Entries from May 2006 ↓

As the ARMs get broken and the interest only mortgages  turn venomous, a person who is facing bad times and owns a house can be in big trouble. There are a group that prey on homeowners who are facing foreclosure. They will search foreclosure reports and look for those that need to sell or lose whatever equity they have in the home.

And although I refer to these bottom feeders in not the most glowing terms, they do have a purpose. If the choice was to turn my home over to the bank or sell out to a shark, odds are the shark would win. Homeowners in the Northeast and West Coast who have appreciation in their homes but can not  pay their mortgage will be prime targets of these land sharks.

The slowdown in housing sales, after five years of frantic buying, has ended the party for many real-estate investors. But the cooler market is welcome news for a subset of investors — those who target homeowners facing foreclosure.

Most foreclosure investors run small, local operations, buying and reselling a handful of properties a year. Some are self-taught; others take courses touted on Web sites or in late-night TV ads. Invariably, they draw criticism from advocates for the poor, who accuse them of preying on the vulnerable.

“Our time has finally come!” proclaims a recent email advertisement from ForeclosureS.com, a Fair Oaks, Calif.-based company that markets training materials for would-be investors. A 90-minute telephone program promises to teach foreclosure specialists how to be a “white knight” and not “feel like a shark.”

More people are falling behind on their mortgages, according to the Mortgage Bankers Association. The percentage of loans on which payments are at least 30 days overdue rose to 4.7% in the fourth quarter of 2005 from 4.4% a year earlier. With interest rates rising, it’s harder for homeowners to refinance or sell quickly. via  the WSJ.com

The 9th Circuit Court has ruled that Quicken Loans violated state law in California by improperly overcharging on mortgage interest. The company according to the ruling may be required to repay millions of dollars to customers for mortgage interest that it charged illegally.

Quicken executives say they will look to appeal the case to the Supreme Court or ask California lawmakers to change the laws retroactively. That has to make you feel good that the company breaks the law and then wants to change the laws so they do not have to pay a penalty.

California law used to bar lenders from charging interest more than one day before mortgages were recorded in county offices, a process that could take weeks.
The law was changed in 2003 to let interest accrue one day before a lender disburses loan proceeds.
California, however, argued that Quicken had received interest payments that violated the earlier law. It sought refunds as far back as Oct. 14, 1999.
The appeals court panel rejected Quicken’s argument that the state statutes were pre-empted by federal law, and amounted to an unlawful taking that violated the U.S. Constitution.
Quicken said it made $500 million to $745 million of mortgage loans in California in 2001 and 2002, court papers show.

Stock Market News and Investment Information | Reuters.com.

The 50 Year Mortgage, a relatively new way to finance a home, has been seen on the marketplace as an antidote for those trying to find their way into a home loan with the high cost of housing. When one hears 50 year  mortgage, they immediately think that it is in the same category as the 15 or 30 year fixed rate mortgages that we hear about constantly. But au contraire real estate buyer, think again and think twice before getting into one of these hybrids.

The current 50-year deals are not fixed-rate for five full decades, but rather adjustable deals that carry their offered rate for just five or seven years — or which carry a balloon payment after 30 years — and which then could have the rate move up or down for decades to come.
Anthony Hsieh, president of LendingTree.com, said in a recent statement about the new 50-year deals that “mortgage lenders are getting craftier with their product offerings to get the attention of consumers.”
He did not say that consumers always benefit from that kind of creative thinking, and said in an interview that he doesn’t think 50-year mortgages will get much traction, in part because consumers may wake up to the idea that this is a deal borne more out of desperation than sound financial thinking.
“If a consumer looks at a 50-year mortgage as the only way to afford that home, to get into a hot real estate market or simply to afford the monthly payment in a refinance, they’re really not looking at the potential problems,” Hsieh says. “It’s a very small portion of the consumers who could use this the right way.”
The “right way” would involve using the longer amortization schedule to drop initial payments expecting that there will be a significant increase in income to cover any adjustment in mortgage rates or the costs of a refinance just a few years down the road. via the QCTimes.com

Recently I checked my FICO score. I was checking my credit report and they offered a FICO score  for only $7.95. What a deal, and I have to tell you I felt great when I saw the number as it was a good deal higher than I expected.

Then I saw this article over at the Miami Herald about how the credit agencies are selling fake FICO scores that can mislead a consumer that they are in better shape than they are.

A mortgage applicant says, ”Oh, I’ve already checked my credit score online.” Then the loan officer pulls the home buyer’s FICO score and finds that it’s 50 or 100 points lower than the generic credit score the applicant quoted.

”This is becoming a real problem — a lot of people simply don’t know the difference between FICO scores and other scores,” says Ginny Ferguson, immediate past chairperson of the National Association of Mortgage Brokers’ credit-scoring committee and co-owner of Heritage Valley Mortgage of Pleasanton, Calif. “They think it’s all the same.”

FICO scores, developed by Fair Isaac Corp., are the predominant credit measure used by the mortgage industry. The scores run from 300 to 850 and are used to predict a borrower’s likelihood of future nonpayment, with higher scores indicative of better creditworthiness. via the Miami Herald

If you are serious about checking your real FICO score, there is only one place to find it: Fair Issacs website, myfico.com. The site is not cheap, they charge 80 dollars a year for 2 reports and 11 dollars after that. But if you are looking to make a major purchase or looking to improve your credit, this is a good investment.

The tightening mortgage environment has forced Liberty Mortgage out of business. The Tampa based lender has been in trouble for the last couple of years and the recent downturn put the final nail in the coffin.

After a 5 year period of low interest rates and prosperous times, the mortgage industry is looking at tough period. Companies that have been marginal successes will most likely wash out during the coming months as they will be unable to withstand the slower times.

