Your source for FHA mortgage information

Ginnie Mae (The Government National Mortgage Association and issuer of FHA Mortgages), which happens to be the only issuer of mortgage backed securities explicitly backed by the U.S. government, has issued more of their fixed-rate bonds this month than Freddie Mac AND Fannie Mae, showing us where the housing market has gone this year! According to eMBS (A Tampa data aggregation company) this is the first time in at least 15 years Ginnie Mae has topped both Fannie Mae and Freddie Mac’s fixed-rate issuance in the $4.5 trillion market.

“As far as percentage of issuance, Ginnie Mae has been on decline for over a decade, so this really has been a turn of events” said Todd Abraham, co-head of government and mortgage bond management at Federated Investors, Inc. in Pittsburgh, Pennsylvania.

So you must be wondering, what does that have to do with FHA Mortgages? Well, directly it shows the longevity power of the government and being backed by the government (as with FHA Loan Programs) and it also shows that through the crazy market cycles it always boils down to the fundamentals: longevity begets success, trends beget ends. Not to mention the obvious Ginnie Mae is the issuer of mortgage backed securities that is responsible for FHA mortgages.

So to keep it short and to the point: FHA mortgages are outproducing both Fannie Mae and Freddie Mac. Who said the older siblings are the better ones?

Marsha, Marsha, Marsha!

The Benefits of FHA Insured Mortgage Programs

We’ve all heard the popular saying “in a perfect world”, well in a perfect mortgage world a mortgage banker would be able to lend a borrower the money they need for a home and would be able to take care of the customer even if their credit score went as low as 580% while only putting down 3% on their home.

Well, with FHA insured loans we’re finally looking at a perfect world. FHA (Federal Housing Administration) insured home loans are some of the safest investments into residential mortgages that mortgage banks can make, and subsequently we’re able to offer the most favorable terms and conditions for a home loan that can actually place you in that better neighborhood with better schools.

So what is FHA?

FHA traces its roots back to the New Deal. It was established in 1934 to provide a reliable, low cost source of financing for American homeowners. Like Fannie and Freddie, the FHA doesn’t issue loans, but through its sister agency Ginnie Mae, guarantees mortgages made by private lenders like Wells Fargo and Chase. FHA loans carry the explicit backing of the U.S. government, not just an implied backing like its two better-known cousins. That means that borrowers can get lower interest rates and more favorable loan terms.

A FHA mortgage allows some borrowers to qualify for the lower interest rates of a conventional loan, rather than using a higher rate sub-prime mortgage. This can save thousands in interest charges. Required down payments are also smaller. Instead of the typical 10% down, a buyer can put down as little as 3%. The closing costs can also be financed with the mortgage, lowering the initial costs of purchasing a home. The FHA also limits fees that can be charged to the borrower. For example, the loan origination fee cannot surpass 1% of the mortgage amount.

With everything I just mentioned above I believe the benefits of going FHA are obvious and worth every minute the government put into making the program possible.

Once upon a time a bank wouldn’t loan money to a borrower unless the borrower didn’t need it, and while I don’t know what happened to those times, they certainly don’t exist anymore. I must say, “it’s been an interesting journey” to observe my fellow mortgage professionals putting their careers and the well being of their supposed valued customers by writing those toxic sub-prime loans while my team and I was writing good ‘ol FHA insured loans.

Now, don’t get me wrong I’m not trying to say that everyone who wrote a sub-prime loan is a terrible person, or that if you received one it’s because you’re a good for nothing jerk. We all know that things happen and anyone’s credit can go sour temporarily, the difference is some of the people that were writing these sub-prime loans knew that they were putting their borrowers into a situation so risky even Evel Knievel wouldn’t try it. And it’s the past assertation that gets my juices flowing everytime I here someone say that mortgage professionals in general are to blame for the problems in the housing market today.

