Sudbury MA Real Estate

Are Mortgage Servicers Like Evil Credit Card Companies?

There’s an article out today in the New York Times that portrays mortgage servicers in a pretty bad light. How bad? It makes them sound like those nasty credit card companies that Congress not-so-gently scolded recently through some new regulation. The Times asserts that mortgage servicers might be intentionally letting houses go into foreclosure so to collect higher delinquency and foreclosure-related fees.

Those servicers are claiming that they’re simply overwhelmed and can’t keep up with all of the mortgage modification requests coming in. Here’s what the Times reports:

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30-year loans still cheaper than a year ago

Fixed rates stable, ARM rates up on Fed uncertainty
Freddie Mac reports that rates on 30-year fixed-rate mortgages averaged 6.45 percent with an average 0.6 point for the week ending June 26, up from 6.42 percent last week but down from 6.67 percent a year ago. The rate was the highest since Aug. 23, 2007, when it averaged 6.52 percent. Rates on 15-year fixed-rate mortgages averaged 6.04 percent with an average 0.6 point, up from 6.02 percent last week but down from 6.34 percent a year ago.

Fixed-rate mortgages remained stable this week while adjustable-rate mortgages rose slightly due to uncertainty about this week’s Federal Reserve’s Open Market Committee meeting, Freddie Mac Chief Economist Frank Nothaft said.

Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 5.99 percent, with an average 0.7 point, up from 5.89 percent a week ago but down from 6.30 percent a year ago. One-year Treasury-indexed ARMs averaged 5.27 percent, up from 5.19 percent a week ago but down from 5.65 percent a year ago.

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Home resales rise, prices fall

WASHINGTON - Sales of previously owned homes in the United States rose in May from the lowest level in at least nine years as a slide in prices lured some buyers into the market.

Resales increased 2 percent to a 4.99 million annual rate, higher than forecast, from a 4.89 million pace in April, the National Association of Realtors said yesterday. Separately, the Commerce Department said the economy grew at a 1 percent annual pace in the first quarter, capping the weakest six-month expansion in five years.

The supply of homes for sale remains about twice the level representing a stable market, according to the NAR, and figures have yet to show any sign of sustained sales gains. Federal Reserve officials said Wednesday the housing contraction will likely damp growth into 2009.

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Loan requirements tighten, change as home sales fall

NEW YORK - The loan you qualify for on Monday might be out of reach on Tuesday.

Bankers and lenders are rapidly changing their requirements as home sales and prices plummet and delinquencies and defaults rise. Problems in the mortgage market are spilling into other lending markets as customers struggle to keep up with payments on other loans, such as auto and credit card payments.

“The market is reinventing itself daily,” said Les Berman, owner of Beverly Hills, Calif.-based EB Financial and the president of the California Association of Mortgage Brokers. “I did my first loan in 1971 and have never seen anything like this.”

To adjust their standards - which many critics say grew too lax in the middle of the decade - lenders now are raising minimum credit scores, offering smaller loans, and requiring detailed proof of income and assets.

For those who do meet the tightened criteria, a new plan disclosed yesterday by the Federal Reserve to provide $200 billion to the financial services sector should mean there is plenty of money available for borrowers and lower interest rates, said David Wyss, the chief economist at Standard & Poor’s.

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Mortgage Pre-Approval versus Mortgage Pre-Qualification

Is there a difference between a Mortgage Pre-Qualification letter and a Mortgage Pre-Approval letter?

The reality is that most all buyers need to obtain a mortgage loan to purchase a home. Since mortgage approval is such an integral aspect of a home purchase, wouldn’t it make sense that REALTORS® have a better understanding of the mortgage pre-approval process, since so few buyers are able to buy a home and pay cash.

These terms appear to be similar, but can be quite different. Not only do they cause confusion for home buyers, there seems to be many interpretations from those in the real estate and mortgage industry as well.

Speaking as a REALTOR®, the difference is in documentation and verification. In other words, is the buyer providing copies of income paystubs and bank account statements to the Mortgage Lender or is the Mortgage Lender simply relying on verbal information provided by the buyer? More often than not, the difference between the two terms is that one is issued without any verification of information and the other starts with the buyer providing written documentation of all information provided. While neither is a considered to be a mortgage commitment, nor a written mortgage guarantee, obtaining a Mortgage Pre-Approval letter is more preferred than obtaining a Mortgage Pre-Qualification letter.

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