21. August 2008 by admin.

The FDIC revealed a new program to help 25,000 borrowers with their troubled mortgages from failed IndyMac. Interest rates would be decreased to 3% for five years, extending life of the loan and charging interest on only part of the loan balance. However, critics of the program believe that it will encourage IndyMac borrowers to default on their loans, since the program is only for borrowers who are behind in their mortgage payments.

U.S. 30-year mortgage rates dipped to an average of 6.47% from 6.52% last week and 6.52 a year ago. 15-year mortgages dropped to an average of 6.0% from 6.07% last week and 6.18% . One-year adjustable rate mortgages, or ARMs, rose in the week to an average of 5.29% from 5.18% last week. “5/1″ ARM, set at a fixed rate for five years and adjustable each following year, averaged 5.99% compared with 6.02% a week earlier and 6.34 percent a year ago.

Freddie Mac vice president and chief economist, Frank Nothaft, said that despite the affordable mortgage rates, there are still “signs of weakening in the housing sector.” Housing starts fell 11% in July to an annual pace of 965,000, the lowest since March 1991. Despite declining home prices, fewer people are purchasing homes as the volume of mortgage applications fell 61% from this year’s peak in February to the lowest level in nearly eight years. Construction of new new homes and apartments fell to the lowest lvel in more than 17 years. Fewer people are refinancing existing mortgages as well.

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12. August 2008 by admin.

As part of a plan to reduce $1.5 billion in annual expenses by the end of 2009, Wachovia is closing mortgage offices in 19 states where it has little branch presence. The move will result in cutting of 125 jobs as part of a 6,350 previously announced full-time layoffs. Wachovia spokesman Don Vecchiarello says the company wants to focus on building fuller customer relationships in states where it has a branch presence.

Freddie Mac said it will not purchase New York securitized subprime mortgages starting September 1st. Some fear that this move will likely bring higher borrowing costs for homeowners and make it even harder to obtain home loans. Fannie is also decreasing purchases of mortgage-related securities to preserve capital. As defaults on home mortgages soar, Fannie and Freddie have recorded combined losses of about $14 billion over the past four quarters. Shares of Freddie were recently up 1 cent to $5.61.

In an effort to reduce costs and defaults, Fannie Mae is raising the fees it pays servicing companies to renegotiate loans. The new incentive fees are for repayment or loss mitigation plans starting Monday, Aug. 11. Fannie Mae said it will pay $700 for each successful modification completed on a conventional home loan. 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.

JPMorgan Chase posted a third quarter loss of $1.5 billion in mortgage assets, resulting in shares falling 7.9%. JPMorgan is under pressure to write down mortgage assets, in part because of Merrill’s decision to sell $30.6 billion of repackaged debt to a private equity fund at 22 cents on the dollar. As of June 30, JPMorgan held $19.5 billion of prime and Alt-A mortgage exposure, $1.9 billion of subprime mortgage exposure, and $11.6 billion of commercial mortgage-backed securities exposure. Lehman Brothers Inc analysts cut their 2008 profit forecast for JPMorgan to $2.30 a share from $2.60 but kept an “overweight” rating and $50 share price target.

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8. August 2008 by admin.

Fannie Mae posted loss of $2.3 billion or $2.54 per share in the second quarter. Just like Freddie Mac, Fannie Mae is experiencing a fourth straight quarterly loss that exceeded estimates of only a 97 cents per share loss. A year earlier, Fannie Mae posted a profit of $1.95 billion or $1.86 a share. Fannie Mae’s CEO, Daniel Mudd, blamed the “volatility and disruptions” in the capital markets and deteriorating credit performances. However, Fannie Mae said it raised more than $7 billion in added capital in the second quarter.

The 30-year fixed-rate home-mortgage rate average was unchanged from a week ago at 6.52%, compared to a year-earlier rate of 6.59%. The 15-year fixed-rate mortgage averaged 6.10%, up from 6.07% last week. Five-year Treasury-indexed hybrid adjustable-rate mortgages averaged 6.05%, down from 6.07%. One-year Treasury-indexed ARMs averaged 5.22%, down from 5.27%. However, consumers will soon have to pay more for mortgages as Fannie Mae said it will be increasing an adverse-market charge to lenders, a “middleman fee” of 0.5% from 0.25%.

New York City, Houston and Miami had the most expensive closing costs on a $200,000 mortgage totaling $4,016, $3,975 and $3,683, respectively. North Carolina is the least expensive state in which to get a mortgage, with average origination and title fees totaling $2,650. Fees have increased despite the weak housing market.

News in brief:
Countrywide Financial, acquired by Bank of America, has been subpoenaed by the SEC as part of an investigation into its lending practices.

UK mortgage repossessions for the first half of 2008 (18,900 repossessions) increased 41% from the second half of 2007 (13,400 repossessions) and a 48% increase from the first half of 2007 (12,800 repossessions). The number of households with arrears of three months or more increased to 155,600 at the end of the first half of the year from 129,600 at the end of 2007 and 120,800 at the end of the first half of last year.