Because we all know that the truth is simple: Once upon a time a bank wouldn’t loan money to a borrower unless the borrower didn’t need it. Banks changed their tune and started loaning money to anybody that had a pulse, but as all of this took place there was one constant in the mortgage market: Goverment insured loans.

FHA & VA loans were the ones that did and will stand the test of time. And that’s what I look for when quanitifying a customers financials…

Longevity.

Banking Committee Chairman Chris Dodd, D-Conn., and Budget Committee Chairman Kent Conrad, D-N.D., have come under intense scrutiny since a magazine reported last week that they received special treatment from Countrywide on personal loans.

Dodd and Conrad were among a handful of powerbrokers that Countrywide CEO Angelo Mozilo reportedly offered lower-rate loans as well as waiving fees and points when they refinanced mortgages.

Dodd said he received no special treatment that he knew of, although he acknowledged being told that he was in a VIP program that he assumed was because

He insisted that he and his wife were able to negotiate fee waivers to obtain lower rates when rates dropped because they were not locked in and could have turned to competitors.

Dodd said that they already had loans with Countrywide since purchasing their D.C. home in 1999 and had also shopped around with other lenders when they decided to refinance in 2003.

But Citizens for Responsibility and Ethics in Washington has sent official complaint letters to the House and Senate ethics committees seeking an investigation. And some House and Senate Republicans are urging a full investigation.

Sen. Richard Shelby, R-Ala., the ranking Republican on the Banking Committee, urged rejection of Bunning’s motion, saying that the foreclosure rescue bill offered no benefit to Countrywide or any lender.

“There is no special treatment for any lender in the bill,” he said. “This is not a bailout.”

Administration officials said they oppose $4 billion in the measure to help states buy and rehabilitate foreclosed properties and a plan to have government-sponsored mortgage giants Fannie Mae and Freddie Mac pay for the rescue.

Dodd and Shelby issued a statement in response to the veto threat, saying they believe the legislation “represents a compromise that will bring relief to hundreds of thousands of homeowners and the housing markets without putting the American taxpayer at risk.”

The bill would provide $300 billion in new, cheaper mortgages for distressed homeowners who otherwise would be considered too financially risky to qualify for government-insured, fixed-rate loans.

Borrowers would be eligible if their mortgage holders were willing to take a substantial loss and allow them to refinance, and would ultimately have to share with the government a portion of any profits they made from selling or refinancing their properties.

The measure is designed to help hundreds of thousands of borrowers in danger of losing their homes, but it also would benefit mortgage holders by allowing them to avoid costly foreclosures and reclaim some of what they’re owed by people facing financial ruin.

The bill would tighten controls on Fannie Mae and Freddie Mac — which provide huge amounts of cash flow to the mortgage market by buying home loans from banks — creating a new regulator for the firms.

It also would provide a $14.5 billion array of housing and other tax breaks, including a credit of up to $8,000 for first-time homebuyers who buy a home in the next year and boosts in low-income tax credits and mortgage revenue bonds.

A group of 28 House Republicans wrote to Speaker Nancy Pelosi, D-Calif., on Thursday demanding an investigation — with open hearings — on the Countrywide allegations.

“At a time when millions of Americans are struggling to repay their mortgage debts while coping with $4 per gallon gasoline and soaring foods prices, they will be outraged to learn that some members of Congress may have personally profited from their official positions through secret sweetheart deals on their mortgages,” said the letter, signed by House leaders. “Although there is no evidence that has arisen to suggest direct quid pro quo dealings, it is extremely troubling that these revelations of preferential treatment have emerged at a time when Congress is considering multiple legislative proposals affecting the mortgage lending industry.”

House Financial Services Committee Chairman Barney Frank, D-Mass., said Thursday that the Senate ethics panel was investigating whether Dodd and Conrad received preferential loans from Countrywide.

“My view is that these allegations should be considered by the appropriate bodies, and I understand that the Senate Ethics Committee has already begun to look into the matter,” he said in a statement.

