Mortgage news

News, trends and analysis of the mortgage and credit market

Thursday, January 31, 2008

How Congress helped create the subprime mess!




January 31 2008 CNN.Money.com
Executives in Houston high-rises can rest easy. The mortgage industry has officially replaced Big Oil as Washington's favorite political punching bag.

But before our elected officials in Congress get too preachy about the lousy lending practices that led to today's mortgage mess, first they ought to consider Congress's own role in laying the groundwork.

The fact is, neither the expansion of the subprime market nor the proliferation of exotic interest-only or option-ARM mortgages would have been possible without federal laws passed in the 1980s.

Lawmakers may say they are outraged, but it was actually two key pieces of legislation that primed the pump for the housing implosion: the Depository Institutions Deregulation and Monetary Control Act of 1980 (DIDMCA) and the Alternative Mortgage Transactions Parity Act of 1982 (AMTPA).
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Wednesday, January 30, 2008

Fed Expected to Cut Rates Another Half Point, to 3%




January 30 2008 CNBC.com

The Federal Reserve is expected to lower U.S. interest rates another half-point Wednesday as part of an ongoing aggressive effort to spare the economy from the worst effects of a deep housing slump and credit crunch. Financial markets saw an 80 percent chance the Fed would lower benchmark overnight rates by a steep half-percentage point after a weak reading on fourth-quarter economic growth was released Wednesday, as the central bank seeks to counter the risk of a U.S. recession. Weaker consumer confidence and spending data, along with rising housing inventories and plunging home prices, may have kept Fed officials concerned about downside risks to growth, economists explain.
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Saturday, January 26, 2008

GSEs's regulator opposes stimulus plan's mortgage fix




January 26 2007 Money.CNN.com
Government agency takes stand against letting Freddie Mac and Fannie Mae buy higher-cost loans. The government agency, the Office of Federal Housing Enterprise Oversight (OFHEO), which has regulatory power over Freddie Mac and Fannie Mae opposes lifting the loan caps for the two agencies, part of the economic stimulus package announced Thursday. The stimulus package includes a proposal that temporarily raises loan limits for the government sponsored enterprises (GSEs), Fannie Mae and Freddie Mac. That could kick start sluggish residential real estate markets in high cost areas that have suffered through the liquidity squeeze that started last summer. "We are very disappointed in the proposal to increase the conforming loan limit as we believe it is a mistake to do so in the absence of comprehensive GSE regulatory reform." said James Lockhart, director of OFHEO, in a statement last Thursday.
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Commercial Mortgage Rates Surging Despite Fed's Efforts To Prevent Deteriorating Real Estate Market




January 26 2008 Bloomberg.com
The cost of borrowing for apartment buildings, offices, retail properties and hotels climbed as much as 1.25 percentage points, while the yield on 10-year Treasury notes fell 1.43 percentage points in the past three months to the lowest since 2003 following four interest rate cuts. Bernanke's easing hasn't stopped the $3.2 trillion commercial market from starting a slide that mirrors the housing decline, where prices have dropped for the first time since the Great Depression. Delinquencies of securitized commercial mortgages may quadruple in the next 18 months to almost 4 percent, said Kenneth Rosen, an economist at University of California, Berkeley. A buyer could borrow $1 billion a year ago and expect to pay annual debt service of $58 million. Today that same mortgage would have an annual cost of $76 million. The average down payment lenders required rose to 23 percent of the purchase price in the fourth quarter, the highest in three years, from 19 percent in the second quarter, according to New York-based Merrill Lynch & Co.
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Wednesday, January 23, 2008

