March 31, 2007

SAN FRANCISCO, CA – Consumer spending in the United States rose substantially in February and economists see this as a sign that the economy is in good shape despite a few lingering aches and pains.  Analysts were surprised as consumer spending rose .6%, which was nearly twice what had been expected.

The Commerce Department indicated that personal income rose by .6% as well.  This figure was also double what many analysts expected.

Spending on construction rose also by almost .3% in February.  This number had been declining or steady since March of 2006.  This figure reflected primarily commercial construction projects such as state and local government buildings, shopping center projects, and hotels.

Home construction on the other hand continued its long string of declining figures.

Foreclosure expert, Patrick McGilvray, J.D., CFP®, president of http://www.TheHomeBuyingCenter.com commented on this phenomenon, “it looks like our overall economy has a very solid foundation, but my company is getting increased numbers of calls from people who want to sell their houses fast to avoid being foreclosed on.  The single-family home sector, especially homeowners with subprime mortgages, is suffering from too much supply and not enough demand.”

Analysts still are looking for the economy to slow down in the first quarter of 2007, and then they anticipate a rebound in the second quarter.

The Fed on Inflation

Federal Reserve Chairman Ben Bernanke reported to Congress this past week that inflation continued to be the central bank’s main concern.  He also mentioned that risks to overall economic growth have emerged.  Because of this he noted that he and the other Federal Reserve regulators might soon lower interest rates to help prevent a stall in the economy.

Bernanke mentioned that the prolonged housing downturn and a slowing economy might preclude businesses from making investments and that growth was a major part of his focus.

Teaser rates start out low then increase dramatically. 200,000 Ohio families could be affected in 2007-08.

They’re called teaser rates and they could make Ohio’s mortgage foreclosure crisis even worse in coming years.

The loans are for adjustable rate mortgages (ARMs) with low, fixed interest rates for the first two or three years. After that initial period, the rates increase, as often as every six months, so that monthly mortgage payments grow dramatically, according to a report released Thursday by the Coalition for Homelessness and Housing in Ohio.

According to the report, $14 billion in ARM “teaser rate” loans will be reset in Ohio this year and in 2008, likely creating an increase in foreclosures and affecting at least 200,000 families.

Even before this anticipated surge, Ohio nationally has the second highest rate of loans in “serious delinquency” — either in foreclosure or more than 90 days late. Ohio’s 5.12 percent rate is behind only Mississippi, 5.3 percent, and just ahead of third place Louisiana, 4.98 percent, two states devastated by Hurricane Katrina.

“The coming foreclosure crisis hitting Ohio is on the scale of Hurricane Katrina hitting the Gulf Coast, except it is happening silently, one foreclosure at a time,” Bill Faith, executive director of the homelessness coalition, said in a press release.

The “teaser rates” are only part of the problem, the report said.

Inflated appraisals and high loan-to-value mortgages have increased debt problems. In 2006, 24 percent of ARM borrowers getting new loans owed more than the value of their home at the loan’s origination, according to the report.

The study expands on a report issued earlier this week by Policy Matters Ohio, a Cleveland-based research institute, that showed foreclosure filings jumped by nearly a quarter last year in Ohio, the largest increase in recent history.

The number of filings in 2006 — 79,000 — marked an almost fivefold increase over 2005. Warren County had the sharpest increase among eight counties in the Dayton region, with foreclosure filings increasing more than ninefold since 1995.

The Policy Matters report also showed that Montgomery County had the second highest foreclosure filing rate last year — 9.4 per 1,000 people — behind only Cuyahoga County, which includes Cleveland.

http://www.TheHomeBuyingCenter.com

If you’re behind on your mortgage or facing foreclosure, contact your mortgage company first to see whether a new payment plan can be worked out or the loan can be refinanced. If that doesn’t work, consider selling the house or contacting a credible housing counselor.Housing counselors approved by the Department of Housing and Urban Development can be found at http://www.hud.gov

ACORN Housing offers a Home Equity Loss Prevention program with mortgage-delinquency counselors who can intervene to help homeowners who face foreclosures.

If you’re trying to avoid foreclosure, stay away from advertisements, mailings, billboards, fliers and visitors offering to help you save your home at terms that sound too good to be true. The arrangements often wipe out hard-earned equity and only delay foreclosure proceedings.

Be especially leery of people who offer help but discourage you from contacting your mortgage company or attorney; likewise real estate agents and mortgage brokers who try to get you to sign documents under pressure or without fully explaining what they are.

The Federal Trade Commission advises avoiding lenders who:

_Ask you to sign blank forms that they fill in later.

_Won’t provide copies of documents.

_Tell you it’s not important to read the contract fine print.

_Promise certain terms when you apply but provide a different set of documents to sign with no valid explanation.

Experts suggest that an attorney or a credible financial or real estate professional review documents before you sign them.

If you think you’ve been victimized by a foreclosure-rescue scam, contact your state’s financial regulatory agency. For a list of agencies that can take administrative action, go to http://www.fraudproblem.com/where-to-complain.

Your state attorney general’s office also can conduct a criminal investigation. For a list of state attorney general’s offices, go to the National Association of Attorneys General at www.naag.org.

