Mortgage Interest Rate Survey - June 1, 2007
June 1st, 2007
In this week’s Mortgage Interest Rate Survey, according to Freddie Mac
rates jumped another 5 basis points or .5/100%. “The interest rates on fixed-rate mortgages increased further following stronger growth in orders for durable goods,” said Frank Nothaft, Freddie Mac vice president and chief economist. “Recent reports have indicated that economic growth outside of the housing market remains robust, with a healthy consumer sector and improving business spending.”
Freddie Mac released its May 31st, 2007 weekly results of the Primary Mortgage Market Survey® (PMMS®), with interest rates for the following programs:
* 30-year fixed-rate mortgage (FRM) averaged 6.42 percent with an average 0.4 point for the week ending May 31, 2007, up from last week when it averaged 6.37 percent. Last year at this time, the 30-year FRM averaged 6.67 percent.
* The 15-year FRM this week averaged 6.12 percent with an average 0.4 point, up from last week when it averaged 6.06 percent. A year ago, the 15-year FRM averaged 6.26 percent.
* Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 6.19 percent this week, with an average 0.5 point, up from last week when it averaged 6.02 percent. A year ago, the 5-year ARM averaged 6.26 percent.
* One-year Treasury-indexed ARMs actually fell from 5.64 percent to 5.57 percent this week with an average 0.6 point. At this time last year, the 1-year ARM averaged 5.68 percent.
There was a truckload of economic data this morning, and it was overwhelmingly positive on the economy. “The rate rise resumed today on news that May payrolls exceeded already-strong expectations, up by 157,000 jobs, unemployment still a dead-low 4.5%; and the purchasing managers’ index of manufacturing continued its recovery, up to 55 from near stall only sixty days ago,” says Lou Barnes of Boulder West Mortgage Credit News in his weekly commentary on the mortgage market.
“April’s total home sales (including condominiums and co-ops) were below the pace of last year, and the S&P/Case-Shiller® 20-market composite index shows home values off by 1.4 percent over the year ending March.” Says Lou Barnes, the OFHEO House Price Index (the best of the bunch, worth study at OFHEO) had a .5% gain in prices from the 4th quarter ’06 to the 1st of ’07, and a 4.5% increase year-over-year. Across these two studies, “flat” is the statistically significant word for prices.”
Related Links:
What to know before you buy - Good Info for First Time Buyers and Buyers relocating to Boca Raton
Mortgage Interest Rate Survey, May 25, 2007 - Comparison to Prior Week’s Survey
Even in a Home Buyers Market its important to use your clout wisely
Source: Freddie Mac, Boulder West Mortgage Credit News
South Florida “Subprime” Mortgage Market
May 30th, 2007
South Florida “Subprime” Mortgage Market - the area has much at stake in the furor over the quality of its so-called “subprime” mortgages.
How do South Florida’s numbers compare to the national average and other areas of the country? The latest twist – were half of the subprime borrowers ripped off? Did they actually qualify for “A” paper?
This article was originally posted at www.InmanWiki.com on May 7, 2007. As of today, the March, 2007 Loan Performance report has not yet been published, but I will update articles as new data becomes available.
According to a March 20, 2007 Sun-Sentinel newspaper article, www.sun-sentinel.com , and statistics based on a December, 2006 study done by First American LoanPerformance, a San-Francisco-based mortgage data company, subprime lending has a much bigger share of the South Florida market than the nationwide average in 2 of the 3 major counties. South Florida’s troubled loans, though, aren’t as big an issue. The Sun-Sentinel article only mentioned the statistics in the next 2 paragraphs. The balance of the statistics come from the Loan Performance Study.
The national average of subprime loans as a percentage of total loans at the end of 2006 is 14.7%. In Palm Beach County, 13.3% of its mortgages are “subprime,” while Broward has 18.4% and Miami-Dade has the biggest share of subprime mortgages in the region, at 23%.
South Florida and the state of Florida ranked equal to or better than the national average in several categories. The national average for loans where payments were 60 days late is 11.8%. In Palm Beach County, 9.3% were 60 days late or more. In Broward, 8.9% of the loans were late, while Miami-Dade’s rate was 8.3%.
Loans classified as Seriously Delinquent are 90 days or more late and in Foreclosure. The national average for 90 day subprime delinquencies is 7.57%. The range for Florida is 5.24 – 7.10%, which is lower than the national average. Subprime BC paper also falls within national averages. Florida’s range is from 6.06 – 8.92%, whereas the national average is 8.49%. The study also includes categories for prime mortgages, home equity lines and jumbo paper. Florida’s prime mortgage delinquencies of .48-.62% range also ranked below the national average of .69%.