Surprise Rate Cut May Speed Recovery Of Ailing US Economy




January 23 2007 CNBC.com

There is no quick cure for what ails the U.S. and global economies, but if the Federal Reserve's emergency interest rate cut Tuesday can instill some confidence among consumers, consumers and investors, it may speed a recovery. Interest rate reductions take time to work, and they cannot undo the damage inflicted by the tumbling U.S. housing market and subsequent credit contraction that has curbed the flow of cash to households and businesses, pushing the economy to the brink of a recession. The Fed's efforts, coupled with a $150 billion fiscal stimulus plan of the Bush Administration, can coax cautious consumers and companies back to normalcy and shorten any U.S. downturn.
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Tuesday, January 22, 2008

Lenders continue to be knocked by turmoil in credit and mortgage markets




January 22 2008 MarketWatch.com
A quartet of regional banks reported steep declines in profit on Tuesday as lenders continued to be knocked by turmoil in credit and mortgage markets. National City Corp. said it swung to a fourth-quarter loss of $333 million, or 53 cents a share, from a profit of $842 million, or $1.36 cents a share, a year earlier. The Cleveland-based bank said the loss resulted from a large credit-loss provision, losses on mortgage loans held for sale, indemnification charges from Visa Inc. and severance charges resulting from job cuts. The company also recorded a goodwill impairment charge of $181 million, or 26 cents a share, associated with the mortgage business. Analysts polled by Thomson Financial, on average, projected a per-share loss of 26 cents, excluding some items.
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The Fed Cuts Rates by 75 basis points




January 22 2008 BusinessWeek.com
The Federal Reserve, confronted with a global stock sell-off fanned by increased fears of a recession, cut a key interest rate by three-quarters of a percentage point on Tuesday. The Fed said it was cutting the federal funds rate, the interest that banks charge each other on overnight loans, to 3.5 percent, down by three-fourths of a percentage point from 4.25 percent. The Fed decision was taken during an emergency telephone conference with Fed officials on Monday night. Those discussions occurred after global financial markets had plunged Monday as investors grew more concerned about the possibility that the U.S., the world's largest economy, could be headed into a recession.
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Saturday, January 19, 2008

WaMu accused of fraud: lender told appraiser to produce higher property prices




January 19 2008 Money.CNN.com
Lawsuit claims the lender told an appraiser to offer a rosier housing outlook so risky mortgages could get approved. A former real estate appraiser for Washington Mutual is suing the bank, claiming she was blacklisted last year for providing a housing market forecast that was too gloomy. The appraiser, who is seeking unspecified damages, says WaMu stopped accepting her appraisals in mid-2007 a month after she reported that her local housing market in California was declining. She was told to change her appraisal process to produce higher prices for the properties she was evaluating. A pessimistic outlook makes it harder to extend outsized, risky mortgages to borrowers whose homes can't support them.
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Tuesday, January 15, 2008

Mortgage lending forecast to fall 16% this year




January 15 2008 Money.CNN.com
Previously owned home sales are also expected to fall as banks rack up billions in losses, according to the Mortgage Bankers Association. U.S. mortgage lending will fall by more than 16 percent this year, dragged down by a worsening economy and a slumping mortgage market, an industry group predicted Monday. The Mortgage Bankers Association forecast that U.S. mortgage lending will fall 16.2 percent this year to $1.96 trillion, down from a projected $2.34 trillion last year. The group also said sales of previously owned U.S. homes will drop by about 13 percent, while median prices fall about 2 percent. New mortgage lending would continue its downward descent in 2009, the group predicted, but home sales and prices would steady a bit.
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Subprime lender to file for bankruptcy protection




January 15 2008 Money.CNN.com
First NLC Financial Services cites few buyers for its subprime loans. Friedman Billings Ramsey Group's mortgage lending arm, First NLC Financial Services, will file for bankruptcy protection and plans to liquidate because demand among investors for home loans has vanished, the investment bank said Monday. First NLC Financial Services, which FBR bought in February 2005 for $100.8 million, plans to file for Chapter 11 bankruptcy protection. FBR's plan to sell the business to Sun Capital Partners has fallen through, and the company said it does not expect to recoup its remaining $12 million investment in the unit's recapitalization for that sale.
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Monday, January 14, 2008

