Marc's Mortgage Matter's

During a recent password audit, it was found that a blonde was using the following password: MickeyMinniePlutoHueyLouieDeweyDonaldGoofy. When asked why such a big password, she said that it had to be at least eight characters long.

I usually try to keep my opinions out the daily commentary. But I am really becoming irked by the press. One day they complain about our industry having foreclosure problems and the credit crisis here in the US and in the world. And then the next day they complain about the declining rate of mortgage approvals and fewer people qualifying for home loans in the US. And then on the third day they will have some story about how it makes sense for a borrower to walk away from their home loan obligation. Geez! (I’d read on the web that one guy, who was forcefully complaining about his parking ticket in front of his dad, got this response from the father: " Just pay the parking ticket. Don't be so outraged. You're not a freedom fighter in the civil rights movement. You double parked.")

Besides worrying about capital reserves, the FHA has not been idle. The FHA imposed $512,000 in penalties on Lend America for allegedly violating FHA requirements, including failing to document borrowers' income and creditworthiness, and for submitting false certifications. The move prohibits the company, owned by Ideal Mortgage Bankers, from making new mortgages insured by the Federal Housing Administration or issuing mortgage-backed securities. No word yet on a counter action by Lend America, based in Long Island. No comment!!

And on Tuesday Lend America, after being fined by HUD and asked to stop doing government loans, closed their doors yesterday. One look at their website says it all: http://www.lendamerica.com/ The FHA accused them of submitting false documents and making loans that did not meet requirements, among other things. Kids, don’t try this at home!

Dubai, home of the palm tree-shaped island, sail-shaped high-rise hotel, and indoor skiing, is not immune to the credit crisis. Apparently they borrowed quite a bit to finance their world-famous expansion, but on Wednesday the city-state said it would restructure its largest corporate entity, Dubai World and announced a six-month standstill on the company's debt. Of course this news immediately pushed up the price of insuring against a default and reminded everyone of the collapse in its once-booming real-estate sector late last year. Fortunately it appears that our banks, and the mortgage business, have limited exposure to Dubai’s problems. But the question is whether Dubai World is isolated, or a sign of widespread sovereign debt defaults in emerging markets? One investor said, “I always thought that Dubai was way too flashy anyway, and they’re getting what they deserve – it’s fine unless its problems impact me.”

Between the stock market and some decent economic news all week, interest rates moved slightly higher this past week. A few days ago we found out that Construction Spending for October was unchanged after declining for the last five months. (There are exceptions, of course, but what builder wants to build, given the residential foreclosure issues and the commercial real estate vacancies?). Then Friday we hear we only had gasp, 11,000 jobs dropped/unemployed..("laid off!")(whatever)...way down from projected 100,000+ jobs so that's was "considered" good news and mortgage rates went higher on that news. As you’d expect, after the news the equity markets were jubilant while our bond markets (mortgage rates) took it on the chin. And lastly, as the market adjusts to the Dubai situation, our fixed income securities become less of a “flight to safety”, and the demand drops.

An Irishman, a Mexican and a Blonde Guy were doing construction work on scaffolding on the 20th floor of a building. They were eating lunch and the Irishman said, “Corned beef and cabbage! If I get corned beef and cabbage one more time for lunch, I'm going to jump off this building.”
The Mexican opened his lunch box and exclaimed, “Burritos again! If I get burritos one more time I'm going to jump off, too.”
The blonde opened his lunch and said, “Bologna again! If I get a bologna sandwich one more time, I'm jumping too.”
The next day, the Irishman opened his lunch box, saw corned beef and cabbage, and jumped to his death.
The Mexican opened his lunch, saw a burrito, and jumped, too.
The blonde guy opened his lunch, saw the bologna and jumped to his death as well.
At the funeral, the Irishman's wife was weeping. She said, “If I'd known how really tired he was of corned beef and cabbage, I never would have given it to him again!”
The Mexican's wife also wept and said, “I could have given him tacos or enchiladas! I didn't realize he hated burritos so much.”
Everyone turned and stared at the blonde's wife. The blonde's wife said, “Don't look at me. He always made his own lunch.” 

 

Cashtration (n): The act of buying a house, which renders the subject financially impotent for an indefinite period of time.

