Mar
16
MEMPHIS, TN – Shelby county homeowners facing foreclosure might get a little relief. Mediators may help them negotiate with banks. That’s the idea behind a bill pending in the Tennessee legislature.
“A professionally trained mediator would mediate between the lending institution and the homeowner and try to work out an agreement between the two,” explained Shelby County Commissioner Mike Carpenter.
Mediation would be voluntary, but the head of the Memphis Mortgage Bankers Association said homeowners need every option.
“There are a lot of people trying to keep their homes, a lot of people upside down on their loans or getting behind on their payments,” Sam Goff said.
He said mediation lets homeowners save homes, and banks save money.
“The public should really understand lenders do not want your home because its not in their best interest to foreclose,” Goff said.
Carpenter said foreclosure hits families — and communities – hard, so it’s in everyone’s best interest to avoid it.
“While there’s a lot of debate about what role the government should play in this issue of lending and foreclosure, I think it’s in everyone’s best interest at this point to mediate when we can between the homeowner and the lender,” Carpenter said, “So that everybody at least walks away with something.
“Our economy is impacted by these foreclosures,” he continued. “We all lose if we don’t find a solution to the foreclosure problem.”
This proposal would create a pilot program for Shelby County, but the bill still needs approval from state legislators. Even though the proposal makes mediation voluntary, lenders who take that route would get a break. They would not face penalties for any violations of the state law that protects homeowners from predatory lenders.
Mar
16
The US housing market will face another retreat while mortgage-backed securities and Treasurys are likely to go through a “material” correction, Meredith Whitney, CEO of Meredith Whitney Advisory Group, told CNBC Tuesday.
“The housing market surely will double dip,” Whitney told “Worldwide Exchange.”
Government programs to support housing have been “murky” and when the modifications caused by them come to an end, a lot of supply may come to the market and that’s when the real-estate market is likely to go down, she explained.
Hopes that an improvement in liquidity and continuing investment from China in US assets will prop up mortgage-backed securities (MBS) and Treasurys are exaggerated, Whitney also said.
“The asset classes of MBS and Treasurys are priced for a material correction in my opinion,” she said. “The only buyers of agency MBS are the Fed and banks so you see how precarious that market is.”
“If the Fed pulls back, that’s a really big deal… because there’s no substitute buyer.”
Banks Model Is Broken
The Federal Reserve can’t make banks start lending again because the business model financial institutions used before the crisis is broken, Whitney also said.
“I don’t think there’s much the Fed can do to get banks to start lending again. That’s a structural problem, the model is broken,” Whitney told “Worldwide Exchange.”
Before the financial crisis erupted in 2007 banks were able to offer customers low-priced mortgages because they were making money on securitizing these mortgages and selling them on, she explained.
But now that the securitization market is effectively closed, the prices of mortgages for consumers have not risen to compensate banks for that loss of revenue, so banks have been playing defense for the past two years, Whitney added.
The Federal Open Market Committee holds a meeting later Tuesday to decide on monetary policy. Fed officials have been saying that interest rates are likely to remain low for an “extended” period of time.
Whitney said she will be watching for anything regarding the Fed’s stance on buying mortgage-backed securities in the statement after the meeting.
“The Fed has been supporting the housing market, a third of the Fed’s balance sheet is tied to mortgages,” she said.
“The banks aren’t issuing anything (in terms of mortgages) to hold, they’re issuing everything to dump on” Fannie Mae, Freddie Mac and Ginnie Mae, Whitney added.
Much of the profit banks made last year was due to their performance in capital markets and this is “unreplicable” this year, Whitney also warned.
“I think that people that expect an earnings handoff to a normalized scenario are going to be disappointed,” she said.
“Normal will not be what it has been over the last 20 years and there’s disappointment baked into that.”
Mar
11
Standard 30-year fixed loan is now 4.95 percent, down from 4.97 percent. Mortgage rates held below the 5 percent threshold for the second straight week, a report said Thursday, weeks before a government program that has been keeping rates low is scheduled to expire.
The average rate on a 30-year fixed rate mortgage was 4.95 percent this week, down from 4.97 percent a week earlier, mortgage finance company Freddie Mac said.
Rates dropped to a record low of 4.71 percent in December and have hovered around 5 percent since, kept down by a Federal Reserve campaign to stabilize the housing market by lowering mortgage rates.
The central bank’s $1.25 trillion program to buy up mortgage securities issued by Freddie Mac and sibling company Fannie Mae is set to expire March 31. But the Fed has held the door open to extending the program if the economy weakens.
Some analysts argue that rates could rise once the Fed’s program ends, hurting both the recovery in housing and the overall economy. But government officials are optimistic that the Fed will be able to end its program without a major disruption.
Freddie Mac collects mortgage rates on Monday through Wednesday of each week from lenders around the country. Rates often fluctuate significantly, even within a given day, often in line with long-term Treasury bonds.
This week, the average rate on a 15-year fixed-rate mortgage was 4.32 percent, down from 4.33 percent last week, according to Freddie Mac.
Rates on five-year, adjustable-rate mortgages averaged 4.05 percent, down from 4.11 percent a week earlier. Rates on one-year, adjustable-rate mortgages fell to 4.22 percent from 4.27 percent.
The rates do not include add-on fees known as points. One point is equal to 1 percent of the total loan amount.
The nationwide fee for loans in Freddie Mac’s survey averaged 0.7 of a point for 30-year and 15-year loans and 0.6 of a point for five-year and one-year loans.