Lending Industry Gets Its ‘Due’ for Mortgage Mess
A new financial legislation is being worked at by both houses of the US congress in the hopes of saving the entire country and its people from any more market meltdowns in the future. Among its aims, albeit a minor one, is to regulate the dealings of mortgage lending industries through providing certain rules and restrictions. This is good news to millions of borrowers coming from different states, given the allegations that these companies are processing foreclosures by fraud. In fact, financial experts have it that the current recession should be imputed primarily to the housing industries.
As said by Julia Gordon, the Senior Policy Counsel of the Center for Responsible Lending, getting over the current economic recession would be absolutely impossible if the apparent issues that beset the mortgage market weren’t solved first. Gordon even categorically stated that it is the mortgage market that created all the mess in the U.S., if not in the rest of the world.
The legislative move of the US Congress aims to provide four major changes to the way mortgage lenders are conducting their business today. Specifically, they are after the prepayment penalties that are being imposed on every imaginable type of loans nowadays such that people who don’t have the paying capacity are even more put in a much difficult financial situation. The law specifically indicates that the penalties, although agreed upon, shouldn’t be included in the adjustable rate mortgages computation. It also prevents the unjust enrichment of loan officers because of the unjust rates charged to the borrowers. Besides, it should also be totally removed so as to encourage people to go into refinancing into cheaper loans, affording them the possibility of paying off their debt much sooner.
Another aim of the bill is to make the business fair for both the mortgage brokers and the clients. For this, the broker will be constrained to only give borrowers charges that are within the legal bounds. The popularity of the incentive- based compensation to brokers after all puts the needy borrowers into an even more disadvantaged position. In fact, it is said to be among the things that eventually caused the decline in the financial world. Although mortgage companies claim that the incentives are converted into something to help the client during foreclosures and evictions, the legislators are still unconvinced.
Furthermore, the law is also after making sure that the lenders get to undergo all the legal processes before granting a loan. This in the end is also for their benefit because they will be able to screen the borrowers and make sure that they have the capacity to pay. In the law, granting a mortgage without requiring any document will be illegal. As to adjustable loans, the companies will also be required to make the necessary computations and see to it that the borrowers conform to it.
Finally, the law is after the creation of all possible opportunities and assistance for the borrowers to have loans on convenient terms and for them to be able to pay the same in the soonest time possible.
Mortgage Fraud – First in Making Loans, Now in Foreclosures
Bankers and lenders today have been in hot water ever since this trend of the house market crash. Apparently, these bankers are taking the disadvantaged position of people for their own benefit. We have heard of the popular institutions like the Ally Financial Inc. and the JP Morgan Chase & Co facing suits allegedly for processing foreclosures unlawfully.
Discovery and action against fraud in foreclosures began with Ally needing to suspend their massive eviction proceedings because they were sued by the state of Maine for different cases. The state contends that the company is rushing foreclosure documents to the extent that ordinary employees are signing them. Legally, a notary public should be the one to sign it and only after the all the information relative to the mortgage has been examined and reviewed. To their defense, the Ally spokesperson said that they are being extra cautious in trying to maintain the integrity of the foreclosure and eventually eviction processes. The spokesperson further said that the company in confident that if ever there were processing errors committed, they are sure that it did not result to undue foreclosures.
Next to Ally is Chase. It has been on the hot seat for a long time now also because of alleged fraud in processing foreclosures. Recently, it has had to stop evictions and foreclosures on more than 50,000 cases coming from 23 states because of the issue. Ohio has already pronounced that investigations on the possible abuses of the company are soon to ensue. Just like in the case of Ally, Chase is also being accused of processing mortgage foreclosure documents without it being notarized. This may sound like trivial to this huge company but it has to be given more than enough attention because that is required by the law. Besides, the facts and circumstances must be carefully studied by professionals because proper housing is not something that you just take away from people.
According to Thomas Cox, a lawyer for the state of Maine, in an interview with the New York Times, huge companies are trying to manufacture foreclosures like they would with any profitable merchandise. They want it to happen fast so that sales will bloat and profits will come in like crazy. Well they can’t do that for long before starting to make a stink. The investigations being conducted are now very much widespread such that no foreclosures are yet allowed in many states despite the contention of Ally and Chase that there was really no fraud in their processes.
Because of this issue, the Old Republic National Title, a well- known insurance company has been ordered to deny insurance to the properties that have been foreclosed on by the two companies. This is something that could pull down the revenues for Ally and Chase. If they want to come back from all of this scandal, an admission of error is the first step they should take.
There’s More to Life than Interest Rates
There has been a recent issue posted by the Wall Street Journal online that says that rates today are down to their lowest, or as they said it, “absolute rock bottom.” In fact, they even advised people who were already able to buy their own homes or those who have applied for refinancing of their mortgages to find a way this early to refinance again. Today, the prevailing rate for a 30 year- fixed rate mortgage loan or FRMs is somewhere below 4.25 per cent and it has remained so for a month already. This rate is unexpected and hasn’t been experienced in a period of 50 years. About the same period last year, rates were only at 5% maximum.
Some people might think that interest rates are just a little part of the deal and to make this as a primary consideration for getting refinancing is absurd. Well, people should know better than this. Amy Hoax, author of many financial publications, illustrated the situation by making up a borrower of a 30- year period fixed- rate loan of $200,000 and agreed to a 5 per cent interest rate. Now, if this borrower got a refinancing of 4.5% today, he is likely to save about $100 a month, a great deal for people who are living month to month.
