DeMarco: Guarantee Fees will Continue Gradual Rise

Guarantee fees (G-fees) are likely to continue the pattern of gradual increases initiated since Freddie Mac and Fannie Mae were placed in conservatorship.   Edward J. DeMarco, Acting Director of the Federal Housing Finance Agency told an audience at the American Mortgage Conference in Raleigh, North Carolina yesterday that the steady increases, over time, should gradually reduce taxpayers’ risk from the financial support they provide to the two government sponsored enterprises (GSEs).

Risk, however, is only a part of the motivation for increasing the cost to lenders and borrowers for the loan guarantees.  DeMarco said that even with the improvements in the GSEs’ pricing of credit risk, these fees remain less than what one would likely observe in a purely private, competitive market.

He reminded the audience of his remarks at the same conference one year ago in which he spoke of his preference for a series of periodic, gradual hikes in the G-fees rather than one or two larger adjustments.  Since then, he said, there have been two such increases; the first took place in April and was an across the board 10 basis point increase.  The second, set to begin later this year, is designed to average 10 basis points across the two companies’ books of business with actual increases varying by loan terms and other factors.  “These increases will move Enterprise pricing closer to what it would be were mortgage credit risk borne solely by private capital, and it could begin to incentivize private firms to increase their participation in the mortgage market.  We intend to stay on this path with future increases,” he said.

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The Seven Deadly Sins Of Real Estate Investing

Have you committed one of the seven deadly sins?

No, I’m not referring to gluttony, wrath, or sloth. I’m talking about the Seven Deadly Sins of Real Estate Investing.

Ok, maybe they aren’t physically deadly – but they are possibly catastrophic to your business.

If you are concerned about the health of your investments, make sure to steer clear from these seven sins:

1. Buying Based On Future Value
Also known as “pro forma” numbers, many investors buy property based on what it “could” be worth, not what it is worth. Real estate agents are especially known for emphasizing the future possible value (they are the eternal optimists) but neglecting the facts on the ground. Make sure you don’t fall victim to this sin and always know exactly what the current value is and don’t buy anything for what could be.

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The Week Ahead For Mortgage Rates : September 10, 2012

Mortgage markets worsened slightly in last week’s holiday-shortened week. As expected, Wall Street took its cues from Europe and from the U.S. jobs market, and mortgage rates moved across a wide range.

Home buyers and would-be refinancing households were greeted with wildly varying mortgage rates, depending on which day they loan-shopped.

According to Freddie Mac’s weekly mortgage rate survey, 30-year fixed rate mortgage rates averaged 3.55% nationwide last week, with an accompanying 0.7 discount points.

That is, until Thursday’s meeting of the European Central Bank. 

The ECB is similar to the Federal Reserve in that, among its primary functions, it provides liquidity to banking systems in times of crisis. Thursday, the European Central Bank intervened with force.

To aid Spain and Italy, the third- and fourth-largest Eurozone economies, the European Central Board launched a bond-buying program meant to reduce speculation that the two nations — and the Euro itself — would fail.

The move calmed investors and sparked a broad equities market rally.

U.S. mortgage rates did not fare so well, however, climbing as much as 0.25% and leaving that “Freddie Mac mortgage rate” in the dust. If you tried to lock a loan Thursday, you may have been greeted with a rate nearing 4.000 percent.

Fortunately, those rising rates were short-lived.

Friday morning, the U.S. Bureau of Labor Statistics released its August Non-Farm Payrolls report and mortgage rates dropped. Far fewer jobs were created in the U.S. than was expected. 96,000 net new jobs were made in July. Wall Street had expected 130,000. This increases the likelihood of new Fed-led stimulus — perhaps as soon as this week.

The Federal Open Market Committee meets for the 6th of eight times this year later this week; a 2-day get-together scheduled for September 12-13. The Fed may announce a new round of market stimulus. If it does, mortgage rates should fall. If it doesn’t, mortgage rates may rise.

Other news affecting potential housing payments this week includes the release of key inflation data Thursday and Friday, and Friday’s Retail Sales data.

Mortgage Settlement Tally: $10.56B in Relief, Mostly ‘Short Sales’

Mortgage Settlement Tally: $10.56B in Relief, Mostly ‘Short Sales’ |

From March 1 to June 30 of this year, mortgage servicers have provided a total of $10.56 billion in relief to 137,846 borrowers under the $25 billion deal to settle foreclosure-processing abuses by the nation’s top lenders.

However, most of the relief has come in the form of short sales or “deeds in lieu of foreclosure.”

Only 7,093 borrowers have successfully completed a first-lien modification and received $749.4 million in loan principal forgiveness, averaging approximately $105,650 per borrower.

The servicers are required to eliminate up to $17 billion in principal reduction and other forms of loan modification relief nationwide under the settlement approved in April.

Former North Carolina Commissioner of Banks Joseph Smith, who is the independent monitor overseeing relief provided to borrowers, has provided an update on the $20 billion that mortgage servicers are required to provide to approximately 2 million consumers.

The vast majority of the $10.56 billion already provided amounted to a short sale, in which the servicer agreed to a sale of a home for an amount less than the principal balance on the mortgage – or the lender agreed to accept a deed in lieu of foreclosure.

The total amount of this type of relief amounted to $8.67 billion, affecting 74,614 borrowers.

Under the mortgage settlement, lenders and affiliated mortgage servicers are also required to implement new policies and standards to prevent foreclosure abuses of the past, such as “robo-signing,” improper documentation and lost paperwork.

Those eligible should receive letters. Due to its scope and complexity, the settlement will be executed over the next three years.

Here’s the breakdown on relief provided through June 30:

• 7,093 borrowers completed a first lien modification and received $749.4 million in loan principal forgiveness, averaging approximately $105,650 per borrower.
• An additional 5,500 borrowers received forgiveness of pre-March 1, 2012 forbearance of approximately $348.9 million, representing an average of about $63,445 in forgiveness per borrower.
• Second lien modifications and extinguishments were provided to 4,213 borrowers, representing about $231.4 million in total relief. The average amount of relief for borrowers whose second liens were modified or extinguished was approximately $54,930.
• Servicers refinanced 22,073 home loans with a total value (unpaid principal balance) of $4.9 billion. The estimated annual relief provided to borrowers is about $102.8 million resulting from an average annual interest rate reduction of about 2.1 percent. On average, the estimated annual interest savings to each borrower will be about $4,655, or $388 monthly.
• In addition, 74,614 borrowers had either a short sale completed during this period, in which the Servicer agreed to a sale of a home for an amount less than the principal balance on the mortgage, or the lender agreed to accept a deed in lieu of foreclosure, waiving any unpaid principal balance in either case. The total amount of this type of relief approximated $8.67 billion, averaging about $116,200 per borrower.