Refinance Free Credit

Seeking to blunt a potential roadblack that many mortgage servicers have said still exists, Congressmen Michael N. Castle (R-DE) and Paul E. Kanjorski (D-PA) introduced a bill late Tuesday designed to shield servicers from potential legal liability arising from bulk loan modification efforts.

H.R. 5579, the Emergency Mortgage Loan Modification Act of 2008, would provide a legal safe harbor for mortgage servicers making loan modifications, under certain defined conditions. In spite of efforts by the Treasury and other adminstration officials to spur on voluntary loss mitigation efforts, including the ASF-outlined rate-freeze program for subprime borrowers, many have said that investors remain at odds over loan modifications.

Part of the problem, as HW covered earlier, may be that the highest-rated securities in most subprime RMBS deals have yet to suffer a wave of downgrades; the result, sources say, is that investors in different classes are at odds with each other over what is in their best interests.

“I think it’s in the best interests of at-risk homeowners and investors to work out payment terms that give a homeowner financial stability and the investor some return for their investment,” Congressman Castle. “Without this legislation, I am concerned that lawsuits could bring modifications to a halt.”

If enacted, the bill would give mortgage loan servicers greater confidence to work out new loan terms with struggling borrowers, Castle said.

Kanjorski said the bill generates a “win-win” situation for borrowers, servicers, and investors.

“Investors in mortgage-backed securities, as a whole, win because their investments’ values increase due to fewer expected mortgage defaults,” he said. “Importantly, the bill accomplishes all of this without violating private contracts.”

“I hope the committee will deal with this bill as part of a package to stem the number of foreclosures in America,” said Barney Frank (D-MA), chairman of the House Committee on Financial Services. “As with all of the forthcoming initiatives on foreclosure avoidance, we are open to further discussions on the policy,” said Chairman Frank. “I believe this is the direction we should be moving, and given the newness of the issues, no one should have a closed mind about this.”

The text of the new bill has not yet been published online, but H.R. 5579 is a substitute for H.R. 4178, which Castle introduced last year. Read the original bill’s text by clicking here.

Freddie Mac on Wednesday released its guidelines for conforming jumbos — and, yes, that’s what the GSE is formally calling the newly-and-temporarily conforming loans above the traditional lending limit. The guidelines at Freddie, interestingly, paint some areas of contrast from Fannie Mae; the differences likely signal an attempt to capture some additional share, and come somewhat as a surprise to some market participants that had expected guidelines at each GSE to mirror one another.

Perhaps the two largest areas of divergence lie in underwriting and which products are considered eligible under the “jumbo conforming” program at each GSE.

Freddie said it will allow underwriting via Loan Prospector, its automated underwriting system, which means loans are eligible for its “Accept Plus” program as a result. Tanta at the Calculated Risk blog explains:

“Accept Plus” allows partially-verified income for salaried borrowers and stated income for self-employed borrowers. Loans receive “Accept Plus” eligibility based on LP’s internal evaluation of the entire loan file; it cannot be used with non-LP loans.

Freddie’s move towards automated underwriting sits in stark contract to Fannie Mae’s requirement that all conforming jumbos be manually underwritten, a move that a few originators have said will likely favor Freddie.

“Most originators still want to push their loans through the AUS, because it’s easier and they are often more familiar with the process,” said one source Housing Wire spoke with, a residential mortgage broker.

Freddie also will allow cash-out refis, as well as offering a 10-year interest-only fixed-rate product and fixed-rate terms up to 40 years. Cash out refis don’t come free, however: the GSE said such refinancing would come with a 1 percent ding up front. 10-year interest-only mortages carry an additional 25 bps delivery charge. Nonetheless, the fact that Freddie is allowing cash out refis at all represents a departure from Fannie Mae, who said last week it will not allow any cash-out refis under its jumbo conforming program.

Not that many in California will be able to qualify to refinance at all anyway, cash out or not, say lenders.

“The bigger deal here is the 10 year IO,” said a broker in the Golden State that spoke with Housing Wire Wednesday morning. “That’s a great product for borrowers here right now.”

If you have bought a house before, you know that you are always looking for the best deal possible. Now the shoe is on the other foot. You have become the seller and you do not want to sell this house for anything below market value. How do you keep the ball in your court when you know the buyer will do anything to gain the upper hand? This is your house and you should not be bullied.

Selling Tips You Need

Fix your home if it needs to be fixed up. You should fix up the house, because most house buyers are not looking for something they can buy and have to fix up at the same time. You should never resort to selling your house the way it currently is. The little fixes you can make will go a long way towards getting that house sold and the price you seek.

Use the internet to your advantage. Your house should be posted on all relevant housing sites, and it should include all the details possible. People are surfing the Web more and more now days in order to find properties, and you should not be left out in the cold.

Simplify your house. You want to bring out the potential in the house. If the rooms are large, then make them large. Do not clutter up the house with useless junk. You want people to see the potential of each room, and make them dream about what they can do inside this house. People do not really care much to see what you have done with inside the place. They only want to see what they can do.

