Refinance Free Credit

Banks continued to tighten lending standards for mortgage borrowers over the past three months, the Federal Reserve reported Monday; in particular, prime borrowers are now beginning to feel the credit squeeze, although banks said lending standards had tightened across the board for mortgages in all credit and lending categories.

The Fed’s quarter survey of loan officers found evidence of broad credit tightening outside of just mortgages; almost no banks had eased credit terms on any type of major lending during the first three months of 2008.

Market experts point to tightened credit standards as one driving reason why so many troubled mortgage borrowers find themselves unable to refinance into a new mortgage that might keep them in their home.

60 percent of U.S. banks said they had tightened standards for prime mortgages during the first quarter, up from fourth quarter numbers; among non-traditional mortgage lenders, including Alt-A, 75 percent said they had tightened lending standards. The moves by U.S. banks come as Alt-A mortgage performance has deteriorated rapidly, and cracks are beginning to emerge even among prime jumbo borrowers as well.

Last week, rating agency Standard & Poor’s cut 184 prime jumbo RMBS classes, and warned on hundreds more, as it said that delinquencies among prime jumbo borrowers had increased by more than 68 percent since December of last year.

HELOCs — among the most problematic class of mortgage-related lending — saw credit standards tightened 70 percent of banks in the first quarter, while 50 percent said they had tightened terms on existing secured lines of credit.

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The reverse mortgage trend is officially hot: WSFS Financial Corp. (WSFS: 49.936, -2.05%), the parent of WSFS Bank, said Monday that it had purchased a majority stake in wholesale reverse mortgage lender 1st Reverse Financial Services, LLC.

The investment marks the second major financial institution in roughly one month to jump into the now-booming reverse mortgage space; MetLife, Inc. said in early April that it would acquire New Jersey-based EverBankReverse Mortgage LLC.

A reverse mortgage allows homeowners age 62 or older to convert some of the equity in their home into tax-free cash, a line of credit, monthly income or a combination of the three. There is no mortgage payment and repayment of the loan is not made until the homeowner permanently leaves the home. Most reverse mortgages are government-insured products.

WSFS said it made the move because it expects “high demand” for reverse mortgages as Baby Boomers transition into retirement. More than 7,400 people each day will turn 62 over the next three years, according to Census estimates; and almost 50 percent of workers have set aside less than $25,000 for retirement, according to research from the Employment Benefit Research Institute.

“In addition to WSFS’ long history and extensive experience with the reverse mortgage business, this acquisition is the right investment in the right industry at the right time, especially as baby boomers need more choices to finance their retirements,” said Mark A. Turner, WSFS President and CEO.

WSFS has originated reverse mortgages via retail banking channels for nearly 15 years; the acquisition marks the institutions move into wholesale origination.

As an operating subsidiary of WSFS Bank, 1st Reverse will continue to operate under their existing name and will remain headquartered in suburban Chicago, the bank said in a press statement.

Disclosure: The author held no position in WSFS when this story was originally published. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.

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Equifax Inc. (EFX: 38.85, -0.69%) said Monday that it has launched a tool that targets forward-looking valuations of mortgage-backed and related securities. Called Mortgage Market Risk Insight, or MRI, Equifax touted it as the first such tool on the market that can help investors assess credit risk tied to underlying collateral.

“The real power of Mortgage MRI is its ability to segment the universe of borrowers that are still current on their mortgage loans to help improve mortgage credit risk and cash-flow analytics,” said Dann Adams, president, US Consumer Information Solutions, Equifax. “Mortgage MRI is the only tool available that provides aggregated credit data derived from the entirety of borrower credit profiles to gauge credit risk on mortgage debt.”

Equifax, along with other major consumer credit bureaus, has moved heavily into the mortgage market as investor interest in credit risk has become a front-and-center issue during the ongoing credit crisis.

“With increased sensitivity to credit risk in the mortgage secondary and capital markets, the industry must find new ways to leverage information,” said Tom Madison, senior vice president, Equifax Mortgage Solutions.

Mortgage MRI segments zip-level data by vintage, loan type and first mortgage payment status. Once the data is segmented, Mortgage MRI leverages a set of indicators and models to analyze credit risk and the likelihood of a certain borrower profile filing for bankruptcy over the next 24 months. The results are then aggregated for subscribers.

Equifax in December rolled out a software data suite targeting loss mitigation efforts; the data provided by major credit bureaus is often a vital step in the process of working with troubled borrowers.

For more information, http://www.equifax.com.

Disclosure: The author held no position in EFX when this story was originally published. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.

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In the wake of Friday’s announcement by Bank of America Corp. (BAC: 38.92, -2.19%) that it likely would not take on any of Countrywide Financial Corp.’s (CFC: 5.03, -15.89%) outstanding debt, analysts are buzzing that BofA is now likely to renegotiate its deal to purchase the troubled lender — or that the banking giant could walk away altogether.

