Senate Approves Measure to Reduce Home Foreclosures

The Senate on Wednesday approved a bill that would expand federal efforts to prevent mortgage foreclosures, shield mortgage service companies from lawsuits if they participate in federal loan modification programs, and give renters of foreclosed properties at least 90 days’ notice before eviction.

The bill’s other provisions would make it easier to modify loans and give renters at least 90 days’ notice before being evicted.

The Senate bill, however, did not include Democrats’ most ambitious proposal to aid troubled homeowners: a provision that would have allowed bankruptcy judges to modify the terms of primary mortgages.

The new Senate bill does not include additional money to aid mortgage borrowers, but it does draw $2.3 billion from the Treasury’s $700 billion financial bailout fund for various provisions. The bill also would increase the borrowing authority for the Federal Deposit Insurance Corporation to $100 billion from $30 billion, a move that will save banks billions of dollars by reducing the extra premiums that they would have had to pay to shore up the deposit insurance fund.

“The bill does other things, but certainly, a major target is to deal with peoples’ housing issues and try to stem the tide.” Senator Jack Reed, Democrat of Rhode Island, a main proponent of the bill, had a strong role in the homeless prevention provisions and others that would give the Treasury secretary more latitude in deciding when to use taxpayer money to buy stock in financial institutions receiving bailout assistance.

The Senate bill would provide $2.2 billion for homelessness assistance and up to $440 million for prevention.

 

Sources

By DAVID M. HERSZENHORN
NYT

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Home Mortgage Applications Drop to Lowest Since Mid-March

U.S. home loan applications fell last week to the lowest level since mid-March, driven by a big drop in refinancing demand even as mortgage rates clung to record lows, according to the Mortgage Bankers Association on Wednesday. Refinance applications fell 21.9 percent in the week ended April 24, overwhelming the 0.6 percent dip in home purchase loan requests to drag the trade group's total loan index down 18.1 percent.The drop in total mortgage applications brought that index to 960.6, its lowest since 876.9 in the March 13 week.

The rate nearly matched the all-time low of 4.61 percent set in the week ended March 27 and was well below 6.01 percent a year ago.

Still, it remained well above 2,722.7 in early February, when the average 30-year mortgage rate was more than 1/2 percentage point higher. Refinancings represented about 75 percent of all mortgage applications last week, down from a nearly 80 percent share the prior week.

"A combination of the lowest rates in generations and a pretty healthy decline in property values in most parts of the country strikes me as something that certainly is positive for the housing market, although it's hard to predict certainly where the bottom in pricing will be," said Scott Happ, chief executive at Mortgagebot, a mortgage origination software company in Mequon, Wisconsin.

Sources:

Reuters

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Obama Administration Expands Housing Aid Plan

The Obama administration said Tuesday it is expanding its plan to stem the housing crisis by offering mortgage lenders incentives to lower borrowers' bills on second mortgages.

Obama administration launches effort to aid troubled borrowers with second mortgages.

While home prices soared, such mortgages were even extended to borrowers with poor credit scores and people who didn't provide proof of their incomes or assets. That's because borrowers who are trying to get their primary mortgage modified at a lower monthly payment need the permission of the company holding the second mortgage.

The new incentives are estimated to help up to 1.5 million borrowers with second mortgages, Housing Secretary Shaun Donovan said.

As an incentive to modify second loans at lower interest rates, mortgage companies would get $500 upfront for each modified loan, plus $250 a year for three years as long as the borrower doesn't default.

Lenders would also be given the ability to remove second mortgages entirely in exchange for larger government payouts. The administration also plans to give mortgage companies $2,500 payments to entice them to participate in the "Hope for Homeowners" program.

Sources:
By ALAN ZIBEL AP Real Estate Writer
WASHINGTON April 28, 2009 (AP)
ABCNews

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Home Prices Drop 18.6 Percent in Feb.

In another sign the housing crisis could be reaching the bottom, home prices dropped sharply in February but for the first time in 25 months the decline was not a record. The Standard & Poor's/Case-Shiller index released Tuesday showed home prices in 20 major cities tumbled by 18.6 percent from February 2008.

Index shows housing prices falling by 18.6 percent in February, but didn't set annual record.