Private attorneys can file civil suits against suspected scam artists, but the investigations are long and complicated and many lawyers won’t take the cases. The National Association of Consumer Advocates lists lawyers in each state who specialize in consumer-fraud cases. They can be reached at http://www.naca.net.

Local Legal Services offices can assist those who can’t afford lawyers. For a listing of state offices, go to http://www.lsc.gov.

For information on how to avoid foreclosure, go to the U.S. Department of Housing and Urban Development Web site, at http://www.hud.gov/foreclosure.

http://www.TheHomeBuyingCenter.com

SACRAMENTO, CA - Nevada, Colorado, and Florida are leading the nation in an unfortunate statistic:  highest foreclosure rates.  Florida averages currently one in each 382 homes.

Across the nation people are feeling the crunch to make mortgage payments on houses that have gone down in value or that have only appreciated modestly.  Rouding out the rest of the Top 10 are Georgia, Michigan, Tennessee, Ohio, Texas, Arizona and Indiana.
Nevada actually surpasses Florida with one in each 278 homes, greater than triple the national average.

The U.S. rate is one in each 884 homes.

http://www.TheHomeBuyingCenter.com

Subprime loans are, by definition, risky business. They target home buyers with poor credit records or without cash for a down-payment, often luring in borrowers with lowball introductory interest rates that morph into more robust charges years down the road. If a lender can properly assess default risk—and tolerate quite a lot of it—subprime loans can turn a neat profit. They also provide entrée into homeownership to consumers once frozen out of the market. This win-win situation works so long as each side knows what it’s getting into. But where lenders or borrowers—or both—get carried away, trouble looms. For evidence, look no further than the United States, where an overeager subprime market (TIME) rapidly devolved into a fiasco.

Across America, risky mortgages are going up in smoke. U.S. mortgage foreclosure filings sky-rocketed (Bloomberg) 12 percent last month, and at least thirty subprime lending firms failed this year. New Century Financial, formerly the second-largest subprime outfit in the United States, is the most glaring cautionary tale (MarketWatch)—the company is now auctioning assets in what many analysts view as a precursor to imminent bankruptcy. For global lenders, many of which are less active than their U.S. counterparts in subprime lending, the fate of New Century and other struggling American firms is a cautionary tale.

No single factor caused the subprime meltdown. Borrowers, of course, should theoretically shun loans they cannot possibly repay. In one notorious case highlighted in the Economist, a twenty-four-year-old in Sacramento bought seven houses in five months, never paying so much as a down payment—and now faces $2.2 million in debt. Lenders also shoulder blame for cavalierly offering loans to unqualified borrowers. In good times, unsustainable loans still turned a profit (MSNBC); the lenders reaped short-term fees and quickly sold the loans to investment banks which chopped them up, repackaged them, and flipped the debt to hedge funds and institutional investors. Now the gravy-train is derailing, and as CFR’s Sebastian Mallaby argues in the Washington Post the investment banks could be exposed as the real scoundrels of the subprime blowup. The banking giants “bamboozled ratings agencies into assigning misleadingly high credit scores to some mortgage-backed bonds,” Mallaby says. This enabled them to pawn off bad debt, disguised as good debt, to unwitting investors.

How far will the damage extend? Bloomberg, in the article cited above, says subprime housing-loan woes could spill over into the auto-loan industry, where highly speculative loans are also prevalent. The issue has global ramifications as well: In late February, subprime concerns sent stock markets tumbling on fears of a U.S. economic slowdown. Even though subprime loans aren’t nearly as common internationally as they are in America, a U.S. credit crunch could still suck liquidity out of global financial markets. Testifying before Congress on March 28, the U.S. Federal Reserve Chairman Ben Bernanke said the subprime issue thus far has had only minimal effects (Reuters) on the broader U.S. economy. But some factors remain unknown. Perhaps the most frightening question is what happened to all that bad debt the investment banks pawned off. Hedge funds, the Financial Times’ Gillian Tett points out, are often masters at using tricky paperwork to cover up their losses. But somewhere, somebody is taking a heavy hit right now. Tett wonders: “Where are the bodies buried?”

http://www.TheHomeBuyingCenter.com

March 28, 2007

WASHINGTON – Chairman Ben Bernanke of the Federal Reserve said to Congress that the recent crisis in the subprime mortgage industry is merely “moderate” in a big picture sense.  His comments were echoed by Secretary of the U.S. Treasury, Henry Paulson who said the situation “appears to be contained.”

Mr. Paulson indicated that he believed that the residential housing market downturn was at or near its bottom.  In testimony to Congress, Paulson said, “from the standpoint of the overall economy, my bottom line is we’re watching it closely but it appears to be contained.”  He did reserve what he called “grave concern” for many American homeowners who will be negatively impacted by the resetting of their subprime adjustable rate mortgages.

Mr. Bernanke added that he thinks the recent tightening of credit standards in the subprime mortgage market will be a good thing overall.  He is focused on watching the housing market through the spring to help himself decide which direction the Fed will move in with respect to interest rates.

