A Whole Different Kind of Mortgage Broker

A Whole Different Kind of Mortgage Broker
by Craig Romero www.wisemortgageinfo.com


There's a different kind of mortgage broker on the block, and they're giving conventional mortgage brokers a run for their money. With today's current economy, consumers have to be as budget conscious as ever, and it's showing in every consumer decision they make - including shopping for a mortgage.

Gone are the days where the consumer waits with baited breath as to whether or not the corner mortgage broker can find financing for the home they want to buy.

Say hello to today's new mortgage seeker; the one who has lenders competing for their business, makes educated lending choices and is making upfront mortgage brokers more popular than ever. So what is an upfront mortgage broker? The main difference between an upfront mortgage broker and a conventional mortgage broker is that an upfront mortgage broker discloses their fees to the borrower up front and in writing.

The borrower will pay the broker a fee in addition to paying the wholesale loan price. With conventional mortgage brokers, borrowers don't know the true cost of the loan until after the application has been submitted. The conventional lenders add a markup to the wholesale rate of the mortgage to make their profit. While on the surface it may seem like the prices quoted by upfront mortgage brokers compared to the quotes received by conventional lenders would not be the wise choice, don't be fooled.

The quotes you get from an upfront mortgage broker will be an accurate reflection of what you're really going to pay. Just because a conventional mortgage broker promises you the moon, does not mean that he can actually deliver it. There are other reasons that have conscious consumers choosing upfront mortgage brokers over the traditional conventional brokers.

While conventional mortgage brokers don't always have the best interests of their customers in mind, upfront mortgage brokers gain nothing by providing their borrowers with anything other than the mortgage that best suits their needs.

There are also times when mortgage brokers are given rebates by third parties.While a conventional broker may keep this rebate as a part of their profit, an upfront mortgage broker will always pass this rebate on to the borrower.

With consumers appreciating honesty and no-nonsense approaches when dealing with their lending needs, upfront broker methods may just change the face of mortgage lending forever.

Written by Craig Romero

Discover how to quickly build a minimum of $40,000 worth of home equity and pay your mortgage off in 10 years or less without making biweekly mortgage payments. Visit: www.wisemortgageinfo.com

Mortgage rates moving back up

Mortgage rates moving back up

Procrastinators beware: Mortgage rates are beginning to rebound from record lows as the U.S. economy shows more and more signs of stabilizing.

“Rates are still low, but they’ve moved up from the super-low point they hit a few weeks back,” said Greg McBride of market-tracker Bankrate.com.

Average conforming-loan rates shot up a quarter-point in just two days last week, hitting 5.5 percent on Friday for zero-point fixed-rate mortgages given to well-qualified applicants. That’s up 0.375 points from an all-time-low 5.125 percent average rate Bankrate.com recorded early last month.

Locally, mortgage brokers say customers with excellent finances can still get rates as low as 4.875 percent, but that’s up from about 4.625 percent early last week.

Rates began moving upward Thursday after federal officials reported a drop in initial jobless claims and announced that most big U.S. banks had passed new government “stress tests.”

Then, the Labor Department reported Friday that America lost 539,000 non-farm jobs in April - 61,000 less than many analysts had forecast.

The three better-than-expected reports pushed mortgage rates higher as lenders priced in a possible economic recovery that could raise loan demand and increase inflation.

“The economic glass is now being seen as half full instead of half empty,” McBride said.

Although the analyst expects rates to fluctuate in coming months, McBride recommends would-be borrowers not wait to see if interest levels drop back downward.

After all, McBride said today’s rates are still well below the market’s 7.5 percent long-term average.

In addition, he said, some refinancers who qualify for loans today might not do so tomorrow if home values keep falling.

“People who wait to refinance could win the battle but lose the war,” McBride said. “If the value of your house drops and you no longer qualify to refinance, it doesn’t matter how low rates go.”

