Mortgage Loan Outlet

Clearly the Fed has played a significant role in helping the mortgage industry rebuild its foundation.  It’s like the risky Payment Option ARM loans, subprime mortgages and no income loan products have vanished in thin air.  The Obama administration and the Federal Reserve have certainly talked about mortgage reform and indirectly this has helped bad credit mortgage lenders and banks implement less volatile home loan products that may have previously unintentionally promoted predatory lending.  At least for now it seems that the mortgage lenders who are still in business have a broader perspective than in previous years and maybe they are putting the borrower first. 

According to Bloomberg News, the Federal Reserve understands that keeping key interest rates unchanged is critical for maintain affordable mortgage interest rates that will help the housing sector recover.  30-year fixed rate mortgage loans are available below 5% from most lenders nationally. 

Cleveland Federal Reserve President Sandra Pianalto“For the next couple of years, I expect employment levels to remain well below what I would consider full employment,” and inflation will “only gradually drift up from its currently low level” to a mark that will nevertheless remain “subdued,” Federal Reserve Bank of Cleveland President Sandra Pianalto said.  “This outlook warrants exceptionally low levels of the federal funds rate for an extended period of time,” she said. But she also noted there is “more uncertainty than usual around my outlook” and policymakers will need to apply more discretion than is typically the case. “It will be critical to monitor incoming information and respond as necessary to promote economic recovery and price stability,” Pianalto said.  Pianalto, who made the comments in a speech before the Economic Club of Pittsburgh, is a voting member of the interest rate-setting Federal Open Market Committee. 

Most mortgage executives remain confident the U.S. won’t fall back into recession — a survey released last week by the Federal Reserve Bank of Philadelphia showed forecasters lowering already reduced odds of a double-dip recession. At the same time forecasters have been pushing back odds of a Fed rate tightening.  Pianalto said she is not looking for a particularly vigorous recovery. “Our journey out of this deep recession will be a slow one” because of the negative impact of long-term joblessness, coupled with “a heightened sense of caution on the part of consumers and businesspeople,” she said. 

In addition to mortgage reform, the Obama administration plans to roll out its new loan modification program for the unemployed on July 1^st 20101. Eligible homeowners could enter a forbearance program rather than a HAMP loan modification.  The forbearance could suspend their monthly home loan payments entirely or reduces them to less than 31% of their pre-tax household income.  Obama admin officials also plan to provide more details on the performance of the eight largest servicers in July. It will report the average time homeowners spend in the trial phase, the servicers’ handling of calls and problems and a review of whether borrowers were appropriately evaluated. This is another step in the government’s effort to put pressure on servicers to perform.  The trial loan modification HAMP have clearly not been working for the “average Joe.”

The traditional mortgage refinancing option has become almost impossible for the average homeowner to qualify for because the lending criteria and FHA guidelines have tightened so significantly over the last two years.  Most borrowers are unable to qualify to refinance because of home equity loss, so the HAMP modification program has become an important alternative to homeowners facing foreclosure.

There are many mortgage loan companies out there that are excited  to help you refinance your 1st and 2nd mortgages.  You have probably seen advertisements all over the Internet and television for refinancing services.  These refinance ads can significantly helps you because you have the opportunity to compare the many different mortgage refinancing options. 

If you find that one mortgage lender does not work with you the way you would like you can always find a different lender somewhere else.  With the competitive loan quotes you are in a position to get some of the best lending advice you have seen in years.  Read the complete article > Home Mortgage Loan Rates.

Last week, government officials warned about loan modification scams and predatory mortgage aid offers from brokers and loan relief specialists.  Homeowners should be alert and do their due diligence of companies, when considering refinancing for a loan workout from a company other than your existing mortgage lending company. Some of the reports have indicated that struggling borrowers have been paying fees of $2,000 to $5,000 in up-front fees to companies that promise foreclosure prevention. Some government officials say such operations are usually fraudulent because help is available for free from government-approved housing counselors. However, most people understand what kind of services they get for “free.” 

QUESTION- Is it possible my payments will be higher?

ANSWER- If you’re still paying a low, intro rate, it is possible your monthly mortgage loan payment will increase more under the federal refinancing program. But the idea is to avoid the surprise interest rate adjustments and negative amortization that erodes your home equity even in a healthy housing market. In the last few years, 2/1, 3/1 and 5/1 ARM’s have sent shock waves through communities across the nation, because borrowers were suddenly hitting their variable rate period with no options to refinance into a reasonable fixed rate mortgage.  After submitting a request for the Making Home Affordable program, your current mortgage lender should give you a “good faith estimate” that includes your new interest rate, mortgage payment and the total cost of the loan. Compare the numbers with your current loan; you might decide that refinancing isn’t an improvement.  You can also check out the payment reduction estimator on the government’s Web site at http://www.makinghomeaffordable.gov.

QUESTION- Should I wait to see if mortgage interest rates come down in a couple of months before applying?

