Wednesday, January 31, 2007

Countrywide Foresees a Tough 2007

Countrywide Financial, one of the US leading mortgage lenders, announced its financial results for 2006. While the overall annual results indicate a successful year, the 4th quarter performance was worse than predicted. The company Chairman Angelo Mozilo said he expects a tough 2007 “as mortgage origination volumes decline and industry capacity is rationalized”. The management is also preparing for higher delinquency levels and credit deterioration.

Nevertheless, Countrywide officials hope the company will continue to profit as smaller players leave the market or merge with larger businesses in the tough environment. The company predicts a better 2008, which should mark the beginning of an upward trend for the housing and mortgage market.

In spite of the reports, Countrywide shares went up as rumors of possible merge or acquisition by Bank of America spread late last week.

Countrywide is one of the largest residential mortgage originators in the U.S., holding a 15% market share.

Tuesday, January 30, 2007

New home sales on the rise

Census Bureau reports indicate increasing numbers of new home sales, which in December reached the highest level since April 2006. In spite of the fact that the market has been on the rise since November, the overall picture of 2006 remains quite pessimistic, with a drop of 17.3% since 2005, the industry’s biggest decline since 1990. The low sales levels are in part due to a cooling down after several years of record-breaking activity. Forecasts envision low sales in 2007 as well – both for new and existing homes.

This situation, combined with low mortgage interest rates, benefits first-time home buyers. The fixed-rate mortgage rates are expected to rise later this year, and the new home prices will remain low for a while, with builders trying to reduce unsold inventories. In order to boost sales, increasing numbers of builders are offering free upgrades, paying some of the mortgage costs or other incentives. Nevertheless new home construction is likely to drop in 2007, and a 1-2% fall in home prices is predicted by Fannie Mae economists.

Sales of existing homes have declined in 2006 as well, dropping 8.4% compared to 2005.

Monday, January 29, 2007

Legislators to protect consumers from Unfair Mortgage Deals

Preliminary estimations of December’s financial indicators show signs of steady growth in the economy; the final reports are expected next week. Mortgage rates have shown mixed activity, with the 30-year fixed rate rising since last week and one-year and hybrid ARMs declining. All rates are somewhat higher compared to last year’s indications, the 30-year fixed-rate mortgage reaching 6.25 – the highest level since November, vs. 6.12% this time last year, and five-year ARMs at 6.00 vs. 5.75 in January 2006. The 15-year fixed-rate mortgage remains unchanged since last week at 5.98%.

The government report on the economy’s performance during the last 3 months of 2006 will be released next week and it shall point a direction for the interest rates activity.

Saturday, January 27, 2007

Mortgage activity: Freddie Mac reports mixed trends

Preliminary estimations of December’s financial indicators show signs of steady growth in the economy; the final reports are expected next week. Mortgage rates have shown mixed activity, with the 30-year fixed rate rising since last week and one-year and hybrid ARMs declining. All rates are somewhat higher compared to last year’s indications, the 30-year fixed-rate mortgage reaching 6.25 – the highest level since November, vs. 6.12% this time last year, and five-year ARMs at 6.00 vs. 5.75 in January 2006. The 15-year fixed-rate mortgage remains unchanged since last week at 5.98%.

The government report on the economy’s performance during the last 3 months of 2006 will be released next week and it shall point a direction for the interest rates activity.

Friday, January 26, 2007

Cash-back deals: A new type of mortgage fraud

A scam called “cash-back deal” is becoming commonplace in the Arizona Real Estate Market; some citizens don’t even suspect it’s illegal.

This is how it works: a buyer purchases a home at a price higher than its market value, but the seller only gets the amount he’s asked for, i.e. the home’s market price. Typically an outdated appraisal, stating the higher price, is involved, and the seller is asked to return the extra money, to be used for renovations or under some other excuse. Then a mortgage for the amount paid (higher that the market value) is taken and the extra cash is divided among the buyer, the agent, appraiser or anyone else who’s participated in the scam, which may sometimes include the seller himself. The one who loses his money is the lender, because when the house is foreclosed, its selling price doesn’t cover the loan amount.

It also leads to inflated home values in the region, which means that anyone wishing to sell their home may have to accept a price lower than the actual value, and homeowners may suddenly owe more on their mortgage than they would get by selling the property. Loss from mortgage fraud has increased during the last few years, reaching approximately $1 billion in 2006. Lenders and buyers are advised to look for warning signs, such as agents offering to buy a house for a higher price or requests that the property is removed from any listings, so that the original price can’t be found.