Wanna buy a bank? Now is a good time to give that someone special a little something special - like a failed bank. Seven U.S. banks were taken over on Friday, and the FDIC could not find buyers for three of them. It brings the total to 140 for the year, the most since '92. Heck, even ex-IndyMac (now OneWest Bank) picked up the assets and 39 branches of First Federal Bank after it was closed Friday. OneWest was formed by a group of private equity and hedge fund investors to take over IndyMac's assets earlier this year. Added to the list of banks this year who have experienced deteriorating loan portfolios and related liquidity and capital issues are Imperial Capital Bank of La Jolla CA, Peoples First Community Bank of Panama City FL, New South Federal Savings Bank of Irondale AL, Independent Bankers' Bank of Springfield IL, RockBridge Commercial Bank of Atlanta GA, and Citizens State Bank in New Baltimore MI. City National Bank bought assets of Imperial Capital, Beal Bank bought the assets of New South, and Hancock Bank bought the assets of Peoples First Community Bank. The other three: zip.

Modifications aren’t going so well. Why not? Well, getting to the essence of things, from someone in the trenches, most people do not qualify income-wise on paper. Self-employed borrowers write off a lot on taxes, and many wonder if the government should help a tax cheater. Others experience the loss of spouse’s income (divorce, death, joining the circus, etc.), loss of job, overtime hours, or second job. Folks dealing with borrowers in this sector report that most borrowers are angry with their servicer because they cannot pay their mortgage, and that this “feud” prevents an open dialogue especially when there is huge amount of paperwork to be filled out.

Lastly, sometimes servicers do not have rights to the loans when the MBS (mortgage backed securities) holders own the rights – often the servicer is just the administrator of the pools. So if you are like many of us looking to modify your loan, it may be many months if it happens at all.

Mortgage rates rose again this week, the third consecutive such move. After a November dip, rates have again returned to late-October levels.

It's important not to make too much of the flare in rates. Holidays are now in full swing, markets are thinly populated and traded, and exaggerations in market moves are common. Some of the rise in yields this week appeared to be money shuffling from bonds and into equities to take advantage of any "Santa Claus" rally in stocks. It's also important to remember that the ranks of potential homebuyers and refinancers are generally reduced by the demands of the holiday season, so relatively few borrowers are affected by the minor rise in rates.

If you are in midst of a mortgage loan, and have not locked in a rate yet, I suggest that you forget about rate movements and enjoy the holiday. Some of the rise over the past couple of weeks is likely to be washed away when more pronounced activity returns to the markets in a couple week's time. Until then, we could see slightly higher or lower rates next week, all still well within the context of recent ranges.

We'd like to wish all our clients, visitors and friends Happy Holidays.

A woman was at her hairdresser's getting her hair styled for a trip to Rome with her husband. She mentioned the trip to the hairdresser, who responded:

"Rome? Why would anyone want to go there? It's crowded and dirty. You're crazy to go to Rome. So, how are you getting there?"

"We're taking United," was the reply. "We got a great rate!"

"United?" exclaimed the hairdresser. "That's a terrible airline. Their planes are old, their flight attendants are ugly, and they're always late. So, where are you staying in Rome?"

"We'll be at this exclusive little place over on Rome's Tiber River called Teste."

"Don't go any further. I know that place. Everybody thinks it’s gonna be something special and exclusive, but it's really a dump."

"We're going to go to see the Vatican and maybe get to see the Pope."

"That's rich," laughed the hairdresser. “You and a million other people trying to see him. He'll look the size of an ant. Boy, good luck on this lousy trip of yours. You're going to need it."

A month later, the woman again came in for a hairdo. The hairdresser asked her about her trip to Rome.

"It was wonderful," explained the woman, "not only were we on time in one of United's brand new planes, but it was overbooked, and they bumped us up to first class. The food and wine were wonderful, and I had a handsome 28-year-old steward who waited on me hand and foot. And the hotel was great! They'd just finished a $5 million remodeling job, and now it's a jewel, the finest hotel in the city. They, too, were overbooked, so they apologized and gave us their owner's suite at no extra charge!"

"Well," muttered the hairdresser, "that's all well and good, but I know you didn't get to see the Pope."

"Actually, we were quite lucky, because as we toured the Vatican, a Swiss Guard tapped me on the shoulder, and explained that the Pope likes to meet some of the visitors, and if I'd be so kind as to step into his private room and wait, the Pope would personally greet me.