The traditional kind of refinancing is most helpful in scenarios where the borrower wants to decrease the monthly payment he or she is making to give way to some other personal or family expenses or to just decrease the accrued interests for the loan. Well, wouldn’t that be every borrower’s hope? The good thing is that it can be done quite easily, if the borrower is resourceful enough.
An attractive refinance mortgage that borrowers can take is the “zero cost” type. For this you will be asked to agree at a rate of a little lesser than their rock bottom rates of banks and then they will be the one to shoulder the closing costs which will just be added eventually to your loan. The good thing about it is that you wouldn’t be required to give up your properties or to dig in much deeper with some other kind of loans.
The thing about refinancing is that the earlier you do it; the better is your chance of paying off a great deal of your previous loans within a much shorter period of time. You will autoatically be making up some savings by alleviating some of your debts. This is very good for people who are always running out of cash to spend for all their needs. Despite these benefits, many people will still find the deals difficult to understand. If you are one of them, you might want to consider your options first. Everything you need is here already. In fact, in today’s economic situation, having a reliable refinance is your best hope. Just the same, ask the advice of a financial expert for specific advice.
Existing Home Sales – November Report
Home Sales Pace
National Association of Realtors have it that the sales of existing U.S. homes is showing apparent signs of slow yet sure recovery. The industry has recorded its second monthly gain in September of this year. Now, the total sales of existing homes have hit 10.0 per cent subject to slight adjustment annual rate of 4.53 million units in September up from the 4. 12 million last August. Side by side the pacing of sales also in September last year, it will be deduced that of today is down by 19.1 per cent.
With this data, Lawrence Yun, well-known economist for the NAR or National Association of Realtors, remains positive about the trend. He is much confident in saying that there will be a recovery in the housing industry although little by little at first. It will be influenced by factors such as foreclosure and moratorium but overall home sales are directed upwards. This is due to the even lower interest rates that are being issued and terms and conditions being adjusted in favor of low income borrowers. As per records, the national average selling price of existing homes significantly dropped to $171, 700 for the month of September coming down from the $178, 600 if August. A 2.4 per cent drop in the price was also experience one year earlier. Figures were about or in between $176, 600.
There are different classifications for existing homes. The National Association of Realtors has narrowed it down to previously owned single- family homes, townhomes, condominiums and those released to co-ops. The sales of all these units, however, are not independent. They are adjusted due to many known factors such as changes in the weather, career and education possiblities. Besides this, the annual pace is also a great factor.
Sales Pace by Region
The NAR also believes that the amount of sales of existing homes in the US is also affected by the regional economy and statuses of the different states. For example, in September, the sales that had been recorded for the whole nation, following the trend of the Midwest, had a 14.5 positive difference from that of August. Although still 26. 4 per cent shy from that of last year, the increase in sales to a pace of 950,000 is still something to rejoice about.
On the other hand, areas belonging to the southern and northeast portions of the country were able to have a record of 10.6 per cent improvement or total sales of 1.77 million and 760, 000 units respectively although the pace is still lower by 20.8 per cent from that of September last year. The west, finally, showed an increase of 5. 0 per cent or sales record of 1. 05 million units.
Home Prices
The median selling prices of existing homes are evidently going down so that more people can be able to buy. Prices of houses sold in different regions of the country are lower by plausible rates. This is good news to people who want to have their own house despite the economic difficulty that is going on.
Inventory
Due to the slow pacing of sales, constructions of “existing homes” are also down to 1. 9 per cent. Meaning there are only 4. 04 million homes available for sale.
Next Report
Data and information covering October existing home sales, prices, and inventory is to be accessible at the end of November.
Look Out – The Next Tidal Wave of Foreclosures is About to Crash
According to Jay Brinkmann, chief economist to the MBA, there couldn’t be a recovery in the real estate market unless there is a change that happened to the jobs market. After all, according to him, to be able to make a mortgage payment one has to have a stable source of income from work. Surveys done over the last few months have in fact yielded that most of the serious delinquent borrowers to date fell during the dates where in massive laying off of employees are being done. The numbers are in and it’s depressing looking at it. In the first quarter of 2010 4.63 per cent of all homes that were mortgaged were foreclosed. During the second quarter statistics showed 4.57.
Albeit the subtle decline during the second quarter it has been showed that still one out of every ten mortgages have missed at least one payment. Those who are late by one payment, otherwise called the newly delinquent loans, made up 3.51 per cent of the last quarter. This rate is much higher than last year’s when the effect of economic crisis wasn’t felt as much.
Looking at how the rate is going, we can only hope for a positive change in the jobs market. That is only when we can predict also a decline in the foreclosure rates. If not, it is still fair to expect an even greater wind that will make the foreclosure waves stronger. We have seen the government make efforts to help the people who are dealing with delinquency in mortgages, as in loan modifications, but this is never enough. It’s a good thing that there are private banks and lending institutions that are doing great with foreclosure prevention. The only problem is that this is just a temporary solution.
What the people need now are more job possibilities. This is the only way for people to return to the regular payment of mortgages without suffering on the other aspects of life such as food and shelter. Economists say that there is no showing yet of the job opportunities coming back anytime soon. They say that this shocking unemployment rate is set to end in 2019. Well we can just hope that these people are wrong with their predictions. But just the same, preparing for it will not hurt. It’s best to be careful and wiser in spending in the long run.
Lindbergh Field, CA
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