The stock market has been punishing the builders of homes in recent weeks partly as a result of the subprime mortgage crisis.  Since the beginning of February 2007 the Dow Jones U.S. Home Construction index is down by 20 percent.  Standard Pacific Corp. was down 5 percent, Centex down 4.3 percent, and Beazer was down by 10 percent.

http://www.TheHomeBuyingCenter.com

In February, Florida had a disappointment statistic when it showed 19,144 filings in February from a month earlier; that was the highest among all states. This now placed Florida with the third-highest foreclosure rate in the country, averaging one for every 382 households.

Nevada, Colorado, Florida continue to post the top foreclosure rates in the nation.

Nevada registered the nation’s highest state foreclosure rate of one foreclosure filing for every 278 households — more than three times the national average.

Nationally auction sale notices and bank repossessions, and it showed a 12 percent increase last month over January, showing a national foreclosure rate of one filing for every 884 U.S. households.

Other states with foreclosure rates ranking among the nation’s 10 highest were Georgia, Michigan, Tennessee, Ohio, Texas, Arizona and Indiana.
http://www.TheHomeBuyingCenter.com

State regulators, lawmakers, and community groups expressed broad support for legislation to stem the tide of foreclosures of home mortgages.

“This is a crisis in Massachusetts, a crisis created by the proliferation of subprime loans,” said state Senator Jarrett Barrios, a Democrat who represents districts from Cambridge to Revere. Subprime loans are high-interest mortgages offered to borrowers with credit problems.

Barrios is the sponsor of one of several bills in the Legislature to grapple with the state’s rising foreclosure filings, which hit a record of nearly 20,000 in 2006. His bill would provide counseling to homebuyers and foreclosure relief to those already having difficulty paying their loans, and would crack down on regulation of subprime lenders. To prevent some foreclosures, he also proposed giving borrowers 30 days to catch up on loan payments when they fall behind, a time period one community activist said was too short.

Numerous stories of troubled borrowers were retold. Barrios said an elderly resident in Cambridge’s Huron Village neighborhood signed a loan, even though she had Alzheimer’s disease and was “unaware what was going on.” A Chelsea resident took out a refinancing loan with a 16 percent interest rate cap, he said.

Isabel Frias, a former homeowner and single mother of three, said she lost her life savings when lenders foreclosed on her two-family home in Lawrence, which cost $340,000. At the loan closing, she told the committee her mortgage payment would be $1,000 higher than she had been promised.

When asked why she signed the loan, she said, the broker said “if she changed her mind she would lose her downpayment, a life savings of $12,000,” Frias, who speaks only Spanish, explained through a translator.

“These are documented cases, and it’s completely unregulated,” Barrios told the chairs of the Joint House and Senate Committee on Housing, Democratic Senator Susan Tucker of Andover and Democratic Representative Kevin Honan of Allston-Brighton.

Tina Brooks, undersecretary of the Massachusetts Department of Housing and Community Development, said that the subprime problem is most acute in the African-American and Latino neighborhoods where loans are “unaffordable and a recipe for foreclosure.” She urged legislation be passed to provide assistance “for those victimized by abuse.”
http://www.TheHomeBuyingCenter.com

More than 450,000 California homeowners could lose their homes through foreclosure because they can’t afford payments on risky subprime mortgages, a consumer advocate told state lawmakers Monday in Sacramento.Regulators should strengthen mortgage laws to tighten underwriting standards and help borrowers in trouble with loans they should have never taken out, Paul Leonard, California director of the Center for Responsible Lending, said at a hearing of the state senate’s banking, finance and insurance committee.

California leads the nation with more than 833,000 outstanding subprime loans, 22 percent of the U.S. total, according to data from First American LoanPerformance.

http://www.TheHomeBuyingCenter.com

March 25, 2007

NEW YORK – At the Senate Banking Committee hearings last week in Washington, D.C. Senator Robert Menendez (D)-NJ said that black and Hispanic homeowners will be hurt disproportionately by the crisis occurring in the subprime mortgage industry.  “What we’re looking at is a tsunami of foreclosures that is on the horizon,” said the Democrat from New Jersey.

Congress is under pressure to act to help deal with fallout that has seen lenders close their doors and homeowners default on their mortgage payments in staggering numbers.  Many people in predominantly minority communities say that subprime lenders targeted vulnerable consumers in their areas and provided home loan products that were confusing at best and misleading at worst,

Executives from some leading companies who specialized in providing loans to people with imperfect, and in some cases poor, credit histories testified on Thursday.  The Chairman of the Senate Banking Committee, Senator Christopher Dodd (D)-CT, described what he called a “chronology of regulatory neglect.”  Dodd blamed regulators as well as industry for the current situation.

“Our nation’s financial regulators were supposed to be the cops on the beat, protecting hardworking Americans from unscrupulous financial actors,” said Sen. Dodd “They were spectators for far too long.”

Roger Cole, in charge of the banking supervision department at the Federal Reserve, while being grilled by Dodd, had this to say, “I will say that given what we know now, yes, we could have done more sooner.”  Cole promised that he would start a process at the Fed that might result in broader federal rules concerning mortgage lending practices and standards.

“It’s not regulation that is the real problem here.  What is the real problem is an inconsistent patchwork of regulation with standards imposed by the federal government and by the individual states,” said Patrick McGilvray, J.D., a foreclosure expert and President of http://www.TheHomeBuyingCenter.com.

