Refinance Free Credit

I have only been a loan officer for the last year. However, I feel like a veteran after how much has changed and occured in that last year.

When I started last April, sub-prime loans were still easy to get and the rates were competitive, if not better than conforming rates. At that time, nobody realized just how much their home values would drop. Everybody and his brother either was or knew a loan officer.

Now, sub-prime loans are pretty much dead. Qualifying standards on mortgages are much stricter. There are very few loans with pre-payment penalties. If anybody does an ARM, it is for at least 5 years now instead of 2 or 3. Home values continue to plummet and foreclosures continue to skyrocket. Long term fixed interest rates on conforming loans are still holding steady in the upper end of the 5% region, which is still extremely strong in the historical scheme of things.

There are countless mortgage companies that were thriving last year and are now out of business. The main reason for this is greed and poor lending practices. It was possible to get anybody with a social security number a loan not too long ago. Stated income, stated assets, appraisal waivers, no documentation, all kind of ways around the fact that a borrower was not well qualified for a mortgage.

The companies that relied on these types of loans are now gone, but the poor lending practices are not. I have witnessed companies with very good reputations and that are very well known, flat out lie and purposely deceive their borrowers to make a few extra dollars or just to get their business in the first place.

Baiting and switching, refundable deposits, lock in fees are some of the tactics I have seen used. The borrower can't comprehend that a huge, well known company would catually purposely deceive them, especially on something as vital as a mortgage. Some of these companies include Quicken, Ditech, Countrywide, and Wachovia. I would be happy to give more specific examples of their deception, but not right now.

I worked for a great broker in San Diego. The company is out of business now, but that is because of high overhead, stiffer competition, shrinking margins, and decreased sales volume. My boss was very demanding that I always be honest and upfront with my borrowers. I had to explain everything very thoroughly and always keep the borrower informed. We also gave our borrowers very square deals, especially for the amount of and quality of customer service they received. I am proud to have worked at 20/20 Mortgage, and very thankful for all that I learned and experienced.

The company I work for now in Portland is Rose City Mortgage Specialists. I truly am lucky to have found and been hired at this company. We are one of the nation's first green mortgage companies, we donate $100 of every loan to non-profit charities, we have won numerous awards on a local and national scale, we are honest, and we don't judge anyone. I can safely say that there is no other mortgage company in the nation that is doing as much good for the world as we are, all the while providing outstanding customer service and getting the job done at a fair price, timely, and correctly.

The whole point of this blog is that you must be careful out there when you are hunting for a mortgage. There are plenty of people in this world who will make money off of you at any cost. Shopping for a mortgage can be confusing and contradicting. Make sure to do lots of homework before you even start getting quotes. Familiarize yourself with mortgage terminology, specific loan details, and today's financial market. In the end, you are the boss and your mortgage broker works for you.

Lately we have all heard about the mortgage crisis. If you have not then you need to read up on it at some point. One thing that we love is when people, who are experts, jump all over the mortgage crisis and then say that the crisis will cause other crises just like the current one. Well, today we come in contact with a theory that the mortgage crisis might actually be causing divorce! Is this something that needs to be feared? Let’s take a look at what some of the people are saying about this situation. This is something that could be serious.

A Rise in Divorce Sales

Lately there has been a rise in the number of home sales that have come about because of divorce. Meeting their mortgage payments have been something that have caused some trouble in many people’s lives. The money struggle is very serious and this is something that people should never want to face in their lives. Divorce home sales are very tough to handle sometimes. This currently has shown that it might not be a coincidence, and more likely be related to the current thought of mortgage crisis.

Why is This Causing Divorce?

Well, these couples are facing troubles. They are deciding that it is a very constructive practice to blame each other for their struggles! They don’t decide that they will try to fix the problems, but decide separation is easier. Then these people have trouble deciding what to sell the house for! It seems like a never ending, vicious cycle. All this blaming of each other can lead to much more anger being thrown around. In the end all this results in another home being placed on the market.

What Can We Conclude From This?

While this could be a very serious issue it is more likely to become clearer within the next few months. This might be a trend, but it also might not. One thought is that the relationship was headed from a downfall and all it needed was a little money troubles to push it over the edge. These people have probably thought about it before and needed a reason. It is very unlikely that a happy couple goes straight to divorce within a day because of this.