The study also has a category for a 3-Month CPR rate, which is defined as the conditional prepayment rate (CPR) estimating principal that will prepay over the next 12 months based on actual principal prepayments for the preceding three month period. Florida’s range ranked equal to the national average or better in all 3 categories mentioned above.
Were Half the Subprime Borrowers Ripped Off? Did they actually qualify for “A” paper?
Lou Barnes of Boulder West Financial Services, in his May 4th, 2007 Mortgage Credit News, , refers to observations made by Lewis Ranieri in a presentation to the Milken Institute conference the week of April 23rd, 2007. Lewis Ranieri, the 1983 co-inventor of the modern, mortgage-backed securities market, asserted that, of the subprime originations late 2005 through 2006, 50% of the subprime borrowers qualified for loans from FHA, Freddie Mac, or Fannie Mae on much more favorable terms, at least an Alt-A loan, perhaps even prime.
These observations were also based on statistics from the LoanPerformance report. Please see related Blog articles by Calculated Risk, referencing Mr. Ranieri’s presentation transcripts, Calculated Risk April 28, 2007, and Naked Capitalism for report graphs and comments - Naked Capitalism, April 30, 2007 - Were half subprime borrowers ripped off? and Naked Capitalism, April 29, 2007 - Lewis Ranieri on Subprime Mess.
The articles also quote Fannie Mae CEO Daniel Mudd’s testimony before Congress, stating that “they are getting 15,000 applications for subprime refinancing coming into their system per month, - and 80% were getting a “yes.” Altogether, they estimate that about 1.5 million homeowners who face resetting ARMs and potential payment shock this year and next could be eligible for Fannie Mae’s loan options.”
As Mr. Barnes states, “Contemptible behavior by desperate salesmen has concealed borrowers in better shape than feared, and withdrawal of trash credit is unlikely to collapse housing.” This news further supports his centerline position regarding the housing / mortgage meltdown, that “housing will not resolve for years, but is a drag, not a killer.” Please refer to some of his other articles for further information.
Many forecasts predict that South Florida will be hit hard by foreclosures because the area experienced such rapid price appreciation, and with the high inventory, prices have come down and the inventory is moving. These latter articles do not refer to any state or area breakdown, but based on South Florida’s and Florida’s above percentages, future updated statistics may prove the result to be lower than originally anticipated, at least those based on the subprime market.
Related Links:
Demand for Housing not dependent on Interest Rates
Credit Crackdown shutting out home buyers
13 Tips to Protect against Mortgage Fraud
3 Palm Beach County High Schools in Top 50 of Nation’s Best
May 28th, 2007
Three high schools in Palm Beach County made the Top 50 in NEWSWEEK Magazine’s list of the Top 1,200 Schools in the Nation. Suncoast High in Riviera Beach (5), Dreyfoos School of the Arts in West Palm Beach (17) and Atlantic High in Delray Beach (37) also were in the top 50 in last year’s rankings. Another Palm Beach County School, Spanish River High in Boca Raton, made the list at No. 171.
NEWSWEEK published national lists in 1998, 2000, 2003, 2005 and 2006, in which public schools are ranked based on the Challenge Index formula, a ratio developed by Jay Matthews, a Washington Post reporter and Newsweek contributing editor. The magazine’s annual ranking is based on the number of Advanced Placement and/or International Baccalaureate tests taken by all students at a school in 2006, divided by the number of graduating seniors.
Suncoast is a magnet school with an International Baccalaureate program, and has specialized tracks in math, science, engineering and computer science. Dreyfoos is a magnet school for the fine and performing arts. Atlantic High also has an International Baccalaureate program.
In Miami-Dade County, Coral Reef High was ranked No. 20, while Broward County’s highest-ranked school was Marjory Stoneman Douglas in Parkland at No. 197. Thirty-one Florida schools made the list, with 12 in the top 50.
The link to the entire article, “Education, Why are They the Best”, the “Frequently Asked Questions about NEWSWEEK’S Best American High Schools”, and “The Top of the Class, the complete list of the 1,200 Top U.S. Schools” are located at Newsweek’s Best American Schools They are lengthy articles full of important information, that should be read in their entirety.
I am big on education. One of my favorite sayings is, “Education … A mind once stretched by a new idea, never regains its original dimension.” There may be disagreements about this Challenge Index vs. Test Scores, and which schools rank on the list, but I think the most important aspect of this story and NEWSWEEK’S survey is that it stressed how important it was for average students to take the tests if they were planning college, vs what some of the better schools were doing by encouraging better students to take them so they have higher school test scores. I hope you get to the “punchline paragraph” at the end. I think it says it all.