The scam is so popular, many think it’s normal business practice, but officials are trying to explain that the procedure is illegal under Federal Law, because the home’s value is misrepresented to the lender. Participants are punishable by fine or imprisonment, and any agents or appraisers involved can lose their licenses. Measures are taken to raise awareness and protect potential victims.

Thursday, January 25, 2007

The Fed to meet at the end of January

With the Fed meeting on Jan 30-31st, next week may prove to be an interesting time for investors and mortgage brokers. The last Fed meeting in December 2006 brought no rate adjustment, but the policy statement implied a possibility for further increase. Nevertheless, economists deem hikes unlikely, after four consecutive meetings since August 2006 without a rate change. Predictions are that the rate will remain unchanged after the meeting yet again, and a cut is possible later in 2007.

The mortgage and sales data to be received until the end of this week will be very important, as it will outline the current direction of the market, which shows some signs of decline in activity. This may or may not affect the overall picture but it may influence the outcome of the meeting.

In the meantime, on Tuesday, January 30, 2007, Patricia Cook, Freddie Mac’s executive vice president of investments and capital markets, will hold a speech at the Citigroup 2007 Financial Services Conference in New York City.

The speech will be broadcasted live through a link on Freddie Mac’s webpage http://www.freddiemac.com/investors. The archive will be up early on January 31st and available until March 1st, 2007.

Wednesday, January 24, 2007

Prosper.com - A website that matches lenders with borrowers

A new website called prosper.com promises to match borrowers with lenders who are willing to lend to them. Prosper.com has already brokered over $30 million dollars in loans through it websites, and they only went live in February.

If your worried about getting your money back after lending it to a person you have never met or don't know from a hole in the wall, Chris Larsen, the founder and ceo, states that they have certain measures in place to prevent false identities and let lenders choose the safest borrower. The site rates borrowers by their credit score and debt-to-income ratio and claims to properly screen each for an authentic identity and credit record.

While this seems like a great idea, I myself would be hesitant about lending my money to anyone I didn't know and would surely want to start very small to test the site and the borrowers. It's a novel idea but one that I believe will take more features and protection from prosper.com to make it mainstream. For starters, the ability to trade a loan, better lender protection, and even better id theft would be a great start.

After the real estate market surge, new rates arrive.

According to Freddie Mac, a leading mortgage agency, the interest rates have risen slightly, after the increased sales and mortgage activity in the first 2 weeks of January.

With home prices and fixed-rate mortgages at near-record lows, the real estate environment benefits home buyers. Refinancing activity has been on the rise as well, with consumers changing from adjustable to fixed rate mortgages and consolidating debt after the holidays. Now, the market reacts with the 30-year fixed-rate mortgages, 15-year mortgages and hybrid ARMs raising a fraction as compared to the previous week.

The increased home buying activity is in part due to high employment numbers and low prices. Contrary to expectations, purchasing activity started going down during the second week of 2007, after the rise in the beginning of January. Home prices are likely to rise soon, with the spring home buying season approaching and the market waking up after last year’s lows.

The rising trend for ARMs may continue in 2007, making fixed-rate mortgages even more attractive for borrowers and stimulating refinancing. However, some researchers predict cuts after last year’s consecutive hikes, so ARMs may yet offer surprises.

Saturday, January 20, 2007

Mortgage Refinance Loans: What you need to know

Online mortgage brokers are and their ads are popping up everywhere now a days. That's because it's a multi-trillion dollar industry with millions of online lenders all vying for you business. What does that mean for you? More options. That' s a generally a good thing but you also need to know some basics about mortgage refinancing to protect yourself from scams and to avoid overpaying even then the apr is the best you have found. The three most important things you need to look out for are:

Arm Loans (Adjustable Rate Mortgages)
These mortgages fluctuate with the market and it's possible for your monthly mortgage payment to double what it was when you first refinanced after only a short period of time. These loans are accounting for a record number of forclosures as we speek so be aware.

Junk Fees
Go over the paperwork very closely as many lenders have starting adding more and more mystery fees to increase their profit.

Equity Stripping
Watch for lenders that seem to eager to help you and will pad your income on your appliaction to help you get the mortgage approved. They may be out to get the equity you have built up in your home after you can't make the payments. If a lender is willing to pad your income, walk out that minute.