Well then who is too blame? Simply put, they both are! They were the ones who got into this mortgage, and they did it together. A lot of people who are feeling the heat from their mortgage did not put in the time or effort to figure out if they could really afford this home. Many people just jump into it without even giving it much thought. This is why you need to take the time and really assess what is going on in your life personally and financially. Money troubles are not something that you want to face, but you need to give yourself a fighting chance. It is not quite clear how mortgage trouble and divorce are working together, this will take a few months. In the mean time you need to assess the mortgage you want to get before you sign on that dotted line. Hopefully this is something that will not affect marriages in the future. It is so important that you put yourself in a position to succeed.

Related:

• How Bad Will the Mortgage Crisis Get?
• Inside the Mortgage Crisis

Bank of America Corp. (BAC: 36.66, -2.08%) said Tuesday that it now expects losses on home equity loans to reach above estimates offered last month in the company’s first quarter earnings report, suggesting that the credit crunch that hit financial institutions with epidemic force during the back half of last year is now moving towards leveraged consumers as well.

BofA’s Liam McGee, president of the company’s consumer and small business division — 77 percent of the bank’s revenue base in Q1 — said yesterday that the bank now expects losses in its $118 HEL portfolio to top the 2.5 percent ceiling the company estimated in early April. McGee did not provide an estimate of how high the HEL loss rate might actually go, according to Bloomberg News, which first reported on the story.

Home equity lending has proven especially problematic for the Charlotte, NC-based bank during the first quarter. BofA’s allowance for loan losses in home equity lending jumped from $963 million to $2.6 billion in one quarter, as net charge offs rose 177 percent to $496 million. More than $1.78 billion of outstanding home equity loans were nonperforming in Q1, compared to $1.3 billion in the fourth quarter of 2007.

Much of the home equity losses absorbed by Bank of America are stemming from problems in California and Florida, the bank said on it’s April earnings call with analysts and investors. 39 percent of the bank’s HEL portfolio is in these two states, yet they represent they represent more than half of all charge-offs, BofA said.

Rounding out a rather bleak financial picture, McGee also said that the bank observed a “sharp increase” in spending on necessities by its credit-card customers in the past few months, Bloomberg reported.

The eponymous author of the finance & economics blog Calculated Risk speculated Tuesday that the boost in credit spending “is probably part of the reason retail sales (ex-autos) are holding up a little better than expected.”

If the speculation proves true, economic experts that spoke with HW suggested that HEL delinquencies could rise dramatically.

“BofA sits in a relatively good position to assess the overall health of its consumer lending base,” said one analyst, who asked not to be named. “It’s pretty clear that they took a broad look at consumer credit spending trends, and realized it was time to take the hatchet to HELs.”

Efforts by Senate Banking Committee Chairman Christopher Dodd (D-CT) to gain bipartisan acceptance for a sweeping housing proposal broke down late Friday, leading Dodd to push ahead with a proposed markup of his own housing package in a committee hearing scheduled for this Thursday. Talks with Richard Shelby (R-AL), the senior Republican on the Banking Committee, collapsed late last week, the Washington Post reported Tuesday.

Dodd had originally postponed a committee vote on a proposed housing package in hopes that he could win bipartisan support for the bill before pushing it into a formal debate with committee members; without Shelby’s support, HW’s sources said, it’s unlikely that any Democratic-led housing proposal will win Congressional approval.

Nonetheless, Dodd introduced the Federal Housing Finance Regulatory Reform Act of 2008 on Monday, scheduling it for markup on Thursday morning. The bill mirrors similar legislation passed last week by the House.

“I will bring to the Committee on Thursday can make a very significant difference for our nation by reducing foreclosures and restoring the safe, sound and dynamic operation of the mortgage markets,” Dodd said in a press statement on Monday.

Like the House bill proposed by House Financial Services Committee Chairman Barney Frank (D-MA), the Senate bill would authorize the Federal Housing Administration to insure up to $300 billion in refinanced mortgages for troubled borrowers, when the investor agrees to take a haircut on a portion of the outstanding debt. Critics suggest such loans are significantly more likely to default than those mortgages already on the FHA’s books, essentially pushing the housing mess into the lap of taxpayers.