Senator Dodd promised further action to help the nation deal with the rise in foreclosures, loan default, and the collapse of lending institutions across the nation.  He plans to soon gather a number of regulators, consumer activist groups, mortgage lenders, legislators, and others to create a solution for suffering homeowners.

March 22, 2007

WASHINGTON - At the Senate Banking Committee hearings on Thursday officials downplayed the potential spread of problems in the subprime mortgage sector.  One official, Roger Cole, Director of the Federal Division of Banking Supervision and Regulation told the committee that he thought the deterioration in the housing market would stay limited to the subprime sector.

“We are not observing spillover effects from the problems in the subprime market to the traditional mortgage portfolios or…to the safety and soundness of the banking system,” said Cole.

Subprime mortgages, which became widely popular in the U.S. mortgage market in recent years, are primarily used by people with poor credit histories or people who wanted to buy a larger house than they might be able to afford under more conservative lending guidelines.

One of the largest of the lending institutions which sold these types of loans, Countrywide, said that they thought that loans made in 2006 would turn out to have the highest rate of foreclosures in the company’s history.  Countrywide’s Executive Managing Director, Sandor Samuels, said 2006 could be worse than the year 2000, “for which the cumulative foreclosure rate was 9.89 percent.”

The Chairman of the Senate Banking Committee, Connecticut’s Senator Christopher Dodd (D) informed those present at the hearing he called that he plans to create legislation to prevent consumers from falling victim to predatory lending, but he thought the broader solution to the crisis might not be a legislative one.  “Instead, I would seek to ask leaders…to come together and try to work out an efficient process providing some relief for these homeowners who will be caught in this bind,” Dodd said.

Foreclosure expert, Patrick McGilvray, J.D., President of California-based http://www.TheHomeBuyingCenter.com commented, “I believe that overall a market-driven solution is in the best interest of the nation, yet there is still a role for governmental regulators to ensure our banking system is not abused by irresponsible lenders.”  Mr. McGilvray’s company matches people that need to sell their homes with real estate investors and first-time home buyers across the United States.

In other developments the nation’s 5^th biggest home building company, KB Home cautioned that higher rates of foreclosure could lengthen the downturn in the housing sector.  The CEO of the company said that more stringent lending requirements for new borrowers and high default rates on existing loans could forestall any recovery in the sector.

March 21, 2007

SACRAMENTO, CA  — As the housing market downturn in California and across the country continues lenders are reexamining their lending policies and making loans less available than they were in years past.  This effect is lauded by many economic observers, but may result in a reduction of buyers which could lead to an even greater supply of homes on the market.

In the greater Sacramento region lenders began the processing of foreclosing on homes for non-payment of mortgages at a 239% higher rate in 2006 as compared to 2005.  According to Patrick McGilvray, J.D., President of Sacramento-based http://www.TheHomeBuyingCenter.com, “Our region saw homes skyrocket in value between 2000 and 2005 and many, many new homes were built.  We’re still dealing with a glut of houses available for sale.”  Mr. McGilvray added, “this [situation] could last for years, but I am optimistic about the long-term health of California’s housing market.”

Economists will tell you that when supply outstrips demand then prices of a given commodity, houses in this example, will fall.  In this environment, the moves by politicians and lenders to restrict prospective homeowners from easily obtaining loans will likely continue the stagnation and decline in the California residential real estate market.

The prospective home purchasers in question in recent years were able to buy homes because of the ability to qualify for so-called subprime mortgages.  These products were sometimes the only way to get money to buy a home for people in the process of repairing their credit status.

Congressional hearings, run by Senator Christopher (D)-Connecticut are investigating the subprime mortgage market industry’s practices tomorrow in Washington, D.C.  The industry, in addition to lax underwriting practices, is accused of predatory lending practices, among other things, that have had a disproportionate effect on minority purchasers.

Consumer advocates have alleged discriminatory practices among lenders in recent years and have complained that many African-American and Latino homebuyers have been sold inappropriate products that were not fully explained.  Many of these people were first-time homebuyers and were sold mortgages with dramatically higher costs than white purchasers even with identical financial backgrounds.

According to real estate tracking service RealtyTrac up to 1.5 million homeowners will face foreclosure in 2007.

Millions of American homeowners are at risk of losing their homes to foreclosure because they signed up for adjustable rate mortgages they can no longer afford.

If you are one of them, it may be possible to refinance to save your home. But you should know predatory lenders are waiting to pounce on you in your hour of desperation. Sounds melodramatic, but it’s true.

If buying a home is the American dream, then predatory lending is the American nightmare. Predatory lending typically occurs in refinancing deals. Unscrupulous lenders cause people to lose their homes and neighborhoods to lose their luster. Aggressive mortgage brokers target the poor, the elderly, minorities and women, but it can happen to anyone.

Charles K. is a combat veteran who lives on a fixed income. He was a month or two behind on his mortgage, so he wanted to refinance in hopes of arranging a lower monthly payment. The mortgage broker promised Charles he could lower his payment from $980 a month to $880. The broker advised Charles to stop making payments to his old mortgage company, because his new loan would be ready soon.

But then the broker waited more than a month to schedule Charles’ closing. At that closing, Charles learned his new monthly payment was $1,250 — hundreds more than the old payment he had been struggling to make. By now, Charles’ old mortgage company was threatening to foreclose on his home, so he felt trapped and he signed for the new loan.