Liberty is among a handful of mortgage companies that have gone out of business as the housing market cools and the mortgage industry gets tighter.
MortgageDaily.com, an online news source for the mortgage industry, reported the closing in April and May of three large firms: San Francisco-based Capital Alliance Funding Corp.; QuoteMeARate.com., based in Houston; and Merit Financial Inc. in Kirkland, Wash. Dozens of other mortgage companies are “teetering on which way to go,” said Sam Garcia, editor of MortgageDaily.com.
Ameriquest, one of the nation’s largest subprime mortgage lenders, is restructuring and eliminating retail branch offices. Wachovia Corp.’s (NYSE: WB) planned $25.5 billion purchase of Golden West Financial Corp. (NYSE: GDW), the parent company of World Savings Bank, a major residential mortgage lender, is a sign of consolidation in the industry, Garcia said. via  MSNBC.com.

IndyMac is opening a regional office in Tampa as the  company is taking a brave plan of expansion in the face of a slowing mortgage market. They are  adding 140 jobs in the Tampa area.  

The 12,187 square foot facility is located in the Centerpointe office building at 5100 W. Lemon St. When fully staffed, the new center will create more than 140 jobs in the Tampa area, 100 in operations and 40 in sales, the company said. It will employ individuals involved in underwriting and funding, various support positions, and sales.

“At a time when other mortgage companies are downsizing and closing operations centers, Indymac is continuing to expand into additional regional markets,” said Frank Sillman, chief executive officer of Indymac’s Mortgage Bank, in a release.
With the Tampa office, Indymac will operate a total of 15 regional mortgage centers and employ 3,300 mortgage professionals and more than 7,200 individuals. via Tampa Bay Business Journal:.

With the rise in consolidation of the mortgage industry after a 5 year run of record profits, Merrill Lynch is looking to make a purchase in the industry. The company does not have any exposure in the mortgage world, but is looking to buy into the dip as independent mortgage companies retrench.

New York-based Merrill’s top managers spent the past six months determining how to spend “excess capital,” Chief Administrative Officer Ahmass Fakahany said in an interview last week. The firm, which has the world’s biggest network of brokers, decided against expanding by buying a consumer bank, he said.
“What’s new is an increased emphasis on building our institutional business,” said Fakahany, 47. “When I say mortgage origination will take capital, that’s because it requires an acquisition.”
The biggest U.S. mortgage lenders not owned by major banks include Countrywide Financial Corp., Ameriquest Mortgage Co. and IndyMac Bancorp Inc. Fakahany declined to name potential targets.

Bloomberg.com: U.S..

H&R Block is expecting slower earnings for 2006 as it’s mortgage division has slowed down significantly. The company said its tax business was doing much better than expected, but that a slow down in its mortgage writing has hurt the companies earning.

The company said it now expected its earnings per share to come in slightly below the $1.65 low end of a previous forecast. Analysts on average were expecting earnings of $1.70 a share, according to Reuters Estimates.
The move comes as mortgage lending across the industry slows down and as H&R Block fights charges from New York Attorney General Eliot Spitzer that it fraudulently marketed retirement savings plans that caused losses for hundreds of thousands of mostly low-income clients.
Chief Executive Mark Ernst said in a statement the company cut its forecast for fiscal 2006, which ends in April, citing in part weaker results from the company’s mortgage services, which is one of its four main business units.via  Yahoo! News.

The rising interest rates are causing an increase in mortgage refinancing as households are changing their mortgages from Adjustable Rate Mortgages (ARMs) to Fixed Rate Mortgages. Countrywide Financial Corp and Quicken Loans are both expecting an increase in volume as homeowners get out of ARMs to more stable fixed interest mortgages.

About $200 billion of adjustable-rate mortgages will be reset this year, according to Calabasas, California-based Countrywide. Fifty-five percent of the home loans the lender made in the first quarter were used to replace floating-rate mortgages with ones that pay a fixed rate, compared with 47 percent a year ago. Next year, $1 trillion of floating-rate loans are due to reset.

The difference between the monthly payment on an adjustable- rate home loan and a 30-year mortgage narrowed as the Federal Reserve raised interest rates 15 times since June 2004. The monthly payment on a floating-rate mortgage was about 30 percent less than for a loan charging a fixed rate two years ago. Today, the gap is about 10 percent.

“The consumer preference these days is for the longer-dated mortgage” loans that reduce interest-rate risk, said Larry Goldstone, chief operating officer of Santa Fe, New Mexico-based Thornburg Mortgage Inc., which made $5 billion of adjustable-rate loans last year. via Bloomberg

Golden West Financial will sell out to Wachovia as the US Mortgage industry is poised to see a consolidation as the volume of mortgages slows down after 5 boom years. Golden West Financial is solely focused on mortgages and as such did well during the past few years, but as  Herbert Sandler, co-chairman of Golden West states, We’ve always been aware that being a monoline company had extra positives and extra negatives,” he said Monday. “There were inherent weaknesses in our strategy.”

As the market is turning down, these single play mortgage companies are going to look to be consolidated into the larger banking institutions. Smart business if you ask me.

Mortgage banks have spent the last five years in boom mode, benefiting from historically low interest rates that drove more people to take out first mortgages, refinance existing loans and take out home equity lines. But rising interest rates have threatened to end the party.

The Mortgage Bankers Association estimates that this year, even with interest rates stabilizing, the volume of new mortgage loans will drop 14% from the $2.7 trillion logged last year.

Herbert Sandler, the colorful and blunt co-chairman of Golden West, said his decision to seek a merger partner was in no way meant to signal his view that the mortgage business is going down the drain. Rather than concerns about loan volumes coming off the boom times, Sandler pitched his desire to diversify. via Forbes