Citigroup write-offs could reach $24 billion in subprime related losses




January 14 2008 MarketWatch.com
Citigroup may write off up to $24 billion over subprime- and credit-related losses, putting as many as 20,000 jobs at risk, according to a published report on Monday. Citi also may cut its dividend payment without attribution, the report said. The company may raise as much as $15 billion from selling stakes to foreign and domestic investors. The report pointed to some of those shares being sold to Saudi Arabia Prince Alwaleed bin Talal, already Citi's largest shareholder. China Development Bank may invest about $2 billion. Meanwhile, the Financial Times reported that the Kuwait Investment Authority may invest as much as $3 billion in Citigroup.
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Saturday, January 12, 2008

Cleveland sues lenders over subprime mortgage loans




January 12 2008 Money.CNN.com
City says 21 banks and mortgage companies signed off on deals they knew they shouldn't have made. Likening their actions to those of organized crime syndicates, Cleveland's Mayor is suing 21 major banks and mortgage companies for the roles they played in the subprime mortgage crisis that devastated many neighborhoods in the city. The suit, filed in Cuyahoga County Common Pleas Court, alleges that in pushing subprime mortgagesin Cleveland, the companies created a public nuisance in violation of state law. City officials hope to recover hundreds of millions of dollars in damages for lost property tax revenue, the cost of demolishing homes left abandoned and the cost of policing neighborhoods devastated by thousands of foreclosures.
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Friday, January 11, 2008

Bank Of America buys Countrywide: What's next for the largest mortgage lender?




January 11 2008 Best-Mortgage-Companies.com
Bank of America is in advanced talks to buy Countrywide, the largest mortgage lender in the country, at a severely distressed price in order to avoid the company‘s bankruptcy. Countrywide has been aggressive in helping troubled subprime borrowers get out of loans they can’t afford. Bank of America will have to restructure the loans that have to be reworked. There are hopes that the bailout will provide more opportunity for loans in the future. So what does this mean for Countrywide CEO and co-founder Angelo Mozilo? Bank of America' s CEO Ken Lewis says he will keep many top executives. "Angelo has told me he will do anything we want him to do in terms of how long he stays", he says.
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Federal Reserve Chairman Ben Bernanke's speech on financial markets




January 11 2008 Best-Mortgage-Companies.com
Full transcript of Federal Reserve Chairman Ben Bernanke's speech on "Financial Markets, the Economic Outlook, and Monetary Policy" in Washington, D.C. on Jan. 10, 2008

Following a period of aggressive risk-taking, the subprime crisis has led investors to reassess credit risks more broadly and, perhaps, to become less willing to take on risks of any type. Also, investors have been concerned that, by further weakening the housing sector, the problems in the subprime mortgage market may lead overall economic growth to slow. The subprime crisis has contributed to a considerable increase in investor uncertainty about the appropriate valuations of a broader range of financial assets, not just subprime mortgages.
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Thursday, January 10, 2008

Capital One shows credit woes firmly hitting consumer




January 10 2007 MarketWatch.com
Credit-card shares were among the top decliners in the financial sector Thursday after Capital One Financial Corp. lowered its earnings outlook and raised its loan loss reserves, with increasing clarity that the credit crisis sparked by careless home lending has spread to the consumer sector. As delinquencies on subprime mortgages surged this year, there were initially few signs that similar problems were leaking into the credit-card industry. However, that changed in recent weeks as evidence, like Thursday's news from Capital One, shows that consumers loaded up on credit-card debt to make up for a loss in the purchasing power they once wielded by refinancing mortgages during the real-estate boom.
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Freddie Mac may be downgraded by Moody's




January 10 2008 BusinessWeek.com
Freddie Mac's financial strength rating may be cut by Moody's over concerns that the government-sponsored mortgage finance company will experience higher-than-expected credit losses. Freddie shares fell more than 4 percent Thursday morning but later recovered. Fallout from the ongoing housing slump and credit crunch has forced Freddie and its larger government-sponsored rival Fannie Mae to set aside billions of extra dollars to account for bad home loans.
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Mortgage Lenders: The Pain Deepens