Mortgages Over 5% Mean Fed Purchases as Bonds Slump

Mortgages Over 5% Mean Fed Purchases as Bonds Slump

The world’s biggest investors are increasing bets that Federal Reserve Chairman Ben S. Bernanke will boost purchases of Treasuries as the steepest losses on government debt since 1994 send mortgage rates above 5 percent.

The slump in Treasuries the past seven weeks pushed yields on longer-maturity bonds up by more than half a percentage point and sent average rates on 30-year mortgages to the highest since the start of April, according to North Palm Beach, Florida-based Bankrate.com. Policy makers said March 18 they were committing “greater support to mortgage lending and housing markets” when they pledged to buy as much as $300 billion of Treasuries and stepped up purchases of bonds backed by home loans.

BlackRock Inc., American Century Investments, Federated Investors and Pioneer Investment Management say it’s time to buy Treasuries because the Fed will need to expand its purchases to keep consumer borrowing costs from rising further. While higher bond yields, the 37 percent increase in the Standard & Poor’s 500 Index since March 9 and U.S. reports on housing and inventories show the economy may be stabilizing, Bernanke said May 5 that “mortgage credit is still relatively tight.”

“The Fed needs to consider increasing its purchases of Treasuries,” said Stuart Spodek, co-head of U.S. bonds in New York at BlackRock, which manages $483 billion in debt. Spodek said he resumed buying Treasuries. “We are still in a recession. It’s quite bad. They need to stabilize long-term rates.”

Fed Precedent

Reviving the housing market is critical to ending the longest recession since the 1930s. The National Association of Home Builders says the industry accounted for 13.6 percent of U.S. gross domestic product in the first quarter of 2009, down from 16.7 percent in 2005. GDP contracted at a 6.1 percent rate last quarter after shrinking at a 6.3 percent pace in the final three months of 2008.

There is precedent for the central bank to expand purchases. The Fed increased its commitment to buy mortgage bonds to $1.25 trillion in March from $500 billion when it said it would begin buying government debt in a policy known as quantitative easing.

“We think there’s a point very close to here where the Fed would act,” said James Platz, a fund manager at Mountain View, California-based American Century, which invests about $24 billion in bonds and resumed buying Treasuries. “We would expect at some point an announcement of additional buybacks.”

The Fed purchased $92.2 billion of Treasuries since the March 18 announcement, according to data compiled by Bloomberg.

Losing Streak

At the same time, 10-year note yields, a benchmark for consumer and mortgage rates, reached 3.38 percent last week, the highest since November and up from 2.46 percent on March 19, according to BGCantor Market data. Thirty-year mortgage rates are up from 4.85 percent on April 28.

Yields rose for seven weeks, the longest streak in five years. The benchmark 3.125 percent note due in May 2019, which was auctioned by the Treasury on May 6, ended last week at 98 20/32 to yield 3.29 percent. The yield declined to 3.21 percent today at 9:32 a.m. in New York.

Treasuries lost 3.93 percent this year, according to Merrill Lynch & Co.’s U.S. Treasury Master index, after gaining 14 percent in 2008 as investors sought a refuge from tumbling prices of securities tied to subprime mortgages. Losses and writedowns at the world’s largest financial institutions total $1.41 trillion since the start of 2007, Bloomberg data show.

‘Tight’ Credit

The declines are the most since Treasuries tumbled 4.94 percent at the same point in 1994, according to Merrill Lynch indexes. That year, the Fed raised its target rate for overnight loans between banks to 5.5 percent from 3 percent in an effort to contain inflation. Treasuries ended up losing 3.35 percent for all of 1994, before returning 18.5 percent in 1995 and 2.61 percent in 1996, including reinvested interest.

Thirty-year mortgage rates as measured by Freddie Mac rose to 9.25 percent on November 1994, from 6.74 percent in 1993, before falling to 6.94 percent in February 1996.

Home prices have declined for 31 straight months and are down 31 percent from their peak, according to S&P/Case Shiller indexes. Mortgage applications to purchase a home remain below the high reached in September when rates averaged 5.94 percent, Mortgage Bankers Association and Bankrate.com data show.

