Ameriquest to pay $325m settlement
Topic: Mortgage News
LOS ANGELES -- Jan. 23, 2006 -- The parent company of mortgage lender Ameriquest has agreed to pay $325 million to settle investigations into its practices by attorneys general in several states.

Ameriquest lends to people with poor credit and modest incomes. It is the nation's largest sub-prime mortgage lender. Civil lawsuits by consumers in California and other states claim a pattern of fraud, bait-and-switch sales tactics and other violations. Accusations include forging documents to lying about borrowers' income to qualify them for loans they can't afford.

The settlement involves 30 states and is expected in the end to include all 49 states where the company operates, according to a statesperson.
It's parent company has agreed to many changes in company practices, including providing borrowers with clearer disclosures on the terms of their loans.

Under the terms of the settlement, Ameriquest will have to reform its business practices, including...

• A clearer form that explains in simple language the terms of a loan, including rates, points and penalties, if any.

• Giving borrowers notice before closing on their loan if any changes are made to the loan terms.

• Verbal disclosures by loan officers to ensure borrowers are clear on the financial terms of their loans.

• Borrowers applying for stated income loans, or loans in which borrowers don't offer proof of income, will have to sign statements certifying they're telling the truth.

• Ameriquest also agreed to use independent closing agents and to select appraisers randomly, in order to eliminate potential conflicts of interest with lending agents.

Survey: Delinquent borrowers don't ask for help
Topic: Mortgage News
McLEAN, Va. -- Dec. 16, 2005 -- The first step in helping homeowners avoid foreclosure is to understand the problem. To do that, Freddie Mac conducted a survey and found that nearly two-thirds of delinquent borrowers don't know they will be offered help simply by contacting their lender and asking for it. In over half of al foreclosure cases, the borrowers never contact their lender, and the survey was undertaken to help find out why.

The survey found that 75 percent of the delinquent borrowers surveyed recall being contacted by their mortgage servicers. But, a substantial percentage gave a variety of reasons for neglecting to follow-up with their servicers to discuss workout options. Mortgage servicers collect monthly housing payments on behalf of Freddie Mac or other investors.

Specifically, 28 percent said there was no reason to talk to their servicers or that their servicers could not help them, 17 percent said they could take care of their payment problems without any help, and 7 percent said they didn't call because they didn't have enough money to make the payment. Other reasons for not calling included embarrassment (6 percent), fear (5 percent) or not knowing whom to call (5 percent).

The lack of borrower follow-up may help explain why more than six in 10 (61 percent) of late-paying borrowers said they were unaware of a variety of workout options that could help them overcome short-term financial difficulties. At the same time, 92 percent said they would have talked to their servicers had they known these options were available to them.

The survey found no significant statistical difference in the responses given by white, black, Latino, male or female borrowers indicating an almost universal need for more borrower education about workout options and foreclosure avoidance.

Freddie Mac requires mortgage servicers to explore several workout options with late-paying borrowers. These options include forbearance, which temporarily delays or reduces payments, and loan modifications, which can restructure the payment terms for a fixed period. Many servicers typically describe these options in their collection letters. However, it is up to borrowers to follow-up with their servicers to learn more about these options.

"Part of the problem is that the data shows that there's a knowledge gap: People's interest in the options available to them is quite high, but their awareness of these options is quite low," says Elizabeth Armet, Vice President, Senior Account Executive at Roper Public Affairs.

While the likelihood of a successful foreclosure avoidance depends upon each individual borrower's financial situation, a 2004 Freddie Mac study concluded that repayment plans could lower the probability of home loss by 80 percent among all borrowers, and by 68 percent among low-to-moderate income borrowers.

Other notable findings from the Freddie Mac/Roper survey:

• Eighty percent of delinquent borrower households included at least one employed individual and only five percent said someone in their household was unemployed. Seven percent of the respondents said they were retired.

