Did a disputed bill put the kibosh on your refi? Possibly, according to Ken Harney's column at latimes.com.
Could a little-known and potentially controversial practice by mortgage giants Fannie Mae and Freddie Mac kill or stall your next loan application? Absolutely.
Picture this scenario: You've got outstanding credit scores close to 800 and solid equity in your home. All you want is to refinance your mortgage to take advantage of today's rock-bottom interest rates.
Your application should rocket through your lender's system and get you a great rate. But your bank says: Sorry, we can't do your loan. Fannie Mae's automated underwriting system won't accept any application where there is a notation in the credit report that a consumer has disputed an account or "tradeline."
You explain that the dispute -- over a medical bill or a credit card charge -- was valid. The account was closed. The creditor promised to remove the dispute notation but apparently didn't. Your loan officer won't budge. Policy is policy, he says. Your refi application is dead.
Apparently automated underwriting is kicking some refi applications out and returns them to the lender for manual underwriting. This may be why some people have been reporting such long delays in getting their refinancing. Has this happened to you?
The surge in home refinancings triggered by rates that dropped below 5% last month appears to be tapering off.
Mortgage rates went up a little last week and applications for new home loans declined nearly 14%, the Mortgage Bankers Assn. said in its weekly report today.
The average rate rose to 5.07% for a 30-year fixed-rate mortgage from 5.02%, with points (including the origination fee) edging up as well, from 1.11% of the loan amount to 1.13%.
The figures assume that borrowers are making a 20% down payment.
Rates for 15-year fixed mortgages and adjustable loans edged up as well.
But in August, they learned it had been rejected. The reason, according to the letter they received from the bank: "Income insufficient to support expenses."
Apparently BofA decided not to take into consideration the $58,000 severance package Trujillo received from BofA along with her pink slip.
Or her $377,000 BofA pension.
Or her $156,000 in savings at BofA.
Or the $10,000 she and her husband deposit at BofA monthly for rental properties they own and manage.
Not to mention the $450,000 value of their house, as appraised by BofA for their current BofA loan of $280,000.
Oh, and let's not overlook that Heinzen's FICO credit score was 809 at the time of their refi application and Trujillo's was 764, placing them among the least-risky loan seekers in the country.
I understand banks not wanting to loan to the unemployed -- nearly 10% of the population according to the latest U.S. figures. And just because someone has a pension and hefty personal savings doesn't mean they won't decide to strategically walk away if values decline further. But it still surprised me that even with their rental income, they were considered too risky for the refinance.
A California mortgage lender agreed Tuesday to pay $20,000 in civil fines for sending pre-screened credit offers to homeowners without telling them that they could opt out of receiving similar offers in the future.
Metropolitan Home Mortgage Inc., which was sending out the credit offers under the name Wholesale Home
Lenders, settled with the Federal Trade Commission on charges that it violated federal law.
The Irvine-based company also agreed to share its record-keeping and reporting on its pre-screened credit offers with the FTC so the agency can monitor the company's compliance with federal law, the commission said in a statement.
Metropolitan Home Mortgage didn't respond to requests for comment.
Federal law permits lenders or insurers to make pre-screened credit or insurance offers only if they clearly state that the person's credit report was used to make the offer and that they can opt out of getting such offers, the commission said.
The Federal Trade Commission has teamed with local and state authorities in a nationwide crackdown on loan adjustment scams, as reported in the Business section of The Times.
But one of the biggest challenges the FTC and its allies are up against is reaching homeowners looking to stave off foreclosure before the scammers reach them and dupe them, promising mortgage modification services that they never deliver.
The FTC produced a video on how to avoid scams as part of its inter-agency crackdown, dubbed "Operation Loan Lies," which can be watched and downloaded at www.ftc.gov/YourHome, or below.
The FTC's video, "Real People, Real Stories," is also available in Spanish, which can also be seen below.
For those seeking to lower their monthly home loan payments, here are some tips on avoiding scams. The suggestions come from the FTC and the office of California Atty. Gen. Jerry Brown:
The first thing anyone seeking to modify an existing loan should do is call his lender.
Lenders want to hear from homeowners and will probably be more willing to work directly with them than with a foreclosure consultant. Do not ignore letters from your lender. Many lenders are willing to work with homeowners who are behind on their payments.
Contact housing counselors approved by the U.S. Department of Housing and Urban Development, who may be able to help you for free. For a referral to a housing counselor near you, contact HUD at (800) 569-4287 or www.hud.gov.
It is illegal for foreclosure consultants to demand money before they give you a written contract and before they actually perform all the services described in the contract, such as negotiating new monthly payments or a new mortgage loan.
However, an advance fee may be charged by an attorney, or by a real estate broker who has submitted the advance fee agreement to the California Department of Real Estate for review.
Do not transfer title or sell your house to a "foreclosure rescuer." Fraudulent foreclosure consultants often promise that if homeowners transfer title, they may stay in the home as renters and buy their home back later.
Fraudulent foreclosure consultants claim that transfer is necessary so that someone with a better credit rating can obtain a new loan to prevent foreclosure. Beware -- this is a common scheme so-called rescuers use to evict homeowners and steal all or most of the home's equity.
Do not pay your mortgage payments to someone other than your lender or loan servicer, even if he or she promises to pass the payment on. Fraudulent foreclosure consultants often keep the money for themselves.
Do not sign any documents without reading them first. Many homeowners think that they are signing documents for a new loan to pay off the mortgage they are behind on. Later, they discover that they actually transferred ownership to the "rescuer" who is actually a scammer.
Homeowners who think they have been ripped off can file a complaint with the California Department of Real Estate through their website here. The department also offers tips on how to avoid getting scammed and what to do if you think you've been scammed here.