Following are some excerpts that highlight the main points:
As for the words “top” and “best”, they are always based on criteria chosen by the list-maker. The Challenge Index is journalism designed to serve readers, like the Dow Jones averages or baseball slugging percentages—not scholarship. The adjective “best” always reflects different values. Your best movie may have won the most awards; his may have sold the most tickets. In this case, Jay Matthews wanted to recognize those schools with the teachers who added the most value, even in inner-city schools where no one has yet found a way to reduce dropouts or raise test scores significantly.
He did not count passing rates in the way schools had done in the past because he found that most American high schools kept those rates artificially high by allowing only top students to take the courses. In some other instances, they opened the courses to all, but encouraged only the best students to take the tests. What turns out to be the rule in most U.S. schools, is that average students are considered not ready for, or not deserving of, AP, even though many studies show that they need the challenge, and that success in AP can lead to success in college. Just taking the course and the test mattered more than the score because even struggling AP students learned a great deal.
Test scores, the usual way of rating schools, are in nearly every case a measure of parental wealth and education, not good teaching. Every study shows that if your parents fill their house with books, include you in conversations and take you to plays and museums, you tend to score well on standardized tests even if your school is not the best. So, with the help of some astute AP teachers, he developed a scale called the Challenge Index, which used each school’s rate of participation in college-level tests like AP to indicate which schools were the most demanding and supportive of all students. It is based on the total number of AP tests (later adding International Baccalaureate and Cambridge tests) taken each year and divided by the number of graduating seniors, so that big schools would not have an advantage over small schools.
The total number of Advanced Placement, International Baccalaureate or Cambridge tests given at a school in May, are taken and divided by the number of seniors graduating in May or June. All public schools that NEWSWEEK researchers Dan Brillman, Halley Bondy and Becca Kaufman found that achieved a ratio of at least 1.000, meaning they had as many tests in 2006 as they had graduates, are put on the list on the NEWSWEEK Web site, and the 100 schools with the highest ratios are named in the magazine.
The baseline of 1.000 is a modest standard. A school can reach that level if only half of its students take one AP, IB or Cambridge test in their junior year and one in their senior year. But this year only about 5 percent of all U.S. public high schools managed to reach that standard and be placed on the NEWSWEEK list. The 1,258 schools are all exceptional schools. Every one is in the top 5 percent of 27,000 American high schools measured this way.
Magnet or charter high schools that draw such a high concentration of top students that its average SAT or ACT score significantly exceeds the highest average for any normal-enrollment school in the country, and are not included in the formula. This year, that meant such schools had to have an average SAT score below 1,300 on the reading and math sections, or an average ACT score below 27, to be included on the list. It is, however, acknowledged this year on Newsweek’s Public Elites list the 19 schools that did not make the list because their average SAT or ACT scores were too high.
AP and IB are important because they give average students a chance to experience the trauma of heavy college reading lists and long, analytical college examinations. Studies by U.S. Department of Education senior researcher Clifford Adelman in 1999 and 2005 showed that the best predictors of college graduation were not good high-school grades or test scores, but whether or not a student had an intense academic experience in high school. Such experiences were produced by taking higher-level math and English courses and struggling with the demands of college-level courses like AP or IB. Two recent studies looked at more than 150,000 students in California and Texas and found if they had passing scores on AP exams they were more likely to do well academically in college.
Every year that he has published the lists, he’s received thousands of emails from parents and educators that both agree or disagree with his methodogy. Educators in schools with large numbers of low-income students that, like Garfield, in East Los Angeles, have succeeded in coaxing students into demanding courses, say the list has given them recognition they never thought they would get, and fortified their efforts to get more students exercising their academic muscles for college. Many parents say the list has helped them find great schools in otherwise undistinguished places.
Here is what Brian Rodriguez, who teaches AP American and European history at Encinal High School in Alameda, Calif., told Jay Matthews about the impact of AP on non-AP courses in a school with many low-income and minority students:
“AP teachers rarely teach only AP classes. They have many other responsibilities to their department, collaborative educational focus groups and as liaison to our middle schools. The AP techniques honed in years of teaching or gleaned from seminars are used in the regular
classrooms (at a slower pace, but no less effectively). For instance, I am teaching a unit on Vietnam to my regular U.S. history class. I will use the PowerPoint lecture I developed for my AP class on that subject, teach the students to take notes, use the Socratic-method discussion techniques so effective in AP classes, and then teach writing methods and tips I use so effectively in my AP classes. In addition, I will teach these techniques to our new teachers at history department meetings, prepare a pamphlet on multiple-choice testing techniques that was distributed to all teachers at our school to prepare them for state standardized testing and then visit our local middle schools to make a presentation to the teachers there. In
summary, AP teaching can be schoolwide, and raises all the ships in the harbor.”