While he agreed that it was appropriate for the Ethics Committee to investigate, Frank defended Dodd, whom he has worked closely with since Democrats took control of the House and Senate in 2006. “At no point in any of our joint efforts has Sen. Dodd shown even the slightest indication that he was in any way influenced by considerations, other than what was best for the economy and the American people,” Frank said.

The Associated Press contributed to this story.

Rates on home mortgages continued their climb this week, with the 30-year fixed-rate mortgage hitting its highest level since September, Freddie Mac said.

Inflation again was the culprit that caused fixed-rate mortgages to rise, said Frank Nothaft, Freddie Mac vice president and chief economist.

“Fixed-rate mortgage rates continued to climb this week to the highest point in nearly nine months following the release of May’s consumer- and producer-price indexes, both of which showed stronger levels of inflation,” Mr. Nothaft said.

The 30-year fixed-rate mortgage averaged 6.42% in the week ended Thursday, up from 6.32% last week. The mortgage averaged 6.69% a year ago; the last time it was this high was the week ended Sept. 27, when it also averaged 6.42%.

The 15-year fixed-rate mortgage averaged 6.02%, up from 5.93% last week. The mortgage averaged 6.37% a year ago, and hasn’t been higher since the week ended Oct. 18, when it averaged 6.08%.

Adjustable-rate mortgages also rose, with five-year Treasury-indexed hybrid adjustable-rate mortgages averaging 5.89%, up from 5.70%. The ARMs averaged 6.31% a year ago, and haven’t been higher since Dec. 27, when they averaged 5.90%.

One-year Treasury-indexed ARMs averaged 5.19%, up from last week’s 5.09%. The ARMs averaged 5.66% a year ago.

The rising rates also appear to be causing a decline in applications for mortgages, according to the latest Mortgage Bankers Association survey, released Wednesday. Applications for all mortgages fell a seasonally adjusted 8.7% last week, compared with the previous week. Application volume was down 21% compared with the same week in 2007, the association said.

Countrywide, as one of the largest wholesale mortgage lenders pushing sub-prime loans, was sued for alleged deceptive mortgage practices by officials in its home state of California and in Illinois on Wednesday.

Marking the end of an era, shareholders the same day approved the company’s takeover by Bank of America  at a private meeting conducted by founder and CEO Angelo Mozilo.

The merger is set to close by July 1.

Countrywide became the company most closely associated with the U.S. housing boom — in which mortgages with low teaser rates were seemingly handed out to anyone who asked — as well as the real estate market’s collapse when shaky borrowers lost their homes to foreclosure when mortgage rates rose.

Mozilo has also come under fierce criticism for his role in the bust. One of corporate America’s top-paid executives, he has been under fire from consumer activists, lawmakers and regulators for the company’s lending practices and the way it treats borrowers struggling to keep up with mortgage payments.

Mozilo got a standing ovation on Wednesday from the meeting’s 300 attendees, many of them employees, said Scott Adams, coordinator for a pension program of the American Federation of State, County and Municipal Employees.

As a handful of journalists waited outside the company’s suburban compound, the 69-year-old CEO tearfully recalled that he had received a loan from Bank of America to help co-found Countrywide, and reminisced about the millions of mortgages the company had written over the years, Adams said.

Despite the meeting’s reflective tone, “there was a lot of security in there,” Adams said, and shareholders were not given a chance to comment on the deal ahead of the vote.

Mozilo ended polling on the $2.7 billion deal in less than 20 minutes, making no mention of the mounting lawsuits against Countrywide, Adams said.

The largest U.S. mortgage lender is accused in the lawsuits of unfair trade practices that encouraged homeowners to take out risky loans, regardless of whether they could repay them.

California and Illinois officials said the company relaxed mortgage standards in an effort to rope in more customers. Countrywide “exploited the American dream of homeownership” and then sold its mortgages for huge profits to third-party investors, California Attorney General Jerry Brown said.