Complaints can also be made directly to the FTC by phone at (877) 382-4357, the FTC's Headquarters or Financial Services Division in Washington, D.C., at (202) 326-2222. The FTC also has regional offices; in San Francisco at 901 Market St. and in Los Angeles at 10877 Wilshire Blvd.
HUD can set up homeowners with personalized guidance from housing counseling agencies they've certified at (888) 995-4673. More information on how to find free certified counseling services is available at HUD's guidance website at www.hopenow.com or the Obama Administration's website loan modification website, www.makinghomeaffordable.gov.
Applications for home loans declined by more than 16% last week as interest rates rose, the Mortgage Bankers Assn. said in a survey today.
As expected, the drop-off occurred in people seeking to refinance their homes because the benefits of refis are driven by interest rate trends.
The trade group said the average rate for 30-year, fixed-rate mortgages jumped from 4.81% a week earlier to 5.25% -- the biggest weekly increase since October 2008. Typical points charged, including the origination fee, decreased from 1.28% to 1.02% of the loan amount for mortgages amounting to 80% or less of the property value.
The average rate for 15-year, fixed-rate mortgages increased to 4.8% from 4.44%.
Interestingly, applications to purchase homes rose more than 4%, the mortgage bankers said. If you think now is the time to buy, a rate in the low 5% range still looks pretty good.
Investors buying bonds backed by Fannie Mae and Freddie Mac mortgages are demanding higher interest rates, Bloomberg News reported today.
Why should anyone but bond buyers care? Well, if the buyers won't accept lower yields, the bond issuers will have to get loans with higher interest rates to bundle up and sell. And since the vast majority of all U.S. mortgages are now winding up in Fannie and Freddie securities, that could mean more costly loans for anyone buying or refinancing a house.
The Fed, seeking to use lower home-loan rates to stem the housing slump and bolster consumers, said March 18 it would increase its planned purchases of so-called agency mortgage bonds by $750 billion, to as much as $1.25 trillion, and start buying government notes. Rising mortgage-bond yields, driven higher in part by climbing Treasury rates, means the Fed now “faces a challenge to its ability to sustain low mortgage rates,” according to Jeffrey Rosenberg at Bank of America Corp.
The report notes that the yields on 10-year Treasury bonds, a traditional indicator of fixed-rate mortgage trends, are at six-month highs.
The average rate on a typical 30-year mortgage for the week ending May 21 was 4.82%, Freddie Mac said last week. When Freddie issues its new rate report Thursday, will the average have crept closer to 5% again?
The number of refis is swelling. From "Obama welcomes new wave of lending" at latimes.com:
Reporting from Washington -- President Obama, meeting with homeowners at the White House, said the government's efforts to drive down interest rates had fueled a surge in refinancing -- putting money into many homeowners' pockets during the current economic crisis.
But almost all the refinancing so far involves borrowers with conventional mortgages who are not in serious financial trouble. The president's own programs for helping troubled homeowners are just beginning to get off the ground....
Mortgage refinancing applications are up 15% since the beginning of the year, according to a weekly survey by the Mortgage Bankers Assn. Obama noted that the same survey shows an even bigger jump in refinancing applications -- 88% -- since the week he announced his mortgage relief plan in mid-February.
How some firms are coping comes from the Wall Street Journal article "Mortgage Servicers Try the Softer Touch":
On Tuesday, Paul Koches, general counsel at servicing firm Ocwen Financial Corp., said the West Palm Beach, Fla., company last year hired psychologist Seth Carter to help the company screen for employees to work with borrowers to counter a shortage of industry experts.
"You've got a situation in the industry where all of the trained, experienced collectors -- the resolution consultants -- anybody who's out there with training, they're hired. They're sopped up," Mr. Koches said. "There is an unprecedented demand. So we've got to go out there and find people who don't have that training background."
Continues the story:
Instead of telling a borrower that Ocwen has empathy because the borrower is one of thousands in financial peril, Ocwen tells the borrower that he could be one of many whose homes have been saved.
"That's a much more positive spin," Mr. Koches said.
I'd be much more concerned by servicers' lack of experience than their bedside manner.
Mortgage bankers are excited about the Fed's plan to buy Treasury bonds and mortgage-backed securites, and a major industry trade group is estimating that the moves will spur $800 billion in additional mortgage activity.
The Mortgage Bankers Assn. has increased its projection of the value of mortgages taken out in 2009 to $2.78 trillion, the highest on record since the woo-hoo days of the bubble.
As millions of would-be refinancers have realized, a Federal Reserve program to push down mortgage rates to the sub-5% level is working, although many homeowners still don't qualify for the loans. (See related stories from the Los Angeles Times and the Wall Street Journal.)
The latest confirmation came today in a report from Freddie Mac. Freddie, of course, is one of the government-backed home loan outfits that creates the mortgage-backed securities the Fed is buying.
While mortgage brokers have said for weeks that 30-year fixed loans are available under 5% for borrowers with good credit and sizable down payments or equity, the week ending today was the first in which Freddie said the national average had broken the 5% barrier. From the Freddie release:
The 30-year fixed-rate mortgage (FRM) averaged 4.96 percent with an average 0.7 point for the week ending January 15, 2009, down from last week when it averaged 5.01 percent. Last year at this time, the 30-year FRM averaged 5.69 percent. The 30-year FRM has not been lower since Freddie Mac started the Primary Mortgage Market Survey in 1971.
The report also showed why adjustable-rate loans have all but gone the way of the dinosaurs. Loans fixed for five years that then begin to fluctuate based on government bond prices had initial start rates of 5.25% over the past week, with an average 0.6 point. Why lock in a rate like that for five years if you can get money for 30 years at 4.96%?