Know the market value. This does not only go for the house, but for the entire area. Know what the houses are selling for in your neighborhood, and surrounding neighborhoods. Then know what the houses in the entire city are going for. This will help you compare with your house in order to come up with the best number possible. This should be a number that is competitive but still gets you the money you require for this property.

Make Them Want the House

It should be your goal to note the positives of the house whenever possible. After all, it should be them who wants the house, not you who wants to sell. You have done a lot of hard work to ensure that this house stays in top shape; therefore you must not give it away for anything less then it commands. You are the seller and you should not be pushed around by any buyer.

Additional Resources:

• Home Sellers Seek New Ways to Woo Buyers
• Should I Sell My House Now - or Wait?

Nearly two-thirds of cities report that foreclosures have increased in their communities during the past year, with one-third seeing declines in city revenues as a result, according to a poll released today by the National League of Cities. The poll also found that more than half of cities saw increases in the need for temporary assistance for services such as counseling, food banks and other non-housing related issues.

“Mortgage foreclosures are causing havoc in many of our communities,” said Cynthia McCollum, president of the National League of Cities and council member from Madison, Ala.

“Cities are already seeing reductions in their revenues at the same time that more services are needed to address the many related problems caused by the foreclosures. Unfortunately we also know that the problems will continue for many years before they get better. That’s a tough situation for all of us.”

The results of the online/email poll represent responses from more than 200 cities. Of particular note is the ripple effect the housing crisis seems to be having on city finances: one out of three report that funding for programs and projects has declined in the past year.

Also significant was a reported increase in abandoned and/or vacant properties and other forms of blight, reported by one-third of the cities. “In one new community in Charlotte, NC, 115 out of 123 homes were boarded up,” said McCollum. “Where there are widespread foreclosures, cities must ensure the safety of the residents still living in the community, must keep the grass mowed, and stop vandalism.”

The NLC poll shows that the housing crisis is disproportionately impacting certain residents, with half reporting the crisis is affecting lower-income families; one-third seeing problems for families headed by single parents; and one in five seeing impacts on seniors and people of color.

“We know that homeownership strengthens our communities — but the housing crisis is making it more difficult to achieve this goal. Overall, financial stability of millions of Americans is in jeopardy,” McCollum said.

For more details, visit http://www.nlc.org.

MFA Mortgage Investments Inc. is the latest secondary market participant to disclose a firesale of mortgage-backed securities, saying Monday evening that it had sold $1 billion in MBS since last Friday. $950 million of that amount represented agency MBS, and was sold at a loss of approximately $15 million, the company said in a press statement.

The sales came as the REIT said it made a “balance sheet strategy adjustment,” and said that to date the company had met all of its margin calls.

“We have made this strategy adjustment because it is our view that credit conditions are tightening, rapidly and indiscriminately,” MFA said. “After analyzing recent credit events impacting other leveraged public and private companies investing in high quality MBS, we believe that while these companies utilized substantially higher levels of leverage than MFA, our interpretation of their public disclosure and other information available to us increases the probability of increased margin requirements in the future for all repurchase agreement borrowers, including MFA.”

The company also said it was “concerned” about news of potential security liquidiations further roiling the secondary market.

MFA wasn’t the only company selling agency MBS in recent days, of course. New York Mortgage Trust, Inc., a mortgage REIT that sold off its retail and wholesale lending platforms last year, also said Wednesday that it had sold approximately $211 million of Fannie Mae mortgage-backed securities at a loss of $6 million.

The RMBS market has been erratic and extremely volatile in the past week amid news that UBS AG, among others, sold its RMBS assets at a fire-sale in an effort to stay ahead of a potential decline in market value. The result has been a frenzy of selling activity, depressing prices even for agency-backed mortgage securities as investors deleverage to avoid being handcuffed by margin requirements.

A source suggested to Housing Wire that while the Fed’s move yesterday to provide access to $200 billion via a Term Securities Lending Facility has served to slow panicked selling, it hasn’t changed the market’s now-sour outlook on mortgage-backed investments.

For more information, visit http://www.mfa-reit.com.

In an investor presentation delivered Wednesday, Freddie Mac executives predicted that so-called single family flow all-in guarantee fees at the mortgage finance giant could reach as high as 35 basis points come the fourth quarter of this year.

Guarantee fees are the percentage of the loan amount that Fannie Mae and Freddie Mac charge to provide their guarantee on principal and interest payments to agency MBS investors.

Freddie Mac’s “g-fee” currently stands around 20 basis points, it said. Fannie Mae hiked its g-fees to nearly 30 basis points last November as part of a plan to compensate for increased portfolio risk.

The increased fees are one way both Fannie and Freddie are offsetting the higher credit costs that come not only with the downturn in the U.S. housing market, but also with the increased protfolio risk arising from to higher legislated lending limits, and other likely policy changes that seem likely to further increase mortgage bankers’ reliance on the mortgage giants for funding mortgages.