The company “was, in essence, a mass-production loan factory, producing ever-increasing streams of debt without regard for borrowers,” Brown said. “Today’s lawsuit seeks relief for Californians who were ripped off by Countrywide’s deceptive scheme.”

The California case, which also names company President David Sambol as a defendant, was filed in the Los Angeles Superior Court.

The Illinois suit was brought in Cook County Circuit Court, and seeks to rescind or reform Countrywide mortgages originated under alleged unfair and deceptive practices as well as restitution for foreclosed homeowners.

Illinois Attorney General Lisa Madigan also asked the court to put a 90-day stay on Countrywide loans in foreclosure in her state to allow her office time to review them. Madigan said Countrywide was a major contributor to foreclosures in Illinois, with the foreclosure rate on Countrywide loans more than double that of other lenders between 2006 and 2007 in Cook County, which includes Chicago.

“Much of this came from Countrywide’s greed and their desire to dominate the marketplace,” she told a news conference.

In a statement, Countrywide said it was fully cooperating with the California and Illinois attorneys general, and was working with customers who are having trouble making mortgage payments.

Also on Wednesday, Washington state Gov. Christine Gregoire planned to hold a news conference to address “allegations of repeated discriminatory lending practices” by Countrywide, her office said in a press advisory. The state will fine the lender and ask that its license be withdrawn, the announcement said.

Countrywide faces lawsuits on many fronts over its falling stock price and allegations it inflated earnings and overstated its ability to weather the housing slump.

It also has been accused of abusing bankruptcy or foreclosure processes. At least three lawsuits were filed by offices of the U.S. Trustee, part of the Department of Justice.

Mozilo also faces a U.S. Securities and Exchange Commission probe into his sales of Countrywide stock before the share price dropped sharply when the U.S. housing bubble burst.

Presented with public records Wednesday, Cantwell spokeswoman Ciaran Clayton said that Cantwell originally obtained the mortgage on her Edmonds, Wash., home from U.S. Bank but that U.S. Bank subsequently sold the loan to Countrywide.

It’s a common practice for mortgages to be sold after they’re originated, and the transfer often happens without any involvement by the homeowner.

Asked if Cantwell had any contact with Countrywide during the transaction, Clayton said, “Not that I’m aware of.” Asked if Cantwell received any special terms on the loan, Clayton said, “I don’t know the details.” Clayton said Cantwell’s Washington, D.C., condominium is financed through U.S. Bank.

A handful of offices still have not provided answers to one or more of the questions.

The offices of Sens. Jon Kyl (R-Ariz.) and Richard Burr (R-N.C.) said only that the senators did not obtain mortgages through Countrywide and did not obtain special deals.

“We’re not going to comment further,” Kyl spokesman Ryan Patmintra said. “We’ve provided you with the information that goes to the heart of your story: who holds Countrywide mortgages and/or received special terms or pricings with their mortgages. I believe we’ve made clear that neither applies to Sen. Kyl.”

Burr spokesman Chris Walker said his boss got no special deals and did not borrow from Countrywide but that Burrdoes not want to publicly reveal his mortgage lender, because “he represents a state with two of the four largest banks in the country (Wachovia and Bank of America) and doesn’t want to appear as though he’s picking favorites.”

If you have a mortgage, carry credit cards and are considering a home equity loan to cope with soaring food and energy prices, you should be paying attention to what the Fed has to say.

On Wednesday, the Federal Reserve held a key short-term interest rate steady, following a series of steady rates cuts – a move that signals to some that rates are about to change direction. And most assume that means consumer lending rates will rise as well.

But the central bank had cut rates seven times since September in an effort to bolster the lagging economy and spur economic growth. And during that time, mortgage rates were increasing. So what gives? And what should consumers expect loan rates to do next?
How it works

The fed funds rate is often thought of as a benchmark to set rates paid by consumers on many types of loans, from mortgages and home equity lines of credit to credit cards and business loans.

