[tag]Foreclosures[/tag] are rising in many parts of the country, fueled by a slowdown in home sales, [tag]slumping real-estate prices[/tag] and [tag]rising payments on adjustable-rate mortgages[/tag]. Homeowners who have lost a job or faced another economic crisis are finding it hard to refinance or take out home-equity lines of credit to bail themselves out, analysts say.

The Detroit, Fort Lauderdale, Fla., and Denver areas posted the nation’s three highest foreclosure rates for the third quarter of 2006, replacing Indianapolis, Atlanta and Dallas, which had been the top three markets for the two previous quarters. The Indianapolis area was the only one of the three to see the high rate of foreclosure rates dip, edging down 2%. (more…)

A banana republic is also characterized by a ruling class that curtails people’s personal freedoms and is moving towards a heavy-handed military dictatorship under the excuse of fighting guerrilla (or terrorist) opposition groups or enemies. Moreover, the fact that the ruling class or the elite comes from different political parties isn’t a relevant factor in classifying a country as a [tag]banana republic[/tag]; what is relevant is the determination of the elite, irrespective of which party its members belong to, to shift wealth from the majority of the people (the masses) to themselves, usually through simply printing money and incurring chronic [tag]budget deficits[/tag], and frequently also through senseless warfare.

The third good news is that although there are ominous signs of the US drifting towards the status of a banana republic, the polarization of wealth isn’t due only to appreciating asset values, inheritances, and the disproportionate growth of the financial sector compared to the rest of the economy. The five richest Americans all made their money themselves, and while money managers, real estate moguls (including hotel and casino owners), and leverage buyout artists are very predominant on the Forbes list of the 400 richest people in America, there are also a large number of “new economy” entrepreneurs on the list, such as the founders of Yahoo, eBay, Amazon, and Google. (more…)

It doesn’t make financial sense to pay for points to buy down the cost of a [tag]mortgage[/tag] only to [tag]refinance the mortgage[/tag] before reaping the advantage of the buy down. Apparently, however, that’s what virtually all home buyers do when they elect to include points to lower their interest rate with plans to save money over time, according to “Do Borrowers Make Rational Choices on [tag]Points and Refinancing[/tag]?” a special mortgage study by Abdullah Yavas, an Elliott Professor of Business Administration at Penn State’s Smeal College of Business and Freddie Mac analyst Yan Chang.

Only a tiny fraction, 1.4 percent, of borrowers who bought points held their loans long enough to make them pay off. Of those who didn’t buy points, only 1.5 percent would have been better off purchasing them, according to the study an examination of 3,785 mortgages originated between 1996 and 2003. Each “point” is 1 percent of the value of the mortgage. That is, if your mortgage is $200,000, one point is $2,000. Some points are called [tag]origination points[/tag] — charged for originating or writing your mortgage. (more…)

Activity drops more than 14 percent as 30-year [tag]fixed-rate mortgage[/tag] climbs to 6.12 percent, industry trade group’s weekly index says. Mortgage applications fell as interest rates rose across the board, an industry trade group reported Wednesday. The [tag]Mortgage Bankers Association[/tag] said its seasonally adjusted index of mortgage application activity for the week ended Dec. 22 fell 14.2 percent to 555.8, from 647.6 a week earlier.

The 30-year fixed-rate mortgage rose to 6.12 from 6.10 percent last week. The group’s seasonally adjusted refinance index fell 18.5 percent to 1604.6 from 1968.8 the previous week, and the purchase index decreased 10.6 percent to 390.2 from 436.5 one week earlier. The refinance share of mortgage activity decreased to 48.8 percent of total applications from 50.8 percent the previous week. Fixed 15-year mortgage rates increased to 5.84 from 5.82 percent. Rates on [tag]one-year adjustable-rate mortgages[/tag] (ARMs) increased to 5.87 from 5.82 percent. (more…)

Randy and Jennifer Rimstad of Minnetonka, Minn., refinanced their mortgage in 2004 to replace a 50-year-old furnace and pay for their youngest daughter’s wedding. In May, their interest rate jumped to 8.55% from 5.55%, pushing their monthly payment from $1,654.81 to $2,295.68, and the Rimstads buckled under an [tag]adjustable rate mortgage[/tag] they say they didn’t understand and could ill afford. Then came the collection nightmare that tacked on another $700 or so in [tag]monthly payments[/tag].