“Two months ago, the federal government provided $30 billion to help a company on Wall Street,” Dodd said. “For a fraction of that amount, we can assist deserving Americans on Main Street.”

President Bush has vowed to veto the housing package, characterizing the FHA expansion proposal as a bail-out for both lenders, investors and irresponsible borrowers.

Like its House counterpart, the Senate bill also would include provisions covering GSE reform, which has long stalled in Congress despite Republicans’ efforts. It does not include House-approved provisions that would seek to limit servicer liability in modifying loans, and does not include a proposal to permanently fix current temporary “jumbo conforming” lending limits in certain high-cost areas — both proposals were included in the housing package confirmed by House leaders.

Despite realtors’ best efforts to paint the national housing picture as mixed — or even to explain away its own data — the latest quarterly housing survey by the National Association of Realtors painted an unmistakeable picture of a housing market under increasing duress. The NAR said Tuesday that 100 of 149 key metropolitan statistical areas posted price declines during the first quarter; in the fourth quarter, only 77 MSAs did so — meaning that the incidence of price declines grew by nearly 30 percent quarter-over-quarter.

All of which seems to make the NAR’s insistence that housing is defined by local markets more quixotic than usual, considering that more local markets than ever are facing increasing pricing pressure.

“It’s more important than ever to examine what’s happening with home prices at the city and neighborhood level,” said NAR president Richard Gaylord. “The old real estate mantra of ‘location, location, location’ is perhaps more relevant today than ever before.”

In the first quarter, the median existing single-family home price as calculated by NAR was $196,300, down 7.7 percent from one year ago, and off 4.8 percent from the fourth quarter alone. NAR economist Lawrence Yun said the drop in prices was due a dearth of jumbo mortgage transactions in the first quarter — the same explanation the relator-led organization gave for the fourth quarter price decline.

“These are highly unusual results because there were very few jumbo loan originations in the latest quarter, so sales are much slower in high-cost areas, and at the same time foreclosures related to subprime mortgages rose,” he said.

Yun also suggested that its numbers “don’t tell the whole story.” The NAR has been characterizing its pricing data as “unusual” for well over a year now; more than a few mortgage industry participants say the organization has cost itself credibility, as a result.

“It shouldn’t be unusual at this point to see prices drop, or become more widespread in terms of affected markets,” said one source, a senior executive at a large commercial bank. “If anything, what would be unusual is seeing prices increase, which seems to be the realtors’ baseline.”

While the effects of a mortgage-led credit crisis may be waning, the long-terms effects of a U.S. recession are just beginning, according to remarks delivered Monday by JPMorgan Chase & Co. (JPM: 46.48, -1.61%) chief Jamie Dimon.

Dimon said that he expects the U.S. to run through a recessionary phase similar to that of the early 1980s. That recession began in July 1981, and was at the time the worst recession since the Great Depression — a position that the current crisis and subsequent economic downturn seems determined to assume.

In the 80s-era recession, unemployment soared to 10.8 percent by in December 1982—higher than at any time in post-war era. Unemployment today stands at roughly 5 percent.

Dimon suggested that economic contraction could persist through 2010, and if so, said that JPMorgan’s consumer lending business would be likely to post increasing losses tied not to bad investments, but instead to macroeconomic losses.

Via Reuters:

If that happens, Dimon warned that New York-based JPMorgan and its national consumer lending businesses would suffer some significant losses, such as home equity losses doubling to $900 million by year-end.

Dimon further warned that the bank would have to continue boosting loan-loss reserves if economic conditions deteriorate, further eating into profit.

In the current quarter, Dimon said subprime mortgage losses could rise to between $200 million and $250 million, with prime mortgages generating about $100 million in losses.

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

Williams & Williams, one of the larger auctioneers in the foreclosed real estate space, said Tuesday morning that it will coordinate a nationwide auction of 565 properties during the third week of May. The nationwide auction event is largely being driven by the foreclosure fallout, the company said in a press statement.

“Just as foreclosures have sharply increased, the number of auctions is on the rise,” said Dean Williams, the company’s chairman and CEO. “Both those hoping to avoid foreclosure and those wanting to dispose of vacant and non-earning real estate are looking to a system that is more time-definite, transparent and efficient than the traditional means.”

