loans

A Few Good Reasons To Ignore Your Mortgage Prepayment Penalty

August 15, 2007

Industry trade magazine Inside B&C Lending pegs the 2006 dollar volume of new sub-prime loans at $640 billion.  According to the Real Estate Charts chart above, 78% of those dollars were in 2-year adjustable loans. A loan of this variety is often called a 2/28 (“two twenty-eight”). A 2/28 originated in 2006 will reach its […]

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What’s The True Risk In Mortgage Lending? It’s Anyone’s Guess Right Now.

August 10, 2007

Any security — stock, bond, or otherwise — has a specific risk associated with it.  Based on that risk, an investor decides whether or not the price is worth paying.  If the security is a “good value”, an investor will buy it.  If not, the investor will pass. Until recently, mortgage bonds were considered a […]

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The Week In Review (August 6, 2007) : What To Watch For

August 6, 2007

In a week in which several high-profile mortgage lenders closed their doors, not all news was bad. Mortgages rates for home loans bought by the quasi-government groups Fannie Mae and Freddie Mac actually dropped a bit. If you only watched the news, or market commentary on CNBC, though, you likely have the wrong idea about […]

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What If You Got To The Closing Table And The Money Never Showed Up?

August 3, 2007

Several high-profile mortgage lenders, including American Home Mortgage, closed their doors this week and stopped funding loans.  Others dramatically limited their list of “eligible” borrowers. Many buyers and sellers across the country have been stranded at the closing table without funds this week, only adding to the confusion. Because the story is not getting much […]

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The Biggest Banks Are Eliminating The Most Prevalent Sub-Prime Loan

July 24, 2007

Mixed news from the sub-prime sector, depending on how you look at it. Many lenders discontinuing their short-term ARM products. Washington Mutual, Countrywide and Wells Fargo are among the sub-prime lenders no longer offering the 2/28 mortgage product. The “2/28” is a adjustable rate mortgage in which the interest rate remains fixed for two years, […]

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Before You Rush To Make Bi-Weekly Mortgage Payments…

July 11, 2007

Before paying down your mortgage balance with extra principal payments, be sure to plan carefully. The biggest risk in lending for banks is that you will suddenly stop paying your mortgage.  In that event, the banks hope that you owe them as little as possible against the value of the home. That way, your mortgage balance […]

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How To Protect Yourself From Becoming A “Trigger Lead”

June 26, 2007

From the CBS News Video Web site, an interesting story for anyone who’s recently applied for credit. Credit repositories now sell the contact information of people applying for new mortgage loans to other mortgage lenders that want to compete for the business. Called “trigger leads”, an unsuspecting mortgage applicant can have his credit checked by a […]

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Be Wary Of Opinions That Masquerade As News

June 21, 2007

Is “news” always news, or is it masked opinion? When doing research on mortgages, it’s important to pay attention to the objectivity of your research source. Often, a writer will deploy key adjectives, phrases, and/or images that distort an otherwise factual story. This cartoon from clangnuts.com is a terrific example. It implies that interest only […]

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How The Recasting of Interest Only Loans Helps With Financial Planning

June 14, 2007

An interesting feature of interest only loans is that your payment is re-calculated each month based on how much money you are borrowing. The industry term for the re-calculation is “recasting”. When an extra principal payment is made on an interest only loan, the new loan payment is calculated as: (Outstanding Loan Size) * (Annual […]

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What Role Do You Play In This Rising Mortgage Rate Environment?

June 13, 2007

The American Consumer keeps spending. This morning, the monthly Retail Sales report showed a larger-than-expected jump.  Even after stripping out elevated gas prices, the sales increase was more than double the expected amount. The economy surges ahead, fueled by everyday spending, and this does not bode well for the future of mortgage rates. The recent […]

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One Method To Reduce The Amount Of Sub-Prime ARM Foreclosures

May 23, 2007

The graphic at right comes from The Wall Street Journal and it illustrates something that we all intrinsically know: Sub-Prime ARMs foreclose at a faster pace than all other home loan types. When adjustable rate mortgages reach the end of their “fixed rate” period, some homeowners are unprepared for the upward-adjusting mortgage payments and that […]

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When You Can’t Pay The Mortgage, Pick Up The Phone Pronto

May 15, 2007

According to RealtyTrac, one out of every 783 homes in the United States filed for foreclosure in April.  This is down one percent from March, but up 62 percent from one year ago. If you are struggling to pay your mortgage and have not yet entered foreclosure, the best thing to do is to call […]

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Why “Prime Rate” Is A Name And Not A Number

May 2, 2007

Pop Quiz: Which interest rate is lower?  8.25% or Prime Rate? If you answered anything other than “they are the same”, then you can understand first-hand why banks refer to Prime Rate by name instead of by number. It’s a neat little piece of sales psychology that keeps people from recognizing their true cost of […]

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What’s All That Yellen About?

April 27, 2007

So much for market calm. The mortgage market tanked yesterday when, in response to conflicting data about growth and inflation, San Francisco Fed President Janet Yellen said “watchful waiting” is the Fed’s likely next step. This surprised markets because most expect the Fed to lower the Fed Funds Rate within the next few months. The […]

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Wealthy Americans Are 25% More Likely To Hold Mortgage Debt

April 11, 2007

Interesting fact of the day: 55.5% of “wealthy” Americans have mortgages on their primary homes vs. 44.6% of the overall population. This doesn’t mean that the wealthy are more indebted than the rest of us; it means that the wealthy are maximizing the tax deductions that the IRS makes available to every homeowner in the […]

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Conforming ARMs Are Going Delinquent More Rapidly Than Sub-Prime ARMs

March 14, 2007

The Mortgage Bankers Association released a report yesterday detailing how mortgage-holding homeowners are meeting their obligations. The statistics were a major factor in the Wall Street sell-off yesterday as investors increasingly grow nervous that sub-prime mortgage defaults will spill over into other credit markets and take the economy with it. The report stated that fourth […]

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Sub-Prime Changes Freeze Out Homeowners

March 8, 2007

The snowballing in sub-prime lending is becoming an avalanche. Effective today, many lenders have discontinued 100% financing programs and other “piggyback” scenarios.  These types of loans represented the widest doors to homeownership for Americans in recent years. There are several reasons why a home loan applicant may be considered “sub-prime”, but the most common reason […]

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Like Me And You, Sub-Prime Lenders Have Credit Limits

March 7, 2007

Turbulence in the sub-prime lending market forced several big name lenders to shut their doors to business in recent weeks. In a healthy sub-prime environment, institutional investors buy mortgages in large bundles called “pools” from sub-prime lenders. The current environment is not healthy, however.  Loans are defaulting more quickly than in the past and investors are […]

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Mortgage Insurance Is Tax Deductible in 2007, But With A Catch

January 23, 2007

Adding complexity to the home financing process, The Tax Relief and Health Care Act of 2006 includes new tax code for homeowners.  The act grants itemized deductions for private mortgage insurance (PMI) and government mortgage insurance (MIP) expense premiums paid in 2007. For all loans originated in the 2007 calendar year, mortgage insurance is tax-deductible […]

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Sub-Prime Lenders Eliminate Loans To Riskiest Borrowers

January 3, 2007

Washington Mutual-owned Long Beach Mortgage announced yesterday that its underwriting guidelines are changing, effective Monday, January 8. Following the lead of a host of other sub-prime lenders including large-players Fremont and New Century, Long Beach is hoping to avoid the fate of sub-prime lenders Ownit, Sebring Capital, and Mortgage Lenders Network. All three closed their […]

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