Millions of other families in the U.S. could soon find themselves in the same dire straits. Some $1.2 trillion in [tag]adjustable mortgages[/tag] will shift to higher rates in 2006 and 2007, more than half of which are to borrowers with less-than-perfect credit, or subprime borrowers, like the Rimstads. These loans already are defaulting at unprecedented rates. Lenders are in large part responsible because they sold risky and unsuitable mortgages to unsophisticated borrowers. In some cases, of course, careless borrowers shoulder some of the blame. But some say there’s another force at work: aggressive servicing tactics. (more…)

As a weak housing market nudges the foreclosure rate higher, next year is looking promising for investors in distressed real estate. So far, the [tag]U.S. housing slump[/tag] hasn’t produced a bonanza for such investors, but lenders stuck with [tag]foreclosed property[/tag] are becoming more inclined to slash prices or sell properties through auctions, industry experts say. “We’re all going to have to be more creative in the next 12 to 24 months” in selling foreclosed homes, says Chad Neel, president and chief operating officer of Fidelity National Asset Management Solutions, a unit of Fidelity National Information Services Inc., Jacksonville, Fla. Mr. Neel’s company helps lenders manage and sell foreclosed homes.

In the first half of 2006, REO properties accounted for 3.1% of all U.S. home sales, up from 2.4% two years earlier, according to a study by First American Real Estate Solutions, a unit of First American Corp., Santa Ana, Calif. The study found that those homes sold at a median discount of 14% to their estimated value in the first half, compared with 12.5% two years before. The discounts reflect the gap between the actual sale price for the homes and the value estimated by a computer model, which takes into account sales of comparable homes nearby and price trends. It has taken a while for foreclosures to mount. The housing boom of recent years reduced foreclosure rates because most people who fell behind on their loans could refinance or quickly sell their homes for at least enough to pay off the loans. (more…)

In good markets or bad, real estate broker Ralph R. Roberts reveals in “[tag]Flipping Houses for Dummies[/tag]” how he acquires [tag]run-down houses[/tag], fixes them up, and then either “flips” (sells) them for a profit or holds for [tag]long-term investment[/tag]. Roberts, a highly respected real estate author, trainer and broker, shares his techniques along with advice on how to minimize the tax bite on profits.

As a longtime real estate broker, Roberts knows all aspects of the home brokerage business and he doesn’t hesitate to share his insider secrets. For example, he says, “Nothing on the MLS (multiple listing service) is the gospel truth. Sellers and real estate agents alike often estimate room sizes or make mistakes when entering details. Approach all prospects with a discerning eye.” Even if you are not interested in “quick flip” real estate profits, this is a great book to study because the author shares so much of his real estate knowledge which he gained, starting at age 19, over more than 30 years in the [tag]real estate business[/tag]. Maybe Roberts is getting a little “salty” in his old age, but he exposes secrets most Realtors would never share with their clients. Examples include how to obtain a “listing history” of a property, how to determine what the seller paid, how long the property has been on the market even with more than one listing, and if the property is difficult to “unload.” (more…)

Scott Patterson, a college dropout-turned-[tag]real estate investor[/tag], flings open the door of a vacant bungalow in north Charlotte and shouts to scatter any vagrants who might linger inside. The run-down house emits a musty odor, its walls are grimy and rust covers the bathroom fixtures. Patterson likes what he sees. “You never know which house will be a moneymaker,” he says.

In a city remarkable for its can-do economy and penchant for business deals, Patterson and others like him fill a special — and risky — niche. They snap up dilapidated houses and duplexes for less than $100,000, long before the neighborhoods become popular with newcomers and urban pioneers. They renovate and sell the properties for more than $300,000 in some cases. “Everybody’s trying to predict what the next hot area will be,” said Mike Jaffa president of Graham Investment, which writes loans for some of the city’s biggest individual speculators. In some neighborhoods, real estate investors have reduced blight, raised property values and lured young professionals to long-neglected areas. But not everyone is thrilled. (more…)

December is a time when most Americans will run up at least a little extra debt in order to celebrate the holiday season. Now, if we only saved up our money the other 11 months of the year, this wouldn’t be a problem. But we don’t. In fact, for the last two years, Americans as a whole have been spending more than we save. That hasn’t happened since the [tag]Great Depression[/tag]. We are officially living on credit. Americans have become used to [tag]living on credit[/tag]. We think nothing of whipping out the plastic to get those things we “need,” like iPods and flat-panel televisions.