ANSWER- Probably not, since mortgage rates are at historic lows.  Last week, rates on thirty-year mortgage loans inched upward to nearly 4.9%, but that’s still close to the lowest level since the Great Depression.  Ken Inadomi, director of the New York Mortgage Coalition said, “Waiting for mortgage rates to drop further would be irresponsible and could backfire.” Even low intro mortgage rates should not be that much lower than fixed interest rates these days and in some cases, they may even be higher. So it’s probably in your best interest to lock in now to a low rate refinance loan that you can afford.  Remember, the Making Home Affordable program expires on June 10, 2010.  Read complete article > Is Mortgage Relief Melting with Loan Mod Scams

In a recent article, James Sterngold considers the impact many consumers aren’t seeing in mortgage relief from TARP.  As the new owner of $172.5 billion of preferred shares and warrants in 208 U.S. financial institutions, the Treasury Department hasn’t succeeded in thawing frozen credit markets, leaving taxpayers propping up an industry that won’t lend to them.

While inter-bank lending rates have fallen since Congress approved the $700 billion Troubled Asset Relief Program on Oct. 3, most bank lending to consumers remains tight and mortgage rates were high. The average credit-card rate was 14.33% on Dec. 16, according to IndexCreditCards.com in Cleveland, almost unchanged from 14.41% in October 2007.   That’s prompted criticism from Alan S. Blinder, a professor of economics at Princeton University in New Jersey and a former Federal Reserve vice chairman, who says the government should take a more active role as a stakeholder in the nation’s banks.   “With the banks in a state of catatonic fear now, they’re just sitting on the capital,” Blinder said in an interview. “I don’t fault the banks one bit, since this shows Wall Street they’re safer, but then this doesn’t get you much improvement. If you’re taking money from the public purse, we should get something in return, and we’re really not.”

Jeffrey Garten, a professor of international trade and finance at the Yale School of Management in New Haven, Connecticut, and a Commerce Department undersecretary during the Clinton administration, says banks should be forced to increase their lending or risk having taxpayer money taken away. “The government isn’t acting aggressively enough to demand a quid pro quo,” Garten said. “The public good is the key to the private good in this case. It’s not the other way around.”

$8.5 Trillion

Although the government has committed more than $8.5 trillion to energizing the economy, and the Fed cut a key lending rate almost to zero, banks haven’t made it easier to borrow. The Fed said consumer credit fell by $6.4 billion in August, the largest drop in 65 years, and then by $3.5 billion in October, the first time since 1992 that there were two months of declines in a year.

In its most recent quarterly Senior Loan Officer Opinion Survey in October, the Fed reported that about 85% of U.S. banks said they had tightened standards on commercial and industrial loans to companies with more than $50 million in annual sales, up from 60% in July. 95% said they increased the cost of those home loans. About 70% said they made it more difficult to obtain prime mortgage loans, and almost 65% said they did the same for consumer loans.

Mortgage Rates

While mortgage rates have declined, they haven’t fallen as fast as bank borrowing rates, meaning financial institutions are demanding more profit for every dollar they lend. Average rates on thirty-year home mortgages fell to 5.14 % last month, according to data compiled by McLean, Virginia-based Freddie Mac. That’s down from 6.67% in June 2007, before the worst turmoil in the housing market. At the same time, the spread of mortgage rates over the 10-year Treasury bond yield rose to 2.958 percentage points from 1.567. 

The spread of rates on so-called jumbo mortgage loans, those of more than $729,750, is close to a record at 1.6 percentage points above the rate for smaller mortgage loans that conform to terms of ones Freddie Mac and Fannie Mae will purchase, according to financial data firm BanxQuote in White Plains, New York. A year ago the difference was 0.23 percentage points.

High interest rates have angered consumers. The Fed has offered relief in the form of rule changes that allow banks to raise interest rates only on new credit cards and future purchases, not on existing balances. Banks will also have to give cardholders 45 days notice of changes in terms, up from 15 days. Those changes aren’t scheduled to take effect until July 2010.   Read the complete article online >  

The Federal Reserve’s board of governors on Sunday approved Wells Fargo’s $11.7 billion purchase of Wachovia, removing the last key regulatory hurdle for the deal.  On Friday, federal antitrust regulators backed the acquisition by San Francisco-based Wells Fargo of Wachovia.

Citigroup had initially offered to buy the Charlotte, North Carolina-based bank for $2.1 billion in a deal brokered by the Federal Deposit Insurance Corp. Days later, the board of Wells Fargo agreed to an all-stock offer worth $11.7 billion.  Citigroup walked away from the deal on Thursday, but is still seeking $60 billion in damages for breach of contract.

The Federal Reserve released a statement announcing the approval of the deal, which includes Wachovia’s banking business and all other units. Wachovia shareholders must now approve the deal.  Wells Fargo provides stability and liquidity that is needed for these difficult economic times.  The popular Wells Fargo mortgage products include the FHA mortgage, conventional home loans, VA loans and home equity loans.  Refinancing and purchase mortgage loans are available for qualified borrowers.