Generally, the Fed lowers rates when it is concerned about the economy slowing and raises rates when it is more worried about inflation. In times of lower interest rates, consumers tend to spend more because of the cheap cost of borrowing.

But people incorrectly equate the Federal Reserve’s actions with changes in consumer interest rates, cautioned Eric Tyson, author of “Personal Finance for Dummies.”

There is not a direct connection, he explained, but an indirect one. “Rates are set by market forces and they have been trending higher in part because of inflationary concerns and, in part, because of Fed expectations.” So with inflation fears on the rise and many investors expecting the Fed to raise rates again, mortgage rates have already begun to tick higher.

Rates on 30-year fixed mortgages have surged to a 9-month high on growing concerns about inflation, according to a recent report by mortgage backer Freddie Mac.

And rather than track the fed funds rate, which is the rate banks charge one another for overnight loans, fixed mortgage rates are more closely aligned with the yield on the 10-year treasury note, which offers a long-term look at a fixed investment.

While the lagging economy has bolstered the yield on the benchmark 10-year note, it still remains at a relatively low level, Tyson said.

Unlike fixed-rate mortgages, adjustable-rate mortgages can fluctuate in response to a number of rates, depending on the terms of the loan. Many are pegged to the Libor rate, an international interbank lending rate. Others follow the prime rate, which is generally three percentage points higher than the federal funds rate (presently the prime rate is 5%).

Credit card companies also tend to move the rates on their variable rate credit cards in line with the prime rate of interest.

“Credit cards are generally tied to the prime rate which usually moves in lock step with the Fed’s actions,” according to Scott Hoyt, senior director of consumer economics at Moody’s Economy.com.
Why it matters

Even as the Fed leaves rates unchanged, what they say about the economic picture could also influence consumer interest rates in one direction or another.

“Most likely they will express concern about inflation,” said Keith Gumbinger, vice president of HSHAssociates.com, an online publisher of consumer loan information, which could send consumer interest rates higher as people take that as a cue that the Fed intends to start raising rates soon.

So if you are in the market for a house, now could be the time to pull the trigger before rates rise even further. As Tyson points out, yields on 10-year treasury notes are still relatively low, an indication that 30-year mortgages could still be a good deal.

Financing conditions for lines of credit, including home-equity lines, will be tighter than they have been for years. “Keep in mind that it will be difficult to leverage your home’s value to greater than 90%,” Gumbinger said. So if you do need to borrow against your home equity, now might be a better time than in the near-term future.

And it is likely that credit card issuers will switch back to variable interest rates to ride the future rate hikes, according to Robert McKinley, CEO of credit-card tracker CardWeb.com.

“Consumers should be weighing carefully all card offers they receive in the mail or via the Internet to lock in a good promotional rate or long-term rate, before rates head north again,” McKinley advised.

If you carry a balance on your credit card, now is a good time to pay that down as well. But generally speaking, “if you have consumer debt you should get rid of that anyway,” Tyson said.

But since no one can predict for certain what the economy will do, and how the Fed will react, it is generally not a wise idea to make critical financial decisions based on expectations about what will happen with interest rates, he added.

Does this make sense? Offering loans to home buyers without making them commit at least some of their own money as down payment?

How about you? Would you loan a complete stranger $500,000 to buy a home without making sure he or she had at least some skin in the game—especially with national home prices falling at double-digit rates?

Common sense indicates that, at a minimum, you would require the borrower to put some cash down. After all, he is a complete stranger; what’s to stop him from walking away from the house after a year when he finds out it is only worth $425,000, or possibly much less five years from now?

As banks and investors found out last June, when borrowers don’t have any of their own money at risk the odds are that a lot more struggling homeowners will default on their mortgages.

That is one of the biggest reasons private sector lenders have virtually stopped issuing loans to people unwilling or unable to put any money down when asking for a home loan.