• Among homeowners in good standing, 62 percent were employed, 32 percent were retired, and only two percent were unemployed.

• Delinquent borrowers earned slightly less than borrowers in good standing. The median annual income among delinquent borrowers was $52,400 compared to $56,700 a year for homeowners in good standing.

• Forty seven percent of the defaulters were first-time homeowners but 62 percent of the homeowners in good standing had owned a home in the past.

? 2005 FLORIDA ASSOCIATION OF REALTORS?

Changes to FHA Programs
Topic: Mortgage News
SAN FRANCISCO -- Oct. 31, 2005 -- Brian Montgomery, head of the mortgage loan insurance programs at the Federal Housing Administration, announced significant changes Friday that will make it easier for consumers to use -- and Realtors? to promote -- FHA products.

Speaking at a forum during the 2005 Realtors? Conference & Expo last week, Montgomery said FHA will no longer have specialized FHA appraisals and will let homebuyers fold into their mortgage up to $35,000 in home repairs or minor remodeling.

Specialized FHA appraisals often require a list of repairs that have to be made before settlement, which often delay settlement, kill a transaction, or prompt Realtors and lenders to direct homebuyers elsewhere for a mortgage. Required repairs can be time-consuming and often unclear, but underwriters are afraid to waive the requirements.

FHA will continue to work with Realtors, lenders and appraisers to be consistent with the rest of the market, Montgomery said, and will no longer impose unnecessary repairs or require inspections and evaluations that aren't customary for an area. "Instead, we will accept the new Fannie Mae appraisal forms," he said.

"Similar to Fannie Mae and Freddie Mac, we will defer to state and local requirements regarding the condition of the home," Montgomery added.

The new version of the loan will permit homebuyers to finance up to $35,000 in their mortgage to pay for straightforward home repairs, like replacing a roof, windows or furnace.

"The program is a financing tool for the average homebuyer who wants to make simple changes, such as updating the appliances or replacing flooring or installing new windows to make the home more energy efficient," he said. Buyer's agents can assure their clients "that they can close on the house, and then make the repairs," he added.

Montgomery said that the two major changes are the first of many, and that the recommendations came from the real estate industry. He assured Realtors that FHA is continuing to study its operations and programs, and to consider changes recommended by users, Realtors? and lenders.

"FHA needs to be compatible with the rest of the industry. I feel very strongly that FHA is here to serve the American public in a way that protects the consumer. But consumer protection that drives away the consumer is no protection at all," he said.

? 2005 FLORIDA ASSOCIATION OF REALTORS?

HUD - No Down Payment Mortgages in Hurricane Regions
Topic: Mortgage News
WASHINGTON -- Oct. 13, 2005 -- The Department of Housing and Urban Development (HUD) announced that HUD has a mortgage financing program that requires no downpayment for people whose homes have been destroyed or damaged due to Hurricanes Katrina or Rita. In addition to requiring no downpayment, potential homeowners can live anywhere they choose in the United States.

"HUD is committed to helping people affected by these terrible disasters to re-establish their lives," says HUD Secretary Alphonso Jackson. "We want to give these families and individuals an opportunity to start over -- as homeowners -- whether they owned or rented their previous residences."

Under the special mortgage program, called Section 203(h), HUD, through the Federal Housing Administration (FHA), will insure mortgages for individuals or families in a presidentially declared disaster area whose residences were destroyed or damaged to such an extent that reconstruction or replacement is necessary.

Borrowers must be able to qualify for FHA mortgages, which are generally easier to qualify for than those on the private market, but they will not have to put any cash down. In addition, the FHA mortgage insurance premiums can be financed into the mortgage amount, so only minimal closing costs would be required.

An added benefit of the 203(h) mortgages, which are offered by any FHA-approved lender, is that they can be used anywhere in the U.S. For example, Katrina victims from Louisiana can choose to move wherever they wish. The mortgage amount is limited, but can be as much as $312, 895, depending on the average sales prices in the area.

