Thursday, August 16, 2007
Mortgage Woes in the News
Mortgage companies and Banks have taken some hard hits so far this month.
Novastar Financial Inc., which provides mortgages to people with weak credit temporarily suspended funding on some of its loans on August 3rd through August 7th. The mortgages that were affected are wholesale loans that have not been locked in. After a re-evaluation, the company resumed funding wholesale mortgages on August 7th.
American Home Mortgage closed its doors on Friday, August 4th resulting in the lay off of more than 6,250 workers, including almost all of its 1,460-person Melville staff. The company's stock, which was above $36 as recently as December, was trading at 76 cents in mid-afternoon. Unfortunately, the market conditions in both the secondary mortgage market as well as the national real estate market have deteriorated to the point that we have no realistic alternative," chief executive Michael Strauss said in a statement. Numerous shareholder lawsuits have already been filed against American Home and its executives. The mortgage-lending company recently filed for bankruptcy.
National City Corp.,a large U.S. Midwest regional bank, said on August 6th that its National City Home Equity unit has temporarily suspended offering new home equity loans and lines of credit, citing tighter mortgage market conditions.
Countrywide Financial, the top U.S. home mortgage lender drew on their $11.5 billion emergency Line of Credit to stay afloat, and the stock took a 30% hit before institutions stepped in and propped it back up today, August 16th.
All these mortgage woes are affecting the stock market and not in a positive way. Stocks continued to slide this morning due to the U.S. subprime mortgage mess. U.S. Treasury Secretary, Henry Paulson said that the current turmoil in the market "will extract a penalty" on U.S. growth, but said the economy was strong enough to avoid a recession.
-- L. Morse
Labels: home equity, maket conditions, mortgages, stock market
Sunday, June 24, 2007
Colorado Mortgage Brokers Part of Probe
According to the Denver Post, the Colorado Attorney General's Office is investigating lending and advertising practices at four mortgage brokerages which is an expansion of a probe that begun last year.
Late last year, the state sent 17 subpoenas to brokerages and opened full investigations into four, according to Nate Strauch, spokesman for Colorado Attorney General John Suthers. The companies were not named.
Officials state that the main focus of the investigation is to look into companies that advertise low teaser interest rates, tout minimum-loan-payment plans and use confusing terms to describe their loans.
Colorado had the highest rate of foreclosure filings per household of any state last year, according to RealtyTrac of Irvine, Calif. The state is now No. 2.
The state's investigation could result in the filing of civil lawsuits against mortgage brokers found to have violated the Colorado Consumer Protection Act, Deputy Attorney General Jan Zavislan said in October.
For more information regarding mortgage brokers and what they are allowed to advertise, click the links below:
What is a Mortgage Broker?What Mortgage Brokers Can Advertise-- L. Morse
Labels: Forclosure, Mortgage Brokers, mortgages
Monday, April 23, 2007
Subprime Lending in the News
Subprime lending has definitely been one of the hottest topics in the news lately. All of the coverage that this crisis has gotten lately has caused confusion over what it all means and how it will affect the average homeowner. We hope that the questions and answers that we have compiled will help alleviate some of this confusion.
What is Subprime lending?Subprime lending, also called "B-Paper," "near-prime," or "second chance" lending, is a general term that refers to the practice of making loans to borrowers who do not qualify for market interest rates because of problems with their credit history. A subprime loan is one that is offered at a rate well above the prime rate, which is a benchmark that banks set for establishing interest rates for other loans.
Why is it such a hot topic in the news lately?There has been a lot of bad buzz going on about subprime lending lately because there has been large movement, mostly down, as the stock market reacts to a large number of foreclosures on homes in the so-called "subprime" mortgage area. A large amount of these subprime loans are going into default and, the companies that made these loans are in real trouble.
Why are so many of these loans going into default?Subprime lending was all well and good in the low interest rate environment we've enjoyed for a long time, but as interest rates have come up over the past few years, these shaky buyers have been increasingly unable to make their mortgage payments and going into default.
In the last 5-10 years, many people with not so great credit histories, low incomes, and low credit scores were approved to borrow money to buy houses because banks lowered their normal guidelines. These borrowers became "subprime" credit risks. The banks used different types of lending methods like adjustable rate mortgages, interest-only mortgages, and other kinds of financing to get these people into homes.
How does this affect you?You really will not be affected directly by the subprime crisis if you already own a home and have a standard 30-year fixed mortgage. If there is an increase in foreclosures in your neighborhood, you may see your home's value drop some. If you are not planning to sell your home any time soon, you should be able to get through the dip in your home's value.
Unfortunately, if you are buying a home but do not have a down payment or have a credit score that is below 620 you will find it more difficult to obtain financing to purchase a home. Many lenders are either getting stricter on their approval requirements or getting out of the subprime business as a whole.
On a positive note, if you are looking to buy a home, the subprime problems may benefit you. Now that there is some uncertainty in the real estate market, homes are selling for lower prices and there are more homes out there for sale. You get more options for lower prices. At this point, rates are still low, so if you have good credit, you will be in a good position.
-- L. Morse
Labels: crisis, default, foreclosure, lending, mortgages, Subprime
