Marc's Mortgage Matter's

In my spare time I have very little to do, or so my family tells me. So the other day I carried out a little research project. Using the standard key board found on typewriters and computers, how many words can one type using only their left hand (like exaggerate or stewardesses)? I added up 3,000! By comparison, by my calculations my right hand can only type 300 words on its own. A little known fact....


Are saving patterns different among countries? You bet they are! Singapore, for example, has a gross national savings rate of around 50%. China copied Singapore’s savings plan, and, on average, have a similar savings rate. Here in the US for the last several years the savings rate has been close to 0% (zero): Personal Income comes pretty close to Personal Consumption. Maybe there are too many flat-screen TV’s and ATV’s to buy. It is easy to see how China is able to buy so much of our debt: they are using their savings to invest and earn more! We saw the latest figures this morning (see below), but recently savings have increased here as people are spending less.

In the following press release FBI Special Agent In Charge Weysan Dun announced today the arrests of Garth Celestine, age 44, of 535 Dean Street, Apartment 515, Brooklyn, New York; and Phil A. Simon, age, 34, of Brooklyn – both better known collectively as “Home Savers Consulting Corporation” (HSCC). Both were arrested this morning at their residences without incident and charged with attempt and conspiracy to commit wire fraud in connection with a home foreclosure scheme.


Celestine and Simon owned and operated Home Savers, which held itself out as a foreclosure rescue company, at 946 Fulton Street, Brooklyn, New York and 350 North Main Street, Freeport, New York. The company conducted business in both New York and New Jersey. According to the complaint, Celestine and Simon allegedly conspired with each other to defraud both homeowners facing foreclosure and mortgage lenders by making materially false representations and promises and causing wire transfers to perpetuate the scheme. A key aspect of the scheme was the targeted victims: homeowners with substantial equity in their homes who were facing foreclosure because of an inability to make the monthly payments. The criminal complaint specifically alleges five incidents of fraudulent mortgage loan applications generated by the defendants in August and September of 2005 for properties located in Bergenfield, Paterson and Elizabeth, New Jersey. The defendants are suspected of additional incidents in New York, but have not been charged in those matters.

Based on the complaint, there were three separate groups of victims. First, there were the defrauded homeowners. Celestine and Simon would promise to help the homeowners keep their homes by avoiding foreclosure and repairing their damaged credit. The homeowners would be required to allow the title of the homes to be put in the names of “straw buyers” (third party purchasers) for one year –all with the promise of obtaining more favorable mortgages on those homes and having the title returned to them at the end of the one year period. Furthermore, Celestine and Simon allegedly told the homeowners that any equity withdrawn from their homes would be kept in escrow and used to pay the mortgages and expenses on those homes, as well as to repair the original owners’ credit.

The second victim-group consisted of the straw-buyers. Celestine and Simon allegedly recruited individuals with good credit scores to act as “buyers” of the homes facing foreclosure. This was accomplished by misrepresenting to the straw-buyers that they were helping the true owners to “save” their homes. The straw-buyers were also paid a fee up to $10,000 per property in exchange for their participation in the transactions.

The third group of victims were the mortgage lenders. Based on the criminal complaint, Celestine and Simon submitted and caused to be submitted fraudulent loan applications to lenders in the straw-buyers’ names. The applications contained false personal and financial information about the straw-buyers, most importantly their income, assets, and debt. The combination of the high equity properties, the good credit ratings of the straw-buyers, the false information in the loan applications, and the promise that the straw-buyers intended to live in the homes in question all unfairly influenced the mortgage lenders into granting the mortgages. Celestine and Simon also allegedly applied to different lenders for multiple mortgages on the same properties at the same time to extract the maximum available equity from each property.

According to the complaint, Celestine and Simon attended each loan closing and controlled the payout of the loan proceeds. Once all the homeowner’s debts and other fees were paid off, the remainder of the loan proceeds was deposited in one or more of three different company accounts owned and controlled by Celestine and Simon. However, Celestine and Simon kept every penny for themselves. Furthermore, the complaint charges that Celestine and Simon eventually failed to make the mortgage payments in nearly every case and caused the loans to default. In the end, Celestine and Simon caused lenders to fund more than $10 million worth of fraudulent loans and stole $1.5 million worth of equity from the properties.