For more information on Palm Beach County public schools, please go to School District of Palm Beach County, and Florida Department of Education.
Source: NEWSWEEK
Mortgage Interest Rate Survey - May 25, 2007
May 28th, 2007
In this week’s Mortgage Interest rate survey, according to Freddie Mac, rates jumped 10 basis points or 1/100%, as investors sold bonds on the market - the law of supply and demand causes bond prices to go down. When bond prices fall, bond yields rise, and mortgage rates follow the trend.
Freddie Mac released its May 25th, 2007 weekly results of the Primary Mortgage Market Survey® (PMMS®), with interest rates for the following programs:
* 30-year fixed-rate mortgage (FRM) averaged 6.37 percent with an average 0.4 point for the week ending May 24, 2007, up from last week when it averaged 6.21 percent.
* The 15-year FRM this week averaged 6.06 percent with an average 0.4 point, up from last week when it averaged 5.92 percent.
* Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 6.02 percent this week, with an average 0.5 point, up from last week when it averaged 5.92 percent.
* One-year Treasury-indexed ARMs averaged 5.64 percent this week with an average 0.6 point, up from last week when it averaged 5.48 percent.
“Stronger than expected consumer confidence and recent comments from members of the Federal Reserve (Fed) raised some inflation concerns in the market, causing it to lower expectations of a Fed rate cut this year. This helped push mortgage rates higher this week,” said Frank Nothaft, vice president and chief economist.
For Lou Barne’s national and global perspective and commentary on this week’s status of the mortage and housing market, visit Boulder West Mortgage Credit News.
Source: Freddie Mac
Insurance reform attracts new insurers to Florida
April 25th, 2007
Florida’s property insurance market is becoming more welcoming to new insurers thanks to recent changes in the insurance regulation laws that are helping them financially.
Four new homeowners insurance carriers have entered the Florida market since the state passed legislation in January to lower premiums and entice new carriers to write policies. Another three companies have applications pending with regulators to begin doing business in the state, according to the Florida Office of Insurance Regulation.
New carriers entering the market is a sign companies are finding it more attractive to do business in the Sunshine State after the Legislature expanded the Florida Hurricane Catastrophe Fund in January to give insurers cheaper reinsurance, which is insurance for insurance companies.
“We of course were looking at the special session very closely,” said Frank McCahill III, president and chief executive officer of Port St. Lucie-based Homeowners Choice Property and have a small number of policies and therefore will not qualify for as much access to the fund as larger companies. “It depends on what your book of business looks like, how much you get out of the CAT fund,” Howson said, adding that the company plans to initially write about 3,000 policies. “We won’t have as big a book of business. For us, it’s just readjusting our reinsurance budget to whatever we get out of the CAT fund.”
John Laurie, an agent with Bradenton-based BB&T-Wyman, Green & Blalock who serves on the board of the Florida Association of Insurance Agents, said the fact new companies are entering Florida is a positive sign that aspects of the legislation have worked. “Clearly, the expansion othe CAT fund has made an improvement in the business model to allow carriers to at least obtain the reinsurance they couldn’t get before,” Laurie said. “I honestly haven’t seen a huge influx of new companies.”
However, Laurie said existing companies, particularly domestic carriers, have benefited from the backup reinsurance that allows them to expand their policy-writing in the state. Recent legislation also allowed private insurers to receive a match from the state to help build cash reserves for future claims, Laurie said. Legislators set aside $250 million to provide matches of up to $25 million per company to build capital reserves. “We’re just starting now to see the benefits of that incentive go to work,” Laurie said. “You could apply for up to $25 million. If you put up $25 million, the state would match you another $25 million.”
But the cloud to the silver lining is the fact that larger companies with deeper pockets – some with capital in the hundreds of millions of dollars – are still pulling out of Florida, Laurie said. “We still see the big guys retracting,” Laurie said. “That’s a disappointment from the legislation. State Farm, Nationwide, Allstate, Auto Owners, those companies are still retracting.”
Ross Buchmueller, president and chief executive officer of Plantation-based PURE High Net Worth Insurance, said the law changes helped carve out a special niche for his company, which only insures homes worth $1 million or more and began writing policies Jan. 29. One of those changes involved Citizens Property Insurance Corp., the state’s insurer of last resort, no longer being able to offer coverage on $1 million homes in order to limit risk exposure, Buchmueller said.