Americans generally understand that we have a serious problem. They just don’t know how to fix it, or are unwilling to take the measures to fix it. It’s not easy. There are no quick, painless solutions. We simply need to stop spending the money we don’t have, and deal with the resulting economic fallout, which will be significant. We can’t stop the pain, but we can keep adding to it. For one thing, we should work to come up with an alternative energy source to oil, which will keep hundreds of billions of dollars from flowing to the Middle East, money that is used to fund wars against us, which further erodes our treasury. Not only could we stop the oil dollars from flowing out, we could reverse the process and export energy to the world. (more…)

A rush to profit by funding home purchases for Americans with poor credit records has come back to bite the hands that fed the movement. The year-long slump in the U.S. housing market has resulted in smaller profits or losses at lenders of so-called [tag]subprime mortgages[/tag], until recently the fastest growing segment of the $10 trillion U.S. residential loan market. For years, higher margins on such mortgages paid off for lenders and Wall Street as rising home values reduced risks to investors.

Now lenders such as New Century Financial Corp. (NEW.N: Quote, Profile , Research) and Accredited Home Lenders Holding Co. (LEND.O: Quote, Profile , Research) are reining in practices that they concede have helped cause a rapid rise in defaults. They are taking a harder look at practices such as accepting stated, rather than proven, income documentation in mortgage applications. “The time has come” for an end to easy credit, said Bob Moulton, president of Americana Mortgage Group Inc., a mortgage broker in Manhasset, New York. Moulton, who deals with prime and subprime loans, said lenders who were once aggressive in vying for high interest rate loans have suddenly made themselves scarce. (more…)

If you’re in the market for a mortgage, you’d do well to arm yourself with some knowledge before you go knocking on lenders’ doors. I’ll soon point you to where you can learn a lot in short order, but first, here are a few mortgage traps to be wary of, some courtesy of mortgagetrap.org.

When you get a [tag]mortgage[/tag], you’ll unavoidably face a flurry of fees. But not all of them are perfectly legitimate. Ask for itemization of fees and scrutinize them. (Know that if one lender quotes you a very low interest rate, it may make up the difference in steep fees.) If a mortgage broker is charging you an underwriting fee, question it, since the lender does the underwriting, not the broker. If you’re charged $100 for a credit check, question that, since these generally cost between $10 and $20. (more…)

The [tag]lending business[/tag] must embrace a licensing initiative by state banking and mortgage regulators if it is to keep from crumbling under the weight of fraud and unethical loan brokers, a proponent of that project said here last week. A national residential licensing system “has the potential to transform today’s [tag]mortgage industry[/tag] and imbue it with a level of professionalism and accountability that will make it easier for responsible mortgage companies to operate and harder for unethical companies to compete,” said Tim Doyle, vice president of industry and agency relations at the Conference of State Bank Regulators.

Creating a standardized licensing system among the states moves beyond simply raising the profile of mortgage fraud by attempting to stem the tide of unethical and illegal behavior. “It’s time to turn the dynamic around,” said Doyle, who joined CSBR recently after a stint in the public affairs department of the Mortgage Bankers Association, where he was charged with managing the issue of mortgage fraud for the association. CSBR is a professional organization representing the state banking regulators in all 50 states, the District and the U.S. Territories. In 37 of those states, banking departments also are responsible for regulating the mortgage business as well as banks. AARMR represents mortgage regulators in all states. (more…)

“We are purchasing a $400,000 home that we want to finance with a [tag]30-year fixed-rate[/tag] mortgage. While we can more than afford the cost of a 20 percent down payment, I would prefer to keep my money in my investments instead. I was thinking of [tag]financing 100 percent[/tag] (using an 80/20 to get out of paying PMI) but was unsure whether this type of loan structure would result in a higher interest rate on the first mortgage?”