“The supply of mortgage credit is still relatively tight, and mortgage activity remains heavily dependent on the support of government programs or the government-sponsored enterprises,” Bernanke told the Joint Economic Committee of Congress on May 5.

Thawing the Freeze

Bernanke succeeded in narrowing the difference in yields between mortgage securities, which also influence home loan rates, and Treasuries.

The gap between the 30-year current coupon Fannie Mae bond and the benchmark 10-year Treasury shrank to a 15-year low of 0.77 percentage point on May 6. It averaged 1.23 percentage points in the five years prior to the collapse of Lehman Brothers Holdings Inc. in September. Thirty-year mortgage rates are down from 6.46 percent in October.

Other lending rates also show Fed efforts to thaw frozen credit markets are working, which may reduce pressure on policy makers to step up purchases of Treasuries.

The London interbank offered rate, or Libor, for three- month dollar loans fell to a record 0.92 percent. The difference between Libor and what the Treasury pays to borrow for three months, the so-called TED spread, was 0.72 percentage point, the narrowest in almost a year and down from 4.64 percentage points on Oct. 10.

Bond Switch

Investors anticipating an expansion of the Fed’s Treasury purchases were disappointed after the Federal Open Market Committee’s April 29 meeting, when policy makers left the size of planned buybacks unchanged and said the economy is showing signs of stability. Yields on 10-year notes rose 16 basis points, or 0.16 percentage point, to 3.16 percent that week, the biggest increase since the period ended Feb. 27.

Treasuries are falling in part because investors are switching to higher-yielding assets on signs the worst of the recession is over.

Unemployment in the U.S. grew by the smallest amount since October last month. Payrolls fell by 539,000, after a 699,000 loss in March, while the unemployment rate rose to 8.9 percent, the highest level since 1983, the Labor Department said May 8. The Commerce Department said the same day wholesalers reduced supplies of unsold goods for a seventh month in March.

Corporate Debt Sales

“People are feeling a little bit more comfortable that the economy is not getting as bad as it was,” said Richard Schlanger, who helps invest $13 billion in fixed-income securities as vice president at Pioneer Investment in Boston. “There has been a slight migration out of the safe-haven mentality.”

Besides the gain in stocks and the drop in the rate banks charge to lend to each other, U.S. companies including New York- based Morgan Stanley and Bank of America Corp. in Charlotte, North Carolina, have sold more than $500 billion of bonds, according to Bloomberg data.

There is still plenty of incentive for Bernanke to contain borrowing costs as job losses threaten to restrain consumer spending after a first-quarter rebound, according to economists surveyed by Bloomberg News last month.

The government is likely to sell a record $3.25 trillion of debt this fiscal year ending Sept. 30, according to Goldman Sachs Group Inc., to finance bank bailouts, economic stimulus plans and fund a growing budget deficit.

Consumer credit in the U.S. contracted by a record $11.1 billion, the most since records began in 1943, to $2.55 trillion in March, according to a Fed report released May 7.

“If all of a sudden this rise in the 10-year yield feeds into higher all-in mortgage rates, that’s when we think the Fed will come in with a vengeance” to increase its Treasury purchases, said Joseph Balestrino, a money manager at Federated Investors in Pittsburgh, which oversees $21 billion in bonds. “We are a buyer.”

To contact the reporter on this story: Daniel Kruger in New York at dkkruger1@bloomberg.net.

State, bank settle mortgage issue

State, bank settle mortgage issue

Homeowners with subprime mortgages that are now owned or serviced by Goldman Sachs may get some relief under a deal the investment bank made to avoid a lawsuit from the state.

"Many of these loans were unfair, they were destined to fail at their inception," state Attorney General Martha M. Coakley said during a conference phone call Monday afternoon.

"Then they were sold up the line. Those loans were packaged and they were sold to Wall Street."

Goldman has agreed to reduce the principal of first mortgages it owns by up to 25 to 35 percent and second mortgages by 50 percent or more. Borrowers who are delinquent on first mortgages must make reasonable monthly payments while they try to sell or refinance. The relief will be worth $50 million and Goldman Sachs has agreed to make a $10 million payment to the state for a total of $60 million, according to Coakley's office.