After reading the details of this scheme, one might assume Celestine and Simon were experts in the mortgage business. In fact, Simon currently cuts hair at his salon, “House of Hair” located at 615 Washington Avenue in Brooklyn, New York. This is an example as to why the public should research the credentials of anyone with whom they intend to do business in the mortgage and real estate industry.

“Let me make this crystal clear: anyone engaged in any type of mortgage fraud scheme will most definitely be investigated, caught, and prosecuted to the fullest extent of the law,” said FBI Special Agent In Charge Weysan Dun. “It is well known that the collapse of our housing market was a significant contributor to the dire economic circumstances our nation is facing.” Dun credits the mortgage fraud task force with bringing this matter to its investigative closure. Dun also thanks the FBI’s New York Field Office for their assistance.

Celestine and Simon are scheduled for an initial appearance today before the Honorable Esther Salas, United States Magistrate. If convicted, the defendants could face a maximum sentence of up to thirty years in prison, a $1,000,000 fine, or both. A criminal complaint is merely an accusation. Despite this accusation, every defendant is presumed innocent unless and until proven guilty beyond a reasonable doubt.

This case is being prosecuted by Assistant United States Attorney Donna Gallucio in the District of New Jersey in Newark.

Mortgage rates slipped back a little bit last week, moving somewhat closer to the bottom of the range which has held since late May and early June.

Would-be borrowers hoping for mortgage rates to return to the 4% range of Spring should know that those rates were the result of lingering financial and economic panic, circumstances which seem to be fading into the rearview mirror. If the conditions which caused those rates is fading, so it the probability of any return there for rates. Regardless, even as mortgage rates remain at fantastic levels, underwriting criteria remains quite stiff by recent standards.

The overall average rate for 30-year fixed-rate mortgages moved down by 10 basis points (0.10%) this week, landing at an average 5.65%. It was the lowest such average since late May, just barely surpassing the 5.67% seen on July 10. 

That credit criteria remains tight isn't news to homebuyers and refinancers. However, according to the latest Federal Reserve poll of bank Senior Loan Officers, rather fewer banks continued to tighten the vice on potential borrowers. The Fed's survey of lending conditions for 'prime' first mortgages indicated that only 21.6% of respondents twisted the credit tourniquet in the second quarter of 2009, down from 49% in 1Q08. Tight credit has discouraged at least some seekers of home financing, since just 15.7% of banks reported increases in demand for mortgage loans, down from 26.7% in the first quarter.

The Mortgage Bankers Association of America again reported record-high levels of delinquencies and foreclosures. Nearly 14% of all loans -- subprime and prime -- were headed toward or were in serious trouble in the second quarter of 2009. The foreclosure problem, originally rooted in bad-credit borrowers, and later low- and no-doc mortgages, has fully taken hold of the 'prime' mortgage market; more and more formerly great-credit borrowers are suffering from the twin issues of falling home prices and job losses. As homes are foreclosed and dumped back into the market, inventories bloat and downward pressure on home prices continues unabated. What a fantastic time to purchase a home indeed.

I was confused when I heard the word "service" used with these agencies:
Internal Revenue Service.
U.S. Postal Service.
Civil Service.
State, City, County & Public Service.

This is not what I thought “service” meant. But yesterday I overheard two farmers talking, and one of them said he had hired a bull to “service” a few cows.

BAM!!! It all came into focus. Now I understand what all those agencies are doing to us!

The roller coaster of economic news continues. (I guess it would be too easy if everything pointed to one outcome.) Last week mortgage rates improved somewhat, as they did again this week after Asian stocks fell significantly. Oil, gold, and other commodities were down (although sugar is at a 28 year high, which doesn’t help people who make jam at home and kids who eat Captain Crunch).

