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The Great Loan Blog

The Great Loan Blog
A spirited discussion of real estate, the mortgage business and the economy.

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Investors love resetting ARM rates, who knew people couldn't afford the rat
2007-09-15 04:36:00
National Mortgage News will run an interview Monday with Countrywide CEO Angelo Mozilo. In the interview, conducted Thursday, Mozilo tries to "clarify misconceptions in the media about why consumers are going delinquent on their mortgages. He blames a majority of the problem on job losses and sagging home prices -- not ARM resets," says NMN editor Paul Muolo."Resets are not the issue," Mozilo told NMN.Well, yeah... resets weren't an issue as long as home prices kept going up -- you just refinanced into another loan. Hopefully, NMN asked Mozilo why Countrywide cutback ARM production from $19.3 billion in August 2006 to $8.3 billion last month. (Turn sarcasm on.) The resets can't possibly be a problem. Investors love a solid reset from 5% to 7% on their loan portfolio, nothing lines the pockets better. The real problem is these borrowers. They can't pay the higher rates. In the 2-3 years their loan was fixed, all was well. Then property started to decline and many of these folks ca...
More About: People , Love , Rates , Rate

Investors love resetting ARM rates, who knew people couldn't afford the rat
2007-09-15 04:36:00
National Mortgage News will run an interview Monday with Countrywide CEO Angelo Mozilo. In the interview, conducted Thursday, Mozilo tries to "clarify misconceptions in the media about why consumers are going delinquent on their mortgages. He blames a majority of the problem on job losses and sagging home prices -- not ARM resets," says NMN editor Paul Muolo."Reset s are not the issue," Mozilo told NMN.Well, yeah... resets weren't an issue as long as home prices kept going up -- you just refinanced into another loan. Hopefully, NMN asked Mozilo why Countrywide cutback ARM production from $19.3 billion in August 2006 to $8.3 billion last month. (Turn sarcasm on.) The resets can't possibly be a problem. Investors love a solid reset from 5% to 7% on their loan portfolio, nothing lines the pockets better. The real problem is these borrowers. They can't pay the higher rates. In the 2-3 years their loan was fixed, all was well. Then property started to decline and many of these folks ca...
More About: People , Love , Rates

Mortgage Brokers say 57% of clients couldn't refi in AUG.
2007-09-12 07:48:00
NEW YORK, Sept 11 (Reuters) - Some 57 percent of mortgage broker customers with adjustable-rate loans were unable to refinance into a new loan to avoid higher monthly payments in August, a national survey reported on Tuesday.The poll of 1,744 brokers in the last week of August found that subprime borrowers had trouble refinancing mortgages because loan programs were no longer available, according to a statement from Campbell Communications, the Washington-based research firm that conducted the survey. Prime borrowers were impeded by appraisals and high loan-to-value ratios, it said. Original ArticleThe fear within the industry has risen dramatically. Many banks and lenders have resorted to cutting appraisal reports from reputable firms 50-100k to deny loans or to limit their risk. This is happening especially in CA. The lenders that are standing have tightened guidelines and leaned on the appraisal review department to knock down values. I have seen appraisals with 5-6 comparables f...
More About: Brokers , Mortgage , Clients , Mortgage Brokers , Client

Incredible Price Cuts for Countrywide REO
2007-09-11 05:00:00
Have you seen the CA Countrywide REO list recently? Wow, some huge price cuts in the last two weeks. I can't even imagine what is going on in some of these neighborhoods with home prices on their REO getting dropped by 15-20% since they were listed just 6-8 weeks ago. On most of these Countrywide is taking a bath. Your thoughts if you know these areas well would be appreciated. National list here.
More About: Price , Incredible , Cuts

Why it all matters.
2007-09-10 22:37:00
It is well understand that the credit crunch has effected real estate in the last six months and especially so with the tightening of programs for the jumbo market. The impact of the dramatic change in the mortgage industry will have far reaching effects on clients now and for years to come. Many people don't think they have any involvement with the 'Subprime' problem as the media likes to refer to the credit situation within real estate. The effects are wide ranging and people won't realize the impact on their own pocket book until they have to sell, refinance or purchase. For people looking to sell now or anytime in the next few years need to face the reality of today's market not the fantasy land of what a friend sold for in May. I believe values in bubble markets will continue to adjust lower each month as the inventory increases, closed transactions decline, and the tight money environment reduces the available pool of buyers. As an example, a client could have perfect cre...
More About: Matters

