Mortgage Blog

Hello all!

Finally the mortgage rates have started to dip.  The five year ARM programs are around 5.5% right now, which is a great buy for those that are planning to refi later or sell the property in the future.  Wells Fargo has announced has announced a special that they are going to be running:

Jump-Start the Summer!

For a limited time only, we're heating up our price to match the heat of summer.

Effective with new locks on and after July 10, 2008, Wells Fargo will improve price by .250 on conventional conforming 30-year fixed rate loans*, for loan amounts greater than or equal to $300,000.
 
Make sure you take advantage of this hot deal and lock your loans!
 
*This special is only applicable to conventional conforming 30-year fixed rate loans. It does not apply to the High Balance Conforming Loan Program.

Contact your Wells Fargo Wholesale Lending sales team member today!

So, anyone that needs to purchase, today is an excellen day to lock in those loans.  Hopefully the rates tomorrow will continue to drop.

From an email this morning:

 Indymac is getting out of the mortgage business.

    ...will necessitate the reduction in our present workforce from approximately 7,200 to roughly 3.400 or so over the next couple of months."

Indymac has announced they will no longer accept any new loan submissions or rate locks in either retail or wholesale, and are closing their "forward" mortgage business.

Indymac employees have been on hold waiting for a company-wide 1:00pm conference call.

    "Indy Mac is closing TODAY. The entire Marlton NJ office is apparently being shut down and their other operations offices are closing. All wholesale operations are gone."

As this news rolls across the country, we will keep you updated on developments. One source says as many as 4,000 people will be laid off. It's early in the day, but an official announcement is expected within hours as to the extent of the shutdown.

Hello all!  I just wanted to mention an unbelievable deal that was rolled ou in Frmaingham.  The condo complex is Bishop Gardens, and it is a great deal.  They are selling 2 bedroom townhouses (1300sq ft) for about $130,000.  Just a year ago I was financing a property there on a purchase transaction and the value was around 220,000.  I think that those proeperties are going to go right back up in value when the market rebounds.  Take a look!  If you can't find them, let me know, I will provide a link.

HAVE A GREAT 4TH OF JULY!

USDA Rural Development Program

This is what I've received this morning from Franklin American.  They're finally rolling out JUMBO conforming pricing.  About time....

Hello, we are pleased to announce the roll out of our JUMBO CONFORMING product effective today June 27, 2008.
 
PRICING will be available starting on today’s rate sheet with adjustments listed to the Conventional Conforming price.
As always, please be sure to price your loans on our WEBSITE PRICER to confirm your pricing.
 
Please see the attached Jumbo Conforming flyer available in the following states/areas:  MA, RI, CT, NH, VA, TN, PA, OH, NC, NJ, MD, DE, GA, FL, DC
For loans that are Approve Ineligible due to LOAN AMOUNT ONLY.  We will then manually underwrite these loans.
COMPLETE GUIDELINES will be published on our website within the next few days so more details are to follow.
Here are some of the basics as I understand them.  I wanted to put them in an easy to follow format to give you a flavor of the product:
 
Term                30 YR Fixed
Property           SFR only (No Condos)
Occupancy       Owner Occupied
Documentation Full Doc (regardless of findings)
DTI                   45% Max
Reserves          2 mths PITI
Loan Amounts $729750 Max     $417050 Min     Loan Limits determined by county
LTV                  Purch               700 mid 90/90   660 mid 80/80
Refi R/T            700 mid 90/90   660 mid 75/75
Refi Cash Out   720 mid 75/75   $100000 max cash out
Note: Minimum 6 mths since last refi or purchase to do a refi transaction = A minimum 6 mortgage payments must be made.
Credit History   0x30 on mortgage/rent in the last 12 mths.  Must have a minimum 12 mth housing history.  Bankruptcy discharge minimum 7 years.  No non-traditional credit.
Appraisal         Must be dated within 90 days of note date
Appraisers must be qualified to perform the appraisals without “supervision” by a “supervisory” or “review” appraiser
 
Again, these are some of the basics, so please refer to the complete product guidelines to confirm details which will be published on our website within the next few days as mentioned.
This is clearly a vanilla type product, but should certainly create some more opportunities for us to do business while taking advantage of the Economic Stimulus Act.
I hope you find it to be a nice value add, and as always, please call me with any questions.
Thanks for your business.  Mike
 
Michael Kot
Account Executive

Franklin American Mortgage Company
Cell: 401.219.6453
eFax: 615.261.8768
Email: mkot@franklinamerican.com
Web: www.franklinamerican.com

Here's something that I've found interesting on Inman news.  This is something to definetely be aware of when refinancing as this really happens. 

Q and A

Q: We refinanced our home loan in March with an online mortgage lender. Within a couple of weeks, we received a letter from another mortgage company advising us that our May payment was to be made to them. A May payment invoice was included. I contacted the original lender and was told that the loan was not sold. They said if and when that happens, we would receive a "goodbye letter," which has not arrived. We now have May payment invoices from both lenders, and only two weeks to go until the first payment is due. We contacted the second lender and they still insist they now own the loan. What should we do? We do not want this to impact on our good credit rating.

A: It will not be any consolation to you, but as more and more mortgage lenders are closing their doors, this appears to be a common problem. However, there is a federal law that protects you. The short answer: Until you get a letter from both lenders advising that your loan has been sold (or assigned), you should continue to pay the first lender.

When you get a mortgage loan, your lender has two alternatives. They can keep the loan in house -- called a "portfolio" loan -- or they can sell or assign it to an investor. The most prominent investors here in the United States are the Federal Home Loan Mortgage Corp. (Freddie Mac) and the Federal National Mortgage Association (Fannie Mae).