How far can rates drop? I haven’t heard too many experts complain about rates in general, as mortgage rates remain near their lows but the government’s borrowing needs are at historical highs. This limits the amount that rates will be able to fall so as to attract buyers of our debt, and most analysts believe that soon the buyers of our debt will be demanding higher yields. Last week the Fed left overnight rates unchanged. So what? If anything, what the last year or two has taught us is that mortgage rates have little or no correlation with Fed Funds, so even though CNBC and the media make a big deal out of the Fed's decision, mortgage rates are not impacted. Granted, any changes in rates can impact the Prime Rate (currently 3.25%), but that obviously is not the same as a 30-yr mortgage rate. So how do mortgage rates change? Mortgage rates are the result of supply and demand forces, just like any other security that is bought and sold in the open market. Securities that are backed by mortgages trade in the market, just like other fixed-income debt, and just like stocks which garner the headlines, with the prices in turn determining rates.

Three brothers married wives from different states. The first brother married a girl from Oregon. He told her that she was to do the dishes and house cleaning. It took a couple of days, but on the third day, he came home to see a clean house and dishes washed and put away.

The second brother married a girl from Florida. He gave his wife orders that she was to do all the cleaning, dishes and the cooking. The first day he didn't see any results, but the next day he saw it was better. By the third day, he saw his house was clean, the dishes were done and there was a huge dinner on the table.

The third brother married a lady from California. He ordered her to keep the house cleaned, dishes washed, lawn mowed, laundry washed, and hot meals on the table for every meal. He said the first day he didn't see anything, the second day he didn't see anything but by the third day, some of the swelling had gone down and he could see a little out of his left eye, and his arm was healed enough that he could fix himself a sandwich and load the dishwasher.

Last week, not only did they extend the program, but we found out that the Toyota Corolla became the most traded-in car as part of the "Cash for Clunkers" program. After hearing about it, the C.E.O. of General Motors said, "Oh my God, don't tell me Toyota makes even a better clunker than we do."

Yesterday’s FOMC (Fed's) minutes did….not much! “Economic activity is leveling out...inflation is subdued…conditions in financial markets have improved…household spending has continued to show signs of stabilizing but remains constrained by ongoing job losses, sluggish income growth, lower housing wealth, and tight credit…businesses are still cutting back on fixed investment and staffing but are making progress…Although economic activity is likely to remain weak for a time, the Committee continues to anticipate that policy actions to stabilize financial markets and institutions, fiscal and monetary stimulus, and market forces will contribute to a gradual resumption of sustainable economic growth in a context of price stability.” The statement goes on to say that Fed Funds will stay between 0-.25% for an extended period, and that “to provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve will purchase a total of up to $1.25 trillion of agency mortgage-backed securities and up to $200 billion of agency debt by the end of the year. In addition, the Federal Reserve is in the process of buying $300 billion of Treasury securities. To promote a smooth transition in markets as these purchases of Treasury securities are completed, the Committee has decided to gradually slow the pace of these transactions and anticipates that the full amount will be purchased by the end of October.”

In short that tends to mean mortgage rates should stay in the 5's like they are now (mid 5's lately) and HELOC's (equity line of credits) (no longer available..but you knew that ;) should continue to remain at the low levels they are.

Three brothers married wives from different states. The first brother married a girl from Oregon. He told her that she was to do the dishes and house cleaning. It took a couple of days, but on the third day, he came home to see a clean house and dishes washed and put away.

The second brother married a girl from Florida. He gave his wife orders that she was to do all the cleaning, dishes and the cooking. The first day he didn't see any results, but the next day he saw it was better. By the third day, he saw his house was clean, the dishes were done and there was a huge dinner on the table.

The third brother married a lady from California. He ordered her to keep the house cleaned, dishes washed, lawn mowed, laundry washed, and hot meals on the table for every meal. He said the first day he didn't see anything, the second day he didn't see anything but by the third day, some of the swelling had gone down and he could see a little out of his left eye, and his arm was healed enough that he could fix himself a sandwich and load the dishwasher.