When I investigated Charles’ case, I learned his monthly payment was jacked up illegally. By law, the broker was supposed to inform him the price was going up. The reason the monthly payment was so high is that the brokerage firm charged an unconscionable $13,000 to process the loan — pure profit for the broker. This abusive fee was then rolled into Charles’ loan, so he ended up owing $146,000 on a house that was only worth $126,000.

Charles couldn’t afford his new monthly payments. Eventually, he declared bankruptcy and the bank sold his home on the courthouse steps. He’d been trying to avoid foreclosure, but that’s exactly what he got.

Some predatory lenders purposely structure their loans so the monthly payments are too high for the borrower. When the borrower defaults, the lender offers yet another loan with additional closing costs and fees. This is called “flipping.”

Consumer advocates have documented cases in which homeowners were “flipped” into more than 10 different loans in just four years. One homeowner just wanted to borrow $26,000 but ended up paying $29,000 in closing costs and fees!

Know the Signs

1. Predatory lenders often promise one set of terms when they talk to you, then jack up the price at closing. It’s a sign that you’re in for a rough ride.

2. If a mortgage broker asks you to sign a blank application form, that’s a red flag. The broker may intend to falsify your credit history so you’ll qualify for a loan you can’t afford.

3. Adding co-signers is another ploy. Unscrupulous brokers may ask you to come up with a co-signer, knowing full well that person doesn’t really intend to contribute to the payments. It’s another way of getting you an expensive loan that the broker will make a lot of money on.

4. If a lender refuses to give you a copy of the good-faith estimate, that’s a signal that the estimate will change. The lender doesn’t want you to have written proof of the terms you were first offered.

5. Predatory lenders often structure loans with balloon payments at the end. The monthly payment seems manageable, but in a few years’ time you could owe tens of thousands of dollars all at once. Of course, the broker is hoping you won’t be able to afford the balloon payment and you’ll refinance again, generating more fees for the firm.

6. If you see ” credit life insurance” as a line item in your loan, beware! This kind of insurance is supposed to pay off your loans if you die. It’s a rip-off. A basic life insurance policy is all you need. Plus, predatory lenders charge exorbitant premiums for products like credit life, credit disability and involuntary unemployment insurance.

7. Same goes for homeowner’s insurance. Predatory lenders have been known to add expensive homeowner’s insurance to a loan even though the homeowner already has insurance through an outside company.

8. Some predatory lenders continue to abuse you after you’ve gotten your loan by tacking on expenses to your monthly payments. They may charge for providing an escrow account for your property taxes, even though you are paying them directly yourself. They may charge late fees even when your payments are on time. If you try to refinance with another lender they may refuse to provide you with an accurate payoff statement.

Do Your Homework

1. Be the hunter, not the hunted. Don’t borrow money from a company that slips a flier under your door or blares at you in a TV commercial. Find your own mortgage company. Check with the company that currently holds your mortgage if you want to refinance. Go to the bank where you have your checking account. Ask friends and neighbors if they’ve had a good experience.

2. Once you narrow down your list, check out the mortgage brokers or lenders by contacting the BBB and your county and state consumer protection agencies.

3. When a mortgage broker or lender gives you an estimate, get it in writing and make sure you have your own copy.

4. Never sign any paperwork that contains blanks.

5. Never follow advice to stop paying on your old mortgage loan. This could affect your credit record and trap you into accepting a predatory loan.

6. Demand a copy of your closing paperwork a couple days before the closing. Review it to see if the terms are different from what you were initially offered.

7. When you refinance with a different lender, you have the right to back out of the loan within three days of your closing. If you detect problems at your closing, immediately ask a real estate attorney for an opinion, so you can take advantage of that window.

How to Complain

If yours is an FHA loan, complain to HUD, the Department of Housing and Urban Development. If you’ve got a veteran’s loan, complain to the VA. Contact your county and state consumer protection offices too. If they can’t help you, they’ll give you a referral. Your city or county office of fair housing may also be able to help. Also complain to the BBB so other consumers will have a paper trail to follow.

http://www.TheHomeBuyingCenter.com

March 20, 2007

WASHINGTON – Securities and Exchange Commission Enforcement Director Linda Thomsen acknowledged Monday that her agency is scrutinizing the troubled subprime mortgage lending industry.  Amidst growing mortgage loan defaults by homeowners and a rising tide of foreclosures across the country the SEC announced that it would examine the accounting practices at some lenders.

“We’re looking at subprime…we’re going to look at all the actors and their roles.,” commented Thomsen.  She would not provide further details stressing SEC policies about not making comments about ongoing investigations.

Securities regulators in the individual states are also looking into the subprime market meltdown and analysts at major investment firms who covered the sector.  Subpoenas were issued in Massachusetts last week for UBS Securities LLC and Bear Sterns & Co., Inc to see if they glossed over irregularities in subprime lenders’ practices and issued inaccurate analyses.

As a means of creating greater oversight of possible abusive lending practices that have, in part, fueled the problems in the mortgage lending industry, Senator Christopher Dodd (D) of Connecticut has announced hearings on Thursday of this week.  The Senator invited the CEOs of New Century Financial Corp., Countrywide Financial Corp., WMC Mortgage, HSBC Holdings Corp., and First Franklin Financial Corp. to testify at the hearing.