Williams has long been an advocate for greater transparency in real estate transactions, something he says the auction process can deliver both for sellers and for buyers.

On May 13, Williams & Williams auctioneers in 26 states will start the bidding and continue for 72 hours, ending a three-day, nationwide auction blitz on May 15. Live auctions will be held online and on the lawn in Colorado, Connecticut, Florida, Georgia, Illinois, Indiana, Kansas, Maryland, Michigan, Missouri, New Jersey, New York, Ohio, Pennsylvania, Rhode Island, Virginia, West Virginia and Wisconsin, while properties in Arizona, California, Minnesota, Mississippi, Oklahoma, South Carolina, Tennessee, and Texas will be sold exclusively online via the company’s Web site.

“Foreclosures are nothing new. My family has been auctioning off foreclosed property since the mid-1800s,” said Williams. “What’s unfortunate is that auction — a process we feel is the best way to determine a property’s real value — is primarily being used as a last resort right now.” Williams said he would like to see more investors and servicers turn to auction as a first option for disposition instead.

“There’s no reason for someone to sell their stocks through an auction-based exchange and then go into foreclosure on their home just because the list-and-wait approach didn’t work.”

Williams said the way houses are bought and sold currently simply isn’t as efficient as it could be, and pointed to the sellers’ control over the final list price of their home.

“They have the most emotional commitment to the property and usually the least experience. Not exactly a winning combination,” he said.

With the market conditions as they are, Williams said he fears the continued speculative practice of listing properties in what sees as a closed market will lead to more foreclosures. “Selling a property at auction before foreclosure is imminent might just be answer to this mortgage crisis,” Williams suggested. Last year, the company rolled out an auction platform designed to offer loss mitigators an option in the short sale process.

Despite the explosive growth in auctions as the foreclosure mess has grown, there is clearly still room for further growth. Currently, auctions represent only a sliver of the overall housing sales market: just less than 1 percent of the $1.74 trillion in existing home sales in 2006.

For more information, visit http://www.williamsauction.com.

Triad Guaranty Inc. (TGIC: 2.07, -8.81%) said late Monday it swung to a huge first-quarter loss of $150 million, or a $10.09/share loss, from net income of $17.3 million, or $1.16/share, last year.

To say the quarterly loss missed estimates would be an understatement — analysts had expected a loss of $2.61/share, according to Thomson Financial.

“The negative trends we encountered during the second half of 2007 continued to impact us during the first quarter of 2008,” said Mark Tonnesion, Triad’s CEO. “Housing prices remain under pressure across the country and the distressed markets of Florida, California, Arizona and Nevada continue to be particularly affected.”

Tonneson said that distressed markets contributed 67 percent towards a $171.4 million jump in loss reserves during the quarter, underscoring the risk embedded in the company’s current insured portfolio. That risk led Triad to conclude earlier this year that it would be easier to replicate itself with a clean balance sheet, moving its existing portfolio into run-off, rather than attempting to recapitalize its existing operation; the company said earlier this month that it is in negotiations with Lightyear Capital LLC, a New York-based private equity firm, to establish a new mortgage insurer.

Total insurance in force reached $67.6 billion at the end of the quarter, Triad said, compared with $61.5 billion in the year ago period; all of the company’s $1.9 billion in new business was channeled through its so-called primary channel (primarily flow business, but also including bulk structured transactions). The insurer ceased underwriting insurance policies at the modified pool level late last year after losses on policies in the channel began to escalate quickly.

It’s well worth nothing that the vast majority of insurance in force at the end of the quarter sat in the company’s flow line of business, to the tune of $42 billion. That said, a look at credit quality and portfolio composition shows why Triad would rather run — and not walk — away from its existing book of business.

Credit quality worsens
A look at credit quality metrics finds both rising delinquencies and increasing loss severity at the troubled insurer, which was downgraded to junk status in early May by Fitch Ratings. Average severity on paid claims in Triad’s primary business was $42,600 in the first quarter, up from $31,300 one year earlier; average severity on modified pool claims jumped to a much more painful $65,000, up significantly from $23,700 in the first quarter of 2007, the company said.

