Home-Account.com

There are various classifications of lenders — brokers , correspondent lenders, and mortgage lender-servicers which includes retail and commercial banks, credit unions, or thrift institutions.

Brokers may include table funded lenders who do not actually underwrite the loan directly. They act as agents or have lines of credit with the lenders. Correspondent lenders sell their loans to servicers, national examples include Quicken Loans and Lending Tree.  Lender-servicers underwrite and keep the loans on there books, while collecting ongoing loan payments.  This includes such lenders as Countrywide, Wells Fargo, or Bank of America.

Home-Account’s lenders currently are considered Super regional correspondent lenders.  They operate as direct lenders without working through a broker, either servicing the loans themselves or re-selling the loan to a larger servicer.  Home-Account will be dealing with the banker who is funding the mortgage and at the same time either able to service the loan or sell the mortgage to a larger servicer resulting in lower interest rates (i.e. better value) for our members. 

These specialized lenders are able to handle numerous applications and mortgages, on average able to close over 2,000 mortgage per month.  Over a billion dollars of mortgage loans were funded in 2008 by just our initial five lenders.

Here are some additional links you might find interesting:

htttp://www.sideroad.com/Mortgage/home-financing-correspondent-lender.html

http://mortgage-x.com/library/lender_types.htm

http://www.bankaholic.com/finance/what-are-correspondent-lenders/

http://www.mtgprofessor.com/A%20-%20Type%20of%20Loan%20Provider/what_is_a_correspondent_lender.htm

Jack Library Broker, Correspondent, lenders, mortgage

Refinancing applications continue at a torrid pace, up another 3.7 percent last week driven by even lower rates, according to the Mortgage Bankers’s ssociation, while new home mortgages remain almost nonexistent.

Loan rates hit a new low last week, the MBA said, although the decline from the previous week was slight: The average contract rate for 30-year loans dipped to 4.61% percent from 4.63 percent. The 30-year loan rate has tumbled from 5.07 percent in early January as the Federal Reserve has ramped up its efforts to push down mortgage costs by buying mortgage-backed securities in the open market.

Although refis have soared, the MBA index that measures loan applications for home purchases has risen only modestly in recent weeks, despite the plunge in loan rates. The purchase-loan index edged up less than 0.1 percent last week and is up just 14% since reaching an eight-year low the week of February 6, even though home affordability, as measured by a National Association of Realtors index, is at its highest level since the group created the index in 1981.

cringely Lender Updates, News housing prices, mortgage, refi, refinance

The Obama plan to help U.S. homeowners to avoid foreclosures and lower their cost of home ownership is available to about half of U.S. homeowners.  Those still out in the cold include:

• Loans not owned or guaranteed by Fannie Mae or Freddie Mac
•  Jumbo loan amounts greater than $417,000 ($729,000 in some markets).
•  Option ARMs.
•  Wachovia Pick-A-Pay Mortgages.
•  Sub prime Loans.
•  Credit Union shelved, (Serviced by the Credit Union).
•  Any bank portfolio product lines that are non-conforming.

Mortgage experts are recommending a wait-and-see attitude for these groups, saying that there is likely to be further action from the Obama Administration, especially for the large groups of homeowners in Arizona, California, and Florida left out of this week’s plan.

cringely News Add new tag, fannie mae, foreclosure, freddie mac, mortgage, News, Obama, plan

Go to the bank, any bank, and try to buy a house or refinance your current mortgage.  Most people who go to the bother of applying for a loan think that they have a chance of receiving one.  But approvals right now are running nationally around 35 percent.  So the odds against you being approved are 2-to-1.  And even if you can get the loan, it will end up costing you more than you expect – sometimes a LOT more.

Interest rates are down, we’re told.  A couple weeks ago rates were at a 27-year low. Since then published rates have drifted up by about half a point for no stated reason, but we can guess it is mainly because banks want to limit the number of refinance application. The best way to do that is to make loans more expensive, no matter what the Fed has done. 

Remember those 35 percent approval levels look even worse to the banks, which have time and money invested in three loans for every one that goes through.

But the worst news right now is that loans are generally more expensive to get than is indicated by published interest rates.  It turns out there are lots of hidden fees in these new loans and many of those fees come not from your bank or mortgage company (though they tend to add theirs, too) but from parties like Fannie Mae.

Hey, now that Fannie Mae is effectively nationalized, along with Freddie Mac, aren’t those companies supposed to be the very instruments through which the federal government will act to save us from this current mess?

No.

Fannie Mae, for one, is piling extra fees onto those historically low rates making them not so cheap at all.  The operant phrases here are Loan-Level Price Adjustment (LLPA) and Adverse Market Delivery Charge (AMDC).