Goldman Sachs owns 714 subprime mortgages across the state, said Attorney General's Office spokeswoman Amie M. Breton. Of those, 33 are in Springfield, giving it one of the highest concentrations of Goldman Sachs-held mortgages in the state. But the mortgages are spread across the Pioneer Valley with three each in Westfield and in Monson, two each in Agawam and Buckland and one each in Holyoke, Chicopee, Ludlow, Granby, South Hadley, Easthampton, Hatfield, Hadley, Amherst, Whately and Chester.

Goldman has also agreed to help borrowers refinance mortgages it doesn't own, but it services and collects payments through its subsidiary, Litton Loan Servicing. But that relief will come through the Federal Housing Administration, Breton said.

Jennifer M. Kinsman, program manger for Western Massachusetts Foreclosure Prevention Center, said she hopes to learn more about the program. It's coming at a time when more and more lenders are signing on to the federal Making Home Affordable program.

Kinsman said many people with Goldman-owned mortgages may not even know it. Their mortgages have been bought and sold.

Breton, the spokeswoman for the Attorney General's Office, said Goldman is required to notify homeowners if they are eligible to the point of knocking on the door if letters and phone calls don't work. If people want to learn more now, she said they can call the company that collects their mortgage payments.

Kinsman said people can also visit the federal Web site at www.makinghomeaffordable.gov. or by calling the Foreclosure Prevention Center at (413) 233-1622.

Goldman Sachs spokesman Michael DuVally said only that "Goldman Sachs is pleased to have resolved this matter."

Mortgage rates mixed in April

Mortgage rates mixed in April

Lenders raised interest rates on 2-year fixed rate mortgages in April, but the cost of tracker and variable rate deals fell slightly, Bank of England data showed on Tuesday.

The cost of taking out a home loan remained well above the central bank's official 0.5 percent interest rate, reflecting the still-high price of credit on wholesale markets.

The Bank said monthly interest rates on 2-year fixed rate mortgages with a loan-to-home value ratio of 75 percent rose to 4.01 percent in April from 3.98 percent in March.

Rates on tracker mortgages fell to 3.86 percent from 4.01 percent, two-year discounted rate mortgages with a 75 percent loan-to-value ratio fell to 3.6 percent from 3.63 percent and standard variable rate mortgages fell to 3.83 percent from 4.06 percent.

The central bank has been buying government and corporate bonds since March to help boost the supply of credit to the economy. Last week it increased the size of its asset purchase programme to 125 billion pounds.

Analysts said the mixed data suggested mortgage rates in general could start heading higher soon, especially if markets begin to price in higher official interest rates amid growing signs of a moderation in the economic downturn.

"It looks like we've reached a floor in mortgage interest rates, I'm not sure how much further they can come down," said George Buckley at Deutsche Bank.

"Rates are probably going to stay at these levels and because people are expecting higher rates going forward, they will go up in future reflecting higher risk-free interest rates."

U.S. Projects Aid Tally for Mortgage Giants

U.S. Projects Aid Tally for Mortgage Giants

The Obama administration has clarified what it expects the takeover of Fannie Mae and Freddie Mac to cost taxpayers: $171.1 billion.

Budget details released by the administration yesterday project that the companies are likely to need $92.2 billion more to cover losses on mortgage-related investments. The administration didn't give a timetable for this taxpayer assistance but the spokesman for the Office of Management and Budget said it is anticipated sometime before Sept. 30, 2011.

Fannie Mae and Freddie Mac have already received or requested $78.8 billion in aid as losses have mounted. The government seized the firms in September out of concern that their failure could destabilize the global financial system.

District-based Fannie Mae posted a $23 billion loss last week, prompting a $19 billion government investment. McLean-based Freddie Mac is expected to report its earnings this week.

When it took over the firms, the government pledged $100 billion for each company to keep them solvent. Since then, the government has increased its commitment to $200 billion each.