Your intent is to invest the $80,000 that would otherwise go into a down payment. But a down payment is also an investment. The return consists of the reduction in upfront costs, lower interest payments in the future, and lower loan balances at the end of the period in which you expect to be in the house. I calculated the [tag]annual rate of return[/tag] on investment in the case cited above, assuming you intended to be in the house for seven years. It was 15.6 percent before tax, and it carries no risk. Investments that good are not available in the marketplace. (more…)

More American homeowners are slipping behind on their [tag]monthly mortgage payments[/tag], especially those who had subprime [tag]credit histories[/tag] and scores when they applied for their loans. Roughly one of every 20 homeowners with a [tag]mortgage[/tag] — 4.7 percent — was at least 30 days late during the third quarter, according to the Mortgage Bankers Association’s national delinquency survey released last week. The survey examined payment performances on over 42.6 million active home mortgages.

Though the overall trend in delinquencies is upward, Mortgage Bankers Association chief economist Doug Duncan said the slightly higher rates were expected as the housing boom wound down. They are also well below the recent high points reached during the 2001-2002 period. The [tag]subprime[/tag] late payment jumps, however, “were noticeably larger” than projected, “particularly for [tag]subprime adjustable rate mortgages[/tag].” The reason for the spike: “subprime borrowers are more likely to be susceptible to the cumulative increases in (short-term) rates we’ve experienced, and the slowing of home price appreciation that has resulted,” said Duncan. But “it is important to remember,” he added, “that delinquency and foreclosure rates have been quite low the last two years.” The national foreclosure rate of 1.05 percent during the third quarter was up slightly compared with the same period the year before. But today’s rate is well below the 1.6 percent level reached in early 2002, when subprime foreclosures hit 8 percent. (more…)

Despite the recent fluctuations in [tag]real-estate prices[/tag] nationwide and sale prices that have fallen short of sellers’ expectations, homeownership has proved to be a good long-term investment, financial experts agree. Buying a home is the largest investment most people will ever make, said Shrikant Nadkarni, a certified public accountant, certified financial planner and shareholder at WithumSmith+Brown PC’s Somerville office. “[tag]Owning a home[/tag] over a long period of time is generally a good investment idea,” Nadkarni said. “It brings financial obligations and forces savings through paying down the mortgage while [tag]building equity[/tag].”

Homeowners, though, have to be mindful of tax savings from mortgage interest and property taxes, and costs of things needed to keep a house in good condition, like reroofing, repainting and updating appliances, aAnd timing and market conditions are key to whether buying a home will end up being a profitable endeavor, as history shows. People who bought in the 1980s had to wait until 1998 to match the 1988 peak-of-market prices. Recent price downturns are nothing new in real estate. But people are cautioned people about the more exotic mortgages available. which enable people to buy with no money down or with adjustable rates (ARMs). When the housing prices do dip a bit this is going to be a deadly thing. . . . Their monthly payments will go up. It’s just too bad that the criteria is not a little more stringent to make sure that these people can afford to continue with these houses. Surely people should buy, but they should be qualified to buy. (more…)

Early next year my husband Gerry and I will reach two milestones in our finances: Our mortgage’s outstanding balance will drop below $100,000 and, more significantly, more of our monthly payment will go toward principal than interest. With the passing of both of these milestones, Gerry and I will be that much closer to paying off our 20-year fixed-rate mortgage, a process we’re hastening by making additional principal payments of $195 a month. (Why the odd figure? I’ll get to that later; the short story is that it is part of $395 a month in spare cash we debated over where to invest. )

Some people believe [tag]paying off a mortgage[/tag] is a stupid move, and would advise us to forgo the [tag]mortgage prepayments[/tag] and invest that $395 a month elsewhere. This school of thought holds that the wisest financial move you can make is to get mortgages with the lowest [tag]monthly payments[/tag] possible — refinancing as rates decline — and never pay off the loans, a strategy that improves your cash-flow and lets you benefit from potential home-price appreciation. (more…)

Of all the confusing and expensive things about buying a house or [tag]refinancing a mortgage[/tag] — and there are plenty — title insurance just might take the prize. “A lot of customers don’t understand [tag]title insurance[/tag],” said Samuel Ingram, president and CEO of myclosingspace.com, a Wall company that offers title insurance and other house-closing services. “It’s the largest component of your closing costs, and yet people don’t know anything about it.”

