone, but some people are not good on the phone/now what? Buy leads, the internet, mailers, flyers or door to door. All these things are what you are going to have to work on to get a credit application. To achieve 1 credit application from the phone you have to dial 100 to 150 phone numbers a day so if you want 3 to 5 multiply those numbers to determine what you need to do. So if you are scared of rejection get out of the business early. Flyers work, but the numbers are much higher; you have to put out 500 to get 1 credit application so if you want 3 to 5 multiply the numbers to get what you need. Buying the leads works but you have to have enough capital to back you till you can get a loan to close? Now you have your potential customer on the phone and you get the name and address and pull credit. This is where knowledge of the business helps you to determine how you can help this customer. The person has a 560 credit score what do you do now? Just so you know credit score range as low as 350 and as high has 850 and 600 is considered average. This person has a below average credit score. If you want to stand out in the business learn how to deal with low credit scores, because not everyone can work them! Plus learning the tough loans gets you ready for the easy loans. Not trying to overwhelm you, but is this going to be a Conventional, FHA or Sub-prime loan?
See you have been hit with all this information within the first few hours and you have not even scratched the surface yet…
So now I am going to give you more numbers for every 10 credit applications you will only 3 to 4 of those loans. So if you are a one or two credit application man a week, you may not close any loans for a month or two. Persistence, patience, desire and motivation has to be the gears that keep you striving to close loans.
So after you have determined that you have a solid credit application, you need to fill out the 1003 (Uniform Residential Loan Application). This has all the pertinent information that will help the customer obtain this loan. Within the next few days I will go over the 1003 and what each line means and why you need to fill it out. Sometimes leaving one line out of a 1003 can make or break an approval.