That’s the conclusion of Friedman, Billings, Ramsey analyst Paul Miller, who said in a note to clients this week that the banking giant would likely renegotiate the purchase price to between $0 and $2 per share in the wake of mounting losses at the Calabasas-based lender.

Via Reuters, who first reported on the story, Miller concluded that Countrywide’s loan portfolio has deteriorated so rapidly that it currently has negative equity. He called BofA’s announcement on Countrywide’s debt “most likely the first step in renegotiating the entire deal.”

On Friday, Standard & Poor’s said it had cut Countrywide’s core credit rating to junk, citing “the new level of uncertainty as to the ultimate legal status of Countrywide’s creditors after the merger.” BofA said in its statement that it may not support as much as $24 billion of the lender’s debt once the merger is completed.

Miller suggested that markdowns on Countrywide’s loan portfolio may grow larger than Bank of America had planned for when it originally penned a $4 billion deal to purchase the lender in January.

“We believe Countrywide has significant credit risk on its balance sheet, not only in its loan portfolio, but in its subprime and HELOC securities and residuals, its representations and warranties on loans sold, and in loans held outside of banking operations,” Miller is quoted by Reuters as saying.

Countrywide held $28 billion of option ARMs, $14 billion in HELOCs, $20 billion in second liens, and $19 billion of hybrid ARMs at the end of the first quarter.

Disclosure: The author was long CFC and held no other relevant positions when this story was originally published. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.

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Our prayers have been answered. As you may know for the last couple of months we have been trying to refinance with no luck. We have gotten screwed by at least 2 brokers who did nothing for us except run our credit way too much. As a result our credit score went down even more.

I honestly thought all hope was lost. Then a miracle happened. Ocwen actually reached out to help us. They actually have a program to help homeowners who have adjustable rate mortgages. It is called a loan modification.

Well it was a two week long process but we made it through. We were approved for the loan modification. We had to make a payment that was equal to 2 mortgage payments. We also have to make our June and July payments on time (on the 1st not the 16th). If we are late the loan modification is no longer available to us. After we make those 2 payments on time, our loan automatically changes from an adjustable rate to a fixed mortgage for the life of our loan.

Our interest rate went up half of a percent and our mortgage payment went up $100. We are very happy with that. My plans are to pay our June and July mortage payments ASAP. I do not want to screw this up at all. I am going to make sure I make every payment.

One of the best things about this loan modification is there were no additional costs. It is not a refinance so we did not have those costs which in the past were easily $3000 or more.

Unfortunately we had to go into our little emergency fund but that is ok. I just have to build it back up. It is strange, I did not realize how important our home was to me until we were on the brink of losing it.

We are so happy that the people at Ocwen were able to help us out of the very deep hole that I dug. The reps were so nice and polite. They definitely took those extra steps to help us keep our home. You hear so much about mortgage companies taking people homes and I am glad Ocwen is not want of those companies.

So, if you or someone you know is in danger of losing their home, please advise them to talk to their mortgage company. I know sometimes when you are so behind on payments you just want to avoid the mortgage company. You know what I mean. Not answering the phone and ignoring the notices that come in the mail. Just take the chance and ask for help. You really have nothing to lose by asking. You have to be honest about it and see if they offer any type of help. You just may be surprised at the response.

Tags: mortgage, ocwen, refinance, debt, what i am learning, adjustable rate mortgage

Federal prosecutors have intensified their investigation into Wall Street and the mortgage trade, forming a new task force led by assistant U.S. attorney Jonathan Green. Inquiries will range from fraud by brokers, to securities fraud and insider trading allegations, according to a report Monday in the Wall Street Journal. The group includes officials and agents from the FBI, Secret Service, the FDIC, and the New York State Banking Department.

Benton Campbell, the U.S. attorney for Eastern District of New York in Brooklyn involved in the task force, stressed in an interview with the Journal that the group is not out on a mortgage-style witch hunt:

Campbell said the “jury is still out” on just how much criminal activity the office might find, particularly on Wall Street, which saw a sudden decline in the value of securities backed by pools of mortgages last year. “There are market forces in play in that area, and that doesn’t necessarily mean there is fraud,” said Mr. Campbell, 41 years old.

That said, the very formation of the task force likely signals recognition by prosecutors and investigators that fraud is out there.

At least some of the ongoing investigations within the Eastern District are focused on now-defunct American Home Mortgage Investment Corp., the Journal reported, including allegations that company officials “made misrepresentations in securities filings about a company’s financial position and the quality of its mortgage loans, including failing to disclose a rising number of loan defaults, or engaged in questionable accounting to hide losses.”

The investigation overlaps with a separate investigation by the FBI into subprime lending that now encompasses 20 firms. That investigation was initially disclosed to the press in January.

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