An option for today's home sellers:Lease-Options
2007-09-06 12:56:00
The subprime fallout has made the once-slam-dunk home loans more difficult to obtain. While some neighborhoods continue to be very active, other areas have slowed considerably.In addition, the first notion of "back to school" already has hit many second-home owners who are beginning to schedule the "winterization" of the family cabin. Instead of going through another off-season with little use and significant maintenance, some owners will use the last few weeks of the summer season to show -- and hopefully sell -- the family getaway, raising for-sale real estate inventory levels in popular areas.If your house or cabin already has been sitting for sale long enough to bite into your comfort and affordability zones, you might want to consider a lease-option.A lease with an option to buy often can solve a two-mortgage problem for a seller, and provide a cash-poor buyer with an opportunity to "try out" a house while getting a portion on the monthly rent credited toward a down payment.Man...
More About: Home , Options , Sellers , Lease

Job Losses Heaviest in months.
2007-09-06 03:11:00
What's the trickle down from these job cuts? Many of these have occured in the hottest job areas. Have you heard any stories or any anecdotial evidence of this affecting your local economy?
More About: Losses , Months , Month , Mont

Property Speculators first to default.
2007-09-05 02:06:00
The Mortgage Bankers Association (MBA) has released a report showing that as many as 1 in 5 mortgages currently in default in California belongs to borrowers who are not living in the homes with the defaulted loans. The default rates for investor loans were even worse in Nevada, Arizona and Florida, where one-quarter to one-third of all defaulted mortgages as of the end of June were related to investor loans, according to the report. The MBA defines "defaulted mortgages" as those that are 90 days or more past due or in foreclosure. The rapid rise in default rates has led some members of Congress to call for urgent action to aid borrowers who are threatened with the loss of their homes. But the MBA report suggests that some of these borrowers do not deserve to be helped. Many of the vacant foreclosed homes popping up throughout the U.S. these days were bought by speculators who planned to "flip" their investments for a quick profit but got trapped with the market took a sudden down-t...
More About: Property , Speculators , Prop , Pert , Rope

"When should I buy a home?" The quick answer.
2007-09-01 23:42:00
Thousands of numbers, graphs, charts and economic reports can be boiled down for the first time home buyer looking in the previously smoking hot markets for the quick explaination to the question of "When should I buy a home?" When you see this chart of Countrywide's total national foreclosure inventory that they own and are trying to sell via thousands of realtors across the country start to stabilize and then move down again things are getting better. I don't think that will happen until 2010-11 as the amount of loans resetting to much higher rates is just starting in earnest this Oct/Nov, right before Christmas. These are homes that went to the auction step and Countrywide was the high bidder and won because they were trying to protect their skin in the game. Chart courtesy of the good guys at Countrywide Foreclosure Blog. Here is a recent scheduled adjustable mortgage reset chart also:
More About: Answer , Home , Quick

FHA Plan:Bring a water gun to fight a fire.
2007-09-01 00:08:00
The markets waited with baited breath for the announcement of the Bush adminstrations plan to rescue subprime home owners from foreclosure:"Traders seem to have packed away concerns regarding a speech by Federal Reserve Chairman Ben Bernanke, focusing instead on aid for subprime lenders being hinted at by the Bush administration. According to The Wall Street Journal, about an hour after Bernanke's speech, Bush is expected to announce plans for a change in the Federal Housing Administration mortgage insurance program to allow more people to refinance with FHA insurance if they fall behind on adjustable-rate mortgages. The change would allow 80,000 more homeowners in 2008 to receive federally insured mortgages on top of the 160,000 projected to use the insurance, the Journal reported."This helps very few people in California, Nevada, Florida, etc. The states most affected by the resetting of subprime loans and the rising wave of foreclosure filings. As an example visit the Countrywid...
More About: Fight , Water , Fire , Plan