This call for reporting to Congress comes on the heels of a nationwide focus on problems involving subprime loans, those made to people with credit problems or who chose to “state” their income instead of providing proof of earnings.  Many analysts credit this phenomenon of allowing homeowners to merely state their incomes as one of the root causes of the problems in this economic sector.

“The housing market’s spectacular boom in the early part of this decade, especially in California, was fueled in part by homeowners who overstated their incomes significantly,” stated Patrick McGilvray, J.D., President of Sacramento-based www.TheHomeBuyingCenter.com.  He added, “lenders often turned a blind eye to the ability of their borrowers to repay their debts over the entire term of their loans.”

Avoiding home foreclosure starts with picking up phone

SAN FRANCISCO (Reuters) - U.S. lenders trying to get people to pay overdue bills on risky subprime mortgages expect half of those borrowers to avoid telephone calls and letters that could help bail them out.

That reaction ensures the mortgage default rates that rattled financial markets last week will rise well into next year, said Duke Olrich, president of DRI Management Systems Inc., a Newport Beach, California, developer of software for managing mortgage and automobile loan defaults.

“If you can’t get a hold of them you can’t make a deal,” Olrich said.

Based on past experience, mortgage professionals anticipate half of subprime borrowers, or people with no or spotty credit histories who took on risky mortgages in recent years, will avoid attempts to contact them regarding overdue payments, the first step in salvaging the loans, Olrich said.

“2007 and a good part of 2008 is still going to be a difficult time,” Olrich said in an interview.

During the housing boom, adjustable-rate mortgages allowed subprime borrowers to buy homes out of their reach with conventional mortgages. As low initial interest rates expired and significantly higher rates kicked in, mortgage payments jumped to levels many borrowers could not afford.

After 60 days without a payment, lenders fear a default. “Sixty-plus you’re well on your way out,” Olrich said.

Most lenders try to contact borrowers quickly to see if a failing mortgage can be restructured to avoid an average loss of $50,000 when a bad loan forces foreclosure, Olrich said.

“The objective of the servicer is to keep that borrower in the property,” he said. “There is this myth out there that they’re making money hand over fist on taking a property to foreclosure. It’s exactly that, a myth. They’re losing their shirts.”

The jump in defaults of subprime mortgages over the past year, however, has triggered significant turmoil among many lenders, foremost among them, New Century Financial Corp. , the largest independent U.S. subprime lender.

TAPPED OUT, NO HOPE

Amid the confusion, homeowners like Lupe Perez say they went neglected. Perez said she faces an imminent foreclosure on her Sacramento, California, home after falling behind on mortgage payments.

“I feel conned,” Perez said, noting she agreed to the loan’s adjustable rate only after her loan officer assured her she would be able refinance later. But with her neighborhood’s home prices down, lenders will not refinance, she said.

The 28-year-old state worker said she cannot afford her mortgage because its interest rate is at 11 percent, up from a 5 percent rate that expired late last year. She said losing the three-bedroom house will mark a personal defeat as she put $40,000 from the sale of an inherited house as a down payment.

“I’m tapped out,” Perez said. “There’s no hope.”

Her case does not surprise Patrick McGilvray, president of http://www.TheHomeBuyingCenter.com, a Sacramento company matching distressed homeowners with individual investors and prospective home buyers. Some lenders were sloppy during the housing boom because of the volume of business they received, he said.

“There was a record number of originations of loans,” he said. “Facing explosive growth, balls get dropped.”

Little thought was given in recent years to the future costs of easy money, Olrich added: “A lot of loan brokers were out there and I’m not sure they told the whole story,” he said. “Maybe, they (borrowers) didn’t know all the questions to ask.”

http://news.moneycentral.msn.com/provider/providerarticle.aspx?feed=OBR&Date=20070318&ID=6628796

By Jim Christie
Reuters
Sunday, March 18, 2007

SAN FRANCISCO (Reuters) - U.S. lenders trying to get people to pay overdue bills on risky subprime mortgages expect half of those borrowers to avoid telephone calls and letters that could help bail them out.

That reaction ensures the mortgage default rates that rattled financial markets last week will rise well into next year, said Duke Olrich, president of DRI Management Systems Inc., a Newport Beach, California, developer of software for managing mortgage and automobile loan defaults.

“If you can’t get a hold of them you can’t make a deal,” Olrich said.

Based on past experience, mortgage professionals anticipate half of subprime borrowers, or people with no or spotty credit histories who took on risky mortgages in recent years, will avoid attempts to contact them regarding overdue payments, the first step in salvaging the loans, Olrich said.

“2007 and a good part of 2008 is still going to be a difficult time,” Olrich said in an interview.

During the housing boom, adjustable-rate mortgages allowed subprime borrowers to buy homes out of their reach with conventional mortgages. As low initial interest rates expired and significantly higher rates kicked in, mortgage payments jumped to levels many borrowers could not afford.

After 60 days without a payment, lenders fear a default. “Sixty-plus you’re well on your way out,” Olrich said.

Most lenders try to contact borrowers quickly to see if a failing mortgage can be restructured to avoid an average loss of $50,000 when a bad loan forces foreclosure, Olrich said.