“The changes from Senate Bill 1980 created an attractive environment … making million-dollar homes ineligible for Citizens and creating a capital buildup incentive,” said Buchmueller, whose company has $50 million in capital. “All of that was very attractive. “Because reinsurance is easier to get on higher-priced, better-built homes, the expansion of the CAT fund didn’t really play a part in the company deciding to start writing policies in Florida,” Buchmueller said. “I’m not suggesting it’s a bad thing, but it’s certainly not the thing that got us interested in the market.” PURE High Net Worth has already approved 200 of 1,500 qualifying applications.
Source: FAR, Bradenton Herald
What to know before you buy - Good info for first-time buyers and buyers relocating to Boca Raton
April 24th, 2007
The softening Florida real estate market may signal some good news for first-time home buyers, and many others who have been shut out of the local real estate market due to sky-high home prices.
But now, with more inventory on the market, lower fixed-rate mortgages, and sellers desperately cutting their asking prices, home buyers are starting to emerge and start looking again.
The renewed interest among first-time buyers is a marked change from early 2006 when the percentage of first-time buyers dropped to 36 percent, its lowest level since 1987, according to the National Association of Realtors.
Activity has definitely increased in the first quarter of 2007 over the last 6 months of 2006, from both the surge in first-time home buyers as well as other buyers who have been on the sidelines waiting for prices to go down. If you are one of the millions of would-be homeowners, remember that buying a home is a complicated process that is fraught with pitfalls.
Here’s how to avoid some of the most common errors made by first-time home buyers:
Set a budget and stick to it. With housing prices at historically high levels, it’s easy to see how first-time home buyers can get caught up in overspending. Mortgage lenders typically won’t allow monthly housing expenses to be more than one-third of a buyer’s household monthly gross income, so your budget is largely pre-determined by your paycheck stub. Costs associated with buying a new home also add to the monthly mortgage payments, including:
# A down payment - anywhere from 5 percent to 20 percent of the home’s purchase price.
# Property taxes, which average around 1.5 percent to 2 percent of a home’s purchase price.
# Homeowners’ insurance and private mortgage insurance, which is required by lenders if your down payment is less than 20 percent of the purchase price.
# Fees imposed for special tax districts, also known as special assessments, known as SAs, or special service areas, known as SSAs, which are becoming more common in subdivisions.
# Closing costs, which include points and other fees charged by the lender and can add up to 3 percent of the amount you borrow; title insurance, which can range from a few hundred dollars to more than $1,000, depending on the purchase price of your home; inspections, $200 to $500; and other miscellaneous fees.
# Maintenance. Varies year to year, but expect to spend about 1 percent of the purchase price annually on maintenance and repairs.
It’s very important to get pre-approved for a loan before you start shopping for homes. It is better to have a true pre-approval for a mortgage in hand vs. a pre-qualification. Pre-approval means assembling all of the documentation you need for a mortgage commitment. Once a home is found, the only thing left to do is get an appraisal. You need to understand what your total payments are going to be and how they could increase over the life of the loan. People buy based on the monthly payment, not on the purchase price.
The other components in addition to your principal and interest portion are your property taxes, homeowners insurance and HOA or condominium monthly payments. These also can increase every year, as we have seen over the last few years with the dramatic price appreciation and hurricanes we have had. Aggressive changes are being addressed now to lower these costs, but you still should have a cushion and be prepared for increases.
At this point, you also need to determine which type of mortgage makes sense for you: Fixed-rate or adjustable-rate? Fifteen-year or 30-year? There are so many variations of loan programs, that speaking with a mortgage broker or lender will help you understand what your options are.
First-time buyers are especially vulnerable to no-down-payment loans, since they don’t have equity from an existing home they can use. In fact, nearly half of first-time buyers bought their home with no money down, according to a recent NAR survey. Many so-called “no-down-payment loans” are money-making scams for unsuspecting buyers. If you plan to use a down-payment assistance program, work with well-known entities such as Fannie Mae and Freddie Mac, the governmental agencies that buy mortgages and package them as investments. The programs generally offer assistance to income-eligible families and first-time home buyers who have with at least $1,000 saved.
No-money-down programs are much more difficult in 2007 because of the increases in defaults, foreclosures and the problems in the Alt-A and subprime market. Lending criteria have tightened and the interest rates have gone up stubstantially for these types of loans even for buyers with 700+ credit scores. Make sure you understand your loan completely and ask a lot of questions. A couple of years can go by very quickly if there are going to be rate increases.
Gather your real estate team to help you with the process. According to NAR, almost 80% of home buyers start their search for a home online because they can easily preview so many houses to get an idea of what they want. Many people also choose their agent this way as well because they can get to know them a little from their websites and blogs. Many people also get recommendations from friends and co-workers. Interview several and pick one with whom you have confidence in who has dealt in the county where you are looking to buy.
