Smart Borrower Blog

Archive for September, 2007

Countrywide Financial and The HOPE Program

I read with a great deal of interest a report on Countrywide Financial Corp’s CEO, Angelo Mozilo, and his aggressive plan to sell stock options at a time when CFC is in dire straits. It seems he had changed his trading plans in Oct. 2006, when Mozilo adopted a stock trading plan that called for selling 350,000 shares a month. This plan was put into effect three days after Countrywide reported that its earnings from mortgage banking had fallen 40% in the third quarter ended Sept. 30. Although we are assured he did nothing wrong, it gives one pause... more »

Monitoring Existing Home Sales

With things still very much up in the air in the mortgage market, we see from newly released figures that there is a glut of homes on the market, and they aren’t moving. This comes as no surprise when you figure that 15-20% of people looking for a mortgage loan do not qualify at this time, even though their credit is satisfactory. Lenders have gotten very picky about where their money goes, and it only adds to the problems in housing. Thoughts From the Frontline According to John Maudlin, in his Thoughts From The Frontline newsletter, we are seeing that... more »

Home Sales Drop 8.3 Percent

Reporting on the market and everything that affects it can be a daunting task. There has been so much doom and gloom in the market this year that it sometimes feels as if I am being negative and reporting what I see as the “bad” things in the mortgage market. However, this isn’t true. I report what I learn on a daily basis, and make every attempt to give a clear overview of what is happening. It is the only way a person considering securing a mortgage loan can make an informed decision. I have to call them like I... more »

FICO Scores and Mortgages

Would you believe that not too many years ago, credit scoring had little to do with the way banks chose to issue mortgage loans? It’s true. In the past, very few people went into foreclosure. But as foreclosures have grown in number , lenders have begun to study the relationship of FICO scores to the likelihood that you’ll bail on your mortgage. What they found is that there is a definite correlation between a person’s FICO score and the chance they will default on a loan. How Scoring Works Your credit score is based on several things: payment history, amount... more »

Avoiding Jumbo Mortgage Rates

There has been a lot of press lately about the large point spread between interest rates on conforming mortgages and non-conforming, or "jumbo" loans. In particular, this has impacted borrowers who need regular thirty year fixed rates for loans above $417,000 which is the cut off for conforming mortgages. At one point, some lenders were asking 8% on these loans for borrowers with good credit and 20% down. Right now, jumbo rates are in the low to mid 7's, nearly a full point higher than a conforming 30 year fixed rate mortgage. Say you wanted to purchase a property for... more »

Mortgage Fraud Hurts Lenders

Have you heard about Mortgage Fraud? Mortgage fraud is becoming more prevalent now that there is no equity cushion for most sellers. It’s a scheme that goes something like this: Say your home is listed on the market for $300,000. The listing agent raises your sales price to an even higher amount. The appraiser then values the home at the new higher price–so the lender approves a loan. Let’s say the new price is $425,000. A buyer comes along and offers to pay you that overinflated price, he only asks that you kick him back the difference. You reason that... more »

Mortgage News To Make Your Day

In my search this morning for relevant content, I ran across a very interesting site. The site, “The Mortgage Lender Implode-O-Meter“, gives an indication of how many mortgage lenders have gone belly up since December of 2006. Since that time, 159 major U.S. lending operations have “imploded”. Scary indeed. What was scary to me was the list of articles on the site. And I did not find it surprising that the site is currently under litigation. Recaps of Relevant Articles I want to recap some of the content on these articles, to give the reader an opportunity to see what... more »

Housing, Rent, and the Consumer Price Index

FT.com reports today that the sales of homes over $1 million has fallen. I have to ask myself how many people averaging over the country buy $1 million homes? Regardless, this indicator is not good. One of the things most people do not understand is that the Consumer Price Index is not an indicator of what homes sell for, but owner’s equivalent rent. What this means is this - if rent is stable as it has been in the last decade, and home prices ran up 93%, then the CPI is rather meaningless. Time To Rent Look at this from... more »

Fed Cuts Rates One Half Percent

In a move to bolster the economy, the Fed dropped both the federal funds rate and the discount rate by a half percentage point to 4.75 percent on Tuesday. Seen as a good move by the markets, only time can give us a good picture whether or not it is working. The Fed in its statement said that “some inflation risks remain,” but by making the more than expected half-point cut in its federal funds rate, the Fed is signaling that it clearly believes the threat of a recession outweighed concerns about inflation. Some Concern Allan Meltzer, author of a... more »

Tax Escrows: Consider Waiving Them

By default, most mortgage lenders will set up a tax escrow on your behalf to handle the property taxes on your home.   When you make your monthly mortgage payment the lender will also collect 1/12th of your annual property tax bill.   When the bill comes due in your area, the lender will pay it on your behalf.   Think of it as a forced savings account.   Lenders prefer you escrow your taxes because it lowers the risk of you not paying them and a tax lien being placed on the property which could interfere with the... more »