The increased fees, however, also have the effect of raising rates that borrowers pay to obtain a conforming loan, something critics have said is counterproductive to efforts by legislators and policymakers to increase access to affordable mortgage loans.

The full investor presentation is available here.

(Update 1; adds Freddie CFO remarks)

Part of the reason both Fannie Mae and Freddie Mac’s stock has been punished recently is because of general concern over whether both GSEs can successfully weather the housing storm using current capital; the Wall Street Journal reported Wednesday that some market participants have been pricing in the expectation that both Fannie and Freddie will likely need to issue new stock. And alot of it.

The Journal estimated that both GSEs might need to pump out $20 billion in new issues this year, a number that could potentially double Freddie’s current float while diluting Fannie’s shares by as much as 50 percent.

From the story:

Equity issues of around $10 billion would have seemed outlandish just months ago, especially since Fannie and Freddie late last year raised new funds by selling $7 billion and $6 billion respectively in preferred stock. But the credit contagion has caused markets to question the ability of Fannie Mae and Freddie Mac to support the troubled housing market.

… In a recent research note, Friedman, Billings, Ramsey & Co. analyst Paul Miller suggests the companies should have capital equal to 3% of their direct mortgage holdings and 0.8% of those they guarantee. For Freddie, that would require $38 billion of capital, while Fannie would need $41 billion.

The rub is which capital measure an investor uses to see whether they meet that threshold. Fannie and Freddie publish several different ways of looking at this measure. There is capital defined by Ofheo, which excludes certain losses. On that basis, the companies are adequately capitalized, although markets don’t see it that way.

Then there is capital as measured under generally accepted accounting standards. At $44 billion, Fannie Mae would be all right on this measure, while Freddie Mac’s $26.7 billion in equity would be way under the $38 billion suggested by Mr. Miller’s approach.

Not that every investor is demanding this sort of massive dilution, of course, but there is enough speculation around that it is clearly pressuring both Fannie and Freddie’s share price. Freddie Mac has seen shares fall by more than 67 percent in the past six months, even including yesterday’s double digit rally; Fannie’s shares have fallen by more than 65 percent in the same time frame.

Both GSEs have said repeatedly that they feel they are adequately capitalized, after completing dueling stock issues late last year. Freddie Mac CFO Buddy Piszel on Wednesday said that the GSE is not planning on raising additional capital, Reuters reported.

“From a defensive position we feel okay,” Piszel is quoted as saying. “There is no dilutive capital raise planned.”

A jump in mortgage rates last week led to a drop in application activity, according to data released Wednesday by the Mortgage Bankers Association. A composite index of mortgage loan application volume maintained by the mortgage group registered 671.7 for the week ending March 7, a decrease of 1.9 percent on a seasonally-adjusted basis from 684.9 one week earlier.

The application index is calibrated to March 16, 1990; a reading of 671.7 means that application activity was roughly 6.7 times greater than when the index was first established.

The overall application index in recent months has been driven primarily by swings in refinancing activity, which headed downward last week as rates jumped significantly. Refinancing applications fell 4.7 percent, the MBA said, while purchase applications actually increased 1.6 percent. FHA and VA applications soared, jumping 6 percent, indicating that higher FHA loan limits may have begin to affect application volume for this segment of the mortgage market.

While many rate surveys found rates dropping last week, Housing Wire was among a few that covered a large jump in rates tied to turmoil in the secondary market for mortgages.

Formal rates studies by both Freddie Mac and Bankrate.com will be available tomorrow, but the banker’s group said that its survey found 30-year fixed-rate mortgages at an average of 6.37 percent last week, up 39 basis points from one week earlier.

For more information, visit http://www.mortgagebankers.org.

This is a question we get asked a lot, especially lately. The media has done the mortgage industry an injustice by promoting this without telling the whole story. What are even worse are the unscrupulous mortgage companies that try to advertise on the same lines, “Feds just cut interest rates, NOW is the time to refinance!”

Is a Fed rate cut really good news for mortgage rates? The answer may be surprising. The Feds can only control the Discount Rate (The discount rate is the interest rate charged to commercial banks and other depository institutions on loans they receive from their regional Federal Reserve Bank's lending facility--the discount window.) and the Fed Funds Rate (The federal funds rate, also known as the “fed funds” rate, is the interest rate charged when banks lend funds to one another. This is a short-term rate, or a rate that is two years or less in maturity.). This is very different from mortgage rates. Mortgage rates are affected by investors of mortgage-backed securities (Bonds). So our answer is no, if you have just read that the Feds have cut rates then it is historically not a good time to refinance.

So when is a good time to refinance? Only a professional Mortgage Advisor can truly help you with that question. One who watches the Stock Market and has their finger on the pulse of the industry. We pride ourselves in our ability to save our clients money by advising when and when not to refinance based on historical indexes and Bond Market activity.

If you have additional questions we welcome your calls (360.551.1819). Thanks for taking the time to visit.

http://www.RefinanceMortgageNow.net I've launched a new blog about the refinancing market. Get the latest on mortgage refinance, car refinance, bad credit refinance, ARMs, and morgages.