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Category: E. Scott Reckard

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Freddie Mac: Record low mortgage rates haven't rescued housing

Homeforsaleculvercitynov2011genaromolinaLAT

Lenders were offering 30-year fixed-rate mortgages to solid borrowers at an average of 3.95% this week, according to Freddie Mac, the ninth consecutive week of rates at or below 4%.

That wrapped up a year of record lows for the survey, which dates back to 1971. In 1981 and 1982, the average 30-year mortgage carried an interest rate of more than 16%, and the typical rate was above 8% as recently as 2000, Freddie Mac said. This past year, the average was 4.45%.

Despite the record low rates, applications for mortgages to buy homes dropped as the year ended, even after seasonal adjustments, the latest Mortgage Bankers Assn. survey found. Even the demand for refinance mortgages, which accounted for more than 80% of all applications, fell slightly.

“Remarkably low rates are not enough," said Mortgage Bankers Assn. economist Michael Fratantoni, noting that many homeowners have difficulty refinancing because of "lack of equity in their properties, poor credit and a weak job market.”

With loans hard to get and demand for home loans waning, Morgan Stanley analysts titled their housing outlook for 2012 "The Year of the Landlord."

"While we had forecast lower prices [for 2011], we did hold out some hope that at the very least transactions would pick up slightly from 2010 levels," said the report from a team led by analyst Oliver Chang.

"However," the report said, "it proved to be too optimistic a prediction. Not only did total home sales fail to rise, but also mortgage applications for purchase continued to fall -- indicating that not only is tight mortgage credit limiting demand, but even the desire to buy a home continued to wane."

The recent bottom in rates stems from anxiety over the European debt crisis, which has increased demand for U.S. Treasury securities. That has depressed the yield on Treasuries, which act as a benchmark for mortgages.

This week's typical offering rate of 3.95% on the 30-year loan was up slightly from an all-time record low of 3.91% set a week earlier. The 15-year fixed loan, popular with refinancers, averaged 3.24%, up from 3.21%. Start rates on adjustable loans also were up very slightly from record lows, Freddie Mac said.

Borrowers would have paid about 0.75% of the loan amount upfront to obtain the fixed rates, Freddie Mac said. Its survey asks lenders across the nation what rates they are offering to borrowers with 20% down payments or home equity, good credit and income sufficient to repay the mortgages.

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Photo: Culver City home for sale, November 2011. Credit: Genaro Molina / Los Angeles Times

Freddie Mac: 30-year mortgage rate ties record low

Freddie sign - AP - Pablo Martinez Monsivais
The average interest rate on a 30-year fixed-rate mortgage dropped again this week to 3.94%, tying a record low set in October, according to housing finance giant Freddie Mac.

Freddie Mac's weekly survey pegged the rate for a 15-year fixed-rate mortgage at a record low of 3.21%. Loans fixed for five years before becoming adjustable also set a new record, with an average start rate of 2.86%

The survey, released each Thursday, asks lenders to report rates they are offering to well-qualified borrowers who pay about 0.75 of a percentage point in upfront lender fees and discount points. The rates are for loans of up to $417,000.

Freddie has conducted the survey of 30-year loans since 1971, 15-year loans since 1991, and five-year adjustable hybrids since 2005.

The record lows have touched off the latest surge in home refinancing. But while sales of homes increased slightly in California last month, scheduled foreclosure sales have risen sharply and the environment for housing remains rough overall, as Freddie Mac's chief economist, Frank Nothaft, pointed out in announcing the latest survey results.

"In its Dec. 13 monetary policy announcement, the Federal Reserve reiterated the housing market remains depressed," Nothaft wrote. "Over the first nine months of 2012, households lost almost $400 billion in property values, which contributed to a $1.4 trillion reduction in overall net worth.

"In addition, serious delinquency rates (90 or more days delinquent plus foreclosures) on mortgages increased slightly between June 30 and Sept. 30 of the year, breaking a six-quarter consecutive decline, according to the Mortgage Bankers Association.”

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-- E. Scott Reckard

 Photo: Freddie Mac's headquarters in Virginia. Credit: Pablo Martinez Monsivais / Associated Press

With mortgages at 4%, demand for home-purchase loans rises

ForeclosureprotestLATGenaroMolina

With 30-year mortgage rates still averaging a rock-bottom 4%, applications to purchase homes rose after Thanksgiving to the highest level in four months.

Freddie Mac's weekly report on home lender offerings, released Thursday, showed the typical rate for a 30-year loan at 3.99%, the sixth straight week at or slightly below 4%.  Last year at this time, the 30-year fixed loan averaged 4.61%.