For More Information on 203(h), contact a HUD-approved lender, the HUD National Servicing Center Hotline at 1 (888) 297-8685, or HUD's Web sites: www.hud.gov and espanol.hud.gov


? 2005 FLORIDA ASSOCIATION OF REALTORS?

Mortgage Rates Hit 6% and Climbing
Topic: Mortgage News
NEW YORK -- Oct. 14, 2005 -- Americans may have seen the last of long-term mortgage rates below 6 percent, and borrowing costs for home buyers likely will climb further, slowing frenetic demand that has stoked U.S. housing in recent years.

Realtors have spotted a drop in the appetite for housing in recent months, and a survey of lenders from Freddie Mac on Thursday found that rates for 30-year mortgages - a popular home loan - have crested 6 percent for the first time since March.

"The most likely pattern is for mortgage rates to gradually rise over time. It is likely that they'll hover at 6 percent or just a bit over," said Frank Nothaft, chief economist at Freddie Mac. He added that "will translate into somewhat weaker demand for housing, lower home sales volume and lower house price growth."

Douglas Duncan, chief economist at the Mortgage Bankers Association, an industry trade group said that "because of increased concerns about inflationary pressures, it will stay above 6 percent."

In raising interest rates last month, Federal Reserve policy makers expressed their concerns about inflation. And earlier this week, meeting minutes from those Fed officials hinted at more interest rate increases.

These concerns have been noticed in the broader financial markets, especially the U.S. Treasury securities market where interest rates have risen, tugging mortgage rates with them.

According to Freddie Mac, the U.S. housing agency which sells guarantees for home loans, this week's 6.03 percent for 30-year mortgages is the second highest level of the year. Thirty-year rates were at 6.04 percent in the March 31 week.

This week is also the third time this year mortgage rates are above 6 percent - an important psychological level. When rates were below 6 percent, this helped spur home buying and refinancings of home loans that allowed Americans to spend their way out of the most recent economic downturn.

The low mortgage rates have supported consumer spending on goods and services - which accounts two-thirds of the nation's gross domestic product - because low borrowing costs allowed home owners to draw money from properties that had appreciated in value.

Also, the steady rise in the cost of money is sure to limit home price appreciation because buyers won't be able to as readily bid up prices on homes for sale.

"It is going to definitely cause more of a slowdown," said Brenda Binczewski, a realtor at Carlson GMAC Real Estate in Palmer, Mass. Binczewski said she has seen a drop in business since July and has not had multiple offers for a home in three or four months.

By contrast, a year and a half ago a single home could have two or three offers, Binczewski recalled.

Freddie Mac's Nothaft pointed out that he does not expect a sharp drop in home prices or home sales because the rise in mortgage rates has been gradual. "It would be different if we had a spike in mortgage rates," said Nothaft.

Duncan noted that some home buyers may resort to adjustable rate mortgages (ARMs) which initially have lower borrowing costs.

"As fixed rates rise, ARMs will become a bigger factor," said Stephen LaDue, president of Affiliated Mortgage of Wauwatosa, Wisconsin. "The rate of increase in home values will slow or will start to stagnate" because of higher rates, he said.

In its survey, Freddie Mac found that adjustable rate mortgages, which are linked to one-year Treasury rates, were offered 4.85 percent this week. That is up from 4.77 percent a week ago and 4.01 percent 12 months ago.

Further interest rate increases by the Federal Reserve probably will push ARM rates even higher, analysts said.

At the same time, a few consumers prospecting for properties - especially those prequalified by lenders - may be spurred into action by the rising interest rates.

"People may start buying before it (the mortgage rate) goes up any more," Binczewksi said. "They would make offers because they have rate locks. Now, with rates increasing, they won't want to lose rate locks."

Associated Press Economics Writer Martin Crutsinger in Washington, D.C., contributed to this report.

Copyright ? 2005 Associated Press, Aleksandrs Rozens. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.