They should start learning about it, because title insurance, which protects homeowners’ property ownership rights, is drawing scrutiny from state regulators and other critics. They charge that: title insurance prices — and profits — have unfairly soared, because they’re based on house prices, which skyrocketed from 2000 to 2005. “The real estate boom has been very profitable for title insurers,” said J. Robert Hunter, director of insurance for the Consumer Federation of America. (more…)

[tag]Trump-Style Negotiation[/tag] by George Ross (John Wiley and Sons, $24.95). This book offers insights into Donald J. Trump’s big-thinking negotiation style, which leaves the contract details to his trusted adviser, George Ross. Only serious real-estate buyers, sellers, real-estate agents and investors will study this well-written book that reveals negotiation tactics not found elsewhere, illustrated with many actual examples from Trump acquisitions.

The Automatic Millionaire Homeowner by David Bach (Broadway Books, $19.95). If you could read only one real-estate book, whether you are a renter considering a home purchase, a current homeowner, a seasoned realty investor or a real-estate agent, this is the book for you because it shows how homeownership can lead to wealth. The book’s two themes are a) renters can become millionaires by investing in their first house or condo and b) that residence can become the foundation for a better home or more investment property in future years. (more…)

Mortgage giant [tag]Fannie Mae[/tag] has taken a significant stride in its march out of a accounting scandal by completing a restatement of past earnings but still faces tough work to make its financial reporting current. The restatement for 2001 through June 30, 2004, made public on Wednesday, wiped out $6.3 billion in profit for the government-sponsored company, which finances one of every five home loans in the United States.

OFHEO is the federal agency that regulates Fannie Mae and Freddie Mac, its smaller sibling in the $8 trillion home-mortgage market. Last May, it issued a blistering report alleging a six-year accounting fraud at Fannie Mae, the second-largest U.S. financial institution after Citigroup Inc. Regulators said the scheme included manipulations to reach quarterly earnings targets so that company executives could pocket hundreds of millions in bonuses from 1998 to 2004. Fannie Mae paid a record $400 million civil fine in a settlement with OFHEO and the Securities and Exchange Commission. It also agreed to limit the growth of its multibillion-dollar mortgage holdings, capping them at $727 billion, and to make top-to-bottom changes in its corporate culture, accounting procedures and ways of managing risk. (more…)

Years in the making, a federal tax deduction for [tag]mortgage insurance[/tag] is all but assured after bills which include the provision were passed last week by both the House of Representatives and the U.S. Senate. Only borrowers who close loans during and after 2007 and make less than $100,000 a year will be eligible to deduct all the private or government mortgage insurance paid for the year.

The growth in the use of piggy-back loans, down-payment assistance programs, other creative financing and rapid home price appreciation that allows home owners to refinance have all contributed to the declining number of policies. Maligned years ago when two in five new loans were saddled with the coverage, and before laws mandated full annual disclosures and the right to cancellation, mortgage insurance has its pluses and minuses. Because buyers with down payments of less than 20 percent have higher default rates, the insurance is typically mandated on low down payment loans or first loans that don’t also come with a second or “[tag]piggy-back[/tag]” loan to bring the down payment to 20 percent. (more…)

In the first national study on the study on the subject, the Consumer Federation of America has documented that women — no matter whether their incomes and credit scores are higher than men’s in the same market — are more likely to be put into [tag]higher-cost subprime mortgages[/tag] when they buy or refinance a home.

After examining case files on 4.4 million randomly selected mortgages originated in 2005 and available through the federal [tag]Home Mortgage Disclosure Act[/tag] (HMDA) database, CFA researchers found that: Women earning double the median income for their area nonetheless are 50 percent more likely to be charged [tag]subprime mortgage rates[/tag] than men with comparably high incomes. One third of all women in the 2005 sample took out mortgages with rates higher than 7.66 percent — far above the 5.87 average prime rate for that year — compared with one of four men. (more…)

[tag]Subprime mortgages[/tag] are loans made to borrowers who are considered to be higher credit risks because of past payment problems. Since these loans are so profitable, the market has grown at a 39% annual rate from $120 billion in 2001 to $625 billion in 2005. But if a borrower can’t pay back the loan, the costs of this rapid growth become apparent. Up until 2005, if a borrower could not pay back the mortgage, the borrower could sell the house and use the proceeds to pay the mortgage company.