Of $11.1 billion of primary risk in force, net of reinsurance and other hedges, Triad said that $1.4 billion sat in option ARMs; 12.3 percent of primary risk involves properties that are either second homes or investment properties, as well.

Delinquencies, as would be expected, continued their upward trending during the quarter. A total of 21,916 properties sat in some stage of delinquency at the end of Q1, up 30 percent from just one quarter earlier. The deliquency trends mirror those at MI competitor PMI, who also reported a similar trending in borrower delinquencies on Monday.

For more information, visit http://www.triadguaranty.com.

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

The U.S.-led mortgage market meltdown continued to exact a toll on the international banking community Tuesday morning, with two of France’s largest banks disclosing multi-billion dollars’ worth of write-downs tied to ongoing woes in mortgage markets stateside.

Paris-based Societe Generale, France’s second- largest bank by market value, said fell net income dropped 23 percent to 1.1 billion euros ($1.71 billion) as the bank absorbed write-downs of 1.45 billion euros ($2.24 billion) during Q1, compared to 2.05 billion euros of write-downs one quarter earlier. SocGen has been reeling since its now-infamous disclosure of billions in losses tied one rogue trader in the fourth quarter.

Societe Generale also said that its net residual counterparty exposure to monoline insurers actually rose to 800 million euros ($1.23 billion) from 400 million ($618.7 million) at the end of last year.

Not to be outdone, fellow French bank Credit Agricole — who stateside cycling fans may know via their eponymous road cycling team, a fixture in the Tour de France — said that it would look to raise capital as losses from U.S. mortgage exposure continued to mount.

Ahead of a scheduled earnings report on Thursday, the bank said that profits fell by 24 percent in the first quarter, and that it would look to raise roughly 5.9 billion euros ($9.2 billion) as a result. It absorbed 1.21 billion euros ($1.87 billion) worth of write-downs during the quarter.

Speculation was also rampant in the international press that Credit Agricole’s Calyon investment banking arm was set to jettison chief Mark Litzler over subprime-led losses that have hurt the French bank to a greater degree than its main rivals. Bloomberg News first reported on the rumors Monday, and said that neither Calyon nor Credit Agricole would comment on the rumors.

Solidifi Inc., a collateral valuation and risk management services provider based in Canada, said Monday evening that it has opened its U.S. head office in Chicago, Illinois, and extended its suite of solutions into the national mortgage market.

“Through our work with U.S. based lenders and global mortgage insurance companies, we are well prepared to provide immediate solutions to the collateral risk assessment challenges currently facing the mortgage industry,” said Jason Smith, president and CEO of Solidifi.

In light of impending market changes surrounding the introduction of the Home Valuation Code of Conduct — which in particular creates market opportunity for appraisal management companies — Solidifi said it had invested significant resources preparing its Solidifi Values collateral management platform for the U.S. market.

The so-called HVCC has been derided by many industry participants as a one-sided solution that railroads appraisers; others have questioned whether one state’s Attorney General should be able to change national industry practice. New York AG Andrew Cuomo first announced the deal with Fannie Mae and Freddie Mac in early March, and his office has been steadfast in its backing of the proposal.

Expecting that some version of the HVCC will go into effect, Solidifi says that it’s done its best to help appraisers maintain their core fee structure, rather than eroding fees, as some have feared.

“Solidifi’s fully transparent model is founded on the premise of appraiser independence, quality, and speed — not just the lowest fee,” said Smith. “Appraisers conduct business with mortgage participants by setting their own fees, and competing in an open market based on real-time service, speed, and quality metrics.

“With our configurable and automated assignment algorithms, mortgage participants can set their collateral policy geographically and allow Solidifi to transparently manage the valuation transaction within an HVCC compliant framework as required.”

Regulatory compliance is a fundamental contributor to appraisal quality and acceptability for use in mortgage lending. Annual USPAP issuance, additional state and federal requirements, and changing end investor requirements will continue to be key drivers to collateral risk management protocol. Solidifi said its platform enforces compliance to the lender’s requirements throughout the lifecycle of the appraisal, from order through to acceptance.

To learn more, visit http://www.solidifi.com.