All 20 cities in the report showed monthly and annual price declines, but half recorded annual records. In fact, Phoenix home prices have lost more than half their value since peaking in July 2006.

"We will certainly need a few more months of data before we can determine if home prices are finally turning around," said David M. Blitzer, chairman of the S&P index committee.

Existing home sales fell just 3 percent from February to March, and new home sales seemed to have hit bottom. Consumers overall are becoming more optimistic about the economy.

By J.W. ELPHINSTONE AP Real Estate Writer
NEW YORK April 28, 2009 (AP)

Sources:
ABCNews

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How To Nab A Low-Rate Home Loan

On paper it seems like the perfect time to refinance. The average rate on a 30-year fixed mortgage recently hit a 20-year low when it fell below 5% in mid-March. And the Fed has said that it will spend $300 billion to buy back government-backed Treasury bonds; that will probably keep loan rates low for months to come.

Getting a new loan can save you a bundle, but cautious lenders will make you jump through hoops. These strategies can help.

But wade into the mortgage market, and you may quickly feel as if you're trying to grab a dollar in a game-show booth where the money is blowing around: Those ultralow rates are right in front of you, yet maddeningly elusive.

Lenders, grappling with deadbeat homeowners and shifting regulations, have pared back on mortgage products and upped credit requirements. Still, you have a good incentive to try: If you took out a mortgage two years ago, when rates were in the mid-sixes, you stand to drop your rate nearly two percentage points, saving almost $300 a month on a $300,000 loan. Here's how to navigate the roadblocks.

Figure out if you qualify. Nowadays, credit score and equity are king. To land the best rates, you'll probably need a credit score of at least 740, and 20% equity. "Banks are looking for reasons not to lend you money," says Mark Miskiel of Lighthouse Mortgage in Sedona, Ariz.

If you don't have 20% equity, a refi isn't out of the question - President Obama's housing package allows homeowners who owe as much as 105% to receive government-backed loans. To qualify for that program, however, your original mortgage must be held by one of the government-sponsored entities, Freddie Mac or Fannie Mae; you must prove that you can keep up with payments; and you'll get stuck with fees that tack 0.25% to 3% onto your rate.

Get rid of the HELOC. Home-equity loans and lines have become the enemy of would-be refinancers. Before you can close on a new loan, your home-equity lender must agree to "subordinate" the secondary loan (meaning that your primary lender will get repaid first in the event you run into financial trouble). That can take at least a month, says Bob Moulton of the Americana Mortgage Group in Manhasset, N.Y.

One way to speed up the process is to do a consolidation refi through your home-equity lender. If that's not possible, aim to submit the subordination paperwork as you start shopping for a primary mortgage. And know that other lenders may add up to 0.25% to your rate to cash out the secondary loan.

Know where to look. No matter how stellar your credit, you won't get a great rate without doing some serious shopping. That's because every bank is using different standards for underwriting loans, so while you may look like a risky borrower to one, another may welcome you with open arms. In general, says Keith Gumbinger of mortgage data firm HSH Associates, you're likely to get the best rates from small local banks and credit unions.

Unfortunately, if you need a jumbo loan (typically $417,000, but it can go up to $729,750 in high-cost areas), you can kiss those super-low rates goodbye. While jumbos normally run about half a percentage point higher than smaller ones, today the spread is a point and a half.

Pay a point upfront. A point, which equals 1% of your mortgage amount, typically buys you an eighth to a quarter of a percentage point drop in your rate. Today some overloaded lenders are knocking half a percentage point off for those who pay a point, hoping this extra initial cost will deter serial refinancers.

If you're planning to stay put for about five years, it may be worth it. Conversely, consider adding an eighth of a percentage point to your rate to lock it in for 45 days. Banks and lenders are putting a lot more effort into vetting applications, so it can take up to two months to close a loan, vs. about 30 days in the past; you don't want to risk rates' moving against you while you wait. The payoff for patience: a loan you can live with, for a very long time.

Not so long ago, having a pulse qualified you to take out a mortgage. These days lenders are vetting applicants with the ardor of a Senate committee grilling an AIG executive. Here's a summary of what's changed.

Sources: Carla Fried, Money Magazine

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