FHA Plan:Bring a water gun to fight a fire.
2007-09-01 00:08:00
The markets waited with baited breath for the announcement of the Bush adminstration's plan to rescue subprime home owners from foreclosure:"Traders seem to have packed away concerns regarding a speech by Federal Reserve Chairman Ben Bernanke, focusing instead on aid for subprime lenders being hinted at by the Bush administration. According to The Wall Street Journal, about an hour after Bernanke's speech, Bush is expected to announce plans for a change in the Federal Housing Administration mortgage insurance program to allow more people to refinance with FHA insurance if they fall behind on adjustable-rate mortgages. The change would allow 80,000 more homeowners in 2008 to receive federally insured mortgages on top of the 160,000 projected to use the insurance, the Journal reported."This helps very few people in California, Nevada, Florida, etc. The states most affected by the resetting of subprime loans and the rising wave of foreclosure filings. As an example visit the Countryw...
More About: Fight , Water , Fire , Plan

Senators and Bankers beg for Jumbo Loan Changes
2007-08-29 03:27:00
In response to a tightening of credit in the jumbo-loan market, lawmakers are calling on Congress to let Fannie Mae and Freddie Mac purchase substantially larger loans on homes in high-cost metro areas. Currently, Fannie and Freddie can purchase single-family homes for up to $417,000 in the continental U.S. In May, the House passed a bill that would let Fannie and Freddie purchase and securitize bigger mortgages in high-cost areas within the continental U.S. In areas where the median price exceeds to $417,000 cap, the current proposal would permit Fannie and Freddie to purchase loans up to that region's median price or $625,000, whichever is lower. Now Reps. Barney Frank, D-Mass, and Gary Miller, R-Diamond Bar, have called on the Senate to raise the conforming loan limits even higher. "It now is clear that we underestimated in the House bill how far we should raise the conforming loan limit, and the current crises in the mortgage market demonstrate we should raise it to a higher le...
More About: Loan , Senator , Chang , Chan , Jumbo

Senators and Bankers beg for Jumbo Loan Changes
2007-08-29 03:27:00
In response to a tightening of credit in the jumbo-loan market, lawmakers are calling on Congress to let Fannie Mae and Freddie Mac purchase substantially larger loans on homes in high-cost metro areas. Currently, Fannie and Freddie can purchase single-family homes for up to $417,000 in the continental U.S. In May, the House passed a bill that would let Fannie and Freddie purchase and securitize bigger mortgages in high-cost areas within the continental U.S. In areas where the median price exceeds to $417,000 cap, the current proposal would permit Fannie and Freddie to purchase loans up to that region's median price or $625,000, whichever is lower. Now Reps. Barney Frank, D-Mass, and Gary Miller, R-Diamond Bar, have called on the Senat e to raise the conforming loan limits even higher. "It now is clear that we underestimated in the House bill how far we should raise the conforming loan limit, and the current crises in the mortgage market demonstrate we should raise it to a higher le...
More About: Loan , Chang , Chan , Jumbo

A Distorted View:Existing Home Sales.
2007-08-27 20:09:00
Today we received the existing home sales from the National Association of Realtors and I wanted to comment on these a bit. The headline numbers are off 9% from last year and the median price is down only 0.6% nationally. The median is being distorted by sales volumes above the median in each area propping up what would otherwise show falling home prices in these areas. The greatest decimation in the market has been in middle class housing. Home s priced below 500k have seen the largest price declines and volume decreases. Sales at the high end of the market continues to stabilize the median value. The western region has a median home value of $349,400. The median in Los Angeles for example is about $575k. I think median values are pointless as a forecasting tool. What would be the point of knowing the median price of stock on the NYSE? What's the point in knowing the median price of gas nationally? The price of gas in CA is higher than most other markets because of taxes and a lack...
More About: View

Bailout?
2007-08-25 18:29:00
In the spirirt of democracy and a good saturday round table discussion, what is your view on the proposed bailout plans that the presidential candidates have been discussing?If you would like to voice your opinion on a bailout please visit: Petition.Please voice your thoughts and comments below:Mortgage Insider dishes it straight on housing and the mortgage market.
More About: Bailout