Your agent can also give you several recommendations for lenders, mortgage brokers, inspectors, appraisers and surveyors. In each instance, ask what the fees are and what specific services they cover.
Look at as many homes as you need to so you are comfortable with your choice of neigborhood and home. Visit the neighborhood at various times of the day on various days of the week. Consider the qualities that make a neighborhood desirable, such as ample street lighting, sidewalks, parks or playgrounds and little through traffic. Talk to some of the neighbors if you like.
When you find the home you want to buy, you’ll make an offer by submitting what’s called a “contract for purchase and sale.”
Once the contract is signed, you’re legally bound to the terms. The document spells out the terms and conditions of the purchase - from the purchase price all the way down to who pays the utilities until you take possession of the house. The contract also is the blueprint or road map for the closing on the property - if an issue is not spelled out in the contract, then it’s not likely it will be addressed at the closing.
However, don’t think the pre-printed terms of the contract are written in stone. Rather, it’s how you and the seller begin the process of negotiating the terms of the contract that both of you will have to live with. Make sure you understand and are comfortable with all aspects of the contract - you will likely be living with it for a long time.
SOURCE: Statistics NAR
Credit Crackdown Shutting Out Home Buyers
March 23rd, 2007
Even before Goodman Griffin and his girlfriend began house-hunting a month ago, they sat down with a mortgage broker and were pre-qualified for the nontraditional loan they needed to purchase the kind of home they wanted.
So it came as a shock when the loan they thought they had was yanked away from them this week just as the seller accepted their contract on a four-bedroom, $300,000 house.
“We’ve been on a merry-go-round, thinking we’re going to get the loan, then thinking we’re not going to get the loan,” said Griffin, 45, who has rented a house. “We have no confidence at this point that we’re going to get the house.”
More would-be home buyers with blemished credit histories may soon be shut out of the housing market now that lenders are curtailing the number of loans to risky, or subprime, borrowers.
During the first half of this decade, when housing prices spiked, lenders chased after such borrowers, making it easier for them to buy homes they otherwise could not have afforded. But after the housing market cooled last year, delinquencies and defaults spiked, forcing more than two dozen lenders to close, sell themselves to larger firms or report staggering financial losses. Some have chosen to get pickier about borrowers - a course encouraged by federal regulators.
Connecticut had an earlier experience with the trend the many other areas of the country. Mortgage Lenders Network, a subprime lender based in Middletown, was forced to file for bankruptcy protection last month when its sources of funding disappeared.
General Electric’s U.S. mortgage arm this week laid off a fifth of its workers because of a jump in defaults and has stopped making some risky loans.
New Century Financial, one of the nation’s largest lenders to subprime borrowers, said Thursday that it had stopped accepting new loan applications under pressure from its creditors.
BNC Mortgage, the lender that last month pre-qualified Griffin and his girlfriend, chose to tighten its rules. That’s why the company withdrew its offer to grant the couple a 100 percent loan, meaning it would not have required them to put any money down, said Matt Smeltzer, a BNC sales executive.
BNC now demands higher credit scores for such loans than it did a month ago. “I’m probably turning away about 50 percent of those loans, whereas before I would reject maybe 30 percent of them,” Smeltzer said.
Those 100 percent loans, and loans that do not require borrowers to document their income, have been the first ones dropped by some lenders because of their risk. But there are many other types of loans, because as home prices climbed, consumers demanded nontraditional mortgages that lenders happily delivered. Other loans include adjustable-rate mortgages that offer tantalizingly low teaser rates that rise, or balloon, in later years.
The thinking was that as long as home prices kept rising, people could sell their homes or refinance themselves out of trouble. But after prices leveled off last year, delinquencies and defaults followed.
David Liu, an analyst with UBS, said that of all the loans originated in 2006, the default rate for those 60 days or more delinquent has exceeded 10 percent, more than double what it was in late 2005, when the rate was just above 4 percent.
“This is the highest rate we’ve had since the mid-1990s,” when the subprime portion of the mortgage market broke off into a free-standing industry, Liu said.
The industry typically works like this: Mortgage brokers sell the loans to lenders or Wall Street investment firms, which then package them into securities. The mortgage-backed securities are bought as bonds by such investors as pension funds.
“As these defaults accelerate, the end investors are getting spooked,” said Michael Larson, a real estate analyst for Weiss Research, based in Jupiter, Fla. “These mortgages are going bad so fast, that makes them want to buy fewer of the bonds and that means Wall Street investors have trouble packaging the securities and it trickles on down the food chain.”