“The objective of the servicer is to keep that borrower in the property,” he said. “There is this myth out there that they’re making money hand over fist on taking a property to foreclosure. It’s exactly that, a myth. They’re losing their shirts.”

The jump in defaults of subprime mortgages over the past year, however, has triggered significant turmoil among many lenders, foremost among them, New Century Financial Corp. (NEWC.PK), the largest independent U.S. subprime lender.

TAPPED OUT, NO HOPE

Amid the confusion, homeowners like Lupe Perez say they went neglected. Perez said she faces an imminent foreclosure on her Sacramento, California, home after falling behind on mortgage payments.

“I feel conned,” Perez said, noting she agreed to the loan’s adjustable rate only after her loan officer assured her she would be able refinance later. But with her neighborhood’s home prices down, lenders will not refinance, she said.

The 28-year-old state worker said she cannot afford her mortgage because its interest rate is at 11 percent, up from a 5 percent rate that expired late last year. She said losing the three-bedroom house will mark a personal defeat as she put $40,000 from the sale of an inherited house as a down payment.

“I’m tapped out,” Perez said. “There’s no hope.”

Her case does not surprise Patrick McGilvray, president of http://www.TheHomeBuyingCenter.com, a Sacramento company matching distressed homeowners with individual investors and prospective home buyers. Some lenders were sloppy during the housing boom because of the volume of business they received, he said.

“There was a record number of originations of loans,” he said. “Facing explosive growth, balls get dropped.”

Little thought was given in recent years to the future costs of easy money, Olrich added: “A lot of loan brokers were out there and I’m not sure they told the whole story,” he said. “Maybe, they (borrowers) didn’t know all the questions to ask.”

SAN FRANCISCO (Reuters) - U.S. lenders trying to get people to pay overdue bills on risky subprime mortgages expect half of those borrowers to avoid telephone calls and letters that could help bail them out.

That reaction ensures the mortgage default rates that rattled financial markets last week will rise well into next year, said Duke Olrich, president of DRI Management Systems Inc., a Newport Beach, California, developer of software for managing mortgage and automobile loan defaults.

“If you can’t get a hold of them you can’t make a deal,” Olrich said.

Based on past experience, mortgage professionals anticipate half of subprime borrowers, or people with no or spotty credit histories who took on risky mortgages in recent years, will avoid attempts to contact them regarding overdue payments, the first step in salvaging the loans, Olrich said.

“2007 and a good part of 2008 is still going to be a difficult time,” Olrich said in an interview.

During the housing boom, adjustable-rate mortgages allowed subprime borrowers to buy homes out of their reach with conventional mortgages. As low initial interest rates expired and significantly higher rates kicked in, mortgage payments jumped to levels many borrowers could not afford.

After 60 days without a payment, lenders fear a default. “Sixty-plus you’re well on your way out,” Olrich said.

Most lenders try to contact borrowers quickly to see if a failing mortgage can be restructured to avoid an average loss of $50,000 when a bad loan forces foreclosure, Olrich said.

“The objective of the servicer is to keep that borrower in the property,” he said. “There is this myth out there that they’re making money hand over fist on taking a property to foreclosure. It’s exactly that, a myth. They’re losing their shirts.”

The jump in defaults of subprime mortgages over the past year, however, has triggered significant turmoil among many lenders, foremost among them, New Century Financial Corp. , the largest independent U.S. subprime lender.

TAPPED OUT, NO HOPE

Amid the confusion, homeowners like Lupe Perez say they went neglected. Perez said she faces an imminent foreclosure on her Sacramento, California, home after falling behind on mortgage payments.

“I feel conned,” Perez said, noting she agreed to the loan’s adjustable rate only after her loan officer assured her she would be able refinance later. But with her neighborhood’s home prices down, lenders will not refinance, she said.

The 28-year-old state worker said she cannot afford her mortgage because its interest rate is at 11 percent, up from a 5 percent rate that expired late last year. She said losing the three-bedroom house will mark a personal defeat as she put $40,000 from the sale of an inherited house as a down payment.

“I’m tapped out,” Perez said. “There’s no hope.”

Her case does not surprise Patrick McGilvray, president of http://www.TheHomeBuyingCenter.com, a Sacramento company matching distressed homeowners with individual investors and prospective home buyers. Some lenders were sloppy during the housing boom because of the volume of business they received, he said.

“There was a record number of originations of loans,” he said. “Facing explosive growth, balls get dropped.”

Little thought was given in recent years to the future costs of easy money, Olrich added: “A lot of loan brokers were out there and I’m not sure they told the whole story,” he said. “Maybe, they (borrowers) didn’t know all the questions to ask.”

http://news.moneycentral.msn.com/printarticle.aspx?feed=OBR&date=20070318&id=6628796

The 28-year-old state worker said she cannot afford her mortgage because its interest rate is at 11 percent, up from a 5 percent rate that expired late last year. She said losing the three-bedroom house will mark a personal defeat as she put $40,000 from the sale of an inherited house as a down payment.

“I’m tapped out,” Perez said. “There’s no hope.”