Some analysts have said that the companies might need more than $100 billion apiece if the housing and economic downturns persist. Fannie Mae's latest earnings report reflected a troubling trend that losses were spreading from risky borrowers to safer ones.

The Obama administration's budget document also outlined the possible fates of the companies, including returning them to their status as government-charted public companies controlled by private management or "a gradual wind-down of their operations and liquidation of their assets."

Other possibilities, the document says, include turning the companies into a federal agency or a public utility.

"The Administration looks forward to working with the Congress, the regulatory community, and the mortgage industry to determine the best possible long-term role for Fannie Mae and Freddie Mac," the document said.

Cash Advance Loans: Loan Sharks In Disguise?

Cash Advance Loans: Loan Sharks In Disguise?
Author: David Berky

You have seen them on the corner and in the poorer parts of
town with names like "Quick Cash", "Quick Loan", "Payday
Loans", "Car Title Loans". They are starting to sprout
up all over the country and will soon rival Starbucks for
sheer number of locations.

They are the new trend in predatory lending practices but
still manage to fly under the radar of regulation in most
states. They don' t charge interest, they charge a
"fee".

But it sounds like the ultimate in convenience. Need
some quick cash - stop by and in just five minutes you can
be out the door with $100, $500 even $1000 dollars.
But what is the true cost of this "convenience"?

How It Works

A cash advance or payday/paycheck loan is usually secured by
a personal check. Some companies want your bank
account or credit card information in addition to or instead
of a check.

You write a check to be cashed or agree to have an amount
withdrawn from your bank account sometime in the future;
usually 14 days (the standard payroll period).

After completing the agreement/contract you are given an
amount that is less than what you have agreed to pay.
The difference is the "fee" for the loan service. And
you have got your cash!

Why It Works

Why is the company willing to loan you money like
this? Simple, because loaning out money for these
"fees" really amounts to a huge profit at your expense.

For example, say you borrow $200 and the lender charges a
"fee" $15 for each $100. Within 14 days you will have to
pay $230 for borrowing $200. Now if the $200 keeps you
from having to pay a $100 late fee or penalty on something
it is probably worth it. But if you just want the
money today, you are paying a high price.

You are paying 15% interest for a 14 day loan. That
amounts to 3785% compounded interest yearly! No wonder
lenders are happy to loan you this money. If they loan
you $100 and you pay them back with an extra $15 in two
weeks and they loan out the $100 again along with the $15
extra you paid, and they keep doing this for one year, they
will turn their $100 into $3785 by the end of the year!

Maybe you should be loaning your money to them rather than
borrowing from them.

What To Watch Out For

* Early repayment fees. Pay off your loan early and they
sock you with another fee.
* Late repayment fees. You may have to pay the entire fee
again if you miss the payment date.
* "Membership" fees. Some companies charge you to become
their customer along with charging you as their customer.
* Giving lenders access to directly debit your bank account.
Just hand them your wallet, it's quicker.
* Fine print (as in all contracts). Know what you are
signing or don't sign it.
* Bounced check or debit fees. Make sure you have money in
your bank account or you get to pay your bank a fee as well.
* "Collateral" requirements such as a car title. Miss your
payment and you may be missing your car - permanently.

There Is A Better Way

The root problem here could be that you are getting
strangled by your debt payments. Credit cards, store
accounts, installment payments and such can eat up your
income quickly. Ite may be time to visit a non-profit
credit counseling service or create a debt reduction plan
for yourself.

Or it could be that you are just spending more than you
make. You may need to spend a few minutes each week
and write down your expenses. Then categorize and
total them to see where your money is going. Then
record your income for the same time period and make sure
that you are not spending more than you make.

Sure, everyone gets behind occasionally. But you need
enough room in your budget (this means spending less than
what you make) to accommodate the "budget busters" and
surprise expenses that may come up. It may mean
cutting back on cable, magazine subscriptions or eating
out. But last time I checked, McDonalds did not charge
a $15 "fee" for making your food.

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