That’s when the mortgage brokers, the folks on the front lines, start feeling the squeeze, as Daniel Walsh can attest.
“We have had to tell customers that were dreaming and hoping of finding a place to sort of put their search on hold because of the way the market has turned,” said Walsh, president of Guardian Funding, a lender and broker in Kensington, Md.
The firm’s motto has been “When others say no, we say yes.” But recently, “we’ve been saying some no’s,” Walsh said.
One of the national lenders that recently closed gave almost no advance notice, leaving borrowers up in the air, said Tysons Corner, Va., mortgage broker Abe Nejad.
“They were sitting on a pile of loans that were set to close on the very day they closed their doors. They had to call brokers like me and say, ‘Hey, sorry, I know you have 10 loans that were supposed to close with us this week, but unfortunately … we’re not able to close any of them.’ “
But some lenders and housing counselors are cheering the crackdown, saying it will prevent home buyers from getting in over their heads.
“Some of these people who come into our office need more time before jumping into the housing market,” said Marcia Griffin, president of HomeFree-USA, a Washington nonprofit group that helps educate home buyers.
In her opinion, having lenders hold off on financing homes that people can’t afford is a development that’s “heaven sent.”
SOURCE: Courant
Drought spurs order to shackle sprinklers
March 20th, 2007
Turn off those sprinklers. Water restrictions are returning to South Florida.
This time, they might be here to stay.
Water managers voted Thursday to impose three-day-a-week limits for sprinklers from Tequesta to the Keys, saying it\’s time for residents and businesses to share the pain of a drought that threatens the region\’s wells and wildlife.
\”Water conservation is everybody\’s responsibility,\” Kevin McCarty, chairman of the South Florida Water Management District, said after his board approved the limits in a 9-0 vote.
Even after the drought ends, board members said, they will consider enacting mandatory limits year-round to send the message that water is finite. Such limits are in effect in the Tampa Bay area and other parts of the state.
The new restrictions take effect in six days. Violators could face warnings, fines or — in extreme cases — misdemeanor charges punishable by 60 days in jail.
The board also imposed 30 percent cuts in the water supply for growers around Lake Okeechobee, the St. Lucie Canal and the Caloosahatchee River.
Separately, the district declared a shortage that will limit the water available to farms in rural Martin and St. Lucie counties that rely on the C-23, C-24 and C-25 canals. The small number of households that draw from those canals will fall under the same restrictions as people in Palm Beach County.
The three-day-a-week limits also will apply to Martin County residents served by Tequesta\’s water utility.
Farmers around the lake said the restrictions will cost them on the fields and in the wallet. Those growers have been under 15 percent cuts since November.
\”Now that we will be cut back even further and it has not rained in six weeks, our fields are suffering,\” said John Hundley, vice president of production for Hundley Farms east of Belle Glade, who estimated crop losses of up to 15 percent in sweet corn alone. \”It will all hurt. It\’s hurting right now.\”
Barbara Miedema, spokeswoman for the Sugar Cane Growers Cooperative of Florida, said farmers around the lake lost an estimated $100 million in sugar cane, citrus, vegetables and other crops in the last drought, which ended in 2001.
Since then, the farmers have continued to suffer from the region\’s feast-or-famine climate, said Tom MacVicar, a West Palm Beach water consultant. \”These are the same growers who got hammered in 2001 by the drought with significant financial harm, then got hit by two years of hurricanes.\”
In contrast, district leaders described the coast\’s new lawn-sprinkling limits as \”moderate,\” saying they will allow more than enough water to keep grass green.
One of the most public symbols of the region\’s water profligacy, the spurting fountain in front of West Palm Beach\’s city library, will continue to squirt amid crowds of swimsuit-wearing youngsters. Under the district\’s rules, fountains that recirculate water can keep operating as long as they don\’t leak or overflow.
Even so, the limits will affect millions of coastal residents, along with plant nurseries, landscaping operations, carwashes and every other business that depends on water. And the details will make life trickier. For instance, a home\’s allowed watering days will depend on whether its address is odd or even, and nobody will be allowed to water on Fridays.
Even harsher restrictions are inevitable unless the skies reverse the near-record dry spell that has lingered since last spring, district Executive Director Carol Wehle warned. Those could limit watering to two days a week, or even one.
Wehle said last year was the region\’s sixth-driest since 1932, and the district\’s rain gauges have recorded no rain so far during March in Palm Beach, Martin and St. Lucie counties. During the past 30 days, rain in those counties has been 85 percent to 90 percent below normal.
The dearth of drops has plunged Lake Okeechobee to less than 11 feet above sea level, more than 4 feet below where it was a year ago.