In the past, when home prices were rising, banks were willing to give out no-down-payment loans. The banks largely off-loaded the risky loans to investors or speculators. This meant that many of the mortgages were not held on the banks’ books anyway, so giving large amounts of money to strangers didn’t much matter. And if the borrowers defaulted, the homes could be sold for a higher price, and everyone would be covered.

But an unforeseen thing happened: Home prices didn’t continue to rise in an eternally straight line. They actually began to fall—cascading by double-digit percentages in many areas. Now if the risky loans began “non-performing,” the homes couldn’t be sold at high enough prices to recoup the losses. And investors decided they didn’t want anything to do with the toxic subprime loans anymore.

Meanwhile, as the housing bust billowed, new homeowners in many parts of the country discovered they were making payments on homes that were in many cases worth 20 percent less than what they paid for them. With little or no personal money in the home, and with the economy struggling, borrowers en masse began to mail in the keys. According to housing database RealtyTrac Inc., foreclosure filings soared 48 percent in May over a year ago.

The banks quickly learned the lesson: Burn me once, shame on you; burn me twice, shame on me. They stopped issuing 100-percent-financed loans. Smart move.

But apparently, the government doesn’t mind getting burned over and over. The Federal Housing Authority (fha) continues to provide loans to borrowers who do not have to put up any of their own money.

“I just smell a massive taxpayer burden coming,” says Sen. Christopher Bond, who calls the programs “too good to be true.”

So the fha continues to pour cash into the money pit that remains from the collapse of the subprime mortgage market. The fha is about to request a government subsidy for the first time in its 74-year history. The agency says that next year it will need an additional $1.4 billion.

So the Federal Housing Authority continues the policies that helped create the housing bubble in the first place. Giving loans to people who couldn’t afford them was one of the biggest factors contributing to the historic rise in house prices.

But it isn’t just government agencies that don’t learn from history—even recent history.

General Motors is again reviving the “zero percent” financing strategy that helped boost sales earlier this decade. That is despite the fact that repo men are already running around at full speed reclaiming vehicles from borrowers who bought bigger cars and trucks than they should have the last time around.

As the current housing bust shows, borrowing too much money is one of the easiest ways to get into financial trouble.

Unfortunately, borrowing too much money is what America as an economy does best. The housing bust is only the first of many debt-related crack-ups on the way. If you haven’t taken action yet, the Trumpet suggests—as it did more than two years before the housing bust—to reduce your standard of living and take action to shore up your finances.

Most Americans overpay by thousands when purchasing their homes due to not understanding closing costs as cited by a new report from the Urban Institute. The study found that there are large unsupported variations in extra charges, title fees and other closing costs charged to home buyers, not to mention that minority borrowers pay hundreds more in origination fees than do non-minority buyers.

In “A Study of Closing Costs for FHA Mortgages”, noted economist Dr. Susan Woodward analyzed 7,500+ mortgages originated from May of 2001 to June of the same year chosen because it was a time that consisted of relative steady market movement. The Urban Institutes found significant disparities in closing costs even when it compared borrowers with identical credit scores, loan terms and mortgage amounts. More variations appeared to be based on geography, education level, race and ethnicity. Even after accounting for these factors, there remain very substantial variations in what consumers pay at settlement.

“This report demonstrates once and for all that the process consumers endure when they buy their homes is entirely too confusing,” said HUD Deputy Secretary Roy A. Bernardi. “Clearly, we need to open the window and allow consumers to understand the fine print and shop more effectively for the largest purchase of their lives.”

With this now being in a serious study it’s time for everyone to examine the effects of such terrible lending practices; as this can most be avoided if more time was taken to educate the borrower of what exactly their being obligated to perform when they give the bank a mortgage. And maybe more importantly, this can be a great opportunity to clean up the industry of the tarnish that gives us a less than deserving reputation.

Either way you look at it, the data is based in solid, factual evidence and there can only be one way to be sure that you or any of your loved ones aren’t overcharged in closing costs.

Read WhatIsFha.com and check out this website to see what your mortgage rate should be.

Stay knowledgeable!