Her case does not surprise Patrick McGilvray, president of www.TheHomeBuyingCenter.com, a Sacramento company matching distressed homeowners with individual investors and prospective home buyers. Some lenders were sloppy during the housing boom because of the volume of business they received, he said.

“There was a record number of originations of loans,” he said. “Facing explosive growth, balls get dropped.”

Little thought was given in recent years to the future costs of easy money, Olrich added: “A lot of loan brokers were out there and I’m not sure they told the whole story,” he said. “Maybe, they (borrowers) didn’t know all the questions to ask.”

http://news.moneycentral.msn.com/provider/providerarticle.aspx?feed=OBR&Date=20070318&ID=6628796

March 17, 2006

SACRAMENTO, CA — Senator Christopher Dodd (D) of Connecticut, Chairman of the Senate Banking Committee announced plans to hold a hearing next Thursday to investigate the problems in the so-called subprime mortgage industry.

Subprime mortgages and the associated risks of foreclosure they bring are dominating news stories currently, and they involved homeowners with spotty credit or those who simply purchased more expensive homes than they can afford. According to the Mortgage Bankers Association these borrowers are defaulting on their loan payments in record numbers.

Senator Dodd, in a release statement said that “predatory lending practices,” have put at risk the dreams of millions of homeowners. He added, “as Chairman, I will use all the powers and tools at my disposal to keep families victimized by predatory loans in their homes and ensure that America’s dream of homeownership remains alive.”

SACRAMENTO, Calif –  Alan Greenspan, former Chairman of the Federal Reserve on Thursday made comments about the spillover effects of defaults in the subprime mortgage market.

Mr. Greenspan, whose utterances are watched carefully by economists and investors around the world, admitted that it was “hard to find…evidence” about the effects on the broader economy from defaults in the subprime sector.  However, he did opine that, “you can’t take 10% out of mortgage originations without some impact.”

While he did not mention specific related effects of delinquencies of mortgage borrowers he did indicate that he had seen some effects in collateralized debt markets.  In essence, these markets to which Mr. Greenspan referred to are bundles of mortgages sold to investors who look to income from the collected loans.

Greenspan spoke about housing more broadly by commenting that he thought the current downward trend in housing values had more to do with a leveling off of prices after years of spectacular growth.  He did not minimize the problems in the subprime sector, but indicated that he did not think that these challenges were exclusively responsible for the slowdown in housing prices.

The former Fed Chairman spoke about the current problems in the residential housing sector and laid the blame for them at the feet of buyers who came into the game late in the run-up.  Many of these buyers often bought a house in desperation because they thought that they might not be able to afford a home if prices continued to rise. 

Not surprisingly, these borrowers who “bought high” are the ones most likely to be in default on their mortgage payments.  And, according to the Mortgage Bankers Association, the proportion of mortgages in the initial stages of foreclosure rose to the highest rate on record,

According to website Mortgage Lender Implode-O-Meter, a site which purports to track mortgage lenders in difficult straits, 39 lenders have gone belly-up since late 2006. 

Commentator and foreclosure expert Patrick McGilvray, J.D., President of Sacramento, CA based http://www.TheHomeBuyingCenter.com had this to say, “people across the country contact our company and call every day with stories about how their subprime mortgage is hurting them financially.  Many are looking to us to help them with a short-sale because they now owe more than their properties are worth and their adjustable rate mortgages have reset to higher payments or are about to in the very near future.”

(CBS13) SACRAMENTO A national issue is really hitting California. 1 in 5 Californians don’t put any money down when they buy a home. With the grim reality of what’s going on in the mortgage industry, the option of “financing a home 100%” is going to get a lot harder, If not impossible.

When Kyle and Jennifer Finely bought their first home to start their family, they had no money for a down payment. Loans covered 100% of the purchase price.

“There was nothing else we could do,” said Finley.

Now, many mortgage companies are taking away that option. Part of the plummet on Wall Street this week was investors who pulled out partially because they were fed up with losing money on high risk loans.

“There are going to be fewer player in the market which means less competition which means some people just won’t be about to get 100-percent financing and those that do are going to pay a little more for it,” said Pat Driver, loan officer.

To avoid paying private mortgage insurance in 100-percent financing, there are 2 loans: A first for 80-percent and a second for 20-percent. Many lending institutions are now saying ‘no’ that 2nd loan.

“Part of the problem in California, we’ve always had is the affordability of housing,” said real estate agent Dick Swayne

Swayne says home ownership is a great asset but the reality of having to come up 10’s of thousands of dollars for a down payment may push many out of the market.

“if they don’t have a saving account and they don’t have money to put down, It’s going to affect those general that is the 1st time homebuyer. I think it’s been too way to easy to borrow money,” said Driver.

But there may also be a positive. With all the hysteria to jump into the housing market, many people have ended up in homes they can’t afford to keep.

“It’s better not to own a home than lose it in foreclosure,” said Driver.

100 financing isn’t going away completely Bigger banks still have programs, but they will be harder to qualify for and more expensive.
http://cbs13.com/topstories/local_story_076003819.html

http://www.TheHomeBuyingCenter.com

Increase in number of loans to people with shaky credit just part of problem

A growing number of homeowners in Delaware are falling behind on their mortgage payments, a reflection of a meltdown in the subprime mortgage market that is rattling Wall Street and shaking the housing market nationwide.