AMDC is the easy one.  If you live in a community considered to be an Adverse Market, which is pretty much all of California and Florida for two examples, and you try to get a new loan, AMDC will throw a 0.250 percent charge on top of the loan amount.  That’s a quarter of a point or $250 per $100,000 just because of where you live.

Is that even legal?

LLPA is much more complex but works the same way, adding points to the loan – even to supposed “no points” loans.  Want a smaller down payment? That will be an eighth of a point, please.  Have multi-unit property?  That’s a point.  Have investment property?  That’s 1.75 to 3.0 points depending on the loan-to-value.  Want to take cash-out? That depends on your loan-to-value and credit score but will run from 0.25 points all the way up to 3.0 points, depending.  Want a smaller loan? That will be from an eighth of a point up to 1.5 points, again depending.

And all these fees are cumulative.

Let’s say, then, that you bought your house in Florida three years ago for $170,000 with 10 percent down on a 30-year fixed-rate mortgage at 6.875 percent.  While your house appeared to appreciate after you bought it the market has since tanked and your property is worth five percent less than you paid for it.

Now let’s do the numbers.

The house you paid $170,000 for three years ago is now worth $161,500 and your loan balance is $151,000.  Compared to a lot of Florida properties that’s pretty good.  At least your property is above water – you have positive equity of $10,500 from your residual down payment and the $2000 you paid down the loan principle in the last three years.

You want to refinance your $151,000 balance to take advantage of super-low rates of 4.875 percent that you saw in the newspaper – a whopping TWO PERCENTAGE POINTS less than you signed for only three years ago.

But wait, you live in Florida; that’s a quarter point added to the loan balance for AMDC.  The base rate is 4.875 percent, but to get a 30-day lock on that will cost you another 0.875 points.  The only way to get the 4.875 rate is to take a chance that it won’t change by the time you close.  Your FICO score is 660 and your loan-to-value is above 90 percent, so that’s another 1.75 points.  It’s a good thing you don’t need cash out or that your credit score isn’t 659 – you don’t even want to know what those would cost.  Finally, your loan amount is under $164,999 so that will cost you another eighth of a point.

Okay, we’re done, so let’s add it up 0.250+0.875+1.75+0.125=3.00 points or $4,530 added to your “no points” loan. If you don’t have the cash to pay this fee directly it gets rolled into the balance of the loan, which goes from $151,000 to $155,530.  And that $10,500 in equity you so proudly retained is now down to $5,970 and you still haven’t paid for an appraisal or any of the other fees mandated by folks other than Fannie Mae.

Uh-oh!  Financing $155,530 on a $161,500 property is a loan-to-value of 96.5 percent!  Fannie Mae won’t go over 95 percent.  Even though the additional dollars are going straight back to Fannie Mae in fees, it doesn’t matter.  LOAN DENIED.

It happens every day.  FHA loans are somewhat easier to get because they’ll finance up to 97 percent, but the same sort of fees apply.  This isn’t your bank doing this, it is Fannie Mae.  These aren’t numbers I made up, either they are taken directly from the January 8th rate sheet of a national lender and confirmed against the Fannie Mae Selling Guide for the same date.  And here’s the worst part: these fees are going to get even higher!  Fannie Mae has a new fee schedule going into effect as of April 1^st that will charge even more.

Hey, these are mindless bureaucrats just slowly doing their jobs.  Many of these charges were in the works long before the current financial crisis.  But if that’s the case, why haven’t they been adjusted?  Good question.

So if you wonder why you can’t get a good loan despite record low interest rates, this is probably one of the reasons why.

cringely Blog AMDC, Blog, Cringely, fannie mae, LLPA, mortgage, points

The Obama Administration, only days old, is already in a terrible bind.  For all the talk of fiscal stimulus, there is a very good chance that spending a quick $1 trillion or so on public works, tax reductions, and buying back bad loans simply isn’t going to do enough to foreshorten what is already a nasty recession.  Some economists like Paul Krugman of the New York Times and Princeton University say the answer is simply to spend more money.  If $1 trillion won’t do it, then try $2 trillion.

But there is another solution starting to bubble-up from the mortgage industry, itself.  It’s a bit of lateral thinking that wouldn’t generally come to the mind of an academic like Fed Chairman Ben Bernanke, but just might offer a cheaper and easier way out of this mess – a way inspired by the Japanese.  The Japanese of 1600 that is.

The problem faced by the Obama Administration is that this is, at heart, a housing crisis, yet most of the solutions tried so far have little direct effect on housing.  We can use tax dollars to recapitalize the banks, but that doesn’t seem to result in more mortgages being issued, for example.  There are simply too many houses available in the U.S. and WAY too many of those are worth less than their owners paid to either buy or build them.  At least 10 million U.S. homeowners are effectively under water and therefore unable to refinance.  Their options are to pay outrageous mortgage payments as their adjustable rate loans get more and more expensive, or to simply walk away from their homes, taking with them their problems yet leaving their empty houses as a further drag on the U.S. economy.