Within two months, the lake could be too low to drain into the canals that send water to farms, the coast and the Everglades. The district would have to move the water using temporary pumps it began installing this month.
Water levels also have begun dropping in the Everglades, which supplies the bulk of South Florida\’s water.
District board members Mike Collins and Malcolm \”Bubba\” Wade said some of the blame for the shortage should be directed at the U.S. Army Corps of Engineers, which dumped nearly a foot of water from the lake last year to restore the health of its waterlogged interior marshes. The corps wouldn\’t stop even after the district requested it, Collins said.
\”We wouldn\’t be in the position we\’re in today with cutbacks if we still had that water in the lake,\” said Wade, an executive vice president of United States Sugar Corp.
But the corps says it also had to lower the lake to protect the leak-prone Herbert Hoover Dike, which a panel of district-hired engineering consultants had labeled a \”grave and imminent danger\” to human life. Acting on that finding, then-Gov. Jeb Bush last year urged the corps to find ways to keep the lake lower year-round.
\”Our primary focus was the Herbert Hoover Dike, and that\’s still our focus today,\” said Dennis Duke, a corps leader from Jacksonville. \”It\’s easy to talk about the wrong thing you did yesterday.\”
One thing that has changed since then: A year ago, meteorologists were predicting a rollicking hurricane season, but it proved to be a dud.
While it\’s not yet a crisis for the coast, the drought eventually could allow salt water from the Atlantic to contaminate the coastal wells that supply millions of residents\’ faucets. Wildfires could rage. Even the district might not have enough water to save the thousands of acres of underwater plants in the filter marshes that make up its $1.1 billion Everglades cleanup.
Local governments are still gearing up to enforce the rules.
Manalapan may not exhibit the extreme customer-friendliness it showed in 2001, when the town sent employees to reset residents\’ sprinklers. Instead, Town Manager Greg Dunham said, residents would be notified by phone, newsletter, e-mail and door hangers.
West Palm Beach water customers will likely get reminders with their monthly bills. \”We want to encourage our customers to be as conservative as they can and save water,\” said Marjorie Craig, the city\’s utilities director.
The city\’s water supply comes from Lake Mangonia and Clear Lake, by way of the Grassy Waters Preserve and, ultimately, Lake Okeechobee.
\”When we reach the real dry season, we\’ll be very limited in the amount of water we can take from Lake Okeechobee,\” Craig said.
SOURCE: Palm Beach Post
More Growth in Refinancings
March 14th, 2007
Overall mortgage application volume increased last week despite mixed movement in interest rates, the Mortgage Bankers Association reported today.
The market composite index, a measure of home loan application volume, gained 2.8 percent last week, rising to 690.5 on a seasonally adjusted basis from 671.6 one week earlier.
The index that tracks refinancings posted the strongest growth, up 3.5 percent on a seasonally adjusted basis from the week before, while the purchase-loan index grew 2.2 percent. Both indexes were higher for the third consecutive week, according to MBA.
The refinance share of mortgage activity inched up to 46.2 percent of total applications from 46.1 percent the previous week, and the adjustable-rate mortgage (ARM) share of activity increased to 21.9 percent.
Borrowing costs posted mixed growth last week, with the average contract interest rate on 30-year fixed-rate mortgages sinking to 6.03 percent, the 15-year fixed rate gaining to 5.78 percent, and the rate on the 1-year ARM climbing to 5.86 percent.
Points, which are loan-processing fees expressed as a percent of the total loan amount, averaged 1.38 on the 30-year loans, 1.22 on the 15-year, and 0.76 on 1-year ARMs. Statistics are based on loan-to-value ratios of 80 percent.
The Mortgage Bankers Association survey covers approximately 50 percent of all U.S. retail residential mortgage originations, and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks and thrifts.
SOURCE: INMAN
Spring Cleaning for your Finances
February 23rd, 2007
Spring is the time we normally think about taking extra care of our homes and dusting off the cobwebs, so to speak, but it should also be the time where we take a fresh look at our finances. If debt is an issue of concern for you, like many Americans, there are some possible ways to relieve this stress and take a look at your issue in a new way. Consolidating your student loans offers many benefits such as helping to lower interest expenses and reducing multiple payments into one monthly payment to one lender. It also has the possibilities to help reduce monthly amounts owed by about 10%-60% and increasing credit scores and avoiding bad credit. Any federal education loan can be consolidated. You can even consolidate a single loan. Consolidation offers lower monthly payments by giving borrowers up to 30 years to repay their loans.
Secureloadconsolidation.com is a great place to read up on Loan Consolidation tips, tools and industry experts. They also have a variety of other financial information regarding Credit Card Debt Settlements and Tax Debt issues.