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7. August 2008 by admin.

The current mortgage crisis in US has affected the profits of the top European insurers. The DJ Stoxx European insurance sector has fallen around 21 percent so far this year, broadly in line with a similar decline in the FTSE Eurofirst 300 index. Only RSA Insurance Group, British commercial insurer, managed a first-half profit increase among the top European insurers. Allianz, Europe’s biggest insurer, posted a lower second-quarter net profits this week. Net profit at AXA, the second-biggest insurer in Europe, fell 32% to $3.35 billion, due to loss stemming from write-downs on fixed incomes assets.

Certain Asia Pacific stock markets dipped as earnings from mortgages dropped. The MSCI Asia Pacific Index was 0.7 per cent lower at 128.27 by late afternoon in Tokyo. The Nikkei 225 average closed 1 per cent lower at 13,124.99 and the broader Topix index ended 1.4 per cent lower at 1,258.81. In South Korea, the Kospi closed 0.9 per cent lower at 1,564.00, off the day’s lows. China’s markets fared better as the Hang Seng index closed 0.7 per cent higher at 22,104.20 while the main sub-index of mainland companies listed in Hong Kong was almost unchanged at 11,943.85 and Shanghai composite index closed 0.3 per cent higher at 2,727.58. In India, the Sensex was 1.3 per cent higher by mid afternoon in Mumbai at 15,274.81.

Spending is down in Britain as the probability of recession, increasing cost of living and falling house prices in Britain have hurt consumer confidence. Consumer confidence plummeted by 18% last month and Nationwide’s House Price. Although leading lenders have reduced the cost of fixed-rate mortgages, expectations index predicts a 4.8% drop in housing growth over the next six months and the Centre for Economic and Business Research expects property prices to drop by 8% this year and four per cent next year.

In odd news:
The mortgage crisis in Sydney affects even the rich. A former millionaire defaults on his harbor-front home.

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6. August 2008 by admin.

Subprime and Alt-A loans, which accounted for nearly 40% of loans during the peak of housing boom, have disappeared as lenders are imposing stricter rules for financing that require increased down payments and premiums on loans in “declining markets.” Lenders have become more thorough in verifying income and scrutinizing the ability of borrowers to afford the mortgage, taxes and insurance. New buyers complain, however, that lending rules change too fast. In some parts of the country, such as Reno, up to one-third of the deals that are in the final stages of closing have still not closed after 90 days — three times as long as closings typically take as a greater number of closings are falling through, often because lending regulations tighten up after the borrower has been pre-approved.

Freddie Mac posted its fourth straight quarterly loss of $821 million, or $1.63 cents per share compared to a profit of $729 million, or 96 cents per share a year earlier. The second-quarter loss follows a $151 million loss in the first quarter and brings its cumulative loss over the past four quarters to more than $4.6 billion. With losses larger than expected by many analysts, Freddie Mac shares plummeted by more than 17 percent from yesterday’s closing price of $8.04. Freddie Mac’s CEO, Richard Syron, said that Freddie will remain committed to raising $5.5 billion of new capital.

Governor of New York, David A. Paterson, signed into law a critical subprime lending reform bill that would immediately help protect people from losing their homes and require reforms to help avoid a similar crisis in the future. The bill also calls for a balance between consumer protection and the availability of affordable credit.

In shorter news:
First Priority Bank of Bradenton, Florida is first bank to fail in FL since 2004 and the eighth bank to fail this year in the US.

Mortgage application volume rose 2.8% during the week ending Aug.1, refinance volume increased 4.4% and purchase volume grew 1.8%.

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5. August 2008 by admin.

In 2004, Freddie’s CEO, Richard F. Syron, was cautioned by high ranking executives against financing questionable loans that would “pose an enormous financial and reputational risk to the company and the country.” He was also told that there was a need for expansion of its capital cushion. However, Syron told his executives that Freddie “couldn’t afford to say no to anyone.”

The new and bigger wave of defaults is predicted to come from homeowners with good credit, with defaults on alternative-A mortgages quadrupling to 12 percent and defaults on prime loans doubling to 2.7 percent in April from a year earlier. Homeowners are also faced with a struggling economy that includes another drop in home prices and a rise in unemployment rate in July that reached a four-year high.

Freddie Mac are expected to post quarterly loss of $388 million, or 60 cents a share, according to an average of 11 analysts surveyed by Bloomberg while Fannie is expected to post a loss of $763 million or 74 cents a share. Both are expected to report net losses through the first quarter of 2009. Credit Suisse analyst Moshe Orenbuch rates both mortgage companies as “underpeform”. Orenbuch expects Freddie to have second-quarter loss of $1.9 billion and Fannie’s loss to be around $2.4 billion.

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25. July 2008 by admin.