Fifteen-year fixed-rate home loans, a popular option for people refinancing homes, averaged 3.27%, down from last week's 3.3%. A year ago, the 15-year loan averaged 3.96%, Freddie Mac said.

The big government-backed mortgage buyer asks lenders what rates they are offering to borrowers with good credit and 20% down payments or 20% equity if they are refinancing. The rates are for loans of up to $417,500 with the borrowers paying about 0.75% of the loan amount in lender fees and points.

The typical mortgage rate for larger "jumbo" loans was running about a third of a percentage point higher, according to another report this week, this one from the Mortgage Bankers Assn. Jumbo loans are priced higher because lenders can't sell them to Freddie Mac and Fannie Mae, the other big government-sponsored mortgage buyer. 

Offering a bit of hope for housing at a time when foreclosures are drawing angry protests and government investigations, the mortgage bankers said applications for loans to buy houses reached the highest level since early August.

Refinances still made up about three-quarters of all applications for home loans, however.

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Photo: Occupy LA protests a foreclosure auction in Norwalk. Credit: Genaro Molina /Los Angeles Times

Freddie Mac: Mortgage rates stuck in low at 4%

GeithnerMortgagesJasonReedRTR
The mortgage engine seems stuck in low.

For five straight weeks, Freddie Mac's survey of the rates offered by home lenders has averaged at or below 4% for 30-year loans.

The most recent Freddie survey came out Thursday at an even 4% -- a level that would have seemed hallucinatory not so long ago, before the Federal Reserve pulled out the interest-rate stops to support to the economy.

The 15-year fixed loan, at an average of 3.3%, also remains in record low territory, and Freddie Mac said the start rates on adjustable mortgages have dipped to all-time lows.

Something else also appears to be lower, though, despite the record rates: desire for new home loans.

A Mortgage Bankers Assn. count of applications showed an 11.7% decrease last week even after adjusting for seasonal factors such as the Thanksgiving holiday. The previous MBA weekly survey had also shown a decline as the latest wave of refinancings begins to subside.

A Fed report this week on regional economic conditions described residential real estate markets as generally sluggish. But the report also said the economy expanded at a moderate pace in 11 of the Fed's 12 Districts -- a fact that provided encouragement to Freddie Mac economist Frank Nothaft.

"The extraordinarily low mortgage rates of the past month may provide a needed spur to housing activity," Nothaft said, hopefully, in the latest Freddie Mac release.

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File photo: The troubled mortgage business concerns Treasury Secretary Tim Geithner. Credit: Reuters / Jason Reed

Nara and Center merge to form BBCN, largest Korean American bank

Nara2007KoreatownLoriShepler
Center Financial Corp.'s merger into onetime Koreatown rival Nara Bancorp Inc. will create the largest U.S. bank focused on the ethnic Korean market, an institution with nearly $5.3 billion in assets that will be named BBCN Bank.

The parent companies of Center Bank and Nara Bank were scheduled to announce completion of their merger on Wednesday afternoon. BBCN will be the seventh-largest bank based in Los Angeles County, with $4.4 billion in deposits and 40 branches in California, New York, New Jersey, Seattle and Chicago.

The banks, like many other Asian American institutions, have specialized in loans to smaller businesses. About half of their assets are in commercial mortgages, a banking sector whose losses during the recession have increased pressures on the ethnic banks to consolidate.

They announced plans to merge last December, with Center shareholders receiving about $270 million in Nara stock. Alvin Kang, Nara's chief executive, will become chief executive of the merged bank.

The new name derives from Business Bank of Center and Nara, a name that was under consideration but lost out to the shorter BBCN.

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Photo: Nara Bank is merging with Center Bank to create BBCN Bank. Credit: Los Angeles Times  

CalPERS, other investors, settle suit against Countrywide, BofA

AngeloatcourtIrfanKhan
California's giant public pension fund and 15 other large investors settled lawsuits accusing former mortgage goliath Countrywide Financial Corp. of costing them billions of dollars in stock losses by failing to disclose the severity of the risks posed by the easy-money loans the Calabasas lender handed out during the housing boom.

A filing Monday in U.S. District Court in Los Angeles disclosed the confidential settlement. The filing did not reveal how much Bank of America Corp., which acquired Countrywide in 2008 and was also a defendant in the case, would pay to the California Public Employees' Retirement System and the other plaintiffs.

Bank of America's spokeswoman for legal affairs, Shirley Norton, declined to comment. An attorney for CalPERS and the other 15 investors didn't return a call Tuesday, and CalPERS officials declined to describe the settlement.

The 16 big investors, mostly pension and mutual funds, were among 33 plaintiffs who opted not to participate in a $624-million settlement of class-action litigation that U.S. District Judge Mariana R. Pfaelzer approved in February.