"Sure enough, five minutes later, the Pope walked through the door and shook my hand! I knelt down and he spoke a few words to me."

"Oh really! What'd he say?"

He said: "So, Who screwed up your hair?"

Repeat after me: Fed Funds are set by the Federal Open Market Committee, don't vary daily, and have no direct bearing on 30-yr mortgage rates. 30-yr mortgage rates are set by supply and demand through the bond markets, vary every day, and prices are adjusted by what investors & servicers want to see flowing into their portfolios.

A quick note on the House (not the Senate!) passing the Financial Overhaul bill: The legislation includes significant reforms to monitor systemic risk, improve stability of the financial markets, establish and administer a new agency, the Consumer Financial Protection Agency, that will be responsible for regulation and enforcement of consumer protection laws, and reform laws governing capital markets and credit reporting agencies. The House voted against an amendment that would have permitted bankruptcy judges to modify ("cram down") mortgages during Chapter 13 bankruptcy proceedings.

New York just enacted a new law that expands on the governor’s subprime lending reform law enacted last year in an attempt to assist homeowners on the verge of foreclosure and minimize the impacts foreclosures have on communities. It expands the 90-day foreclosure notice currently sent for subprime loans (however one defines those these days) to all home loans. It also requires the lenders who serve the notice to make a regulatory filing with the Banking Department within three days with specified information to allow it and the Division of Housing and Community Renewal (DHCR) to provide assistance to homeowners. The law expands the mandatory settlement conference to include borrowers of all home loans – not just subprime. The law requires that tenants receive written notice of the change in ownership of the property after foreclosure and allows them to stay for 90 days or the remainder of the lease. Under the law, plaintiffs in a foreclosure action who obtain judgment of foreclosure and sale must keep the foreclosed property. The law also prohibits distressed property consulting services from accepting upfront fees.

As expected, mortgage rates edged higher this past week. Some better economic news, some lingering glow from November's employment report last Friday, and light investor demand for new Treasury debt boosted rates a little. We may see some hangover from that next week, if the relationship between the 10-year Treasury yield and average mortgage rates holds true.

Numbers which suggest the economy is healing remain few and far between, but there is a growing number of sporadic signs that we're heading in the right direction. For example, the months-long drawdown in inventories to get stockpiles in better balance with weak final consumer demand does seem to be coming to an end. That augurs well for new orders to help lift factory activity, and production should continue to find new footing.

With the holiday season fully underway, mortgage rates probably have little room to wander, even if the economic calendar next week is more full than was this week's. Inflation reports in the form of the Producer and Consumer Price Indices are due, we'll get a look at the housing markets from the a builder and construction perspective, and a couple of indicators covering factory activity.

Blonde Diary & Cookbook:
It's fun to cook for Tom. Today I made angel food cake. The recipe said beat 12 eggs separately. The neighbors were nice enough to loan me some extra bowls.

Tom wanted fruit salad for supper. The recipe said serve without dressing. So I didn't dress. What a surprise when Tom brought a friend home for supper.

A good day for rice. The recipe said wash thoroughly before steaming the rice. It seemed kind of silly but I took a bath anyway. I can't say it improved the rice any.

I found an easy recipe for cookies. It said put the ingredients in a bowl and beat it. There must have been something wrong with this recipe. When I got back, everything was the same as when I left.

Tom's folks came to dinner. I wanted to serve roast but all I had was hamburger. Suddenly I had a flash of genius. I put the hamburger in the oven and set the controls for roast. It still came out hamburger, much to my disappointment.

GOOD NIGHT DEAR DIARY. This has been a very exciting week! I am eager for tomorrow to come so I can try out a new recipe on Tom. If I can talk Tom into buying a bigger oven, I would like to surprise him with a chocolate mousse.

My credit is so bad I need a cosigner to play Monopoly ;/

Banks are struggling to make money in the credit card business these days, and consumers are paying the price. Interest rates are going up, credit lines are being cut and a variety of new fees are being imposed on even the best cardholders.

One recipient of new credit card terms is Anita Holaday, a 91-year-old in Florida, who received a letter last month from Citibank announcing that her new interest rate was 29.99%, an increase of 10 percentage points.

“I think it’s outrageous they pursue such a policy,” said Susan Holaday Schumacher, Ms. Holaday’s daughter, who pays her mother’s bills. “That rate is shocking under any circumstances.”