In October, borrowers were 60 days or more behind in payments on 3.9% of the subprime home loans packaged into mortgage securities this year — nearly twice the delinquency rate on new subprime loans recorded in 2005. And UBS expects 2006 to be “one of the worst ever for subprime loans” with 80,000 subprime borrowers behind on their payments. The way this happened with subprime mortgages is similar to what is going on now in lending to private equity buyouts. In subprime mortgages, the initial success during the real estate boom caused lenders to relax their standards and loosen their requirements for documentation. In 2003 and 2004, defaults were unusually low and investors who bought the mortgages did well and wanted more. (more…)

Democrats plan to use their new majority status in Congress to expand the [tag]mortgage market[/tag] for tens of thousands of home buyers in Massachusetts and other states where high housing prices are limiting use of federally regulated mortgage programs, according to Capitol Hill lawmakers. [tag]Representative Barney Frank[/tag], a Newton Democrat set to become the chairman of the [tag]House Financial Services Committee[/tag] in January, said he will aggressively push legislation to ease current restrictions on the amount of a mortgage that can be held by Fannie Mae and Freddie Mac, two private mortgage companies chartered by the federal government.

Current law sets a limit — currently at $417,000 — on the maximum amount of a housing loan held by Fannie Mae and Freddie Mac. But because home prices in Massachusetts are comparatively high, relatively few buyers can benefit from the programs, housing advocates said. Frank said he will use his power as chairman to seek a change in the law to correlate the mortgage cap to the price of housing in an area, instead of a flat limit that now applies to all areas of the country. The current rules “keep them from doing luxury housing in Nebraska,” but severely limit opportunities for what would be considered middle-income homebuyers in Massachusetts, Frank said. (more…)

When you write a personal-finance column, being hit up for advice by friends and colleagues comes with the territory. Recently, a colleague asked whether the time was right for his wife and him to refinance their mortgage. [tag]Mortgage rates[/tag] have fallen since they purchased their first home and they wondered whether they might save some money — and worry — by refinancing. Normally, I would have simply directed him to WSJ.com’s “[tag]Should you refinance?[/tag]” tool, which calculates whether refinancing to a lower-rate loan makes financial sense once all the closing costs necessary to obtain the new loan are taken into account. But his situation is a bit more complicated. When he and his wife bought their home, they took out a so-called [tag]piggyback mortgage[/tag].

Piggyback mortgages, which stack a smaller home-equity loan or line of credit on top of a primary mortgage, became popular in the late 1990s. These mortgages were the first in a “creative financing” wave that made homes more affordable for homebuyers and helped to fuel the recent boom in the housing market. A piggyback loan is commonly designed as a primary mortgage that covers 80% of the home’s cost, paired with a second loan that usually covers 10% to 20% of the remaining cost. (Anything left over is accounted for by the down payment.) Lenders have gotten much more creative with financing options so there are many varieties of piggybacks — such as 75%/15%/10%, for instance. (more…)

If you are a serious home buyer, the absolute best time of the year to buy is between Thanksgiving Day and New Year’s Day, even extending through [tag]Super Bowl Sunday[/tag] in many cities. The reasons are (1) few home buyers are in the market during the holiday season so competition is low and (2) house and condo sellers who have their homes listed for sale now are usually [tag]highly motivated to sell[/tag] and will listen to any reasonable purchase offer.

Thousands of home sales take place during this “slow season.” New-home builders are anxious to close sales by Dec. 31, 2006, so they are offering amazing sales incentives such as (1) no [tag]mortgage payments[/tag] for several months, (2) free upgrades, (3) no closing costs, (4) 1[tag]00 percent mortgage financing[/tag], and (5) even reduced sales prices. But sales incentives for buyers of resale homes are different. Motivated sellers (and their anxious listing agents) are willing to listen to all reasonable purchase offers. [tag]Buyer negotiation strategies[/tag] include asking for the seller to pay the [tag]mortgage loan fee[/tag] and/or nonrecurring closing costs. In other words, it’s a great time to be a home buyer. (more…)

New York Attorney General Eliot Spitzer said Tuesday that Countrywide Financial Corp., one of the nation’s largest mortgage lenders, will adopt new measures to prevent discriminatory pricing for [tag]minority borrowers[/tag]. Under the agreement, Countrywide will compensate minority borrowers improperly steered toward [tag]higher cost loans[/tag] and begin a $3 million consumer education program. A Spitzer spokeswoman said the actual amount of the compensation to be repaid won’t be known until a case-by-case review by Spitzer’s office.

