blog.hsh.com

Update1 (03/01/10):

This new and alarming trend of borrowers prioritizing their credit card payments before their mortgage payments is even occurring amongst borrowers with high credit scores, according to FICO:

“We’re identifying lending industry situations in FICO Score Trends that to our knowledge have never been seen before,” said Dr. Mark Greene, CEO of FICO, in a statement. “Economic instability is creating unknown risk in lenders’ credit portfolios as well as counter-intuitive trends in consumer behavior.”

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The federal initiative to kick foreclosures began in earnest on October 1 of this year when the “Hope for Homeowners” (H4H) program, part of the Housing and Economic Recovery Act of 2008, was put into action. Unfortunately, so far the program has proven to be a dud — such a disappointment that, according to CNBC’s Diana Olick, HUD took their projection of helping 400,000 homeowners avoid foreclosure in three years off of their press release (dated October 1, 2008). The program which carries a budget of $300 billion will, based on the latest projections, only service 19,000 homeowners in the first year:

The program works like this. A borrower in trouble contacts the lender, and the lender agrees to write down the principal to 90 percent of the current value of the property. They then get a new FHA insured loan. In return, when the borrower eventually sells the house, the government gets half the equity that is created after the new loan begins: in other words any appreciation. FHA will insure up to $300 billion in new loans.

Freemoneyfinance.com has a very informative and enlightening post that details the author’s experience when he almost bought a house — the deal never went through. The post reveals how the author locked in on the lowest possible rate, negotiated his closing costs, and received a discount on his homeowner’s insurance:

We got a very low mortgage rate by pitting two different lenders against each other (one a bank and one a mortgage broker). I knew both guys and was upfront with them throughout our process that we would 1. give them both an option to bid on the mortgage and 2. select the lowest bidder. I went back and forth a couple times — with them lowering rates (initially) then closing costs and other criteria (like them escrowing for taxes — something I didn’t want) — before one cried “uncle.”

PNC Corp. announced today that they will purchase regional bank National City Corp. for $2.23 a share, for a total of $5.2 billion. PNC has also announced their participation in the Troubled Asset Relief Program (TARP) today, as the Treasury Department plans on purchasing $7.7 billion of PNC’s preferred stock and warrants.

“The acquisition of National City will increase our core deposit base to $180 billion, making PNC the fifth largest U.S. bank by deposits. At a time when core funding is key, we see our deposit strength as an important success factor. Upon closing the transaction, we will implement our successful business model and execute our strategies for managing risk, achieving cost efficiencies and growing high-quality revenue streams,” said James E. Rohr, chairman and chief executive officer of PNC in a press release today.

On both the consumer and corporate sides of the coin, fraud has truly begun to stain the mortgage market. However, federal investigations and new regulations, measures are underway to bolster a bedrock of our economy to return it to the productive and structured state in which it once operated.

The Federal Bureau of Investigation announced yesterday they have begun investigating four past giants of the mortgage market for their possible role in the collapse of the industry. Fannie Mae, Freddie Mac, AIG, and Lehman Brothers have been added to the list of 26 corporate lenders currently under federal investigation. The FBI’s investigation comes on the heels of the government’s proposed $700 billion bailout. According to federal officials, the investigation will focus on “financial institutions and the individuals that ran them.”

With rates falling (as of yesterday the Conforming 30-year FRM was 6.03%, down from 6.34% on Friday), now is a great time to run the numbers and calculate if refinancing your mortgage can benefit you. With our Refinance Calculator it’s important to know the real costs — and potential savings — before making a move.

With this easy-to-use, interactive refinancing worksheet, consumers can see how their existing mortgage payments might change if they were to refinance, and, just as important, how long it would take to recover any closing costs associated with refinancing.

The housing crisis has many little helpers that have contributed to its devastating effect. Real estate agents and mortgage brokers seeking higher commissions through an inflated home-sale price, have sought out home appraisers to fraudulently estimate the value of a home:

After the nation’s last major banking disaster, Congress set up a system to catch rogue appraisers. Their game: inflating the value of homes at the direction of equally unscrupulous real estate agents and mortgage brokers, whose commissions are determined by the size of the deals.

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A relatively new kid on the block in terms of mortgage loan programs, My Equity Freedom (MEF) is an unconventional twist on a home equity loan.

Developed by mortgage vet Anthony Hsieh, formally of Lending Tree, MEF allows homeowners to borrow a percentage of their home’s value in one tax-free, lump sum. The loan requires no payments for between 5-50 years. At the end of the term, or when the owner sells the home, the loan becomes due – including the amount borrowed — plus typically 50% of the home’s appreciation from the time the MEF was issued. There is a penalty for paying back the loan in less than five years.

Florida became the third state to sue Countrywide Financial yesterday over predatory lending practices. In a lawsuit filed by Florida’s attorney general, the state accused the mortgage lender of deceiving borrowers into taking loans that Countrywide allegedly knew they could not afford. Illinois and California sued the mortgage financer last Wednesday, the same day Bank of America took over the troubled lender.

Florida’s lawsuit claimed Countrywide knowingly loaned money at higher subprime rates to borrowers who qualified for prime rates. Managers were encouraged to approved subprime loans that the company’s underwriters had previously rejected. The lawsuit claims underwriters were threatened with termination if they investigated into a borrower’s ability to effectively pay back their loan.