The opt-outs believed the proposed settlement was "shockingly cheap," Columbia University securities law expert John C. Coffee said at the time, citing a discussion with one of the lawyers representing those institutions.

Seventeen additional institutional investors who decided against participating in the February settlement still have claims pending in the case.

This week's settlement, if approved by Pfaelzer, would end the 16 plaintiffs' claims against Countrywide, Bank of America, and former Countrywide executives Angelo R. Mozilo, David Sambol and Eric P. Sieracki.

Accounting firm KPMG, which had audited Countrywide's books, is also a defendant in the case but did not settle with CalPERS and the other funds. It was a participant in the $624-million settlement finalized in February.

Bank of America, based in Charlotte, N.C., has struggled to put Countrywide's woes behind it since it shelled out $2.5 billion in stock for what was then the country's largest mortgage lender.

After running up more than $30 billion in losses on its investment, Bank of America still has undetermined liabilities outstanding for claims against soured Countrywide loans and the mortgage securities that were backed by them.

The Countrywide troubles have caused regulators to pressure Bank of America to increase its capital cushion against losses, and investors have punished the bank's stock, which has declined by 59% this year. Bank of America closed Tuesday down 12 cents, or 2.2%, at $5.37.

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Photo: Dark glasses can't conceal Countrywide Financial co-founder Angelo Mozilo. Credit: Los Angeles Times / Irfan Khan

 

Study: In some areas, risky loans punished the rich more than the poor

 NorthLasVegasforeclosuresJewelSamadAFPGettyImages

Five years into the housing bust, are rich or poor homeowners more likely to suffer foreclosure?

It all depends on which part of the country you're in, according to a Center for Responsible Lending study.

Low- and moderate-income borrowers have been most affected in cities such as Detroit, Cleveland and St. Louis, where weak economies meant home prices didn't rise much even while much of the nation was caught up in the housing bubble, the nonprofit CRL said.

However, in areas that had strong housing appreciation before the collapse, such as California and Nevada, the opposite is true. In these areas, middle- and higher-income borrowers have been most likely to fall into foreclosure, according to CRL's study of 27 million mortgages over five years.

The explanation, CRL said Thursday, is that higher-income borrowers in expensive boom states wound up with a disproportionate number of high-risk loans, as did the lower-income residents of cities with weak economies and housing markets.

The rich borrowers were stretching to buy homes by using supposedly prime adjustable-rate loans requiring interest-only payments at first, or pay-option mortgages that allowed them to pay so little that their loan balance rose instead of fell. 

Continue reading »

Fewer home loans going bad but foreclosures on rise

ForeclosureprotestAPpaulsakuma
Far fewer borrowers are delinquent on their home loans these days, a Mortgage Bankers Assn. report shows, but new foreclosure actions are on the rise in states like California, showing the nation still has much pain to endure before the housing crisis subsides.

Private analysts say the nation is only halfway through the wrenching grip of the foreclosure epidemic. And that's reflected in the housing market, where home sales and prices continue to sag in many areas despite record low interest rates.

Five years into the crisis, 7.99% of all U.S. home loans were behind by at least one payment in the third quarter but not yet in foreclosure, the mortgage trade group said Thursday. That's down by nearly half a percentage point from the second quarter and more than a percentage point from a year earlier.

But the group's statistics showed how banks are reasserting themselves against troubled borrowers after slowing the process for nearly a year amid increased scrutiny from regulators.

The percentage of loans on which foreclosure actions were started during the third quarter was 1.08%, up from 0.96% in the second quarter. California had the nation's fifth-highest rate of new foreclosures: nearly 1.5% in the latest quarter.

The percentage of U.S.loans somewhere in the foreclosure process at the end of the third quarter was 4.43%, up slightly from a year earlier. The rate of homes in foreclosure was highest in Eastern and Midwestern states that route all home repossessions through the courts, with Florida at more than 14% and New Jersey at 8%.

California, which for years had one of the highest rates of loans in foreclosure, has fallen to 19th on the list because its foreclosure process doesn't normally require court action and is among the most streamlined in the nation. In other words, even as the rate of new foreclosures increases, the repossessions are being handled quickly.

Of states that handle foreclosures without going through court procedures, Nevada was the only one high on the total foreclosure-rate list, with nearly 8% of its mortgages in foreclosure.  

In a separate report Thursday, mortgage finance giant Freddie Mac said the typical rate on a 30-year fixed-rate home loan early this week was an even 4.0%, a statistically insignificant rise from 3.99% a week earlier. The 15-year fixed loan rates rose to 3.31% from 3.30%.