The Calabasas, California-based company also agreed to improve training for its loan officers and detailed reporting to the attorney general’s office to ensure compliance and to keep track of Countrywide’s progress. The lender also will pay the state $200,000 to cover the investigation’s costs. Countrywide (up $1.19 to $41.17, Charts) shares rose about 3 percent in afternoon trade. (more…)

[tag]Late payments[/tag] on [tag]subprime loans[/tag] have surged, The Wall Street Journal reported on its Web site on Tuesday, and while economists don’t expect major harm, a continued rise could hurt investors in mortgage-backed securities. [tag]Subprime mortgages[/tag] are loans made to borrowers who are considered to be higher credit risks because of past payment problems, high debt relative to income, or other factors, it said.

Lenders typically charge them higher interest rates – as much as four percentage points more than more credit-worthy borrowers pay – which is one reason subprime mortgages are among the most profitable segments of the industry, the paper added. [tag]Subprime mortgage[/tag] originations climbed to $625 billion in 2005 from $120 billion in 2001, the WSJ said, citing Inside Mortgage Finance, a trade publication. (more…)

One of the many unsavory features of the [tag]home loan[/tag] market is that borrowers, when they close on their loans, sometimes find their [tag]settlement costs[/tag] substantially higher than the earlier estimates given to them in the [tag]Good Faith Estimate of Settlement[/tag] (GFE). Lenders are required by law to provide the GFE to borrowers within three days of receipt of a loan application, but the GFE is sometimes used in bad faith. Some lenders as a matter of course raise their fees or add new ones as a loan moves toward closing. This is especially easy to do on purchase transactions when borrowers pass a point where there isn’t time to begin again with another loan provider. Some lenders low-ball third-party fees as an inducement to borrowers who believe they can shop total fees, then raise them at closing.

The MBA also proposes a limit on deviations between the third-party charges including title costs contained in the GFE and those paid by the borrower at closing. They would cap the deviation on the total of such charges at 10 percent. This would curb some of the worst low-balling, but it would not do anything to reduce third-party charges, which are far higher than they would be if they were sold in competitive markets. I will have an article about this next week. (more…)

Most people know that a [tag]credit score[/tag] is important when it comes to getting a [tag]mortgage[/tag]. But did you know that it also could affect your ability to get a job? Or rent an apartment? Or secure a good rate on car insurance? “The credit score is really the key to your financial life, and we’re not just talking about getting credit,” said Travis Plunkett, legislative director of the Consumer Federation of America.

Credit scores are used by a host of people and businesses, including lenders, employers, insurance agents, landlords and utilities. That’s why it’s so important to maintain your creditworthiness – even when you are in your 20s and 30s, have just launched a career and are still paying off student debt. There are several scoring methods, but the most common is the FICO score, developed by Fair, Isaac and Co., a leading credit analysis and risk management firm. FICO scores can range from 300 to 850. (more…)

New York, if nowhere else, still makes the [tag]Port City[/tag] seem like a bargain. Even a one-bathroom fixer-upper back in Mamaroneck, a [tag]New York City[/tag] suburb, would have run a half-million dollars, said Jennifer Hughes, a recent Wilmington arrival. Instead, she and her husband bade farewell to their two-bedroom apartment there for milder climes and a chance to raise their three kids in a house.

Last week, the National Association of Realtors reported a 1.2 percent drop in home prices during the third quarter of the year. But in the Wilmington area, including New Hanover and parts of Pender and Brunswick counties, the median home price was $205,000 in October, a record high for the month, though down from the all-time high of $224,000 in July. The median is the midpoint on a list. The number of homes sold, however, was down nearly 17 percent for the month from last year and 18 percent from October 2004. “I haven’t done the volume I did last year, but I did better than any year previous,” said Martie Rice, a Realtor in Wilmington since 1993. “People who first experienced the market in mid-2004 to the one of 2005 experienced such a fluke, it’s hard for them to compare.” (more…)