While the average interest rates charged by banks are lower than Ms. Holaday’s, her situation is not all that unusual. The higher rates and fees reflect the grim new realities of the credit card industry — the percentage of uncollectible balances has hit a record even as a new law may further limit the cards’ profitability.

Banks began raising interest rates and pulling back credit lines about a year ago as delinquencies crept upward and regulators discussed reforms. As banks have become more aggressive in making changes, lawmakers have accused them of trying to impose rate increases before many of the new rules take effect in February.

Last month, the Federal Reserve provided new evidence of the banks’ actions. About 50 percent of the banks responding to the Fed’s survey said they were increasing interest rates and reducing credit lines on borrowers with good credit scores. About 40 percent said they were imposing higher fees. The banks also said they were demanding higher minimum credit scores and tightening other requirements.

A study by the Pew Charitable Trusts, released late last month, concluded that the 12 largest banks, issuing more than 80 percent of the credit cards, were continuing to use practices that the Fed concluded were “unfair or deceptive” and that in many instances had been outlawed by Congress.

In response to voter complaints, the House of Representatives voted last week to make the law effective immediately. The bill now goes to the Senate, where a vote has not been scheduled. The Senate Banking Committee chairman, Christopher J. Dodd, Democrat of Connecticut, meanwhile, is pushing legislation that would freeze interest rates on existing credit card balances until the law takes effect.

Whatever the starting date, the law makes it much harder for banks to change interest rates on existing balances, and requires more time and notice before a new rate can go into effect.

The nation’s largest banks are scrambling to figure out a new business model that fits within the new rules and current economic conditions. Those banks made handsome profits over the last decade by charging high interest rates and penalty fees to a small group of customers who routinely paid late or exceeded their balances.

Already, banks are shifting to a model in which a smaller pool of Americans will be eligible for credit cards, and customers with cards will probably pay more for the privilege through annual fees and higher interest.

Still, even consumer advocates have said that the banks were too quick in the past to give out credit. “You know, it doesn’t take a rocket scientist to figure out that if you keep borrowing and borrowing in order to consume now, eventually you crash and burn,” said Martin Eakes, chief executive for the Center for Responsible Lending. “That’s what we’re facing.”

Banking officials said that because the new law limits their ability to reprice credit as a customer’s risk profile changes, they will instead have to price for future risk at the start, when a cardholder applies for a new card.

That means fewer applicants will be approved for new credit cards, and those who are accepted will increasingly be charged annual fees or variable interest rates, rather than fixed rates. Currently, about 20 percent of credit cards charge annual fees, a percentage that is rising, said Bill Hardekopf, chief executive of LowCards.com. Current cardholders, too, will be affected.

Asked to explain its rate increases, Citibank issued a statement saying the “actions are necessary given the losses across the industry from customers not paying back their loans and regulatory changes that eliminate repricing for that risk.”

Ms. Holaday Schumacher did not accept that explanation. She said she haggled with Citibank to try to get her mother’s bills forwarded to her house in Washington and, during the process, two bills were inadvertently paid late, resulting in the rate increase.

“How unbelievably unfair for an older person who might not understand what this is all about,” she said. Citibank declined to comment on the account.

Still, many of the nation’s banks are trying to repair their tarnished reputations with consumers.

American Express and Discover Financial, for instance, have vowed to stop charging fees when cardholders exceed their credit limits. JPMorgan has started a program that can help consumers categorize their spending and pay down their balances more quickly. 

A woman wakes up during the night and her husband isn’t in bed with her. She goes downstairs to look for him and finds him sitting at the kitchen table with a cup of coffee in front of him. He appears to be in deep thought, just staring at the wall. She watches as he wipes a tear from his eye and takes a sip of his coffee.
"What's the matter, dear?" she asks: "Why are you down here at this time of night?"
The husband looks up from his coffee and says: "Do you remember 20 years ago, when we were dating, and you were only 16?" he asks solemnly.
"Yes, I do," she replies.
"Do you remember when your father caught us in the back seat of my car foolin around?"
"Yes, I remember," says the wife, lowering herself into a chair beside him.
"Do you remember when he shoved the shotgun in my face and said: ‘Either you marry my daughter, or I'll send you to jail for 20 years?’”
"I remember that, too," she replies softly, placing her arm around him.
He wipes another tear from his cheek and says, "I would have gotten out today."