The White House has no new ideas for handling this crisis, or appears not to.  Congress is equally stymied.  The Treasury Department and Federal Reserve have used all the tools at their disposal and invented a few more, too, with little effect.  What we need is a miracle.

So did Japan just before 1600.  The country was in turmoil and had been for more than 100 years thanks to the introduction of western firearms in 1477.  The B-movie culture of Samurai swordsmen had given way to armies of peasant soldiers with guns doing as they were told to do by officers who generally came from what was left of the Samurai class.  Japan had lost culture, identity, power in the world, and had especially lost a hell of a lot of Samurai as they found it far more efficient to blow each other up in groups than to die one at a time in sword battles.

All the traditional Japanese feudal classes were threatened.  Something had to be done.  So Japan gave up firearms.  After more than 120 years of shooting-off body parts, Japan under the rule of daimo Toyotomi Hideoshi after 1600 successfully repudiated firearms and went back to the old way of Samurai swords-for-hire hacking each other to bits in service of their feudal lords.

This idea of deliberately turning away from technology is foreign to western thinking, yet we seem poised to do something very similar to end the mortgage crisis – repudiating a specific technology that stands in the way of a quick and soft landing for the economy.  Suddenly there is talk in mortgage circles of selectively giving up under certain highly specific conditions that stalwart weapon of home financing, the real estate appraisal.

There are millions of homes in the United States that are worth less than is owed on them.  The Fed and Treasury are thinking-up ever more expensive ways of dealing with this problem – everything from buying-up sub-prime mortgages and holding them to maturity to buying up sub-prime homes, paying-off their mortgages, then simply tearing them down to reduce supply and help prices to firm.  And the bogeyman most directly faced by politicians attempting to address the housing crisis is  that houses under water can’t, by definition, be refinanced.  The problem is lack of equity in light of  FHA, Fannie Mae, and Freddie Mac rules that require a down payment that varies from five to 20 percent for replacement mortgages and refis.

And yet, in the bad old days of just over a year or so ago there were mortgage brokers selling all day long no-doc loans that required no money down to borrow up to 125 percent of a home’s value.  Why can’t we do that today?

We can’t because the rules have changed – tightened – and it is harder to qualify for a loan.  Yet to hear the Administration talk about it, this is just the time when it would help a lot if more people – not less – could qualify for a mortgage.  People would buy houses, which means other people could sell houses and eventually prices would stabilize and even start to rise, leading the banks out of their current wilderness in the process.

The solution to this problem is simple and actually doesn’t require more money or even an act of Congress:  just stop requiring an appraisal for FHA, Fannie Mae, or Freddie Mac qualifying refinance loans.  Let the actual value of the house or property float.

For new loans on new property, yes, an appraisal would still be required.  But for refinance loans on existing owner-occupied properties with no cash out, appraisals would not be required.  Rather than assign a home value lenders would simply use the previous loan balance.  The new loans could be fixed-rate, rather than adjustable, and at current interest rates payments would be lower.  If they weren’t enough lower, the lenders could still use painless (to them) mortgage management tools like 40-year terms and zero-interest introductory periods.  Few houses would be lost to foreclosure, less capital would be needed by the banks, and because bad loans were being replaced with better ones, the associated toxic derivative securities would be pulled from circulation.

This solution separates – as Wall Street has already done in effect through the use of derivative securities – the house from the loan.  It isn’t the house that is toxic, it is the loan.  Interest rates are down and millions of homeowners – and society as a whole – would be well served if these loans could be refinanced to reflect those lower rates, making the houses in turn more affordable.  The method for doing this is to forgo appraisals and simply refinance the mortgage, not the house.

It’s don’t ask, don’t tell — a convenient ruse that lets us fix what needs to be fixed without too much introspection or analysis.

This isn’t such a radical suggestion.  Many mortgages are already granted without appraisals for properties where large down payments and historical pricing precedents make appraisals just an added expense that lenders sometimes prefer to give up.

Not requiring an appraisal effectively raises the limits on how little equity a homeowner can retain in the property while still claiming to own it – in this case probably allowing financing of up to 109 percent of the market value by recent estimates.  But we won’t officially know that because there is no appraisal.

By simply changing the rules in this manner millions of foreclosures can be avoided, families can avoid disruption, the economy can start to heal quicker, billions can be saved, and nobody has to know better.

It’s the Samurai way.

cringely Blog appraisals, Blog, down payment, mortgage, refinance, Samurai