Expressing some optimism, Frank Nothaft, an economist for the trade group, said the economy "is showing potential for further gains in the near term" as the near-record low mortgage rates persist.

Retail sales rose for the fifth straight month in October, consumer confidence rose for the third straight month in early November to the highest reading since June, and home-builder confidence exhibited a back-to-back monthly increase in November to the strongest level since May 2010, Nothaft said, citing various surveys.

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Photo: San Jose protesters target Bank of America. Credit: Paul Sakuma / Associated Press

Freddie Mac: 30-year mortgage rate back below 4%

Freddie sign - AP - Pablo Martinez Monsivais

The typical rate that lenders are offering on a standard 30-year mortgage is back below 4% for the second time this year, Freddie Mac says.

The rate fell from an even 4% in Freddie's survey last week to 3.99% in the survey released Thursday. The 3.94% recorded in the Oct. 6 report was the lowest in the 40 years that Freddie Mac has been asking lenders across the country about the rate they are offering on the 30-year loan.

The typical interest rate on the 15-year fixed home loan dropped from 3.31% to 3.30% in the latest survey. Borrowers would have paid less than 1% of the loan balance in fees to obtain the loans, Freddie Mac said.

Solid borrowers who shop around often find slightly better rates than those in the survey, and paying additional points upfront to lenders also can lower the rate.

The mortgage rates are a huge boon for home buyers and refinancers with solid credit and income, 20% down payments or 20% home equity -- the kind that would qualify for the loans of up to $417,000 that the survey focuses on.

But they are available at a cloudy time. Foreclosures are rising again, and the rates are scraping bottom mainly because investors are so spooked by the European debt crisis. That has increased demand for U.S. debt securities, still presumed to be a safe haven.

That demand has depressed the yield on Treasury securities, and mortgage rates tend to track Treasury yields. And there is too little in the recent mixed economic news to suggest that inflation could reassert itself in the United States, driving interest rates higher.

"The economy added 80,000 net jobs in October, below the market consensus forecast, but employment gains over the prior two months were revised up by 102,000 and the unemployment rate fell to 9.0 percent, the lowest in six months," Freddie Mac economist Frank Nothaft said. "Factory orders improved in September, yet the expansion in the service industry slowed in October."

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Photo: Freddie Mac headquarters, McLean, Va. Credit: Pablo Martinez Monsivais / Associated Press

Wells Fargo settles bid-rigging case

WFCstagecoachLAmuseumhandout

Wells Fargo & Co. has agreed to pay at least $37 million to settle accusations that it and Wachovia Corp., which Wells acquired in 2008, paid kickbacks to win business from municipal governments.

In its regular quarterly filing with the Securities and Exchange Commission, made Tuesday, the San Francisco bank said it would pay the greater of the $37 million or "65% of the restitution amount of a future settlement, if any, with the various state attorneys general of their investigation of Wachovia."

The agreement, which Wells said was reached Oct. 21, stems from litigation with various municipal governments around the country and consolidated in a federal lawsuit in Manhattan.

The suit accused many investment banks of conspiring to rig the bidding process, “sharing their illegal gains through kickbacks to one another, and making other secret, undisclosed arrangements.”

A Wells spokeswoman said the case mainly involved events at Wachovia that occurred before Wells took over the Charlotte, N.C., bank.

Bank of America, JPMorgan Chase and UBS previously agreed to much larger settlements in the case.

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Photo: A Wells Fargo stagecoach in the bank's history museum in L.A. Source: Wells Fargo & Co.

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30-year mortgage rate drops to 4%, Freddie Mac says

Bankownedgettyimagesjoeraedle
Investor worries over the European debt crisis helped drive the average rate for a 30-year fixed home loan down to 4% this week, according to Freddie Mac.

The figure, down from 4.1% last week, was the second lowest in the 40 years Freddie has been conducting a weekly survey of the terms being offered by home lenders. The lowest average rate recorded was 3.94% four weeks ago.

Freddie Mac said lenders were offering 15-year loans, a popular choice for homeowners who are refinancing, at an average rate of 3.31%, down from 3.38% a week earlier. That rate was below 3.3% for three weeks in late September and early October.

To obtain the loans at the rates being offered this week, a borrower would have to pay upfront fees averaging 0.7% of the amount borrowed.

Worried about the possibility of defaults on European debt, investors rushed to buy U.S. Treasury securities early this week, driving down interest rates.

The low mortgage rates have created an opportunity for some homeowners who are current on their loans to trade them in for new mortgages, often lowering their interest costs dramatically.

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Photo: Foreclosures like this one in Miami clog the market with homes. Credit: Joe Raedle / Getty Image

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