Why do lenders sell their loans? Many mortgage lenders do not have millions of dollars in their bank accounts to enable them to make all of the loans they would like. In order to get more cash, they sell the loan for a discount to an investor, thereby enabling them to make more loans.

The original lender makes its money in two basic ways. First, it charges the borrower various fees, such as loan origination (points) or underwriting. If the lender is a mortgage broker, it will also get a fee, which in the trade is called a "yield spread premium," or YSP. According to Jack Guttentag, the "Mortgage Professor," YSPs are points paid by lenders for loans carrying interest rates above the par rate. The par interest rate is the rate at zero points. Points are an upfront charge expressed as a percent of the loan. On rates below the par rate, lenders charge points, whereas on rates above the par rate, lenders pay points. YSPs are also called "negative points" or "rebates."

Your lender also makes money by servicing your loan. That means that although the original lender may no longer own the loan, it continues to collect your monthly mortgage payments (including escrows for taxes and insurance) and is paid a servicing fee by the actual lender.

Over the years, there have been serious problems with these mortgage sales. And now, in this turbulent mortgage market, these problems are escalating. There have been a number of documented fraud cases, whereby an unscrupulous individual obtains the names and addresses of homeowners and sends them a letter advising the borrower that effective immediately the loan payment should go to this unscrupulous lender. The names and addresses of borrowers are generally publicly available from the land records where the deeds of trust are recorded.

Picture the following scenario: You have a loan with the ABC mortgage company, which is a legitimate lender. All of a sudden, you get a letter from the XYZ company, advising you that effective immediately you are to make your new mortgage payment to XYZ.

You would be surprised at the number of gullible people in the United States that blindly follow the XYZ company's instructions, without any investigation.

After one or two months of receiving mortgage checks, the XYZ company folds its camp. It moves on to another state, and the scam begins anew.

As a result of these mortgage scams, Congress in 1990 regulated the assignment, transfer or sale of mortgage loans. As part of the National Affordable Housing Act, certain provisions were added to the Real Estate Settlement Procedures Act (RESPA).

The law is quite complex, but oversimplified here are some of the protections afforded to individual borrowers whose loans have been sold, transferred or assigned to a new lender.

At the time a potential borrower applies for a mortgage loan from a federally regulated lender, that lender must disclose to the borrower its policy on assigning or selling loans. The Department of Housing and Urban Development has developed a model disclosure statement that must be used by all federally related mortgage lenders.

If a mortgage lender does in fact assign, sell or transfer your loan, both the transferor (your current lender) and the transferee must make certain disclosures. These disclosures include the effective date of the transfer; the name, address and telephone number of the transferee; and an appropriate contact number at both the transferor's and transferee's offices. This will afford the borrower the opportunity to ask questions and confirm the transfer.

More importantly, this disclosure statement must state that the transfer does not affect any term of the security instrument other than the servicing provision.

This means that although your loan has been sold and you must start paying the new lender, the basic terms of your note and deed of trust cannot be changed. Specifically, your interest-rate terms cannot be changed. They remain in full force and effect regardless of who holds your legal documents.

Congress also was concerned about payments made during the transition period when a loan is transferred. The 1990 law specifically provides a 60-day grace period if the borrower misdirects payments. For 60 days from the effective date of the transfer, as long as the borrower makes the payment on time in accordance with the terms of the note, no late fee can be charged. The payment cannot be deemed late for any purpose whatsoever, even if that payment is misdirected. In other words, if you send your payment on time to the old lender when it has been transferred to a new lender, for the first 60 days no penalty or other late charge can be imposed on you. This is very important, since it also means that neither the old lender nor the new lender can report you as being late or delinquent to a credit reporting bureau.

Congress also created a complaint resolution mechanism in the 1990 law. If you, the consumer borrower, have a question or a complaint about the transfer of your loan, you have the right to send a written request to the lender. Please note that in order for the complaint resolution mechanism to be effective, you have to send a separate correspondence, and cannot merely jot a note on your mortgage payment coupon when you return your check.

Your lender must either take action or respond to your letter within 20 business days of receiving your correspondence. Furthermore, the lender has 60 business days from the date of receipt of the request to either correct the problem and give the borrower notice that the problem has been corrected or give reasons in writing why the account is correct or the information requested by the borrower is unavailable. The lender is required to conduct an investigation before it responds to your letter.

Finally, Congress added incentives to make sure that lenders would comply with this new law. If a lender violates the law, an individual consumer can recover any actual damages and any additional damages that a court might allow if the court finds that there is a pattern or practice of noncompliance with the RESPA provisions. The damages are limited to $1,000 per individual consumer. Furthermore, if the consumer files a lawsuit in court, the court can award reasonable attorney's fees if the consumer prevails.

These are obviously technical issues. The bottom line is that you really do not have to worry about your loan if your current lender sells or transfers your loan to another lender. Obviously, you want to make absolutely sure that this is not a scam, and that it is a legitimate transfer. Contact both lenders and make sure that you have something in writing from both the old and the new lender before you send your next mortgage payment check.

The normal procedure nowadays is for the borrower to get a joint letter from the old and the new lender, advising that the loan has been sold and where the monthly payments should now be sent.

In your situation, since you have not received a letter from your first lender, you should continue to pay that lender, but advise the new lender in writing what you are doing. I also suggest that you send a copy of your letter to the old lender, as well as to the consumer protection office of your state's attorney general.

Benny L. Kass is a practicing attorney in Washington, D.C., and Maryland. No legal relationship is created by this column. Questions for this column can be submitted to benny@inman.com.