Wachovia Bank reported losses of $8.9 billion Tuesday and future layoffs of more than 6,000 workers while Regions Financial Corp reported a 55 percent drop in earnings in the second quarter and layoffs of 600 positions in June. Despite reporting massive drops in second-quarter earnings Tuesday, Wachovia Bank and Regions Financial Corp. stocks climbed on Wednesday since many investors believe that the it can’t get much worse and that Washington will not let such large banks fail.

Mortgage rates rose this week with 30-year mortgages climbed from 6.26% last week to 6.63% this week, the highest level since the week of August 1 of last year. Rates on 15-year fixed-rate mortgages rose to 6.18 percent, up from 5.78 percent last week. Economists believe that this is reflective of concerns in financial markets about the mortgage losses at corporate giants Fannie Mae and Freddie Mac.

Due to falling U.S. home prices, write-downs by financial firms will rise to $1 trillion, an astounding figure that will probably curb bank lending and increase sales of assets if not matched by capital raising. According to Gross of Pacific Investment Management Co., a total of $5 trillion of mortgage loans, or almost half of the nation’s home loans, belong to “risky asset categories” such as subprime and Alt-A, with 25 million U.S. homes being at risk of negative equity. This situation could lead to more foreclosures and a further drop in prices.

In odder news:
“Extreme Makeover” homeowners default on a $450,000 loan they took out on their gifted house.

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24. July 2008 by admin.

A federal grand jury in Los Angeles has begun investigations for fraud and other crimes by Countrywide Financial Corp., New century Financial copr. and IndyMac Federal Bank and their executives that may have contributed to the mortgage crisis. Some believe that this could be the the biggest financial fraud case since the savings and loan crisis of the 1980s. The FBI has also started investigations on 21 cases against corporate and other large entities, which include securities firms, hedge fund operators, credit ratig agencies and mortgage brokers and lenders, related to the subprime market collapse.

American Housing Rescue and Foreclosure Prevention Act was passed today in the House, which will allow families to refinance into more affordable lower-cost government-insured mortgages, provide tax breaks to encourage home buying, and providing the Treasury with emergency and temporary financing authority for Fannie Mae and Freddie Mac.

Both existing-home sales and median price of homes continued to fall in June. Home resales slid to a 4.86 million annual rate, a 2.6% decrease from May’s unrevised 4.99 million annual pace, the National Association of Realtors said Thursday. The median home price was $215,100 in June, down 6.1% from $229,000 in June 2007. The median price in May this year was $207,900. The beleaguered US economy also met news of the rise in number of U.S. workers filing new claims for unemployment benefits last week, matching a three-year high.

In sadder news:
Carlene Balderrama, 53-year-old Tuanton, MA resident, committed suicide ninety minutes before her foreclosed home was to be sold at auction. Balderamma faxed a letter to her mortgage company in which she wrote, “By the time you foreclose on my house I’ll be dead.”

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22. July 2008 by admin.

The CEOs of Fannie Mae and Freddie Mac made a combined $30 million in salary plus perks last year, despite the mortgage lenders’ financial problems.  Fannie and Freddie, which hold or guarantee nearly half of the $12 trillion U.S. mortgage market, have seen their stock prices tumble from over $60 a share in 2007 to under $10.  Such high salaries have angered some who believe that executives should be punished for their poor management.  Instead they receive high salaries and government bailouts when trouble arise. 

Governor Arnold Schwarzenegger of California announced the launch of the Community Stabilization Home Loan Program, a special program designed to help first-time homebuyers purchase homes in communities hardest hit by the foreclosure crisis.  Under the program, first-time homebuyers will be eligible for below-market interest rate loans to purchase foreclosed homes in ZIP codes with some of the state’s highest foreclosure rates.  $200 million have been allocated to the program.  

When asked about his plans for Fannie and Freddie, McCain was cautious and only said, “We will not allow them to fail.”  Despite his past vocal criticism of government-backed companies and “no bailout, tough love philosophy,” McCain is expected to support governmental bailout along with regulation and reform. 

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20. July 2008 by admin.

Non-whites’ loss of wealth from foreclosures and falling home values is estimated to be $164 billion to $213 billion, with blacks losing $71 billion to $92 billion and Latinos losing $75 billion and $98 billion.  The police force in Antioch, a suburb near San Francisco, is accused of harassing black renters receiving federal vouchers by pressuring landlords and housing authority officials to evict them and illegally searching their homes without search warrants.  Although Maine ranks low in states with high rates of foreclosures, one of its county, Waldo County, is experiencing an alarming increase in foreclosure rates this year, about six times that of previous years.  Some blame the financial institutions for alleged deceptive lending.  The Des Moines community in Iowa unite to inform homeowners facing foreclosures of free confidential counseling.  Research shows that 50 percent of people who are unable to pay their mortgage never contact their lender or seek assistance from a trained counselor.  Major data sources’ reports differ in their rankings of states with high foreclosure rates.  Although California, Nevada and Florida consistently ranks high in such reports.   

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