January 10 2007 Best-Mortgage-Companies.com
On Wednesday, Countrywide Financial Corp., the nation's largest mortgage lender, said the percentage of borrowers who missed payments on home loans rose in December, signaling worsening trouble for the entire mortgage sector and causing stock prices across the industry to fall. Earlier in the week, Countrywide denied rumors that it would soon file for bankruptcy. Citigroup Inc. and Merrill Lynch & Co., the No. 1 U.S. bank and largest brokerage house, are facing potentially $25 billion worth of losses when they report earnings results next week. Both companies -- led by new CEOs eager to make their mark -- are expected to turn overseas for another injection of capital. Merill Lynch previously secured a $4.4 billion investment from Singapore's state-run Temasek Holdings.
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Tuesday, January 8, 2008

Treasury Secretary defends mortgage rate freeze plan for some subprime borrowers




January 8 2008 Money.CNN.com
Treasury Secretary Henry Paulson used a speech Monday to defend a plan brokered by the Bush administration to "freeze" mortgage rates for some subprime borrowers and also to call on Congress to pass legislation to head off a housing crisis. "Over the next two years, we ... face an unprecedented wave of 1.8 million subprime mortgage resets, raising the potential of a market failure," Paulson said. By coordinating the alliance of lenders, servicers and investors known as HopeNow, which is implementing the rate-freeze plan, the Administration is helping to prevent avoidable foreclosures and safeguard neighborhoods and communities without using taxpayer money, Paulson said.
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Sunday, January 6, 2008

Fed to Offer Banks $60 Billion in January Auctions




January 6 2008 CNBC.com

The Federal Reserve announced Friday that it is increasing the amount of money available to banks through a new auction process, one of the main ways it is combatting a severe credit squeeze. The Fed again pledged to continue with the auctions "for as long as necessary." The Fed said that it will increase the amount offered at each of the next two auctions from $20 billion to $30 billion, a 50 percent jump. The next two auctions will take place on Jan. 14 and Jan. 28. The Fed announcement indicated that the auction process it began last month has been successful in providing a source of loans for cash-strapped banks. The Fed announced in December that it was creating an auction facility to give cash-strapped banks a new way to get short-term loans from the central bank to help them over the credit hump. A global credit crisis has made banks reluctant to lend to each other, which can crimp lending to individuals and businesses.
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Bush on housing: Congress should do more




January 6 2008 Money.CNN.com
The president calls on lawmakers to act quickly on his proposals to ease the mortgage crisis, but not all of them have an equal chance of passage. Criticized for not doing enough to stave off foreclosures, the White House seems prepped to put on a full-court press in dealing with the housing crisis. President Bush last weekend said he will push Congress this year "to act quickly" on proposals he supports. Some of them are designed to have an immediate impact, such as efforts to make the refinancing of subprime loans easier and more affordable, and to make it easier for all homebuyers to get financing. Another proposal focuses on putting a stop to abusive lending. Efforts implemented so far include a Treasury-coordinated rate-freeze plan for some subprime borrowers, and tax relief on breaks that homeowners get from lenders in foreclosure.
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Thursday, January 3, 2008

Mortgage application volume declines




January 3 2008 BusinessWeek.com
Mortgage application volume declined 11.6 percent during the week ending Dec. 28, according to the trade group Mortgage Bankers Association's weekly application survey. The MBA's index fell to 533.9 during the holiday-shortened week from 603.8 the previous week. Refinance volume tumbled 15.4 percent, while purchase volume dropped 8.5 percent. Refinance applications accounted for 50.9 percent of total mortgage applications. The survey provides a snapshot of mortgage lending activity among mortgage bankers, commercial banks and thrifts. It covers about 50 percent of all residential retail mortgage originations each week.
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