Where did the punchbowl go?
2007-08-25 06:31:00
Having personally lost a small fortune in the stock market in 1999 and 2000. I can tell you that markets can stay irrational for a very long time. Any seller that has had his/her property on the market for 60-90 days and hasn't received a reasonable offer is nuts. They need to drop their price or sit out the credit crunch. The credit crunch could last many years.The big problem I see and I speak to dozens of realtors a week; is that sellers feel that their "equity" is real money. I always have to remind people that something is worth only what another person is willing and able to pay. The ability of people to pay irrational prices for homes in bubble areas is gone for the middle class market. Remember the rich are different. Working class vs asset class. The loose financing is gone. Stated loans are on life support. Real income for middle class Americans has barely kept pace with inflation the last few years. At the end of the day Wall St can create the wildest financing known to ...
More About: Punch , The Punch , Bowl

Shocking move by FED to aid CITI and Bank of America.
2007-08-24 22:31:00
In a shocking revelation after market hours the FED on August 20th wrote a letter allowing the bank(i.e. retail banking)divisions of Bank of America and Citi group to extend to their brokerage divisions capital(i.e. loans) up to 25% of their capital. The previous limit was 10% for all banks with brokerage divisions. This rule has been in place for decades to prevent stock/bond market calamity from filtering back to affect the safety of the retail bank operations. Of course all accounts are FDIC up to 100k but this points to a very large situation the FED and the world's banks know that they are trying to fix behind the scenes. Their was no announcement on monday when this letter was effective. The news comes out after stock market hours on a Friday. The letter can be found here.Their server is jammed currently with people trying to read the letter. Also read the CNNFN story here:This is a developing story and I will have more later tonight.Mortgage Insider dishes it straight on hous...
More About: Bank of America , Move

Lose an arm and a leg:Get an option arm today!
2007-08-23 00:55:00
I have long hated this mortgage product. I am a big proponent of getting an old fashioned fixed rate. I completely understand the purpose of this loan structure, but in no way did the 12% of people that did them last year really understand the product. We usually see people get the picture about a year in when the balance has skyrocketed. Unfortunately, the NEGAM is the payment they could afford not the interest only. In addition, with the financial engineering in these products people buy the idea of the NEGAM payment and don't notice the high note rate which is the real interest rate that the borrower is charged. This product is being eliminated at lenders/banks daily. The real concern for people with these is that they get out from under them and into a safer loan product. Cheers and don't let the video spoil your dinner. From our friends at:http://armcrash.com/Mortgage Insider dishes it straight on housing and the mortgage market.
More About: Today

Bank of America Helps Rival Countrywide.
2007-08-23 00:35:00
Countrywide and BOA are competitors across a variety of business segments. It came as a surprise to the markets that Bank of America had agreed to buy $2b dollars worth of Countrywide preferred stock. Countrywide shares rose sharply in afterhours trading, the perception is that this is the start of a move to merge the companies together. Bank of America is not a star in terms of mortgage origination. Countrywide needs a source of cheap funds and BOA has an enormous pool of savings and CD account money to tap into. On the surface it looks like a great merger. But, I think the real issue of concern is that Countrywide is going around Wall St with cap in hand to raise any money that is available. As of now the terms of the preferred stock deal are not known but this wasn't cheap money so it makes you wonder if the giant Countrywide is going to fall into another banks arms or just fall apart. Heard any news, rumors about Countrywide? Post a comment. Mortgage Insider dishes it straight ...
More About: Countrywide , Riva

Countrywide Seeks Cash.
2007-08-22 04:39:00
As a source of mortgage funds most lenders such as Countrywide , Ditech and all the hundreds of mortgage bankers repackaged the debt to get fresh funds to lend with the help of the big Wall St investment banks. These debt securities were sold to mutual funds, hedge funds, foreign banks, etc. The appetite for CDOs as they are known has dried up for all but the most stellar loan scenarios. The investors that bought these instruments have been burned and are demanding higher rates or are completely done with mortgages altogether. So where do the lenders get more money to lend? Going back to the old school banking playbook, Countrywide is taking the lead on this one and soliciting the highest CD deposit rates in the country. Check for yourself by looking at your local paper or checking bankrate.com under the CD tab.They need to raise funds ASAP to fund the 40 billion dollar monthly pipeline. You will notice that many large lenders are on the CD tables with very attractive rates for the C...
More About: Cash , Seek

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